According to Nobel Prize-winning Prof. Joseph Stiglitz of Columbia University, an unwillingness to admit just how bad things were and an economic stimulus package that was inadequate got the U.S. into its present state, and the Fed can’t do anything more to help. For that matter, getting any effective program through the current Congress is not likely.
On Breakout on Wednesday, Stiglitz spoke about the unwillingness of the Obama administration to acknowledge how severe the economic situation was. The stimulus package put in place was “too small, too short, and not as well designed as it could have been.” It also contained too many tax cuts, he said, while not offering “enough other things that would lead to more economic growth.”
While the stimulus did work—according to Stiglitz, without it unemployment would have peaked at 12-13%, while with it it peaked at 10%, it was not enough, and another stimulus is necessary now. “We have to be more careful about designing it, but we need another round,” he said.
The failed economic policy, he added, played an important role in creating the crisis – the Fed “really did a terrible job.” And with interest rates already at an effective negative rate, thanks to inflation, monetary stimulus is not what is needed to get the country out of its hole.