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Joseph Stiglitz’s Deficit Reduction Plan

Analytically, the task of deficit reduction is simple: cutting expenditures and raising rntaxes, says Nobel Laureate Joseph Stiglitz in his plan to reduce long-term budget deficits.

In the next few weeks, the United States will be focused on deficit reduction. Analytically, the task of deficit reduction is simple: cu!ing expenditures and raising taxes. Politically, the task of deficit reduction is enormously difficult, for each cut in expenditure or increase in taxes hurts someone, and typically, some powerful group. … What matters is not the deficit itself or the short-run national debt, but long-run levels of the national debt. The country should be looking at its national balance sheet. Debt reflects only the liability side. In assessing the economic strength of a firm, no one would look just at its liabilities; they would also look at its assets. The single-minded focus on deficits and short-run debt is thus fundamentally misguided.


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