Is inequality Holding Back the Recovery?

                

The Nobel prize-winning Keynesian economist, Joseph Stiglitz, claims in the January 20, 2013 New York Times, that “Inequality is holding back the recovery”.  He says that the most important reason is because the middle class is too weak to support the consumer spending we need.  And that the weakness of the middle class is holding back tax receipts.  And that we are squandering our young who are increasingly unable to get an education without borrowing huge sums of money.

Many liberals deplore the slow rate of economic growth since the recession ended in June 2009 and all of the problems it creates and exacerbates such as high unemployment and lower tax revenue to support public services.  What these liberals amazingly fail to understand is that there are tried and true methods to promote economic growth.  What we need to do is to lower tax rates (offset by eliminating tax deductions and loopholes), remove or diminish the enormous new regulatory burdens which have recently been placed on the economy, boost domestic energy production and aggressively, rather than halfheartedly, pursue new trade agreements to lower the barriers to free trade.

Powerful trends such as globalization and computer technology are driving economic progress and causing the inequality which Stiglitz and many others deplore.  We need to embrace these trends and use them to our advantage.  The way to boost the middle class is to boost our stagnant economy in the tried and true ways which have worked in the past.  The way to boost postsecondary education is to recognize that there are many high quality and low cost schools all over the country.  And that it is not necessary to borrow lots of money to get a good education. 

In short, the solution to the urgent and critical economic and fiscal problems we are now facing lies entirely under our control.  All we need are national leaders who have the vision, capability and fortitude to lead the way.

2 thoughts on “Is inequality Holding Back the Recovery?

  1. In Jack’s comments about the ballooning affect of postsecondary education costs as part of the reason why the middle class cannot support more economic growth, I should like to note that not only are parents and students suffering financially from the costs of such education but so do their budgets for both discretionary spending as well as spending on necessities.

    At some point, we need to convince not only students and their parents but our politicians as well that a degree from a prestigious college or university is not necessary. And we must stop the continuing spiraling of college costs caused by the same barracuda business tactics that have so long put business process above business form and business ethics.

    Since the elitist colleges and university (i.e Harvard, Yale, etc) would be most reluctant to give up their prestigious role in university level education, it will have to be others who take the lead in reducing the costs of education.

    • How does society control the costs of higher education? I believe that this should be done individually by families and students. If a student, i.e. a family, can afford the tuition charged by an elite selective institution, then go for it. If not, then go to a less expensive school and do whatever is necessary to avoid excessive debt. For example, go to a local university and continue to live at home, thereby saving big bucks on room and board.

      With respect to government policy, I suggest that an upper limit be placed on the amount of money which can be borrowed by an undergraduate college student. This will not only cut government spending on student loans but also help students pay closer attention to overall college costs. Let’s say an upper limit of borrowing $40,000 per individual student for an undergraduate degree. Such a national standard like this would not only provide guidance for students but would almost surely lead to innovative financial package offers from colleges to help students keep their costs down.

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