Joseph Stiglitz: 'Significant' Chance The Economy Will Contract In 2010

(AP) -- Nobel Prize-winning economist Joseph Stiglitz warned there's a "significant" chance the U.S. economy will contract in the second half of next year, and urged the government to prepare a second stimulus package to spur job creation.

"The likelihood of this slowdown is very, very high," Stiglitz told reporters in Singapore. "There is a significant chance that the number will be in the negative range."

Stiglitz, a professor at Columbia University, called on Washington to make more funds available to state governments who face a drop in tax revenue.

The U.S. economy, the world's largest, must grow at least 3 percent to create enough jobs for new entrants into the labor force, he said.

The unemployment rate fell to 10 percent in November from 10.2 percent in October.

"If you don't prepare now, and the economy turns out to be as weak as I think it's likely to be, then you'll be in a very difficult position," he said.

The economy grew at a 2.8 percent rate in July through September, after a record four straight quarters of contraction.

Comments

[my obama kos]

01:13 PM on 12/23/2009

We need a job stimulus instead of the usual empty talk. there is no economic recovery until healthcare is passed and people have jobs.

good articles: http://iamned111.blogspot.com/

[rblaquinta]

10:09 AM on 12/23/2009

Hey dude your 15 minutes are up!!

[azphoenixwolf]

02:49 AM on 12/23/2009

Get ready for the uncontitutional, trillion dollar health reform bill OBAMINATION. He is delivering us all into perpetual indentured servitude to the insurance industries. You will lose the right to say no. You will have to pay or become a criminal:

"Involuntary servitude is a United States legal and constitutional term for a person laboring against that person's will to benefit another, under some form of coercion. While laboring to benefit another occurs in the condition of slavery, involuntary servitude does not necessarily connote the complete lack of freedom experienced in chattel slavery; involuntary servitude may also refer to other forms of unfree labor. Involuntary servitude is not dependent upon compensation or its amount.

The Thirteenth Amendment to the United States Constitution makes involuntary servitude illegal under any U.S. jurisdiction whether at the hands of the U.S. government or in the private sphere"

[Raccoon1]

09:27 AM on 12/23/2009

Given the depth of corruption nearly to the point of institutionalization that seems to run through all levels of government this decline seems to be destined to continue until things become so bad that we have a social and/or economic revolution. The system is incapable of changing from within.

[vlm1948]

11:21 AM on 12/23/2009

Unfortunately, I think you are right.

[vippy]

04:31 PM on 12/22/2009

If the economy contracts even more we all will be in the poor house except the 1%ers. Social Darwinismus has arrived.

[alternate id]

03:24 AM on 12/22/2009

It OK folks, go back into your homes, it's only a false alarm.

Mr Summers has assured me that all the experts agree that the recession is over.

[CologneCitizen]

01:42 AM on 12/22/2009

I am missing in the discussion about jobs the point why the USA doesn't look to other countries and see how they deal with the recession.

We have a model in Germany working out fine. In a recession when orders are slow, companies don't fire their workforce. They keep them employed but let them work shorter hours. The employees get less money for less work. But to prevent them going down, the government gives them a part of their original salary so they can survive. After the recession they work their normal hours again and get paid the full salary by their companies again.

We have had very good experiences with this program in Germany. The employee is covered and the employer doesn't have to look for qualified personnel when the orders increase.

Does your government ever discuss to try out this kind of thing ? BTW the German labor unions have been always in favor of this. It prevents strikes and lets people live.

[Oldtimer]

02:43 AM on 12/22/2009

Our system of governance has been corrupted. It is FUBAR.
What you do in Germany makes perfect sense and that is why
it can't happen here because our system intends on doing
the opposite.

[yappnmutt]

05:08 AM on 12/22/2009

in japan they have lifetime employment. your employer actually felt an obligation to keep you employed once you were hired. when the bubble burst this idea was one of the first things usa economists and consultants told the japanese to abandon. it has since evolved into lifetime employment for a core group of employees with temp agencies with lifetime employment filling in gaps.

the japanese understand an unemployed person messes up a family a neighborhood, a community a town and eventually a country. usa companies don't care because they don't see that they pay these costs.

[Pilotincommand2]

11:41 PM on 12/21/2009

It s an easy fix, just stop spending money we don't have. Just like most of us do at home. Stop spending money!

[RogerHWerner]

12:36 AM on 12/22/2009

Regretfully, the US economy is nothing at all like your home economy and that's the mistake too many people make in trying to understand what something very complicated. Stop spending money...yea right. And what do you propose government cut out? If they were to eliminate ALL discretionary spending and foreign aid, it would dent our deficit. The only way out of this deficit is economic growth period. This is what government is counting on. Whether that will happen is debatable. We'd better hope it does or we're going to be in deep do do. And not just the US but anyone who depends on American consumption, foreign aid, or our incessant borrowing. The geniuses who run the world have created a monster called the world economy and our economy represents some 35% of it. Simplistic ideas aren't going to solve the massive problem we face.

[wigglwagon]

02:48 AM on 12/26/2009

"If they were to eliminate ALL discretionary spending and foreign aid, it would dent our deficit. The only way out of this deficit is economic growth period."

I do not understand what you mean. It sure seems to me that a return to protectionism, regulation and a strong labor movement would provide the economic growth you are talking about. Is that not the system that was in effect while we were becoming the largest economy in the world?

[Raccoon1]

09:24 AM on 12/23/2009

For every problem there is a solution that is easy, cheap, and wrong. Sure, let's cut - let's say - the FAA, we don't need airplanes flying around. Let's not maintain the interstate highway system. Let's do away with the FBI, CIA, IRS and simply trust everyone to "do the right thing." No more wasted money on medical research, defense research, and other wasteful things like that. Why, it's so simple even a child could do it.

[Indra]

11:25 PM on 12/21/2009

We need a job corps. Nothing less will answer to the situation. Giving money to the states is a very dumb thing to do. States are for wasting money and are far worse than the Federal government. Giving money to the states is like giving money to Afghanistan. Lets give the jobs and the money directly to the people without state intervention. States do not have the type of job openings that will absorb the diversity of workers out there with no employment. People should be given jobs and states should be allowed to go bankrupt.

[Pilotincommand2]

11:36 PM on 12/21/2009

So your solution, just one big state. How can the govt create jobs anyway. Most jobs are created by small business in the states.

[RogerHWerner]

12:38 AM on 12/22/2009

The Federal government has the ability to directly create jobs. This happened in the 1930s and it can happen today. This is what Indra is referring to...ever hear of the CCC? Just Google the letters. It was one of the most successful and popular New Deal programs. The problem Americans face today is that we don't want to face the reality that our economic situation is at least as bad as it was in the 1930s but for different reasons.

[Raccoon1]

10:02 AM on 12/23/2009

The number one priority should be election reform. Until we get the special interest money out of the electoral process things probably won't improve. This will probably never happen on the federal level but some changes can be made at the state and local level.

[vlm1948]

11:45 AM on 12/23/2009

This is so true, nothing is ever going to change without it.

[liberalbug]

10:00 PM on 12/21/2009

The likelihood of a slowdown is likely in 2010? I'm sorry, did I miss the "speed up" in 2009, because unless you are a banker, oilman, insurance executive or politician, things pretty much still suck.

[RogerHWerner]

12:41 AM on 12/22/2009

Well, if you're an economist at Columbia and looking at statistics sure there's been economic growth-2.8%. But when you look at where this growth has been generated, it's plain to see that the great majority of the American population hasn't felt it. I've talked with a few hundred people this shopping season many who work in stores and not a single person expresses any belief that the recession is over. It isn't over and I don't give a crap what economists or politicians claim.

[Raccoon1]

10:04 AM on 12/23/2009

The "growth" has occured on Wall Street.

[Dnietz]

01:14 AM on 12/22/2009

fanned

[themodernleader]

09:26 PM on 12/21/2009

It requires a PHD Nobel Prize recipient to gain any credence in pointing to our continued precipitious decline. But ordinary informed citizens say the same thing. This economy is not performing other than downwards.
The brilliant "economic team" is creating new bubbles. Sooner then anybody suspects, the bond market will crash. And in panic mode, our toxic filled big banks will demand more public monies. And the President will be publicly booed as hs speaks of the end of the recession. When favoritism and self-interest dominate the nation's agenda, the nation staggers and falls.

[Dnietz]

01:25 AM on 12/22/2009

the problem is that academic ideas and terminology are not well translated to real life situations, so people get the wrong impression

-- so he says you need about 3% growth to handle all the new people being born and graduating. so that means the 2.8% growth we got for a couple of months left us even farther behind. we didn't shrink, but we still had more unemployed people after than before (numbers went down due to dropping off of active lists not jobs found)

-- real life inflation is about double what the numbers we actually see. certain specific industries (like consumer technology goods) regularly drop so much in price that they skew everything else. also they play with numbers using formulas that include terms like "perceived improvement in quality" to justify higher prices without calling it inflation. problem is you can't eat a plasma tv or drive it to work or sleep inside of it.

-- unless you get a pay raise every year to match inflation, then you really got a pay cut. so inflation is either 5% or 10% depending on whether you want to use real numbers. a 2% pay raise is really at 3% pay cut (or 8% pay cut).

economists don't speak these simple truths to people. i wish someone like krugman made statements like these in addition to the high level national economics he talks about regularly.

[themodernleader]

09:15 PM on 12/21/2009

TAISabel. Thank you for the Frank Rich opinion piece. Unvarnished truth is a rarity in a declining organization.

[Incorrect Assumptions]

05:28 PM on 12/21/2009

Since 1960 and accelerated in 1980, private debt has increased virtually every year from 40% of GDP in 1960 to 300% now at $47 trillion. Without ever increasing debt, there would have been virtually no growth in GDP or employment.

The flaw is the concept of making money with money using compounding interest. Allows rich people to sit back and watch their money magically grow but this only happens because of ever increasing indebtedness from the bottom 80 to 90% of people and inflation of asset prices like housing.

Now this is no longer occurring, debt destruction and deflation (depression) are the only way out, made slower and immediately less painful only by govt spending, the debtor of last resort.

While we continue to have the reserve currency with China and oil exporters buying US treasuries in order to peg their currencies to ours, it would have been much better to give their free money directly to Americans to pay down debt and stimulate spending. This is better than giving money to banks seeing there is no bank money multiplier effect (give $1 in order to lend $10) until people have room to take on more debt.

This system should actually be changed since it concentrates wealth and income at the top but won't for this reason and the fact we get free money from China. It's free because we have no plans to pay back our sovereign debt. The end game is to inflate our way out of it.

[schatsie]

05:58 PM on 12/21/2009

We have also over the same period spent about 30 trillion dollars more for healthcare than any other economy and for worse results and I do not see this socalled Reform doing anything about that....IN fact, I believe that this reform package will do NOTHING to eliminate this healthcare surtax that we are paying,,,about 8% of our GDP for the last 10 years and less than that before....

and this is unproductive, we are not producing anything anything at all except keeping our people healthy so that the workforce is healthy,,,but who cares about that when jobs are being outsourced or insourced (think h1b visas)....

I hope these people realize that billions of dollars in subsidies will go for the HEALTHCARE FOR WALMART for the employees of the 4 of the richest (out of the top 10) people in this country.......because we subsidize the poor and indirectly the rich....waltons......

[nThenwhat]

06:27 PM on 12/21/2009

Interesting post ... seems the switch has been made from the tapped out middle class to pawning the gov't to borrow from China and further pawning the gov't into making available free money on an unlimited basis ... the game is ON as much as ever ... just look at the markets. It's a crime against the public trust and should be handled with severe measures.

[DFL]

05:25 PM on 12/21/2009

The rightwing democracy H8'ing party ran up trillions in deficits thinking the dems wont have any $ to help things get better for the people.

[schatsie]

05:59 PM on 12/21/2009

Exactly.

[Noonen]

10:01 PM on 12/21/2009

If the right wing so hated democracy, how was Obama elected and how did both the house and senate fall to dem control?

[Raccoon1]

10:09 AM on 12/23/2009

It's possible to hate something and lose control of it at the same time. Because they lost doesn't mean that they don't still hate. Hate is probably not the right word. They don't hate it, they like it so much that they don't want anyone but the 'select' to have it.

[yourmomscalling]

04:56 PM on 12/21/2009

just wondering
HOW DO YOU LIKE HIM NOW !!

[realpolitic]

04:59 PM on 12/21/2009

My grade is B+. To grade Obama lower is to reward conservative obstructionism!

[markm8128]

11:39 PM on 12/21/2009

A nation that doesn't remember the past, is likely to elect a Republican president again.....

[vlm1948]

11:40 AM on 12/23/2009

Good one.

[yourmomscalling]

04:56 PM on 12/21/2009

It will happen but you don't have to take my word for it. I am just relaying the facts my friends

[nThenwhat]

05:16 PM on 12/21/2009

Barclays is rating double-dip as the most undervalued risk presently ... according to Bloomberg.com
Buckle up and stay tuned.