With the presidential election just months away, one Nobel Prize-winning economist seems to have made up his mind.
Left-leaning economist and Columbia professor Joseph Stiglitz told Bloomberg Monday that Republican presidential candidate Mitt Romney’s plan to slash government spending would send the economy into a downward spiral.
“The Romney plan is going to slow down the economy, worsen the jobs deficit and significantly increase the likelihood of a recession,” Stiglitz told Bloomberg.
He went on to say that President Obama "recognizes the need to stimulate the economy” and sees income inequality as a “significant problem,” while Romney does not.
During other stops on the promotional tour for his new book, “The Price of Inequality: How Today’s Divided Society Endangers Our Future,” Stiglitz touched on income inequality, CEO pay and other economic issues, but was particularly critical of austerity measures that cut government spending while raising taxes.
“No large economy has ever recovered from recession through austerity,” Stiglitz warned during an interview Bloomberg reporter Betty Liu.
A number of recent studies lend support to this view. Both the IMF and United Nations released studies last September that found austerity can have negative effects on the economy. The IMF reported that austerity hurts incomes and worsens long-term unemployment, while a United Nations study warned that nations' continued pursuit of austerity could result in a “permanent recession.” More recently, the International Labor Organization found that worldwide "austerity has not produced more economic growth."
Stiglitz’s criticism of austerity is also shared by fellow progressive economists Robert Reich and Paul Krugman, among others. Krugman wrote in a New York Times column last October that austerity both in the U.S. and Europe had been an “abject failure.”