04/12/2011 05:22 pm ET Updated Dec 06, 2017

Stiglitz to Obama: Don't Reward Richest 1% in Budget Deal Compromise

President Barack Obama is preparing to give a major address Wednesday to outline his long-term plan for deficit reduction. He is expected to propose cuts to Medicare and Medicaid and changes to Social Security. On Friday, the White House and congressional leaders reached a last-minute deal to cut $38 billion in spending for the final six months of this fiscal year. The deal--which still needs to be voted on by Congress--prevented a government shutdown, but larger budget battles are on the horizon.

For analysis on the budget deal, Democracy Now! interviews Nobel Prize-winning economist Joseph Stiglitz, who addresses the growing class divide taking place in the United States and inequality in a new Vanity Fair article titled, "Of the 1%, by the 1%, for the 1%."

"It's not just that the people at the top are getting richer," Stiglitz says. "Actually, they're gaining, and everybody else is decreasing... And right now, we are worse than old Europe." Stiglitz is a professor at Columbia University and author of numerous books, most recently "Freefall: America, Free Markets, and the Sinking of the World Economy."


JOSEPH STIGLITZ: There are only two ways to address the budget deficit: raise revenues or cut spending. And with this 1 percent getting so much, there's only one place really to get that extra revenue. The good news is it's relatively easy. You have 25 percent--almost 25 percent of the income in the upper one percent, you raise their taxes by a few percentage points, and you get an awful lot of money. And in many of these cases, we don't even have to raise the taxes; all we have to do is to say they ought to pay a fair tax rate.

This raises a very important point that I raise in my article, which is that much of the wealth of this one percent comes not from hard work, not from innovation, but from good investments in Washington, investing in political capital. And you saw that in the financial sector, where they first got deregulation, and they got a massive bailout. But it's true in lots of other areas. A lot of the natural resource companies--mining, oil--get access to natural resources that are in public lands at a discount price. So, if you can buy--if you can get access to these resources at a very low price, sell them at a high price, you make a lot of money. It's actually like money being stolen from the public.

Interview Part 2:

DEMOCRACY NOW!'S AMY GOODMAN: In your piece, Joe Stiglitz, in Vanity Fair, "Of the 1, by the 1, for the 1%," you say, "Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation's income--an inequality even the wealthy will come to regret." Talk about all this. We're seeing these rolling rebellions. We are seeing rebellions not only in the Middle East, though, in the Midwest. I mean, look at Madison, Wisconsin. And what about this issue of even the wealthy will regret this?

JOSEPH STIGLITZ: Well, there are two points that I try to make. One is that a successful economy requires collective action. There are lots of things we have to do together. We have to have infrastructure. We have to have an educated population. If you have a divided society, you start worrying more--if you're in the wealthy and you have an electorate system that can use your wealth to affect the politics, you say, "I'd rather have a small government that isn't able to redistribute money, take money away from me. I don't need public schools; I have private money. I don't need public parks; I have private--you know, my large land." So, what you have then is an erosion of the kind of collective action, and that makes a society less efficient, less productive. And you see that already happening. We are competing in education with countries in Asia that were much poorer than we were not that long ago. So that's one problem.

And the second one is that obviously a house divided can't stand, that you start getting tensions, you start not paying attention to the things that make us cohesive as a nation. And that's what you're seeing in Wisconsin. And you also see that in the budget messages that are coming across, saying, "OK, we're going to cut back on healthcare for aged and for the poor, but we're not going to do anything about overall healthcare costs." What does that mean? It means that if you're going to cut back on health expenditures for the aged and the poor, and you're going to let health costs continue to rise, that says rationing. They're not going to be able to get healthcare. Already, we spend more money with poor health outcomes than those in other countries in the advanced industrial world. And it's going to get worse as the poor and the elderly can't get access to healthcare.

For additional coverage on the budget deal and the aftermath of the recession, visit Democracy Now!, click here. Join us on Facebook.