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As President Biden's economic agenda takes shape on Capitol Hill, Amna Nawaz discusses its potential implications with Joseph Stiglitz, a Nobel Prize winning economist. He was senior vice president and chief economist at the World Bank and teaches at Columbia University. And Michael Strain, director of economic policy studies at the American Enterprise Institute and Bloomberg opinion columnist.
President Biden's ambitious economic agenda is still taking shape on Capitol Hill, but the plans call for unprecedented spending, new energy infrastructure, more child care help, and expanded Medicare and health care coverage.
It also calls for tax hikes on the wealthy and corporations.
We get to views now on what this could all mean for the U.S. economy.
Joseph Stiglitz is a Nobel Prize-winning economist. From 1997 to 2000, he was senior vice president and chief economist at the World Bank. He now teaches at Columbia University. And Michael Strain is the director of economic policy studies at the American Enterprise Institute. He's also an opinion columnist for Bloomberg.
Welcome to you both, gentlemen. Thanks for being here.
Professor Stiglitz, I will come to you first on this.
The details of the plans are still being worked out. Wherever they end up, we're talking about a massive amount of spending, spending that the president says is necessary for the country, necessary for the economy right now.
Do you agree? Is it necessary, or is this just something Democrats want?
Joseph Stiglitz, Professor of Economics, Columbia University: No, it is necessary.
You know, there are many things about America that are different from other advanced countries. We have the lowest life expectancy, a life expectancy that is — actually was declining in the years before the pandemic, but has taken a real fall.
We have one of the lowest labor force participation rates, the fraction of the population who is actually working, of the working age population of any of the advanced countries. The median income, the people in the middle, is lower than in other advanced countries.
So there are many problems that we're facing. And, unfortunately, we have not confronted them for a very long time. Anybody that visits other countries and sees our infrastructure, relative to the other countries' infrastructure, realizes that we have a lot of gaps there, too.
And so you see the spending as it's outlined here, that would address all the problems you just laid out?
It would be a beginning of addressing them. I don't make any pretense that it really fully addresses them, but it — we have postponed addressing some of our key issues for a very long time.
And I'm really welcoming this effort to begin doing something about these huge problems that we face.
Michael Strain, what's your view? Do you agree this is necessary right now?
Michael Strain, American Enterprise Institute:
I don't think it's necessary.
I certainly agree that addressing some of the problems that Professor Stiglitz enumerates is necessary. The United States has serious challenges. The question is whether or not President Biden's plan would address those challenges and would address those challenges in the best way.
Take one part of the plan that's received quite a bit of attention, a program that would give a monthly income to households with children. This program would help low-income Americans to pay the bills, but the vast majority of the money that would be spent would go to households above the poverty line, including households that are making $200, 00, $300,000, $400,000 a year.
It is not necessary to give a household making 300 grand a year a check every month. Another big part of the plan would be to expand the Medicare program. We should be trying to provide health security to Americans, but simply putting billions and billions of dollars into Medicare, a program whose finances are already unstable, doesn't really bring health security to the Americans who really need it.
So I think there are some good goals here. And I agree with Professor Stiglitz that America has challenges that need to be addressed. I'm just not sure this plan addresses those challenges in an efficient way or in the best way.
Well, Michael, let me just follow up on that.
What about this argument that some of those investments that you see as excessive right now, child care, the tax credits, for example, the health care coverage, that those are short-term investments now that will also lead to long-term economic growth? Do you agree with that?
I don't think that long-term economic growth would be strengthened by giving a monthly check to households making a comfortable six-figure income.
And I don't think economic growth would be strengthened by putting more money into the Medicare system. There are — there are goals in this program that would contribute to the economy. So, one of the program's objectives is to increase the accessibility and affordability of child care.
That would help people to participate in the workforce, and that would help the economy to grow. I think we need to — we need to debate the specifics of the child care proposal. What the president wants to do is essentially subsidize demand for commercial daycare.
That's one way to increase access to child care. I would be much more interested in seeing how we can increase the supply of providers, to see how we could help families to have child care in the evenings and on weekends, when many lower-income Americans work and when commercial daycare centers are not open.
Professor Stiglitz, I'd love you to respond briefly to one point that Michael raised, which was this idea of no limits on some of this spending, child care tax credits, for example.
Should there be more limits on those kinds of investments in the bill?
Well, the basic thing is that in the bill that was passed when Biden first became president that provided child care — child credits, tax credits.
And that one provision enabled the reduction of childhood poverty by 50 percent in one year. But that was only a one-year provision. And so I'm giving this as an illustration that we — for such a large fraction of American young people, growing up in poverty, inadequate conditions to make them productive in the future, if, in one year, we could reduce that poverty rate by 50 percent, imagine what we could do if we made a commitment to do this over the long term.
And that is the basic core of what is being proposed in Biden's plan. Let's make sure that fewer American children grow up in poverty. And if that happens, we will have a more productive economy in the future.
Professor, what about how to pay for this?
We see that the Biden administration wants to raise taxes on people who make more than $400,000 a year and on corporations. Is that going to cover this kind of investment?
So, there are other provisions, like closing some of the loopholes which undermine the effectiveness of our tax rate. One of the striking things about our tax code is that it's not progressive. The people at the very top are paying a tax rate of just over 8 percent on their total income. Well, ordinary people are paying a much higher tax rate.
So there's an awful lot of money that can be raised by making our tax system fairer.
Michael, what do you say to that? What are your concerns about raising taxes in that way to pay for these investments?
The president has a few goals. He wants to spend a lot more money. To his credit, he wants to raise taxes to pay for that spending, rather than run up deficits. And he wants to combat climate change.
It seems to me that an obvious way to advance all three of those goals is to put in place a carbon tax. A carbon tax would raise a lot of revenue. A carbon tax is, in my view, the best way we have to address climate change and to encourage innovation in alternative sources of energy.
And a carbon tax could fund many of the programs the president wants to — wants to spend money on without the negative effects that come from increasing taxes on income.
Michael Strain, before we let you go, I need to ask you about the debt ceiling, because you have spoken directly to Republicans in your latest op-ed about this who are not joining in the effort to raise that ceiling right now.
Your latest op-ed was titled: "Raise the Debt Ceiling, Republicans. You'll Be Glad You Did."
Why should they listen to you?
I think Republicans have a responsibility to raise the debt ceiling.
The debt is a bipartisan problem. Both parties are responsible for the fact that there's a gap between federal spending and federal revenue. And so I think it's the responsibility of both parties to increase the debt ceiling.
Moreover, I think, by putting so much pressure on Democrats to increase the debt ceiling on their own, without any Republican support whatsoever, including a promise not to filibuster a debt ceiling increase that is passed under the Senate's regular order process, Republicans are making it a little more likely that the president's spending programs is larger, it happens — it happens sooner then I think would be ideal.
So there's an economic argument here, and then there's a political argument.
And we will be following both in the days ahead.
That is Michael Strain from the American Enterprise Institute and Professor Joseph Stiglitz of Columbia University joining us tonight.
Thanks to you both.
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