Nobel Prize economist Joseph Stiglitz has a five point plan to cut the U.S. deficit. It has some principles in common with the left-wing think tank Our Fiscal Security's recommendation made last month.
Summary from Project Syndicate:
• Invest in new infrastructure, it will cut costs in the long-run. (Stiglitz assumes interest of less than 3% on U.S. government debt.)
• Cut defense spending by ending the wars in Iraq and Afghanistan and killing programs associated with the Cold War.
• End corporate welfare to the financial, agricultural, and energy sectors.
• Increasing capital gains taxes (tax on the rich).
• Raising taxes on the rich by 5%.
Now let's look at why each one of these WON'T happen.
• Republicans are in charge of the House now, so they won't want to increase spending. Pressure on U.S. treasuries is rising.
• Well, yes, Iraq war is coming to a close and Afghanistan may sometime soon too. But these things take time to scale back from. As for Cold War spending programs, some will be cut, but it's not going to be too dramatic. Too many interests at stake.
• That's how Congressmen get campaign support.
• Republicans are now in charge of the House.
• Repeat, Republicans are now in charge of the House.
So, it's only defense that has some room for cuts, otherwise Stiglitz's plan seems DOA. Even he admits it.
There’s only one problem: it wouldn’t benefit those at the top, or the corporate and other special interests that have come to dominate America’s policymaking. Its compelling logic is precisely why there is little chance that such a reasonable proposal would ever be adopted.Check out how the deficit would be cut if it were up to liberals >
Read more: http://www.businessinsider.com/heres-joseph-stiglitzs-five-step-plan-to-cut-the-us-deficit-2010-12#ixzz18OslQ7Af
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.