Transcripts For CSPAN2 After Words With Joseph Stiglitz 2024

CSPAN2 After Words With Joseph Stiglitz June 22, 2024

Local level and at the National Level you need to do that as well. But to have something sustainable all welfare programs block grant to the state medicaid medicare everybody has the basic benefit and you compete for that additional ad on that together for dont do the right and plan with the depth of understanding with a sitting congressman and of the right and plan. Putting them together improving the economist i would like to meet with you i am with him. For 20 minutes or half an hour. With every eight republican member of the house i met with them to walk through the space budget so everyone has day tutorial. That is remarkable given medicare reform. They can explain it to two young people and middle income and retired people this is not a threat but a help to your future that you have that base of understanding to make the difference in the world there would lois be a grand bargain that is unchanged and then we become friends now were a 20 to go up to 42 state taxes up to 30 then bring 40 down to 38. That is losing i call it a compromise. Bigger than where it is. The fact republicbank republicans have tax increases they find that an interesting you never see the Washington Post right about those reforms into promise those news reforms but alls they have done is added to the entitlements and now the most recent fight for stock obama with the reforms on medicare. I think were at a time even though i have another hour of questions. Is a fine book i wrote from 5 00 in the morning trade 00 in the morning it is like living with someone who lives in how why we were on different time zones we were awake some of the time. [laughter] host i enjoyed reading it very insightful observations i never thought of. Guest thanks for having me host and i am here with nobel prizewinning economist, ed Joseph Stiglitz i am very excited to have this conversation. Guest nice to be here. Host i am president of an Organization Called demos real have an equal say in equal chance in our economy think of the work they you have done the clarion call there has been a sharpening the past few years of your commentary for what is feeding an economy what it gives you the rightta to about Campaign Finance . We could not not talk about that. With the issue of equality. And quintessentially Industrial Town that began in 1906 the largest deal mill in the country the chairman of the board of u. S. Steel. But when i was growing up and i went to college but that feeling for inequality in des talking a couple of essays. In that was 51 years ago. And we made some progress. We have opened up doors and we have eliminated gender even though we all talk about it. But the quality itself does ben a lot worse when i was growing up to the golden age of capitalism then all of a sudden things got worse and worse we had a sense of hope i grew up in chicago lot of my family to open after African Americans in limited ways i was born 1980 the beginning of the of very different era. To the unraveling of the economic contract. To think of the political changes from the era of shared prosperity and how much there is a political wind behind a new selfishness with the backlash to africanamericans i often think about that shared a contract between labor and business sent government. It has to be three white men. With henry ford and eisenhower. And in some ways business and government got up to leave the table. Guest you ask what right do i have to comment . What you said is related to that i tried to spend 50 years to understand economic models the answer was you couldnt. You couldnt understand why any standard competitive Equilibrium Model while people got such a different pay. They cannot explain power relationships not only discrimination but slavery the was the most obvious example but then i realized those were the easy things to see that the night in beneath the surface that was shaping the economy. But they were projecting all of us one way or another. This is for collective action. If you have more monopoly power that is the power to raise prices. You lower wages just as much by weakening the Union Workers by strengthening corporations. And where politics starts to enter that is the rules in aggravations even like the Federal Reserve to all the politicians interfere with that. But the fact is the Federal Reserve thank is managed by a group of people that are appointed but appointed by whom . Is something is called the open Market Committee for Interest Rates to go up or down theyre not elected in the old ben and transparent their representative of the Financial Community so you get policies focused on equation but not employment. To say on employment and growth and now even Financial Stability the you have people like Alan Greenspan to says they know much more what to do in self regulation for predatory lending market manipulation that they transfer money to the people at the very top. Trip by a trip lot by lot so with these banking practices the can see at the same time to make the poor people for. To make the rich people richer. In a way to undermine our economy for it is pretty obvious and one is to make it more stable. But also undermines the economy in another way. That have to spend everything just to get by with that indebtedness. So they would demand growth. Historically 70 of gdp if you take away many from those whose spend it he will not grow the economy. Very much before the crash people using their home as the atm and that has went away to borrow to make ends meet and it was an expensive form of debt. Which the credit card act of 2009 saving families 50 billion. Its not like they couldnt provide the services for a 20 rate payment mechanism which would have a lower transaction costs. Cut percentage of gdp went from a little over 2 there are taking away 40 of corporate profits that could have went into investment. That is why you explain so well with the of the evangelization of the economy the idea that it isnt supposed to be the end to with self but up pipeline for capital to be used in the economy. The Financial Sector has been siphoning that offer is also the real economy just gets a trickle. So the question of what the Financial Sector should look like to offer ideas for reforms beyond dodd frank. But it was mostly about whole debate to do that kind of damage . We didnt know we should have begun for what it was supposed to go fully if you stop it from other things but that is the hope of where is part of that coalition at that time working in washington d. C. Running point on six titles of dodd frank but that drafter that we got from the secretary of treasury was first and foremost, preserving the system and reformers like us did not want to. [laughter] we need to stop from what happening again because that is the unfinished business. Exactly. That is important for business. Small or Mediumsized Enterprises with capital to start with the flow of money years after the prices down more than 20 . Then take the homeowners. To with capital and manage risk to come up with financial products. Wages go up and down with lots of risk what they do . Were not focused on managing risk george has been raging fishing for fools to find food they could prey of the most to extract the most money out of. Then shift to investors. And eventually a other taxpayers. Even in the United States here in new york state said there was the product that worked with low Interest Rates with a teaser rates no balloon payments. They manage their way through the crisis but the public wasnt trying to pray anothers that worked. Other countries have mortgages but the maturity various. You dont have to wake up every morning to wonder if it is in your budget bill for 25 years to 28 years you can manage that but that is a simple example what are the kinds of constraints to individuals . What are the margins they can adjust . It isnt that hard in a lot of things we could have done that we didnt. To one of the important aspects is the transaction cost. But the Financial Sector wants to maximize the transaction cost that is there in,. [laughter] guest what is the cost to us is their profit. They want to maximize we want to minimize i would get how the system works to say that is not how i will functioning market works. One of the things i talk about the great divide is the version you have to make markets work like markets. Host talk about that. When we were working on dodd frank before that and crying about the fact there was of bubble and predatory lending the economists were not necessarily all on the underside attitude to the wonderful job to create the food did it will kill the American Economy you they blame but even on your own field so can you talk about what they did to help pave the way and is there a way for economics to lead us out . When we think about who is to blame the bankers and Financial Sector who did what they were supposed to do actually worse than that. They were engaged in behavior, if not illegal should have been. I also blame the government because the Financial Sector has often behaved that way and we know about that that is why we passed that legislation like glasssteagall after the Great Depression and they were not doing their jobs for girl that is how 32 our conversations we need regulation for officials. To persuade politics year rubio glasssteagall one company got a hundred 80 billion in a single act of corporate welfare over years but behind those stakes to gave assurances, i dont worry the markets are you efficient and stable that they provided the intellectual underpinning to believe any efficient markets with the unregulated markets and the scope for all this bad behavior and they opened the door to say dont worry people will behave well. One of the interesting things was Alan Greenspan after the crisis said there was a flop. Oh little flaw that cost 5 billion. [laughter] millions of americans losing their homes and their jobs but there was a flaw with that illustrates the schizophrenia. He took from the economist lexicon that the markets worry efficient but there was Research Going on that said that is untrue. This is the period of the Economic Research the work that we did with information imperfections and behavioral economics people are not as rational but that model you are using is totally wrong. Totally wrong. Their predictions for that model will be wrong. Im modestly say we were right. [laughter] and with the selective use of Economic Research their virtues schools of thought with two schools of thought they dont work perfectly the financial burkett shows to Pay Attention to the one that was convenient the politicians chose for the ones that were compensated. That brings us back to why it is so important because it was setting the rules to allow them to do the stains with the enormous effect is the biggest economic event of 75 years. And you can separate that that allows this to occur and that intellectual doctor in. Now we are out of the crash moment where the question is not Financial Stability but just to be shed and growth and there is also a and economic debate whether or not in a quality is acceptable under the rubric of what is supposed to matter openly witches gdp growth and finally i think of it of a shift to understand the relationship that we cannot have these levels of inequality of the growth that we want to. Can you talk about that evolution . Now is is the inhibitor not just the natural outcome of positive growth . This is one of the major shifts of our understanding of economics. A used to be thought there was a tradeoff you could only have more equality if we gave up on growth with is an important to mention. But now we see that as a compliment especially the extremes of the United States. This is not a discussion about equality and nobody talks about that but whether bringing back the inequality from extraordinarily high levels to make our economy stronger. What does that look like . Tax increase is that the top floor are you more concerned about mobility or people at the middle . How do you balance . What i emphasize it isnt just a redistribution but that some people call predistribution before taxes so if you think about the in thinking about the Human Resource question, you have a great essay in here, the great divide. Its one of the issues that has changed in my lifetime. We recently posted a study that looked at the cost sense the Great Recession. Six six years after the Great Recession from that state Education Funding is below the prerecession level. This where the government says we believe in you, the next generation and were going to invest in you. We talk a lot about statelevel things that are happening. As it hit over trillion dollars of student death, they say say its not about public funding its about bigname buildings. Theres been been this construction boom on campus, this administrative blow. We tried to get into this and we found that state Higher Education cuts were responsible for 79 of the hike. So when you think about this question of what we owed to the next generation, what the role of government is, and how that inequality of opportunity is being passed on to the next generation, to what degree do you think funding Higher Education making of the public good is important . Guest its absolutely essential. Put it into the context of what i thought about growing inequality. The fact that in the middle what you saw is income stagnating for families and tuition going up, because states cut back by 25 their support of public education. They had. They had no choice but to raise tuition. The only thing that can help that circle is a debt. And now were seen that is having macroeconomic effects and huge effects on these individuals. So these kids can start to make a family, make purchases, they dont want to buy a house, they cant buy house. All of these things that are very difficult for the individual but also difficult for our economy. It also means we are no longer country of opportunity because what it means, i tell my students the most important choice and decision you have in your entire life is choosing the . And if you make the mistake of choosing a parent in the bottom, youre going to have a really hard time. The kids at the top, of course their parents are going to send them to college. Host its interesting because it never used to be that way. You used to not need a College Degree didnt order to get ahead. But in the 1990s and this and this is bipartisan consensus and we set as a country, its okay to ship over those workingclass industrial jobs because we are going to be the country of innovation. We are are going to be the smart guys. At exactly that same time we will take all the educated jobs, we cut back on funding Higher Education for exactly the families that would have been able to get a good unionize workingclass job now are left with having to go into debt and be frozen out of Higher Education. Guest youre exactly right. Even if we hadnt done that, the changes in technology would have pushed us to require more education. Its actually worse than you described it because today a lot of the good jobs, what used to be the college jobs now you need a masters degree. That means that not the average of 25 to 30,000 dollar debt but 100,000 or 200,000 or 200,000 debt that really makes life very difficult. Some of the most stories outlined in my book kids say im in a pickle. I have this huge debt from college, i know i need to get an advanced degree or i need to take an unpaid intern, i dont have the connections and i cant live and take the it on paid intern and i cant borrow any more to get that masters. Yet they are caught to and and they know that if they dont do that, or even worse case they dont get to college, their incomes have plummeted down. Theyre caught between a rock and a hard place. Spee1 i think its Important Press to talk for us to talk about the issue to recognize that this is not just the foot of the ivy league question, two thirds of young people who graduate go go to college. The problem the number one reason students have been dropping on is that financial burden. The worst thing that is happening so often that people are going to college and working full time mother trying to get that degree, whatever reason its financial pressure is getting too much and they dont have a degree but they still have this debt. That is where we really have walked away from a commitment of opportunity. Guest absolutely and its even worse for the forprofit. Lets put this in a historical context. After world war ii we were a much poorer country. We had the gdp ratio of 130 , our gdp over the last seven years has increased enormously. Yet, we we said at the end of world war ii that we could afford a free for your College Education, the best anyone could get into, if you got into harbor we pay it. Everybody who fought in the war and a lot of women, here we were a poor country and we said we could afford it. Like i said we could not not afford it because that was the basis of and it was a period where we grew together. President obama has proposed a twoyear Community College he and you hear from some that you cant afford it. To me thats nonsense. Nonsense. One of the main messages is its a matter of choice. We chose to do it then, we made the right choice and we

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