How to Stop the Downturn

World economy has tendency in following America's economic lead. As American economy goes sour, so does world economy. At least that's what seemed plausible early this week when stocks in Asia tumbled trailing U.S. economic "slowdown".

Joseph E. Stiglitz who won Nobel Prize in Economics, and had written a few splendid books on globalization and world trade, has a few good suggestions on "how to stop the downturn" in U.S. economy, that in turn can surely help the overall world economy by default. Here are a few pointers from his The New York Times article:

• The country needs a stimulus, but anything we do will add to our soaring deficit, so it is important to get as much bang for the buck as possible. The optimal package would contain one fast-acting measure along with others that could lead to increased spending if and only if the economy goes into a steep downturn.
• We should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately.
  
• The federal government should also provide some assistance to states and localities, which are already beginning to feel the pinch, as property values have fallen.
• More federal support for state education budgets would also strengthen the economy in the short run and promote growth in the long run, as would spending to promote energy conservation and lower emissions.
• The Bush administration has long taken the view that tax cuts (especially permanent tax cuts for the rich) are the solution to every problem. This is wrong. Tax cuts in general perpetuate the excessive consumption that has marked the American economy. But middle- and lower-income Americans have been suffering for the last seven years — median family income is lower today than it was in 2000. A tax rebate aimed at lower- and middle-income households makes sense, especially since it would be fast-acting.