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Joseph Stiglitz on Recession

Posted on Jun 3, 2008

By James Harris

(Page 2)

Harris: And they’re not doing it, I imagine, because, aside from long-run consumption, getting that down, there was another component you were going to speak about that, in the future, doesn’t look good for the U.S.

Stiglitz: We have also been encumbering ourselves with huge debts, some of them apparent, some of them not so apparent. You know, this war has cost us $3 trillion, we estimate. That’s conservative. A more reasonable estimate is somewhere closer to $4 trillion or $5 trillion. Among those costs are $600 billion in unfunded entitlements to pay for the health care costs and disability benefits of our injured/disabled returning veterans. About 40% of the 1.65 million people who’ve already been deployed are coming back with disabilities. Some of them very, very serious disabilities. That’s an obligation that we’ve taken on and we will be paying this for decades to come. Because we borrowed every dime of this war, Americans are going to have to pay those bills. There’s no such thing as a war for free. Just like the economists say, there’s no such thing as a free lunch. And yet the administration was trying to pretend that you could have a war and not pay any sacrifice, not encumber your lifestyle. But the fact is that somebody is going to have to pay that price.

Harris: I just saw the report—I believe on “20/20”—that 300,000 soldiers have reported post-traumatic stress disorder. So these are people that fall into the category that you’re talking about, that will call upon the U.S. to pay for their health care. Am I getting that wrong, or is that right on?

Stiglitz: You’ve got it. I mean, one of the things is, right now, one of the—you might call it duplicitous—one of the shocking things that we uncovered as we were doing research on our book, on “The Three Trillion Dollar War,” is that so many of the veterans, when they come back from the battle in Iraq, fight a new battle: a battle with the bureaucracy to get the benefits to which they thought they were entitled. One of the reasons is that the Bush administration has underfunded the Veterans Administration. You know, they say that we’ll give our troops everything they need, they’ll give our veterans everything they need, but the reality is that they have vastly underfunded it. As late as 2005/2006, they were basing their budget on ... data from 2002, before the war, as if there had been no casualties, as if there had been no injuries in the war. The result of this is, the backlog of 400,000 has built up in the VA, the Veterans Administration. And so even when they go to the VA hospitals, they may not be able to get the care, particularly for psychological problems, for PTSD, that they need. We know from Vietnam what happens when you don’t deal with these problems quickly. You wind up with problems of homelessness, people who have a hard time putting their life together. And it looks like we’re on the road to another disaster like that, unless we resolve to do something about it very quickly.


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Harris: I have a question for you about that, but I— you’ve just reminded me of this article that I read on you in Rolling Stone, of all places. You talked about human capital. I had never heard human life evaluated that way. But you talked about people’s inability, when they return from this war and other wars, to contribute to the economy and the economic well-being of the U.S. And I found that to be one of the most profound things, because that seems to be—to me—the problem with myopic policies, whether they be in the Federal Reserve or whether they be in the administration. I don’t care which administration it is. But that seems to be the most callous negligence that I’ve seen in quite some time.

Stiglitz: I agree. And one of the scandals, again, that we discovered as we were doing this—discovered in the public sense—that people in the armed forces have known about this. You know, after World War II, we had the GI Bill of Rights that guaranteed every GI a right to an education and really had a very big effect on transforming our country. People got to go to college. They changed the face of America. Well, you know, the returning veterans in this war aren’t getting the same benefits. They have to sign up at the beginning of their service to get those education benefits. They have to pay, upfront, a couple of thousand dollars. If they don’t do that upfront—and that takes away a large fraction of their salary for the first period of their enlistment—they can’t get them. They can’t say in three years, “Oh, by the way, I’d like to get a GI bill. I’d like to get these education benefits.” They say, “Too bad; you didn’t sign up for this when you first signed up.”

You know, an 18-year-old is very different from a 22-year-old. An 18-year-old may not be able to think about what he wants. A 21-year-old is beginning to think more seriously. So rather than facilitating their ability to become active contributors, well-educated contributors to our economy, to our society, we put roadblocks. And I think it’s all based on an attempt to save money. To say, “Well, if we make them pay upfront, maybe they’ll forget about it, maybe they won’t ... and then maybe we can make money out of our education program!”

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By Give hope a chance?, June 10, 2008 at 8:11 pm Link to this comment
(Unregistered commenter)

This was obvious even before we went to war, but it makes me feel guilty ... because I think I have had more opportunities to write and comment - and have not.  I think I am a little stupified ... stupified at how little our federal legislatures have actually done.  They really are caught up in another version of the world where political gain is much more important then meaningful, correct and real constituent support.  I fail to understand how they miss the connection between money spent in Iraq and money therefore not available to their districts ... via pipeline appropriations etc.  It makes the difference come elections.  Certainly one of the issues right now is the connection between the war and our economy is not being effectively made.  Further - the flow of taxes ends up in a bating game.  The worse one, however, is the way vets are being treated.  They KNOW they underfunded, and have done so consistently for years.  And what they have created (for lack of a better word) is a very complex system that is driven on a value system of frustrating vets so that they will not pursue benefits.  Further, there are so many levels of this that they almost have to present their case in pretty close to what is a court.  They can spend years trying to get a hearing for PTSD .. or, for an illness that the military will NOT admit exists.  Here is something more sad ... the largest case load for offices representatives and senate will be the military.  And that I can tell over many years, very little has been done.  I think we need to make a really strong case for giving vets their benefits WILL stimulate the economy!  ...

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By Arabian Thoroughbred, June 5, 2008 at 3:46 pm Link to this comment
(Unregistered commenter)

How sadly true this short comment of yours, purpolewolf!

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By purplewolf, June 5, 2008 at 10:39 am Link to this comment

Welcome to the newest third world country-AMERICA! Home of the bankers and the Land of the homeless.

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By purplewolf, June 5, 2008 at 10:37 am Link to this comment

Welcome to the newest third world country-AMERICA!

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By elwood p.dowd, June 5, 2008 at 6:08 am Link to this comment
(Unregistered commenter)

The only true statement to ever come out of any Bush family member was during the ‘88 primary campaign when 41 called it voodoo economics. Keynesian economics and the New Deal worked. Real, decent paying jobs have to go to the people- and not to the corporate moneymen who will pay barely minimum to illegal immigrants here, and foreign workers in out-sourced factories overseas. The deregulation and privatization highway that we have been speeding down since Reagan has to be detoured, or we are doomed.

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By particle61, June 4, 2008 at 5:10 pm Link to this comment
(Unregistered commenter)

Stiglitz is right!

While the MSM focuses on changing the focus- the bank run blog reports daily on the current economic crisis and its financial and social consequences

published by the editors of
funny, frightening, free since 2005
and a new gwbush comic weekly

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johnnyfarout's avatar

By johnnyfarout, June 4, 2008 at 9:41 am Link to this comment

As I was reading this article I thought to myself, “How many books and articles have I read like this one?” Perhaps dozens; now one more that shows again, the rich have been running the country and this is what we get. Disturbingly this slap happy talk Stiglitz is pushing here may be far off the mark of our pending future. No longer can we talk just about the consequences of the last 30 to 35 years as if it has only to do with a problem to be “fixed”, and a way for the USA to see “morning again”. Once Reagan removed the solar panels from the White House roof, the church bells that were heard all over America were knelling, “for whom”. The presidency since has become ever more the office of oppressive reaction across the world, stomping down on whatever the bankers and oil men point out as “a problem for portfolio growth”. But beyond this the planet has a reality of its own. One shrugged away as if the only real things are Federal Reserve Notes and how many are flowing into the pockets of the ruling elite class. Abstractions have replaced realities. Fantasies are the new raison d’être. The fantasy that the world as created by the imperial Western system can go on and on and only needs a few “fixes”. The spiral of fixing has careened out of control. “What’s good for GM is good for America.” may well be a sad epithet. The huge efforts expended in the last 100 years to pump dry the oil fields and spew the exhaust into the atmosphere and rivers and lakes and oceans is the political and economic nightmare mankind is waking up to. As a species we may not be able to recover. We needed to start that morning Reagan watched his powers in action on America’s symbolic roof. That may have been our last chance politically, environmentally, and economically. They knew it then and we know it now. The crushing of the working classes’ organizations is the second sad bell knelling the last hurrah; sensible public transportation, S&L;’s, unions, and now their houses, and their gas guzzling cars, going each one as federal reserve notes accumulated at the top of the teetering colossus of deception. As if keeping them out of the hands of those who make things work was the most rational effort civilization could make. Let’s take some Prozac with that martini lunch; let’s have a beer with that president who is on the wagon and chokes on pretzels in the country’s basement. Who can go on with this? All the notes are violently discordant. Oh the irony of such clever boys and girls having this systemic crime lead us all so far astray; is it us who stand, gladius raised in hand and shout: “We, who are witnessing this tragedy end, salute you!”?

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By Ed Harges, June 4, 2008 at 9:10 am Link to this comment
(Unregistered commenter)

Matthew Rothschild, editor of the venerable “The Progressive” and of lambastes John McCain as “John McCAIPAC”.

It’s clear that a fanatical dedication to a militarized and domineering Israel makes McCain “tick”, but why this is so begs a larger question: why does the far right get to define what it means to be “pro-Israel” or “anti-Semitic”?

Rothschild doesn’t count as a “major Jewish leader” because you see, his views on the middle east are somewhere to the left of Attiila the Hun. This puts him closer to actual Jewish opinion in America, but in direct opposition to the “major Jewish organizations”.

Rothschild writes (by the way, Howard: this is how you quote a person at reasonable length, giving proper credit and a link):

“When John McCain went before the American Israel Public Affairs Committee (AIPAC) on June 2, he could not have been more obsequious to this group that has done more than any other in the United States to block a just solution to the Palestinian quest for statehood.

“...Israel doesn’t really want peace, and McCain was telling AIPAC that this is just fine by him.”

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By elwood p.dowd, June 4, 2008 at 7:19 am Link to this comment
(Unregistered commenter)

And the neocons were able to create this disaster by simply using fear. The American people should be ashamed of themselves for allowing this to happen. We have squandered our children’s futures,while enriching a select few, all to fight this absurd war on terror. FDR was right.

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By GoldenT, June 4, 2008 at 5:44 am Link to this comment

The pigs at Goldman Sachs and Morgan Stanley who have brought us this mess ought to be crushed. Pressure your congressional representative to close the London loophole.

Speculation is the driving force putting the cost of life’s essentials out of reach. Any other “explanation” simply is a contemptible lie told on behalf of the aristocracy propping up the British Empire ... the same liars who brought us WMD in Iraq and all the other crap jammed down the throats of a free people by a bunch of Tories inside and outside the beltway.

Mr. Obama, you can have your “special relationship” with these two-bit thugs if you wish, but this Democrat is NOT voting for you.

Mr. Dodd, your Public-Private partnerships are only a solution if you possess some strange love for Benito Mussolini.

Mr. Frank, that freak Rohatyn is no American. He is only all too good at abusing the People. May he hang you.

Ms. Pelosi, get gone. You had your chance to be Henry Clay and YOU BLEW IT.

Listen, no matter who you freaks impose as our next President, Wall Street, mother England’s child, is FINISHED.

And a new Franklin Roosevelt will rise…

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By Arabian Thoroughbred, June 3, 2008 at 8:22 pm Link to this comment
(Unregistered commenter)

So it’s the war stupid! And more so it’s a war based on lies, deception and plain evil. The economy might relatively recover after one or two years, but how are you going to fix millions of shattered lives, mostly in Iraq, but also at home!

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