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Stiglitz: Washington Should Stop Worrying, U.S. Has "No Problem" Paying Off Its Debts

Posted Feb 18, 2010 08:11am EST by Peter Gorenstein in Investing, Newsmakers, Recession, Banking, Politics, China
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President Obama is taking matters in his own hands when it comes to paying down the deficit.  The President is set to sign an executive order Thursday establishing a bipartisan panel to tackle the deficit; a month after Congress rejected the idea.

The deficit is projected to reach $1.6 trillion this year.  Yet, Nobel Prize-winning economist Joseph Stiglitz is not concerned. "The United States has absolutely no real problem servicing the debt at the current level,” he tells Tech Ticker.

Instead of focusing on the record debt, he's worried the new panel's actions may yield "excessive short-sided behavior."  The author of Freefall: America, Free Markets, and the Sinking of the World Economy, believes the current "deficit fetishism" sweeping through politics is potentially dangerous and flat out wrong.

He explains to Henry in the accompanying clip, there's an unfair double standard in the marketplace.  Unlike corporations, who are often encouraged to raise debt, when it comes to our sovereign debt the market only focuses on "one-side of the balance sheet," ignoring the potential revenue to come.

If (and this might be a big 'if') the U.S. uses the debt to make smart investments in education, technology and infrastructure, Stiglitz says "the long run national debt will be lower." According to his calculations, a simple 5%-6% return on these investments will easily pay for themselves and increase our competitive advantage in the future.

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