Obama Will Need 18 Months to Turn Economy Around, Stiglitz Says

By Dawn Kopecki

Nov. 8 (Bloomberg) — President-elect Barack Obama will need at least 18 months to turn around the U.S. economy, even if he “does everything perfectly,” Columbia University Professor Joseph Stiglitz said.

“It won’t be easy,” Nobel Prize-winning economist Stiglitz wrote in the Outlook section of early editions of tomorrow’s Washington Post. “More than 1.2 million private- sector jobs have already been shed this year, and by the end of the year an estimated 1.15 million people will have exhausted their unemployment-insurance benefits.”

Stiglitz said Obama, who’s argued against cutting taxes for upper-income Americans, should also consider rolling back outgoing President George W. Bush’s 2001 to 2003 tax cuts as well as taxing dividends and capital gains as ordinary income.

“It would reduce the deficit, have few short-term adverse effects on an already reeling economy and make the tax code more fair,” he said.

He also said Obama should prohibit banks that take federal aid from using the money for dividends, bonuses and acquisitions. “U.S. taxpayers got a raw deal, compared to the terms won by other governments (such as Great Britain) or by the legendary investor Warren Buffett, who provided capital to the best-capitalized investment bank, Paulson’s own Goldman Sachs,” he wrote.

To contact the reporter on this story: Dawn Kopecki in Washington at + dkopecki@bloomberg.net.
Last Updated: November 8, 2008 18:14 EST