Joseph Stiglitz: Yes, the net stimulus is too small
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Americans everywhere are feeling the recession's pain – some more than others.
The answer is yes. The basic problem is that the first stimulus is not as big as it appears because of the offsetting reductions in state revenues. The states have balanced budgets, which means they have to reduce their expenditures or raise taxes, either of which has what I call a negative stimulus effect.The net stimulus is much smaller than the advertised stimulus because of the offsetting state and local effects.
I would have a revenue-sharing plan where the government would in effect make up for the shortfall in state and local tax collections as a result of the recession and the downturn. If states and localities are maintaining the same tax effort, meaning tax rates, the diminution in tax revenue is not their fault. It's because the federal government and the Federal Reserve did not manage the macro economy well.
NEXT: Chris Varvares: No, economy likely to grow
