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US economy needs a second stimulus

The last stimulus package didn’t take into account the fiscal problems the recession would create for state and local governments.

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Joseph Stiglitz, who was awarded the Nobel Prize for economics in 2001, spoke to the Council on Foreign Relations this Thursday about his new book, “Freefall: America, Free Markets and the Sinking of the World Economy,” and discussed the US recovery, banking regulation, and China’s stimulus. Nathan Gardels, Global Viewpoint Network editor, participated in the discussion as a member of the council.

Adapted excerpts from Mr. Stiglitz's comments follow:

On the prospects of an economic recovery in the United States

We’ve pulled back from the precipice, but the current situation cannot be described as a strong recovery. The recession may be over in the way economists describe it – two quarters of negative growth – since growth has turned positive. But the recession is far from over for those who don’t have jobs or can’t sell the goods they produce.

The official unemployment rate may be 10 percent. But when we factor in those who are no longer looking for work because the recession has gone on so long, the picture looks pretty bad. Since the US Bureau of Labor Statistics collects data on those who have given up looking for work or taken a part-time job, we can calculate that the real unemployment level stands at over 19 percent.

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