The unemployment rate has become the most urgent issue threatening the US economy, even though the nation still has other internal and external issues to watch, such as its own debt problem, the eurozone debt crisis and the state of the economy in China, Nobel Prize in Economics laureate Peter Diamond said in Taipei yesterday.
Diamond, who is scheduled to deliver lectures on a possible future global economic crisis and national debt in the US and Europe today and tomorrow, said what the US government should focus on more should be the unemployment issue, instead of its debt problem, which might require more time to improve, step by step.
“It seems to me that the US has an unemployment crisis and a debt problem, yet [decisionmakers] see it as a debt crisis and an unemployment problem,” Diamond told a press conference, adding that the longer it takes to solve the unemployment issue, the worse the economy would become.
Photo: CNA
GOOD TIME
Diamond said it is certainly a good time for the US to expand its public spending by building more infrastructure, drawing on resources like workers sitting idle and so help lowering the national jobless rate.
In addition, he said, the US government should increase taxes on the wealthy, because its emergency measure of expanding public spending would deepen the its financial burden.
TAX THE RICH
Although there is opposition to increasing taxes on the rich, it remains an appropriate measure to improve the wellbeing of society, Diamond said.
“No matter whom it takes from, the government needs to raise resources for supporting infrastructure and people in need,” Diamond said, adding that expanding the infrastructure would enhance the efficiency of the nation’s economy.
“It is not a problem of ‘is it harmful to do this?’ It is a problem of ‘is it more harmful to take the resources from high earners or from other people with lower earnings?’” Diamond said.
As for the US debt issue, Diamond said it was a manageable problem that the government has more time to solve, rather than an immediate crisis.
However, if the government cannot solve the problem in an appropriate manner, the debt issue would become a crisis within two decades, he added.
Diamond said the debt crisis in the eurozone, which must be solved immediately, was also a key issue that the US should watch, but the crisis may lead to a recession only in Europe, based on his knowledge thus far.
CHINA
The state of the economy in China is another aspect that global economies should carefully observe, because a global recession might occur if China’s inflation or liquidity problem deteriorate in the future, he added.
Diamond, 71, shared last year’s Nobel Prize in Economics with Dale Mortensen of Northwestern University and Christopher Pissarides of the London School of Economics.
He is a professor at the Massachusetts Institute of Technology.
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