Watch Stiglitz: U.S. Economy Actually Needs More Spending

The U.S. needs smarter spending to climb out of the economic recession, says Nobel Prize-winning economist Joseph Stiglitz.

"The real problem is the way we're spending money not the amount we're spending," he told told CNBC in an interview at Davos. "What we really need to do is actually increase our spending on investments ... and cut back our spending on weapons that don't work against enemies that don't exist, wars that we're going to lose in any case" Stiglitz said."Let's focus on strengthening our economy."

Stiglitz's plan is to spend on investments that will stimulate growth -- a could begin to reduce the deficit.