News / Economy

Debate: How To Fix The Economy

Trader monitoring markets in Europe (file photo)Trader monitoring markets in Europe (file photo)
x
Trader monitoring markets in Europe (file photo)
Trader monitoring markets in Europe (file photo)
French and Greek voters, angered by austerity efforts, are the latest to push European governments out of power.   Although cuts in government spending and services are deeply unpopular and cause economic problems, those who favor austerity say government budget deficits are worse.  Economic experts are debating both sides of the issue.

Austerity measures angered many Greeks, including some who threw gasoline bombs and rocks at police.  

They protested plans to cut government spending on services and raise taxes in a bid to repay loans.  Those loans were needed to make up for deficits when government spending exceeded revenue.  .

Nobel prize-winning economist and author Paul Krugman says austerity is the wrong way to go.  "We have had an unprecedented fall in public employment, unprecedented cutback in purchases of goods and services," he said.

George Mason University scholar Verinoque de Rugy says Japan’s experience shows that government spending increases costs but not growth.

"They have, for years and years and years, tried to get out of their recession, or their slow or non-growth, through spending and spending and spending and being in debt and that has not worked," De Rugy said.

During recessions, many governments spend money on public infrastructure to create jobs and spur long term growth. But De Rugy says, if government spending boosts demand and growth during recessions, it should not be needed when the economy is strong.

"In times of boom or economic growth, government should be cut. The size of government, government spending, should go down.  And that never happens," De Rugy said.

German Chancellor Angela Merkel says  governments that spend more than they take in must eventually pay back the loans they use to cover their deficits.  Austerity advocates argue that, without spending cuts, lenders will lose confidence they will be repaid.  That lost confidence could mean future loans will be unavailable or expensive.

Merkel’s opinion is important here because Germany is Europe’s largest economy and the main contributor to the emergency loans used to bail out economically troubled neighbors.

But Krugman says austerity has failed. "We have had one hell of an experiment in austerity  and the results are in.... Austerity has been contractionary with a vengeance,” he said.

Some voters in Germany may share Krugman's views.  Merkel's political party lost a state election recently where arguments about spending and austerity were part of the political debate.

You May Like

China Investigates Former Powerful Security Chief

Former security chief and member of Politburo Standing Committee, Zhou Yongkang, under investigation for suspected 'serious disciplinary violation' More

India, US Look to Reset Ties During Kerry Visit

This week's talks will be first high level interaction between two countries since Prime Minister Narendra Modi took charge More

Video Young African Leadership Program Renamed to Honor Mandela

YALI program, launched by President Obama in 2010, aims to build skills in business, entrepreneurship, public management and civic leadership More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.