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

EU Court Fines Poland for Hosting CIA 'Black Sites'

Ruling is first time a court has acknowledged suspects were held and tortured at the sites, under US program launched following the 9/11 terrorist attacks More

Migrant Issues Close to Home Spur Groups to Take Action

Groups placing water, food in the desert, or aiding detainees after release, have one common goal: no more deaths of migrants crossing illegally into the US More

Video At AIDS Conference, Prevention Pill Stirs Excitement

Truveda shows promise, spurring debate over access and other approaches More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Israel Targets Gaza Supply Tunnelsi
X
July 24, 2014 4:42 AM
The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video Israel Targets Gaza Supply Tunnels

The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video MH17's 'Black Boxes' Could Reveal Crash Details

The government of Malaysia now has custody of the cockpit voice and flight data recorders from Malaysia Airlines Flight 17, which was hit by a missile over Ukraine before crashing last week. As VOA's Carolyn Presutti reports, the so-called black boxes may hold information about the final minutes of the flight.
Video

Video Living in the Shadows Panel Discussion

Following a screening of the new VOA documentary, "AIDS - Living in the Shadows," at the World AIDS conference in Melbourne, a panel discussed the film and how to combat the stigma associated with HIV/AIDS.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video US Awards Medal of Honor for Heroics in Bloodiest of Afghan Battles

U.S. combat troops are withdrawing from Afghanistan, on pace to leave the country by the end of this year. But on Monday, U.S. President Barack Obama took time to honor a soldier whose actions while under fire in Afghanistan earned him the Medal of Honor. VOA's Jeff Seldin has more from the Pentagon.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.

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.