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

Video Is West Doing Enough to Tackle Islamic State?

There is growing uncertainty over whether West’s response to ISIS is adequate More

China Crackdown on Dual Citizens Causes Concern

New policy encourages reporting people who obtain citizenship in another country, but retain Chinese citizenship; move spurs sharp debate More

Video Coalition to Fight Islamic State Could Reward Assad

Losing ground to Islamic State fighters, Syria's government says it is ready to cooperate with international community More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Is West Doing Enough to Tackle Islamic State?i
X
Henry Ridgwell
August 29, 2014 12:26 AM
U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Pachyderms Play Polo to Raise Money for Elephants

Polo, the ancient team competition typically played on horseback, is known as the “sport of kings.” However, the royal version for one annual event in Thailand swaps the horse for the kingdom’s national symbol - the elephant. VOA Correspondent Steve Herman in Samut Prakan reports that the King’s Cup Elephant Polo tournament is all for a good cause.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.
Video

Video America's Most Popular Artworks Displayed in Public Places

Public places in cities across America were turned into open-air art galleries in August. Pictures of the nation’s most popular artworks were displayed on billboards, bus shelters, subway platforms and more. The idea behind “Art Everywhere,” a collaborative campaign by five major museums is to allow more people to enjoy art and learn about the country’s culture and history. Faiza Elmasry has more.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Uneasy Calm Settles Over Israel, Gaza Strip

Israel and the Gaza Strip have been calm since a cease-fire set in Tuesday evening, ending seven weeks of hostilities. Hamas, which controls Gaza, declared victory. Israelis were more wart. VOA’s Scott Bobb reports from Jerusalem.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. Shaikh Azizur Rahman reports from Kolkata.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.