Austerity Measures Are the Proper Response to a Debt Crisis

I. Will Austerity Reduce Debt? I'll be more detailed in my "common knowledge" statement. Government debt comes from the Government spending too much. That means that they are spending more than they are taking in. Wouldn't cutting Government spending to a level below what they are taking in lead to a surplus that would allow them to pay off their debt? i. Austerity Measures will get a Government out of debt. Since you use Greece as an example, so will I. Greek austerity measures are not enough yet. They have not instituted enough cuts that brings the country to a budget surplus. They are still running deficits. "'The promises from Greece aren't enough for us anymore,' Schaeuble said. 'With a new austerity programme they are going to first have to implement parts of the old programme and save.'"[1] But now, let's look at a country where austerity measures have been instituted at the correct level and correctly. I will use Spain. "They work. For example, deep cuts in spending have helped Spain reduce its deficit 53% during the first half of this year."[2] So austerity measures do work, they just need to be instituted at the correct level so the country can start being able to balance their budget. They also need to be instituted correctly. Greece is the prime example of where these policies have been instituted but are too few to matter. ii. Austerity Measures will help the economy in the long term. In the beginning, Austerity Measures will hurt the economy. Again, using the C I G X=GDP equation, austerity measures will cut the G, which in turn will cut I. But when the bailout is approved by the IMF, they can get the I and X back up since more doing business with the country is part of the bailout. This will spur more capital investment, which will in turn create jobs. "The people become newly unemployed as a result of the austerity measures are those who were either employed by the government or those who worked for companies which had government contracts for construction/public works/etc. However, the employment numbers will likely also be higher because of the re-entry of individuals who lived on government pensions (which are also being slashed quite a bit) who will try to enter the labor force to make up for their lost income."[3] These unemployed people will be reemployed to help counter the job deficit (meaning companies need jobs). Using Ireland as a particular example since the austerity measures have been in place and we can see the long term side effects, "I think it's too early to say we're getting back on track, but it's certainly weathered a good deal of the storm. The cuts that we're announcing in this budget are just the latest installment. They account to about 2.5 percent of Ireland's GDP this year. We've had a sharp enough hit to personal incomes you can imagine; unemployment has risen. So it's been fairly tough, but there are some signs that the Irish economy is beginning to stabilize."[4] Again, as shown, there is an initial loss in GDP from the reduction in Government spending and an initial rise in unemployment from the lost Government jobs, but over time, as more investment comes in and as the people once on Government pensions have to seek work (which is available from the investment), unemployment falls and with it, GDP rises in turn from more work being done and from the increased foreign investment. If all of this fails to make any sense, basically implementing austerity measures would increase investment that would increase jobs and growth. iii. Austerity Measures would not entail a bailout. As shown, since the Government is making money and the increase in foreign investment increases the employment rate and growth, wouldn't average income and the economic situation be better? There woud be no need for a bailout because the Government is balancing the budget. II. Will More Taxes Reduce Debt? My opponent does not realize that tax increases are part of austerity measures. "Austerity is, essentially, raising taxes while cutting expenditures in order to run a budgetary surplus for a few years. So the idea of "implement a great taxation system" is exactly what they are doing."[3] He has some bad arguments about taxation, but I will refrain from pointing them out since they are irrelevant to this particular topic. However, I can debate a few relevant points. i. Tax rates are already sky high. Again, I will use Greece as an example: "All tax on an individual's income in Greece is progressive. As of 2011, a Greek individual is taxed at a rate of 18% - 45%.""In 2011 the standard rate of corporate tax in Greece is 24%. For accounting periods ending after 31.7.2011 the tax rate is 20%. For Greek partnerships the tax rate is 25%."[5] Greece's tax rates can not be raised much higher because the standard of living will just get worse. Cutting Government Spending needs to start therefore. ii. High progresive tax rates kill economic growth. My opponent states that raising taxes will, in his words "investment will be less than during economic boom-times". He is correct there. And yes, sometimes the economy has to be put behind national debt to save the country. But a progressive tax system does not to much more and will kill economic growth further. Since America is the prime example of a progressive tax system, I will use it as my example: "Squeezing the rich doesn't work. Despite marginal tax rates as high as 90% and as low as 28%, federal tax revenues have remained fairly constant around 18% of GDP." Now for the attack, "The top 5%, those making about $150,000 or more, account for 37% percent of all consumer spending, about as much as the bottom 80% put together.""Top 10% of families account for 64% of all major investment assets."[6] So again using the C+I+G+X=GDP equation, that's killing a significant portion of the C and the I, which usually make up around 85-90% of GDP. And as a side note, "The President's new taxes could threaten to destroy up to 1.2 million jobs per year and would cost small businesses $74 billion annually. Americans making more than $150,000 spend an average of $125,000 per year – enough to support more than two middle-class jobs."[6] I guess progressive tax systems kill jobs too. I wil leave my progressive tax argument at that. I agree with my opponent that a sizable tax system needs to be in place, but it should be flat as to minimize the damage to the economy and needs to be used in concert with austerity measures. Just implementing tax increases will not cut it. III. Standard of Living. Yes, but the effect is only temporary. Once the investment comes in, there will be a significant jump in the economy, thus boosting growth and jobs. I have said all my arguments here in point 1. Refer to those. IV. Austerity Measures are imperative. This in effect kills your argument. Every time in the Europen debt crisis when a bailout was needed, the IMF put austerity measures in place, meaning the country had to pass them or they would not get the bailout. No bailout, country in disaster and default. This would make the living situation 10 times worse. You need austerity measures to sae your country in two ways, to help stop overspending and to bring in the bailout. Conclusion: I have proved that my opponent's strategy is already part of austerity measures, and have shown that using a combination of austerity measures and reasonable flat taxes, a country can get out of debt and more importantly, stay out of debt. I have also proved that austerity measures increase the standard of living in the long term and not implementing them would stop the necessary bailout. I have proved my two points. Sources: [1]:http://www.reuters.com... [2]:http://www.askmen.com... [3]:http://www.quora.com... [4]:http://www.marketplace.org... [5]:http://www.worldwide-tax.com... [6]:http://www.demint.senate.gov...