Austerity Measures Are the Proper Response to a Debt Crisis

I. Will Austerity Reduce Debt? In most countries, tax levels are already high enough. They are making enough revenue, but their spending is so large that they are at risk of a bailout. Wouldn't high tax levels hurt the people the same as it would Government reduction in spending? i. Austerity Measures will get a Government out of debt. "He noted Greek leaders want to reduce its debt to 120 per cent of its gross domestic product levels over the next ten years. However, even if this is achieved it is unlikely it will be enough to solve its debt problems."[1] Greece's goal is to reduce the debt to 120 percent of GDP. That is still alot and does not solve anything. "He said the conditions also include bringing Greece's debt level down to 120 per cent of GDP by 2020, limiting official rescue loans and getting approval from the Greek parliament. Those general requirements are not fulfilled yet, he said."[2] Greece has not made its requirements yet. As we see, its debt goal is already not enough and the Greeks haven't even mde it yet and will not make it until 2020 (maybe even later than that). And three things on Greece. One, their austerity measures are not enough. They are not getting the country out of debt. Two, the austerity measures could not have caused the Greek recession that started three years ago. And three, the austerity measures take a few years to implement. In other words, the effects are not being felt yet. It is not a good example for citing the "failures" of austerity measures. Another major argument is that, like all Government policies, austerity measues take a few years to feel the effects. All countries in Europe have not implemented austerity measures until 2010 at the earliest (most in 2011) http://en.wikipedia.org.... This means that the policies still have at least another year for full effect. So let's look at my conclusion here. The European countries have been experiencing economic recession and stagnation since 2008, and since the Austerity Measures were only implemented as early as 2010, we can not see thier full effects yet. The economic problems therefore, are just the economic stagnation Europe is experiencing now. ii. Austerity Measures will help the economy in the long term. Why can't they pay off their loans? Because austerity measure haven't been instituted to the fullest extent. The bailout should be used to help pay off debt. In order to stop increasing the debt, a Government must cut spending, or raise taxes to a truly exorbitant level. Their credit ratings are garbage for the same reason. They need to institute more measures. Spain is still in debt. Again, more austerity measures. I and X will only increase once the Government starts making a budget surplus and is able to be off its debt. X will have to improve in the senario because countries will want to do more business with them. This will raise imports and therefore, GDP. Ireland is doing a lot better than at the beginning of its financial crisis (which is a lot more than I can say for most other countries), because it was one of the first to implement the measures. It has experienced hard hits in the past, but is stabilizing now, and soon, will rocket toward a period of growth rivaling its earlier days (provided the other countries in Europe get their act together). II. Will More Taxes Reduce Debt? "austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to reduce their deficit spending, while sometimes coupled with increases in taxes to pay back creditors to reduce debt." Taxes are part of austerity measures because you need revenue to pay off your debt. They are two policies in one. http://en.wikipedia.org... i. Tax rates are already sky high. But the top end of the economic spectrum, the rich are paying 40-45 percent, using the same source: http://www.worldwide-tax.com.... And 25% is pretty high for the average income tax because that is 1/4 of your income. To put it into perspective, the percentage of your income you put toward rent (if you have a rented house) ii. High progressive tax rates kill economic growth. High progressive taxes reduce growth in the economy. I will use a quote I previously used "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."[3] Increasing taxes would reduce the C and significantly reduce the I since they make a major par of those two most important aspects of GDP. GDP needs to be raised in order to allow a country to have economic growth. Having low tax rates for the rich would help. On top of that "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."[3] Since the rich do most of the business investing, raising taxes on them would also reduce business investment. Businesses would not grow, jobs would be lost, and the economy would stagnate. So as shown, if taxes are raised on the rich, the rich would not be able to spend or invest as much, and this would lower potential GDP significantly since they make up a large part of GDP. On top of that, since the rich are the ones who usually invest in businesses, raising taxes on the rich would also prevent them from spending money that could be used on their businesses. If these businesses do not get the money, they can not grow. This would raise unemployment in the long term. III. Standard of Living. Did you know that for the countries to receive the IMF bailout that they must implement a series of austerity measures? If they do not implement the measures, they will not get the bailout. If they do not get the bailout, the country will go into default. If the country goes into default, thousands of poor will die because they can't get anything. The country in debt needs the bailout to survive. If they do not implement the measures, no bailout. My Final Conclusion: A significant reduction in spending needs to be done in order to stop the debt from growing larger. These measures will help the country get the bailout they need. In the long term, they will increase foreign investment in the country that will help it economically. Any failures in the European countries are either because they are already in a recession, have not had the austerity measures implmented for long enough, or have not implemented enough measures, or any combination of the three. Austerity measures are defined by a significant reduction in Government spending coupled with flat tax increases. Raising taxes solely on the rich will slow overall GDP growth in the short and long term through a reduction in business ventures and expanitures. And the countries need the austerity measures in order to get the bailout. If they do not implement the measures, they will not get the bailout, they will go into default, and then, total economic disaster and a whole lot worse situation for the poor. I thank my opponent for this great debate. It has been one of my best debates. I appreciate you taking the time to formulate good and thorough arguments. I look forward to this debate's finale. Sources: [1]:http://knowledgetoaction.co.uk... [2]:http://www.setimes.com... [3]:http://www.demint.senate.gov...