Austerity Measures Are the Proper Response to a Debt Crisis

I. Will Austerity Reduce Debt? Pro opens by saying that government debt comes from spending too much. This is half-true. I could equally say government debt comes from not making enough revenue. My contention is that even if, from a particular angle, overspending is a cause of debt, underspending isn't a good solution because it hurts the people, whereas increasing taxation doesn't do that in a debt-crisis situation. Furthermore, after a problem has been caused, enacting a different policy can sometimes make the original problem worse. Let's look at some of the economic analysis I gave as to why. .. i. Austerity Measures will not get a Government out of debt. Since the recession, Greece's economy has slumped back more and more, despite implementing more and more austerity measures. Last year their economy contracted 6.91%, which is massive. That's a whole twentieth of the entire economy dismantled in one year (. http://en.wikipedia.org...). It's one thing for a economic opinion piece in AskMen to assert their austerity measures didn't go far enough, and another thing for that to be true in practice. Thousands of government jobs were cut (. http://www.usnews.com...). Millions are left unemployed. Government workers have lost all their pay and pensions. The government is forced to privatise some of their industries in the long term (. http://www.bbc.co.uk...). Who would be surprised that killing jobs and reducing pay would contract the economy? Of course it would! And their tax increases have been on alcohol and cigarettes, not savings, which tends to hurt the poor more than the rich as the rich can simply travel overseas and buy their alcohol/cigarettes there. Now let's look at Spain's apparently-bigger austerity measures. Hey look, a 24% unemployment rate. That's the highest (worst) in Europe (. http://www.bbc.co.uk...). Why? Because young people can't find work. And as a result, GDP is contracting at about 5.1% there, not far off from Greece (. http://online.wsj.com...). That's because of the massive 7% decrease in government spending. Wow, isn't that huge? And that unemployment, according to the best economists, is directly due to the austerity - Spain has always had strong labour laws, which have been the source of its competitive advantage, and are completely undermined by austerity (. http://www.guardian.co.uk...).ii. Austerity Measures will not help the economy in the long term. We know austerity reduces output. Surely that will also reduce worker's income? If you can sell three buttons instead of two, would you not make more money? Is it not reasonable that a governments income will then be reduced with austerity also? And if the government's making less money, surely they can't pay off their loans so well? That's why the credit ratings of both Greece and Spain are at, or very close to, garbage. Spain and Greece will remain in recession until the economy collapses or the austerity ends - it's always been that way. Con says that I and X increase with IMF bailouts. That's dead wrong. Look at Spain - both remain low. Why? With a rapidly contracting economy, a tense political situation and lots of unemployed running around wrecking havok, surely my opponent would agree the risk of making a big investment into Spain right now is massive. During any recession, but particulary one fuelled by a debt crisis, there is a phenonmenon known as capital flight - everybody rushes to take their capital to so-called "safe havens" until it's all over. More austerity doesn't encourage anyone to bring their capital back because they have even less government incentives to do so. Both Greece and Spain still have very high long-term interest rates for this reason - I think Spain is still about 5.5%, Greece is at above 10%. Capital flight also means there is no shortage of workers for the unemployed to conveniently go to - indeed most of the unemployed in Spain (more than half) are young people, not government pensioners. Similary, if production drops in an economy, you can expect a greater reliance on exports, and a more unfavorable exchange rate relative to other countries. Therefore, X will not improve. All this is shown in an economic theory called the Expansionary Fiscal Contraction hypothesis. Pro brings up Ireland as an example. If you read his quote, it admits that the economy has been hit hard by austerity, with "some signs" the economy will "stabilise". First off, stabalising in a weak, contracting economy is a bad thing. You want to stabilise in a strong, growing economy. Secondly, the source is incredibly vague about what these signs are - without any specific indications, it's likely this is no more than wishful thinking on the part of a politician eager to not lose his own job. II. Will More Taxes Reduce Debt? Austerity is defined as "a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided". It is sometimes coupled with lower taxes, but fundamentally the two are different policies (. http://en.wikipedia.org...). As I have proven, the two policies have very different objectives. i. Tax rates are already sky high.25% is not high for taxes. In my country, for instance, we have a company tax rate of 30%, and a personal income tax rate of just above that. This is despite the fact we have the second-lowest personal tax burden in the OECD (. http://www.nzherald.co.nz...).ii. High progresive tax rates kill economic growth. Oh, and austerity doesn't! ? But I digress. .. The idea that economic growth is stifled is predicated on economic growth actually happening. In case you haven't noticed yet, these are economies going through negative economic growth - they're destroying themselves exponentially with debt they can't repay unless they have more income or less spending (in the short term). High progressive taxes give money to help grow the economy and allow the government to make investments through spending. This drives economic growth. The effect would be greater if the money was directly spent as investment - but investment doesn't happen. In a debt crisis, capital flight happens. So rather than no investment, in a debt crisis, high progressive taxes mean more investment. The situation is different in a healthy economy, but these economies are as sick as they get. III. Standard of Living. The idea that a country without a bailout is a country in disaster is humerous - it's because they are in disaster that they get a bailout. High taxes means less disaster. But that's not the point. The point is that even if they work in the long-term, the short-term imperative is far greater. If millions die on the streets of Spain from hunger and rioting, it wouldn't matter if they are the richest country in the world tomorrow. What matters is that they have committed an IMF-sponsored genocide of the poor. Pro does nothing to counter my moral analysis. I look forward to reading my opponent's conclusion.