Saturday, June 29, 2013

More Evidence That Those Who Think Cutting National Debt is the Critical Economic Policy

How Can People Who Are So Wrong Continue to Be Taken Seriously

There has been a significant policy divide since the Great Recession started over five years ago.  One group has advocated Keynesian fiscal policy expansion, with lower taxes and higher government spending.  The other group looked at a growing national debt and said that bringing the debt under control was paramount, and that austerity with rising taxes and most importantly cutting government spending was the right thing to do.

The results of this policy contest have been in for a long time.  The austerians lost.  Their policies, which have been implemented in Europe have been an economic disaster.  In the United States the fiscal expansion was ill conceived and poorly executed, but the fact that there was fiscal expansion meant the U. S. has had a period of economic growth and declining unemployment. 

The deficit hawks have not given up, they will never give because to give up is to admit they were wrong, and if millions have to suffer because they will not face reality, well too bad.  So according to conservatives, rising debt will result in a huge increase in interest rates, so much so that a country will be unable to borrow and the entire economy will collapse.

Well, Japan has had rising deficits, deficits that have resulted in a national debt much greater than that of the U. S. compared to its GDP.  So here is what has happened to interest rates.

Interpretation:  Once again conservatives are wrong, wrong, wrong.  Will being wrong, wrong, wrong stop the news media from taking these people seriously?  Be serious.

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