Category Archive: Debt/Spending

  1. A Five Minute Crash Course on the Greek Crisis

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    The economic and financial turmoil in Greece has been in and out of headlines frequently over the last few months. The Greeks claim austerity measures have only made things worse, while the EU claims Greece continues to fail the austerity measure put in place to receive future bailouts. In this video, we explain what has led to this point and how it’s a problem not likely to go away anytime soon. Check out parts one and two of our videos on Greece below.


    What do you think? Are the Greek people and the Greek government being treated unfairly by the European Union?

  2. Greece Should Default

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    Newly reelected Greek Prime Minister Alex Tsipras expects that by early 2017 Greece will be able to access bond markets, from which it has been virtually cut off since it lost investor confidence in 2010. If it is unable to meet this timeline, it will be forced to rely on further bailouts or go bankrupt.

    In the new Learn Liberty video below, George Mason University professor Garrett Jones argues that the bankruptcy option may be the best route for Greece to take. Going bankrupt, he argues, is not some horrible crime. Sometimes you make promises that you just can’t keep.

    Jones explains that Greece should discharge its obligations so that it can start fresh with supply-side reforms like a simple tax system and strict rules against corruption that the global investor class love. In other words, rather than continuing to kick the can down the road, Greece should crush the can and crack a new one!

  3. ‘Loonie’ Canadians Elect Spendthrift Regime Despite Success with Cutting Spending

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    Last week, Canada elected a new Liberal Prime Minister, Justin Trudeau, who has vowed to massively boost public spending and run several years of deficits, arguing that the “infrastructure deficit” is bigger than the fiscal deficit. He claims that such stimulus spending will spur economic growth.

    But in the video below, economist Stephen Davies looks at recent Canadian history – as well as that of other countries – to explain that the exact opposite is true: economic growth occurs when governments cut spending. He says that Canada, whose economy rebounded after significant public sector cuts in the 1990s, is the “obvious case.”

    That’s because cutting public spending means that money that otherwise would have gone to the government becomes available for productive purposes that create more wealth and a higher standard of living for everyone.

    In other words, like their currency, Canada’s new plan is downright loony.

  4. New York Times’ Solution to Fiscal Problems: Eat the Rich

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    The New York Times came out with an article last weekend claiming how much good raising taxes on the country’s wealthiest could do:

    [W]hat could a tax-the-rich plan actually achieve? As it turns out, quite a lot… the government could raise large amounts of revenue exclusively from this small group, while still allowing them to take home a majority of their income.

    The article then proceeds to detail the “whopping” hundreds of billions of dollars that could be generated were the government to raise taxes.

    But this soak-the-rich argument ignores history. As Professor Antony Davies explains in the video below, over the last half-century tax revenue has held steady at around 18 percent of GDP no matter where tax rates were set. In other words, higher tax rates, like the Times article calls for, have had little-to-no historical success in raising tax revenue.

    Based on this history, Davies argues that the best way to raise tax revenue is not to raise tax rates but to grow the size of the economy as a whole — 18 percent of a big pie is a lot more revenue than 18 percent of a small pie. The recipe for a bigger pie? To use the Times’ phraseology: “allowing” people to keep more of what they earn.

  5. Deficit Day

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    What happens when the government spends all of the tax revenue it collects? In 2013, the U.S. budget deficit was $680 billion dollars! Who eventually pays for this difference in tax revenue and government spending? Professor of Economics at Duquesne University Antony Davies explains in the following video on the worst fiscal milestone of every year, Deficit Day.