Does High Public Debt Stifle Economic Growth?

Off Topic Politics & World Issues
21

I watched the video, and the only thing they did was to refute a paper they found flaws in. The paper stated that there was a cliff @ 90% debt to GDP, and they found that debt still caused a moderate effect on the economy, but no cliff right @ 90%.

But this subject needs a much deeper understanding, for example the debt in the US is not affecting us… yet. One of the reasons is that interest rates are so low that the government isn’t paying much more for debt then it did in the past. Obviously rates cannot stay low forever, so this will eventually cause a hit to the government budget.

Every dollar the government spends that is not financed by debt is covered by printing. (If they can that is.) This should lead to inflation, but so far that just hasn’t kicked in yet, here, but it’s simply a matter of when, not if.

It is too simplistic to simply look at the debt to GDP ratio. While the number is a significant in showing excessive debt, the effects are not direct. Instead it is more what the Government does as a result of that debt. Increased printing can result in inflation as I mentioned, which has been called a hidden tax. Greece didn’t have this luxury, being a member of the EU.

Next is when a government decides to tax it’s citizens to pay for that debt. This has a more direct drag on economies. While in the short term it can increase government revenue, in the long term the drag results in less future revenue, so should eventually turn negative. (This is obviously complex, and related to how big of a tax increase, and where the taxes are increased.)

Austerity involves cutting spending, while increasing taxes. It has nothing to do with benefiting an economy, and everything to do with saving a government that put themselves into a bad situation, and making them look good to creditors.

Only politics is connecting these two papers to austerity. In this interview, I believe the only person who mentioned austerity was the interviewer. What the actual findings were is that debt is bad, just not as bad as the first paper said.

22

[quote]The Mage wrote:
I watched the video, and the only thing they did was to refute a paper they found flaws in. The paper stated that there was a cliff @ 90% debt to GDP, and they found that debt still caused a moderate effect on the economy, but no cliff right @ 90%.

But this subject needs a much deeper understanding, for example the debt in the US is not affecting us… yet. One of the reasons is that interest rates are so low that the government isn’t paying much more for debt then it did in the past. Obviously rates cannot stay low forever, so this will eventually cause a hit to the government budget.

Every dollar the government spends that is not financed by debt is covered by printing. (If they can that is.) This should lead to inflation, but so far that just hasn’t kicked in yet, here, but it’s simply a matter of when, not if.

It is too simplistic to simply look at the debt to GDP ratio. While the number is a significant in showing excessive debt, the effects are not direct. Instead it is more what the Government does as a result of that debt. Increased printing can result in inflation as I mentioned, which has been called a hidden tax. Greece didn’t have this luxury, being a member of the EU.

Next is when a government decides to tax it’s citizens to pay for that debt. This has a more direct drag on economies. While in the short term it can increase government revenue, in the long term the drag results in less future revenue, so should eventually turn negative. (This is obviously complex, and related to how big of a tax increase, and where the taxes are increased.)

Austerity involves cutting spending, while increasing taxes. It has nothing to do with benefiting an economy, and everything to do with saving a government that put themselves into a bad situation, and making them look good to creditors.

Only politics is connecting these two papers to austerity. In this interview, I believe the only person who mentioned austerity was the interviewer. What the actual findings were is that debt is bad, just not as bad as the first paper said.[/quote]
This would only be academic if the conclusions weren’t used as a model for economic policy. That is the problem.

23

[quote]dmaddox wrote:
I loved Willie McGee when he played. I loved the Cardinals growing up. They were only 2nd to the Astros. Consistently good so when the Astros sucked I would watch the Cardinals. Miss the 80’s so much.

Zep you dont have an MBA, just move along with your 28 posts alter ego.[/quote]

Yep, another sock puppet account…dissapointing.

24

Yes, if your debt is too high, you will not be allowed to borrow, ask the City of Stockton about it.

Creditors made it very clear, if the city does not pay back what it owes, and instead pays for public worker pensions, don’t bother coming back to any bank or lender for a loan or bond issue in the future.

25

[quote]MaximusB wrote:
Yes, if your debt is too high, you will not be allowed to borrow, ask the City of Stockton about it.

Creditors made it very clear, if the city does not pay back what it owes, and instead pays for public worker pensions, don’t bother coming back to any bank or lender for a loan or bond issue in the future.

[/quote]

Yes it is the greedy public workers who drain an economy. Funny how Germany has more government assistance but has been effected the least by the Eurozone austerity economic model.