The Instigator
Ron-Paul
Pro (for)
Losing
0 Points
The Contender
larztheloser
Con (against)
Winning
6 Points

Austerity Measures Are the Proper Response to a Debt Crisis

Do you like this debate?NoYes+6
Add this debate to Google Add this debate to Delicious Add this debate to FaceBook Add this debate to Digg  
Post Voting Period
The voting period for this debate has ended.
after 2 votes the winner is...
larztheloser
Voting Style: Open Point System: 7 Point
Started: 4/6/2012 Category: Economics
Updated: 5 years ago Status: Post Voting Period
Viewed: 16,158 times Debate No: 22610
Debate Rounds (4)
Comments (4)
Votes (2)

 

Ron-Paul

Pro

Sorry about not getting this out sooner. The first round is for acceptance.
larztheloser

Con

Apology accepted. I'm excited to be able to discuss this very important topic with such an illustrious debater, and therefore am proud to accept the challenge. I wish my opponent good luck for his opening case.
Debate Round No. 1
Ron-Paul

Pro

I. Austerity Measures can help bring a country out of debt.

This is common knowledge. If a government is spending more than it is taking in, it is losing money. In order to help pay off debts, the Government must cut enough things so that it is making a surplus. A government must use this surplus to pay off the debt.

II. Austerity Measures are therefore important.

Here is what could happen. If you do not pay off your debt, first, your credit rating will be lowered. This will raise the interest rate whenever you borrow something. You do need to borrow resources sometimes. You cannot produce everything. And plus, if the interest rate on international loans is higher, then that is less money flowing in the economy since more money is being devoted to paying the interest.

Second, you could go into default. This would be catastrophic. If a country goes into default, then almost nobody will lend you money and the few that do will charge exorbitant interest rates.

Also, for the countris to receive the bailout it needs, it needs to implement these austerity measures to get the bailout.

"Implementing these so-called "prior actions" is key for Greece to secure a second, 130 billion euro ($172 billion) bailout, without which it would be forced into a disorderly default on its debts by the end of March."[1] If Greece does not accept the measures, there will be no bailout and a default will be likely soon (but as events have shown, Greece has passed it).

III. Will Austerity Measures hurt the economy?

Yes. With the C+I+G+X=GDP equation, using austerity measures, the G (which is Government spending) will be lowered. But with the side effects of a lower credit rating and especially of default, the C and especially the I and X will be lowered since both I and X require a major international presence (especially X).

So in truth, austerity measures do not bring back the economy to its all-time peak. But it will help significantly when used in a country experiencing a debt crisis.

Keeping austerity measures in place is important "to provide the stability that the British economy needs and the low interest rates the British economy needs to allow the recovery to take hold."[2] In a region that needs to recover from a massive recession, austerity measures will provide the economies with the low interest rates it needs to do so.

IV. But don't they decrease the standard of living?

Again, the short answer is yes. But this is only for the short term. By implementing austerity measures, the country will be able to get out of a recession and per capita GDP will rise. This will raise living standards.

Also, like I stated earlier, if the country does not accept the measures, they will be forced into default, and the living standards will be ten times worse. Also, if they accept the mesures, the living standards will rise eventually if the country can get out of debt because once out of debt, the country can help is people some more without immediate consequences.

Sorry about my short argument. I have had no time. I finished this in the two hours before my argument was due. I hope to have a better argument next time.

Sources:

[1]:http://www.cbsnews.com...
[2]:http://nobodylikesatory.wordpress.com...
larztheloser

Con

I thank my opponent for his opening case. Like him I'll keep it short and to the point.

Austerity measures mean that the government spends less money. At the very moment when the people are suffering the most because their homes have been foreclosed, because their savings are lost and their jobs are gone, my opponent would advocate that the government should help them the least. The wonderful thing is that you can help them AND reduce the deficit. It's such an amazingly simple policy that I'm surprised my opponent missed it. Rather than spending less, governments should tax more.

1. Will Austerity Reduce Debt?
Asserting that this is true because it's "common knowledge" isn't enough. The fact is that no government has ever come out of debt by adopting austerity measures. If a government spends less, that has two effects on production. First, the cost of production is increased, reducing production in the private sector. Second, work available in the public sector is decreased. Both effects can be seen wherever it's introduced, with Greece being a good recent example (http://en.wikipedia.org...). That means that GDP is reduced, like my opponent correctly predicts (nice Keynesian model by the way), far beyond the level of government spending reductions. Less output translates to less income, including less income for the government through taxation. Less income for the government means a reduced ability to pay back loans. Not paying back loans means that governments need to take out even bigger loans to keep up with their repayments, usually from unscrupulous lenders such as the IMF who attach ridiclious political conditions to their loans, such as implementing even more austerity measures. Eventually the combination of high debt and high austerity causes the country's economy to collapse in a sea of debt and the currency to become worthless, as we saw in places like Indonesia during the South-East Asian crisis. Before the IMF existed, Germany ran into a similar chain of events during the German hyperinflation, caused, again, by austerity.

2. Will More Taxes Reduce Debt?
The common objection to more taxation is that money is taken away from private sector investments, which reduces the efficiency of the market and thus also hurts production and economic growth. The problem is that this presupposes the money will be used in private sector investments. During a debt crisis, it is much more rational to keep the money until the debt crisis is over, tucked away in a vault where it will be safe. Taxation is thus a form of enforced investment. I accept that this investment will be less than during economic boom-times, but it is far better than the alternative, and in practice the effect on production of higher taxation has always been minimal.

In countries with a relatively flat tax, more taxes tends to hurt the poor quite significantly during the debt crisis. The simple solution to this is to unflatten the tax brackets in the economy.

3. Standard of Living
I'm glad my opponent agrees that this is reduced via austerity measures; it saves me a whole lot of typing. His ideas of long-term standard of living increasing are predicated on austerity measures actually working, which they don't. There is, beyond doubt, a significant connection between whether a policy works and the standard of living of the people. But I'm going to go one step further. Even if austerity works (which it doesn't), the end still doesn't justify the means.

Allow me to explain. Austerity creates poverty - it creates unemployment, reduces wages, and devalues the currency. These are also exactly the same things that a debt crisis causes, and is often the very reason why countries try to escape a debt crisis in the first place. Even if these things solutions worked in the end, the means is so abhorrent and so immoral that austerity shouldn't be considered. We're talking about forcing people to live a life of misery and despair because the government ordained it. They have to live through watching their lives crash to ruins - their grandparents dying because they can't afford food without a pension, their children suffering because without a job they can't provide for their family, their former neighbours now reduced to begging on the street because they've been thrown out of their home. It's not worthwhile, because that damage is not undone by any later prosperity. It doesn't matter if I can eat 100 cheeseburgers in 40 years if I'm starving right now for just one cheeseburger. And that's another reason why austerity is not the best solution, if it is a solution at all.

Conclusion
This debate is about two things. First, it's about whose model of how to get out of debt will work best (though I contest austerity won't work at all). Second, it's about whether the means of austerity is justified in light of the moral consequences thereof (I think it isn't). I look forward to reading my opponent's response.
Debate Round No. 2
Ron-Paul

Pro

I. Will Austerity Reduce Debt?

I'll be more detailed in my "common knowledge" statement. Government debt comes from the Government spending too much. That means that they are spending more than they are taking in. Wouldn't cutting Government spending to a level below what they are taking in lead to a surplus that would allow them to pay off their debt?

i. Austerity Measures will get a Government out of debt.

Since you use Greece as an example, so will I. Greek austerity measures are not enough yet. They have not instituted enough cuts that brings the country to a budget surplus. They are still running deficits. "'The promises from Greece aren't enough for us anymore,' Schaeuble said. 'With a new austerity programme they are going to first have to implement parts of the old programme and save.'"[1]

But now, let's look at a country where austerity measures have been instituted at the correct level and correctly. I will use Spain. "They work. For example, deep cuts in spending have helped Spain reduce its deficit 53% during the first half of this year."[2]

So austerity measures do work, they just need to be instituted at the correct level so the country can start being able to balance their budget. They also need to be instituted correctly. Greece is the prime example of where these policies have been instituted but are too few to matter.

ii. Austerity Measures will help the economy in the long term.

In the beginning, Austerity Measures will hurt the economy. Again, using the C I G X=GDP equation, austerity measures will cut the G, which in turn will cut I. But when the bailout is approved by the IMF, they can get the I and X back up since more doing business with the country is part of the bailout. This will spur more capital investment, which will in turn create jobs.

"The people become newly unemployed as a result of the austerity measures are those who were either employed by the government or those who worked for companies which had government contracts for construction/public works/etc. However, the employment numbers will likely also be higher because of the re-entry of individuals who lived on government pensions (which are also being slashed quite a bit) who will try to enter the labor force to make up for their lost income."[3] These unemployed people will be reemployed to help counter the job deficit (meaning companies need jobs).

Using Ireland as a particular example since the austerity measures have been in place and we can see the long term side effects, "I think it's too early to say we're getting back on track, but it's certainly weathered a good deal of the storm. The cuts that we're announcing in this budget are just the latest installment. They account to about 2.5 percent of Ireland's GDP this year. We've had a sharp enough hit to personal incomes you can imagine; unemployment has risen. So it's been fairly tough, but there are some signs that the Irish economy is beginning to stabilize."[4]

Again, as shown, there is an initial loss in GDP from the reduction in Government spending and an initial rise in unemployment from the lost Government jobs, but over time, as more investment comes in and as the people once on Government pensions have to seek work (which is available from the investment), unemployment falls and with it, GDP rises in turn from more work being done and from the increased foreign investment.

If all of this fails to make any sense, basically implementing austerity measures would increase investment that would increase jobs and growth.

iii. Austerity Measures would not entail a bailout.

As shown, since the Government is making money and the increase in foreign investment increases the employment rate and growth, wouldn't average income and the economic situation be better? There woud be no need for a bailout because the Government is balancing the budget.

II. Will More Taxes Reduce Debt?

My opponent does not realize that tax increases are part of austerity measures. "Austerity is, essentially, raising taxes while cutting expenditures in order to run a budgetary surplus for a few years. So the idea of "implement a great taxation system" is exactly what they are doing."[3] He has some bad arguments about taxation, but I will refrain from pointing them out since they are irrelevant to this particular topic. However, I can debate a few relevant points.

i. Tax rates are already sky high.

Again, I will use Greece as an example: "All tax on an individual's income in Greece is progressive. As of 2011, a Greek individual is taxed at a rate of 18% - 45%.""In 2011 the standard rate of corporate tax in Greece is 24%. For accounting periods ending after 31.7.2011 the tax rate is 20%. For Greek partnerships the tax rate is 25%."[5]

Greece's tax rates can not be raised much higher because the standard of living will just get worse. Cutting Government Spending needs to start therefore.

ii. High progresive tax rates kill economic growth.

My opponent states that raising taxes will, in his words "investment will be less than during economic boom-times". He is correct there. And yes, sometimes the economy has to be put behind national debt to save the country. But a progressive tax system does not to much more and will kill economic growth further.

Since America is the prime example of a progressive tax system, I will use it as my example: "Squeezing the rich doesn't work. Despite marginal tax rates as high as 90% and as low as 28%, federal tax revenues have remained fairly constant around 18% of GDP." Now for the attack, "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."[6] So again using the C+I+G+X=GDP equation, that's killing a significant portion of the C and the I, which usually make up around 85-90% of GDP.

And as a side note, "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. Americans making more than $150,000 spend an average of $125,000 per year – enough to support more than two middle-class jobs."[6] I guess progressive tax systems kill jobs too.

I wil leave my progressive tax argument at that.

I agree with my opponent that a sizable tax system needs to be in place, but it should be flat as to minimize the damage to the economy and needs to be used in concert with austerity measures. Just implementing tax increases will not cut it.

III. Standard of Living.

Yes, but the effect is only temporary. Once the investment comes in, there will be a significant jump in the economy, thus boosting growth and jobs. I have said all my arguments here in point 1. Refer to those.

IV. Austerity Measures are imperative.

This in effect kills your argument. Every time in the Europen debt crisis when a bailout was needed, the IMF put austerity measures in place, meaning the country had to pass them or they would not get the bailout. No bailout, country in disaster and default. This would make the living situation 10 times worse. You need austerity measures to sae your country in two ways, to help stop overspending and to bring in the bailout.

Conclusion:

I have proved that my opponent's strategy is already part of austerity measures, and have shown that using a combination of austerity measures and reasonable flat taxes, a country can get out of debt and more importantly, stay out of debt. I have also proved that austerity measures increase the standard of living in the long term and not implementing them would stop the necessary bailout. I have proved my two points.

Sources:

[1]:http://www.reuters.com...
[2]:http://www.askmen.com...
[3]:http://www.quora.com...
[4]:http://www.marketplace.org...
[5]:http://www.worldwide-tax.com...
[6]:http://www.demint.senate.gov...
larztheloser

Con

I thank my opponent for continuing his case.

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.
Debate Round No. 3
Ron-Paul

Pro

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...
larztheloser

Con

I'd like to thank everybody for reading this debate. This topic is really important, incredibly relevant and most importantly, frequently misunderstood. I hope I've been able to clear up a few misunderstandings with this debate.

The evidence

In this debate, my opponent had to prove that austerity measures are the proper response to the debt crisis. While he has provided some analysis as to why he thinks that's true (I'll get to that in a moment), he has failed to present any real-world examples of austerity measures succeeding. We can argue over whether failing economies, such as Greece, are really implementing austerity measures (although I presented a truckload of evidence to that effect in round three, any my opponent only responded by citing the opinions of a few extreme libertarians). We can debate whether Spain, which was held up as a shining example of austerity working in round three (a claim which pro doesn't seem to defend any more after I proved their economy is in fact failing worse than Greece in many ways) will ever see their austerity policies have a positive effect in the future (a claim not backed up by any evidence). We can argue whether Ireland's newfound stability is in fact just the wishful thinking of the single politician pro keep's citing, given the complete lack of data. We could even argue the examples that I brought up, such as hyperinflating Germany or pretty much all of South-East Asia during their financial crisis, although pro has made no attempt to do so.

But at the end of the day, none of these are examples of austerity working. Why has pro not provided any? Because there are none. Austerity doesn't work in reality.

The theory

My opponent's theory is that X and I will work to offset the decrease in C during an economic recession. Then I said that doesn't happen because of the Expansionary Fiscal Contraction hypothesis and capital flight. My opponent didn't respond to either of these.

Here's the gist of it - when austerity measures are introduced, people are made even poorer unless they can hide their assets, usually in some safe haven in another country. This is because the cost of production increases, causing unemployment. This makes the economy relatively less competitive and less desirable for investment. I explained all this in round two, and my opponent never really engaged with it so I'm calling it conceeded. Just because there are austerity measures doesn't mean investment will happen - in fact, it reduces incentives for investment. Similary, with exports, if production decreases there will be less to sell overseas, meaning less net exports. The effect on the exchange rate will be similary unfavorable. My opponent asserts more countries want to do business with these failing economies - actually the more they fail, the LESS desirable it is to do business with them.

Since my opponent didn't respond to my analysis on what elements of economic theory he was missing, he has not been able to defend the theory of austerity.

Standard of Living

I appreciate my opponent reminding everyone that the IMF keeps forcing austerity measures on failing economies. I suppose he learnt that from my round two case, where I proved why this is a bad thing. But that wasn't my standard of living point.

My standard of living point was a moral case - the end does not justify the means. Pro has refused to answer or even adknowledge this point so I guess I can call it conceeded. So, to sum up what we've got so far ... austerity is immoral, not backed up by theory, and completely lacking in evidence. Sounds pretty bleak, huh?

The solution

I came up with the solution of higher taxes. My opponent liked this so much that he even tried to claim it as his own, but even his own source states they are distinct. It does mention the two are sometimes coupled, but that doesn't mean they're the same. The principal difference is that one works, while the other doesn't.

Pro does have a few objections, however. His first objection is that it's just too much money. My main answer is that no economy has ever failed because they've come out of a debt crisis too well. My secondary answer is that in general, it's not too much money. That's because the rich still have a relatively greater disposable income with progressive taxes than the poor - it isn't socialism. What it does do, however, is redirect their funds towards gainful investment into the economy.

Pro's second objection, slightly stronger, is that the rich won't be able to spend or invest as much. Again, however, that presupposes a healthy economy. In a debt-ridden sick-as-they-get economy, you'd be stupid to spend or invest large amounts of money (if making money is your objective). That's why capital flight happens. I've explained this all often enough already. Government spending has the same effect on the economy as investment - my opponent's pet C+I+G+NX equation proves that. People are slightly more efficient at resource allocation than the government, so in a healthy economy high taxes are not usually a good idea. But when the government's in a hole, they need a ladder - and the rich are the only ones with ladders. By using the ladder, the rich, the poor, AND the government can escape into a more prosperous reality.

Conclusion

The main point, at the end of the day, is that there are alternatives to austerity that DO work. Pro has failed to defend austerity on every level and I therefore believe that the resolution is negated.
Debate Round No. 4
4 comments have been posted on this debate. Showing 1 through 4 records.
Posted by TheMrkanyewest01 5 years ago
TheMrkanyewest01
I would just like to thank both of you for the intellectual conversation you guys had.I found your arguments very stimulating and worthy of praise
Posted by 16kadams 5 years ago
16kadams
Good debate, I liked how it was short, made it easier.

The get out of debt thing, although true, was actually handled well by CON, very interesting, I thought pro would easily win here, but he didn't. It's interesting no country has been healed of debt from austerity.

Also for the economics, CON proved the added taxes and such FAIL, and they (using the example of greece presented by both sides) had a suffering economy after the austerity began. his point goes to con

CON, really, defeated all of pros points, he seemed to be lacking this debate. To sum it up: CON won
Posted by 16kadams 5 years ago
16kadams
Will vote later, looks like con won though
Posted by DouggyFresh 5 years ago
DouggyFresh
I have to admit, not having a lot of education in the way of economics (although I still have a BSc) this debate was marginally hard to follow. I had to look up this GPD=X+I+C+G stuff and it was pretty confusing still, but I get the math part of it. Net flow=incomes-expenditures. Pro kept saying austerity is spending cuts AND tax increases, although this (http://lexicon.ft.com...) and other sources I've found state it is simply cost cutting. The source Pro used to assert that it does include tax increases only leads to a forum, and the opinion of the holder of a bachelor's degree in economics (which I don't regard as a credible source).

Not having a lot of knowledge on the subject, I got lost in the information about the less than successful implementations of austerity measures in other countries. But, Pro failed to defend his arguments on more than a few occasions, and failed in upholding the resolution.

I thank both sides for a very informative debate, complete with good manners and grammars on both sides. Ultimately I regard Con as the victor, as it seemed too much like Pro was grasping at straws or trying to regroup or form a solid argument.
2 votes have been placed for this debate. Showing 1 through 2 records.
Vote Placed by 16kadams 5 years ago
16kadams
Ron-PaullarztheloserTied
Agreed with before the debate:Vote Checkmark--0 points
Agreed with after the debate:Vote Checkmark--0 points
Who had better conduct:--Vote Checkmark1 point
Had better spelling and grammar:--Vote Checkmark1 point
Made more convincing arguments:-Vote Checkmark-3 points
Used the most reliable sources:--Vote Checkmark2 points
Total points awarded:03 
Reasons for voting decision: comments, just a hair over 500 characters
Vote Placed by DouggyFresh 5 years ago
DouggyFresh
Ron-PaullarztheloserTied
Agreed with before the debate:--Vote Checkmark0 points
Agreed with after the debate:-Vote Checkmark-0 points
Who had better conduct:--Vote Checkmark1 point
Had better spelling and grammar:--Vote Checkmark1 point
Made more convincing arguments:-Vote Checkmark-3 points
Used the most reliable sources:--Vote Checkmark2 points
Total points awarded:03 
Reasons for voting decision: Comments