Thursday, 5 December 2013

In Response to Jaime

By Brenna Fisher 
Her author profile can be found below this article.

A few weeks ago, Jaime Bravo wrote an article refuting my stance on reducing the United States’ federal deficit. After reading his article and doing some more research of my own, I stand by my position of reducing the government debt. It is very clear that he is an intelligent young economist and has done ample research into the subjects on which he writes. I respect his opinion and his work; it would be foolish to try and claim otherwise. However, I cannot agree with, or condone, the examples or solutions he poses in response to my article.

First off, I would like to address some of his rebuttals to my points. Jaime seemed to generalize from my article that I believe all government spending is wrong and all debt should be eliminated. He states, “She assumes (by writing this article) that debt is a problem and that therefore, we should cut it.” However, never in my original article did I claim such a thing. Government spending is a crucial component to Gross Domestic Product and necessary to keep a country strong and expanding. Whether it is the federal government or the states individual responsibility to spend money on programs for education, transportation, and technological process is a long debated issue but, in the end, it should not be eliminated permanently, and a moderate amount is healthy. The government deficit should not be entirely eliminated either, but balanced with budget surpluses to create a more evenly equitable budget. Some government debt used to encourage GDP growth is good; 17 trillion dollars worth of debt, of which a majority is being spent on social welfare programs, is not. I have yet to read any concrete evidence of how an exorbitant amount of money spent on welfare programs profits the country in the long run.

There is a definite correlation between periods of GDP decline and higher government spending. The 1987 stock market crash matches up with higher government spending, the spikes in spending in the 1970’s correlate with the Arab oil embargo and the financial crisis that occurred then. In the early 2000’s, there was reduced spending, which matched up with a steadily rising GDP. It would be foolish to state that each of these are the product of each other--it would be a fallacy of false cause. There are obviously many factors at play here, but the correlation in general is undeniable.

Jaime goes on to make another assertion about reducing government spending in saying “She missed one of the most important discoveries in economics: the Keynesian multiplier.” However, there is nothing concrete about Keynesian economics or the Keynesian multiplier; they are, as much of economics is, theories. This multiplier simply calculates the shift in the IS curve, based on government spending, but it is merely one aspect of economics. According to the Ricardian equivalence, a contradicting theory, you cannot really see the effect of deficit-funded government without clarifying how the debt is expected to be repaid in future years.

Furthermore, Jaime assumes I and those who share my opinions don’t apprehend one of the United States’ biggest dividing issues (despite the fact that I acknowledged my solution would not be the popular one): “But those who think like her do not realise that there are families and companies that depends on the Government to survive.” says Jaime. It is true that thousands of US citizens depend on the government to survive and I do not ignore this fact. I also do not condone it. The United States was built on the principles, asserted by our founding fathers, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Every US citizen is endowed with the right for the pursuit of happiness--no where does it say in the Constitution--a document which has withstood the test of over 200 years--that every US citizen is entitled to the right of free goods or government welfare. It is an unfortunate fact that many people are addicted to a welfare program which gives them no incentives to work harder than they need to to get off of welfare. However, it is not because of this fact that we should continue massive amounts of government spending. Those who share Jaime’s argument attempt to simplify a major debate that has been going on in America for the past century. Quite frankly, support of this kind of spending only encourages the ever-growing federal dependency.

“...the most bloody example is Greece, which implemented big austerity and, thus, had low growth.” says Jaime. However, austerity was not the only problem which led to Greece’s economic failure. The system of rents which the government implemented allowed “almost all Greeks, from large business owners to small landowners on islands and to municipal clerks in villages, [came to] believe it is natural to have some income which derives neither from work nor from risking capital.” The government handing out free goods without incentive to earn them yourself? Sound familiar? Parliamentary representative democratic republic, the form of government that the country implemented, which has only two parties representing the people as a whole, also influenced some major problems--it was represented by only two main parties, with no other options, so it essentially divided the population in half. There was a fatal combination of factors which led to Greece’s demise but to state that it was austerity is simply false.

Jaime brings up many intelligent points, including the fact that comparing a family to a government is wrong; I admit I oversimplified the scenario. However, in saying that any form of austerity is wrong, he unconsciously ignores the founding principles of the American government. It is ridiculous to agree, as he did, that 17 trillion dollars of US debt is healthy.


About the author:

Brenna is a 17 year old home schooled girl from the United States. She has recently taken up learning about economics and has found it to be a new favorite subject. In addition, she is fascinated with criminology, psychology, any reading she can get her hands on, and history. In her free time she enjoys acting in local plays, working with children, and volunteering anywhere. This is her fifth published economics article overall, and third for The Teen Economists. In the future, she hopes to work for the FBI as a behavioral science analyst. She hopes you enjoy the article.


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