Topics: Great Depression, Economics, Keynesian economics Pages: 2 (629 words) Published: February 5, 2013
Should significant federal deficit reduction in 2013 be a priority?
Many people believe that government spending needs to be contained. To the common mind, a massive debt and large deficit seems like a problem. Conservatives continue to push for fiscal cuts. However, a large debt isn’t always that bad. First off, a positive budget from cuts is out of the question. As Lisa Desjardins from CNN says, “it's just not realistic to look at balancing the budget right now”. No matter what policies or bills the government passes, the deficit is too large to be dented with cuts.

Second are the consequences of cuts in government spending on the economy. As Noble prize winner Paul Krugman PhD argues, “…austerity in the face of a depressed economy is a terrible mistake.” Ireland is amazing empirical proof of the massive harms in cutting government spending. In 2008, Ireland cut the U.S. equivalent of 1.9 million public workers. Conservatives hailed the cuts and waited for the recovery. But the recovery never came. Irish unemployment is at almost 14%. When the government cuts it’s spending, unemployment sky rockets.

Third are the benefits of government spending. As Chad Stone, who has a PhD in economics from Yale University, says, “deficit-financed government spending… can increase economic activity.” Government spending has a multiplier effect that ripples through the economy. The more the government spends, the faster the economy grows. World War II is but one example of the amazing effect that government spending has. The Great Depression was stopped in its tracks by government stimulus. Keynesian theories have been proved right again and again. The best way to promote a stable economy is with a government constantly pumping money into it.

Fourth is the cure to debt. As Randall Wray, a professor of economics at The University of Missouri, argues,” The budget deficit is highly counter-cyclical, and will come down automatically when the economy recovers.” With...
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