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The “Austerity” Debate: More Academic Evidence against Big Government

In the world of fiscal policy, there are actually two big debates. One debate revolves around the appropriate size of government in the long run. Folks on the left argue that government spending generates a lot of value and that bigger government is a recipe for more prosperity. Libertarians and their allies, by contrast, point […]

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Economic Lesson from Europe for Hillary: Higher Tax Rates Are a Recipe for More Red Ink

We can learn a lot of economic lessons from Europe. Never adopt a VAT unless you want much bigger government. Bigger government means lower living standards. Don’t believe Bernie Sanders about the Nordic nations. Today, we’re going to focus on another lesson, which is that higher taxes lead to more red ink. And let’s hope […]

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Greek Politicians Should Learn from Latvia

I wrote last month that the debt burden in Greece doesn’t preclude economic recovery. After all, both the United States and (especially) the United Kingdom had enormous debt burdens after World War II, yet those record levels of red ink didn’t prevent growth. Climbing out of the debt hole didn’t require anything miraculous. Neither the […]

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Greece’s Debt Is Sustainable

The conventional wisdom, pushed by the IMF and others, is that Greece’s economy will never recover unless there is substantial debt relief. Translated into English, that means the Greek government should be allowed to break the contracts it made with the people and institutions that lent money to Greece. That may mean a “haircut,” which […]

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The Greek Proposal on the Heels of the Referendum on Austerity: A Case of Avoidable Betrayal

Only days after appealing to the will of the people, Greece’s prime minister put forward a proposal to the state’s creditors that contradicts the people’s rejection of further austerity. To be sure, the referendum was nonbinding, and the need for compromise was well justified by the seizing up of the state’s banking system and economy after the “No” vote. Furthermore, one of the virtues of representative as distinct from direct democracy is that officeholders can pursue policies contrary to the immediate will of the people but in line with their best interest. Alexis Tsipras faced immanent economic catastrophe, and so he can reasonably be credited with acting in his constituents’ best interest. Nevertheless, the sting of betrayal (and the larger theoretical point of governmental sovereignty being subordinate to popular sovereignty) warrants attention in this case.


The full essay is at “The Greek Proposal.”

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EU Preps for War Against the Internet: Decides to Lose Again

Well, this is interesting, although not very surprising, really. Does anybody really think that Europe (especially Germany and France) can compete with the US on a level playing field? No, me neither. The UK, maybe, but nobody else has a chance, and if good sense ever breaks out in the ruling clique in Britain (or […]

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Europe’s Problem Is Excessive Spending, not Austerity

It’s remarkable to read that European politicians are agitating to spend more money, supposedly to make up for “spending cuts” and austerity. To put it mildly, their Keynesian-based arguments reflect a reality-optional understanding of recent fiscal policy on the other side of the Atlantic. Here’s some of what Leonid Bershidsky wrote for Bloomberg. Just as […]

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Spending Restraint Is Good Short-Run Policy and Good Long-Run Policy

Regular readers know that good fiscal policy takes place when government spending grows slower than the private economy. Nations that maintain this Golden Rule for extended periods of time shrink the relative burden of government spending, thus enabling more growth by freeing up resources for the productive sector of the economy and creating leeway for […]

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The Missing Data in Krugman’s German Austerity Narrative

There’s an ongoing debate about Keynesian economics, stimulus spending, and various versions of fiscal austerity, and regular readers know I do everything possible to explain that you can promote added prosperity by reducing the burden of government spending. Simply stated, we get more jobs, output, and growth when resources are allocated by competitive markets. But […]

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Detroit, Europe and Krugman-defined optional austerity

Decreases in annual increases of big government budgets do not “austerity” measures make and are not the reason that the, rightly-named-by-Nobel-Prize-winning-economist Paul Krugman, economic Depression continues in most of Europe and the United States. President Richard Nixon actually didn’t say that “We are all Keynesians now” after taking the United States off the gold standard in 1971 and otherwise ensuring that Hubert Humphrey-Democrats got the | Read More » . . . → Read More: Detroit, Europe and Krugman-defined optional austerity . . . → Read More: Detroit, Europe and Krugman-defined optional austerity

Another Example of Editorial-Page Fiction at the New York Times

Are there any fact checkers at the New York Times? Since they’ve allowed some glaring mistakes by Paul Krugman (see here and here), I guess the answer is no. But some mistakes are worse than others. Consider a recent column by David Stuckler of Oxford and Sanjay Basu of Stanford. Entitled “How Austerity Kills,” it […] . . . → Read More: Another Example of Editorial-Page Fiction at the New York Times . . . → Read More: Another Example of Editorial-Page Fiction at the New York Times

Keynesian Economics: Still Failing After All These Years

I wrote this a couple of weeks ago, but didn’t post it here until I noticed that Michael Tanner of The Cato Institute agreed. Keynesianism is still not working. The central idea of the dominant economic philosophy in Washington, DC, is that when the private economy fails to produce enough demand, the government can and should step in to take up the economic slack. It | Read More » . . . → Read More: Keynesian Economics: Still Failing After All These Years . . . → Read More: Keynesian Economics: Still Failing After All These Years

Where Are the European Spending Cuts?

Paul Krugman recently tried to declare victory for Keynesian economics over so-called austerity, but all he really accomplished was to show that tax-financed government spending is bad for prosperity. More specifically, he presented a decent case against the European-IMF version of “austerity,” which has produced big tax increases. But what happens if nations adopt the […] . . . → Read More: Where Are the European Spending Cuts? . . . → Read More: Where Are the European Spending Cuts?

Krugton the Invincible…or Krugman the Inadvertent Opponent of Tax Increases?

President Bush imposed a so-called stimulus plan in 2008 and President Obama imposed an even  bigger “stimulus” in 2009. Based upon the economy’s performance over the past five-plus years, those plans didn’t work. Japan has spent the past 20-plus years imposing one Keynesian scheme after another, and the net effect is economic stagnation and record […] . . . → Read More: Krugton the Invincible…or Krugman the Inadvertent Opponent of Tax Increases? . . . → Read More: Krugton the Invincible…or Krugman the Inadvertent Opponent of Tax Increases?

Krugton the Invincible…or Krugman the Inadvertent Opponent of Tax Increases?

President Bush imposed a so-called stimulus plan in 2008 and President Obama imposed an even  bigger “stimulus” in 2009. Based upon the economy’s performance over the past five-plus years, those plans didn’t work. Japan has spent the past 20-plus years imposing one Keynesian scheme after another, and the net effect is economic stagnation and record […] . . . → Read More: Krugton the Invincible…or Krugman the Inadvertent Opponent of Tax Increases? . . . → Read More: Krugton the Invincible…or Krugman the Inadvertent Opponent of Tax Increases?

Question of the Week: Are there any Lessons to Be Learned from the Rogoff-Reinhart Kerfuffle?

I’ve received several requests to comment on the controversy surrounding the famous Rogoff-Reinhart study on government debt and economic performance. For those who haven’t followed this issue, Kenneth Rogoff and Carmen Reinhart wrote an influential paper in 2010 arguing that government debt above 90 percent of GDP was associated with weaker economic performance. It turns […] . . . → Read More: Question of the Week: Are there any Lessons to Be Learned from the Rogoff-Reinhart Kerfuffle? . . . → Read More: Question of the Week: Are there any Lessons to Be Learned from the Rogoff-Reinhart Kerfuffle?