
How the politics of debt explains everything - pdkl95
http://theweek.com/articles/657252/how-politics-debt-explains-everything
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farright
Politics of debt explains everything if you _only_ care about the short term
business cycle.

In terms of the business cycle, the author has a point. The bond mark has been
deemed "too big too fail" and so creditors will always get bailed out. This is
a problem.

But austerity is primarily aimed at the long term problem of living within
one's means. This is independent of the business cycle. If your debt is
increasing constantly, something has got to give. Even if you do default, you
still need to figure out how to balance the budget in the future.

~~~
pdkl95
> balance the budget

Reducing spending power through austerity policies directly reduces the GOP.
Lower GDP means lower taxes. This is practically guaranteed to make debts
_worse_. You don't balance the budget by cutting a large portion of the
revenue. Historically - as Prof. Blyth shows in his academic work - austerity
programs have always lead to _increasing_ debt.

> the long term problem of living within one's means

Then why aren't austerity programs aimed at the people that actually
overextended their spending: the banks/etc that bet against everyone else by
becoming such a large systemic risk that they had to be bailed out? ("too big
to fail")

If you want a much better description of Prof. Blyth's point that he only
briefly summarized in this article, I suggest watching the talk[1] he gave
last year.

[1]
[https://www.youtube.com/watch?v=B6vV8_uQmxs#t=778](https://www.youtube.com/watch?v=B6vV8_uQmxs#t=778)

