Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


US finance expert giving UC lecture on government debt

US finance expert giving UC lecture next week on government debt

November 27, 2012

Governments are not that special. They have to pay debts like the rest of us, a United States economics expert, who next week will be giving a public lecture at the University of Canterbury (UC), said today.

If government did not pay their debts they defaulted or inflated, which is really the same thing, University of Chicago Professor John Cochrane said.

``Historically, governments that have successfully paid off large debts did so by growing. Tax revenue equals tax rate times income and long term growth produces the tax revenues needed to pay down debt. Governments that have tried huge tax rate increases have killed off growth, and not successfully paid off debts.

``European countries like Greece had been struggling. Alas, the euro, as common currency, got mixed up with all sorts of other projects, and in particular the zany idea that no country may ever default.

``Companies in New Zealand that can’t pay their bills default, and don’t have to be bailed out to save the New Zealand dollar, nor do they have to leave the NZ dollar zone. Countries in the euro are supposed to be the same way. That’s how it was written and set up.

``Countries like Greece grow and pay off debts, they default on the debts, or they get someone else to pay the bills. Leaving the euro is the same as default. Really, this is just accounting. Here are your choices, pick one. The surprise is how reluctant they are to take the ‘grow’ option seriously. Opening up these economies apparently steps on a lot of powerful toes.’’

Professor Cochrane said the US had a yawning gap between what their government spends and what they take in taxes. The US was borrowing roughly a third of the government budget every year. The real nightmare was the ‘entitlements’, the US promises of social security and health care.

The current deficits were bad enough, but he said the real problem was what would happen in 10 or 20 years? Bond markets look forward to that, so the US could be in real trouble soon. The US had benefitted enormously from foreigners willing to buy enormous quantities of their bonds and finance it. How long they will be willing to do so is a troublesome thought, he said.

``The problems we are facing are simple, straightforward long-run questions. If you take 75 cents of every additional dollar someone earns, you get low growth. If you spend like a drunken sailor and don’t have a stable, low-marginal-rate tax base to pay for it, you get a debt crisis.

``If you hyper-regulate an economy – by which I do not mean rules, but so many rules and so much chaos that regulators can tell people to do as they wish – the economy stalls. If you pass laws that nobody can get fired, nobody gets hired. If you pass laws that people can’t get foreclosed, nobody lends to them in the first place.

``If you set things up so financial institutions always get bailed out, they take a lot of risk. It’s not that hard. Fixing it is said to be politically difficult. I’m glad to be an economist, not a politician.’’

Professor Cochrane will give the annual UC Condliffe memorial public Lecture on campus next Wednesday. More details about the lecture can be found at: www.canterbury.ac.nz/wiw.
ends

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Mana Māori: Kawenata Unites Kaupapa Māori Parties

The Māori Party and Mana Party have signed a historic agreement today to unite Māori politically.

Māori Party president Tukoroirangi Morgan said the kawenata or agreement was a huge step forward for Māori in the lead up to the general elections.

"Today is an important day for the Māori nation because today is when the country's only two kaupapa Māori political parties unite to work tactically together in the best interests of our people," says Mr Morgan. More>>

ALSO:

.

 
 

Immigration: Short Reprieve For Nine Indian Students

A temporary hold on deportations of nine Indian students is a step in the right direction but the Government urgently needs to implement safeguards to stop further injustices to more international students, the Green Party says. More>>

EARLIER:

Welfare: WINZ Breaching Privacy Laws With WINZ Vetting Rules

E tū, the union for security guards, says WINZ may be breaching privacy laws with its new screening process for people visiting WINZ offices. The vetting requires WINZ security guards to check photo ID and whether visitors to WINZ offices have an appointment.More>>

ALSO:

Turnbull Visit: Leaders’ Talks Cement Trade Relations, Science Agreement

Mr English met with Prime Minister Turnbull in Queenstown today to discuss common approaches to bilateral and international issues, including trade and science and innovation. Mr English also thanked Mr Turnbull for Australia’s offer of support for those fighting the fires on the Port Hills in Christchurch. More>>

ALSO:

Youth Guarantee: Upskilling Fund Used For Retraining

News that one in five of the people enrolling in Youth Guarantee already hold qualifications at the level they’re enrolling in highlights the failure of the scheme to reach the disengaged young people it was set up to assist, says Labour’s Education spokesperson Chris Hipkins. More>>

ALSO:

Port Hills Fire: Midday Update, Monday 20 February

• 9 homes destroyed
• 2 homes with partial damage. Damage includes things like cracked windows, heat damage.
• 3 properties with damage to other external structures e.g sheds or outbuildings More>>

ALSO:

Gordon Campbell: On What Trump May Mean For Us

So far not much effort has been put into tracing the possible implications for New Zealand of the stream of executive orders and tweets that have been pouring from the Oval Office. Unfortunately, we may not simply be drive-by rubberneckers at this car wreck for much longer. More>>

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news