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

 

PARLIAMENT TODAY:

  • Week in Parliament 22-05-15
  • Saturday Sitting
  • House Rises At Midnight
  • Telco Levy Bill Passes
  • Telco Levy Bill Completes First Reading
  • Social Housing Bill Passes Under Urgency

  • TPPA: University Of Auckland Warns Of Negative TPP Impact

    The University of Auckland May 20, 2015 University of Auckland Warns of Negative TPP Impact With the Trans Pacific Partnership (TPP) negotiation drawing to a close, the University of Auckland has expressed serious concerns about its potential implications. ... More>>

    NZ Flag: Flag Referendum Gets Hit Hard In New Poll

    The latest Campbell Live text poll confirms it is time for the Prime Minister to listen to the public and shelve his flag referendum, says the New Zealand First Leader Rt Hon Winston Peters. More>>

    Gordon Campbell: The Government’s Belated Moves On Property Speculation

    Is it a property tax on capital gains or a capital gains tax on property? The Jesuitical distinctions in the government’s spin about its latest moves on property speculators are all about whether the government can claim that it jumped, or confess that it ... More>>

    Grant Robertson:
    Key Can’t Just Be Prime Minister For Parnell

    John Key must show New Zealanders in next week’s Budget that he is more than the Prime Minister for Parnell, and is also the Prime Minister for Pine Hill, Putararu and Palmerston North, Labour’s Finance spokesperson Grant Robertson says. In a ... More>>

    Labour Party: More Regional Jobs Go In Corrections Reshape

    News that 194 Corrections staff are to lose their jobs will have ramifications not only for them and their families but for the wider community, Labour’s Corrections spokesperson Kelvin Davis says. Prison units at Waikeria, Tongariro and Rimutaka ... More>>

    ALSO:

  • NZ First - Prison Job Losses to Send Money Offshore
  • TPPA: ‘Team Obama’ Regroups On Fast Track, Still Not Deliverable

    ‘After yesterday’s stinging and unexpected defeat for the Obama administration’s attempt to advance Fast Track legislation in the US Senate, Senate leaders have worked up a compromise they think will get them past this blockage’, according to Auckland ... More>>

    NZ Government: 5,500 More Doctors And Nurses In Our Hospitals

    Health Minister Jonathan Coleman says a record number of doctors and nurses are working in District Health Boards across the country. More>>

    Controller and Auditor General: Katherine Rich Conflict of Interest Decision

    We are writing to you about a matter that has been raised with us by members of the public. More>>

    ALSO:


    Budget 2015: Andrew Little On The 2015 Budget

    Speaking to the Chamber of Commerce, the Labour opposition leader attacked the government’s approach to economic issues facing New Zealand. He said they have been “more than reckless in their complacency” and “the next week’s budget will do nothing ... More>>

    Defence Force: NZDF Building Partner Capacity Mission Personnel In Iraq

    NZDF Building Partner Capacity Mission Personnel in Iraq The New Zealand Defence Force Building Partner Capacity training mission contingent is in place at Taji Military Complex in Iraq. The Chief of Defence Force Lieutenant General Tim Keating says the ... More>>

    PM Press Conference: ACC Levy Cuts Announced

    In a press conference this afternoon in Wellington, ACC Minister Nikki Kaye proposed $500 million worth of ACC levy cuts. More>>

    Quakes: New Process For Red Zone Crown Offers

    Canterbury Earthquake Recovery Minister Gerry Brownlee has announced a process to give everyone a say on the Crown offers to owners of vacant, commercial/industrial and uninsured properties in the Residential Red Zone. More>>

    ALSO:

    Gordon Campbell: On The Battle Obama Is Waging Over The TPP

    For the past two and a half years, this column has been arguing that the fate of the Trans Pacific Partnership (TPP) deal will hinge on whether US President Barack Obama can win Trade Promotion Authority (TPA) from Congress... Last week, the White House finally, finally unveiled a draft TPA Bill. More>>

    ALSO:


    Gordon Campbell: On lessons for Labour from the UK election
    If the polls were right – and the pollsters kept telling us how accurate they’d been in 2010, and even Nate Silver was getting the same results – there seemed no way that the British Labour Party could lose last Thursday’s British election. With Labour predicted to win around 270 seats and the Scottish National Party batting around 55-60 seats, Labour seemed to be home free. But…as we now know, things didn’t turn out that way. Labour ended up with 232 seats and the Conservatives swept back to power with an outright majority, after winning only a little more than a third ( 36.9%) of the votes cast.MORE >>
    Also.

  • NZ PM John Key - PM congratulates David Cameron after UK election
  • The Nation IV Transcript - Hack Attack author Nick Davies
  • Get More From Scoop

     

    LATEST HEADLINES

     
     
     
     
     
     
     
     
     
    Politics
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news