How Should Governments Deal With Debt?

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Nations that spend themselves into debt face very difficult choices. As Dr. Stephen Davies sees it, a country in debt has three potential options to fix their debt problem. The first option is some combination of raising taxes and cutting spending. The second is to repudiate on the debt. The third option is inflation. Among these options, Dr. Stephen Davies finds that cuts in government spending are the most effective solution in the long.

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[LibertyDownUnder]

Best way to deal with debt: Don't have it in the fucking 1st place.

Pardon my french.

[onepiecefan74]

@Ranillon So record gold, food, and gas prices is ideology? funny I thought those were facts. You can't explain the increase in the price of gold only %5 of Americans own gold. that's not near enough to be a bubble which to bond market is in. just like he housing bubble and the . dot com bubble. the bound bubble will bust. And what about china talking about talking about the end of the dollar as a world reserve currency? yea that sounds good.

[mortalisk]

I think option 2 is the best morally and practically. The creditors knew they were lending money to people who have none of their own, but must take it from others to pay back, so they deserve it. Governments should not be getting in debt in the first place. I did not get how this would raise interest rates in the economy in general, and also I do not see why this is necessarily a bad thing. None of them follow. It kind of sounds like the central planners in the FED.

[KittenKoder]

Cut spending ... like ... $2,000 for a toilet seat, $500 for a hammer, $50 for each nail, $100 for a roll of toilet paper ... one day of cutting those down to moderate levels could save a fortune.

[ATT12211]

at the same time when you cut government spending you reduce aggregate demand, also reducing economic activity in a government....so its much more complicated, although i agree we do need to cut spending especially on ever growing entitlement programs.

[Ravengaurd6]

@benxr2006 HOT!

[benxr2006]

learn liberty gives me a raging brainer

[Ravengaurd6]

@onepiecefan74 Well spoken,ankama!

[TWSceptic]

@LibertyDownUnder There's nothing wrong with a little debt when it helps to build up a country in the long run, but the problem is that governments are like people who can't handle finances; they build up too much of it.

[lynchmatt23]

@LibertyDownUnder debt can be good the problem is not paying it off

[NOLAMarathon2010]

LearnLiberty is perhaps my favorite channel currently. But I did disagree with Dr. Davies somewhat, though his position and mine did seem to converge at the end. Let me illustrate our disagreement by asking this question: Which would be better: a $3.5 trillion budget that is 100% funded (that is, no deficit); or a $2.5 trillion budget that is only 98% funded (that is, $70 billion in deficit for the current year)? The latter sucks a lot less money out of the private economy.

[Cornampoo]

Balance the budget. Cut a Trillion year one.

Ron Paul 2012