Does Rejecting Austerity Work?

PORTUGAL REVOLUTION PARADE
Former French Socialist presidential candidate Benoit Hamon, center left, and former Greek Finance Minister Yanis Varoufakis, center right, participate in the annual parade in Lisbon marking Portugal's 1974 Carnation Revolution, which toppled a dictatorship and brought democracy, Wednesday, April 25 2018. Varoufakis has launched a new anti-austerity party that will run against the governing left-wing Syriza party in Greece's next general election. AP Photo
PORTUGAL REVOLUTION PARADE
Former French Socialist presidential candidate Benoit Hamon, center left, and former Greek Finance Minister Yanis Varoufakis, center right, participate in the annual parade in Lisbon marking Portugal's 1974 Carnation Revolution, which toppled a dictatorship and brought democracy, Wednesday, April 25 2018. Varoufakis has launched a new anti-austerity party that will run against the governing left-wing Syriza party in Greece's next general election. AP Photo

Does Rejecting Austerity Work?

President Trump has been touting U.S. economic growth in recent weeks. Last month, he told advisers that the U.S. is experiencing "an economic turnaround of historic proportions." Despite the quick growth, the White House expects the federal budget deficit to exceed 5 percent of the total economy by next year. That money will likely need to be borrowed, adding to our federal debt. In many parts of the world, the debts that come from deficits leads to periods of great austerity. Smaller countries are much more likely to default to larger creditors, like the EU’s Central Bank, the IMF, or large banks that own many bonds. Local government are often led to believe they have no choice but to cut services to stimulate growth to pay back the money owed. That conventional thinking is dictating the budget in Puerto Rico today, and has been policy in Greece for many years. The government of Portugal rejected demands for austerity in 2015, and has seen growth at a faster rate than countries like Greece. To discuss the merits of austerity, we’re joined by Steve Keen, professor of economics at Kingston University in London and the "world's first crowdfunded economist."