2014 ndi 6ws-fitzmier, Lundberg, Abelkop Economy Disads Spending da

Turns environment – kills new energy developments and causes more gasoline usage

But there is a downside to all this as well. Most serious is the risk that venture capitalists will refrain from pouring big bucks into innovative energy projects. At an energy forum organized by professional services firm Ernst & Young on October 9, experts warned of a sharp drop-off in alternative energy funding. "The concept of alternative energy has a lot of momentum," says Dan Pickering, head of research for Tudor, Pickering, Holt & Co. Securities in Houston. "But lower oil prices make it harder to justify investment. At $50 a barrel, a lot of that investment will die." Governments could also have a hard time coming up with the funds to finance alternative energy projects. Moderators at the presidential debates repeatedly asked both John McCain and Barack Obama what programs they would cut in order to finance the massive financial-rescue packages the Bush administration has engineered in order to avert further economic distress. Both insisted that their respective energy initiatives would be spared any such belt-tightening. It is highly likely, however, that costly endeavors of this sort will be scaled back or postponed once the magnitude of the financial rescue effort becomes apparent. The same is true for Europe and Japan, who have also pledged to undertake ambitious energy initiatives in their drive to reduce greenhouse-gas emissions. Indeed, leaders of some European Union countries are calling for a slowdown in efforts to curb emissions of greenhouse gases due to the burgeoning economic crisis. Under a plan adopted by the EU in 2007, member countries pledged to reduce such emissions by 20 percent below 1990 levels by 2020, which is far more ambitious than the Kyoto Protocol. European leaders are scheduled to implement a detailed plan to achieve this goal by December of this year. But at a rancorous summit meeting of the EU heads of state in mid-October, Prime Minister Silvio Berlusconi of Italy and the leaders of some Eastern European countries indicated that due to the current crisis, they were no longer able to finance the high costs of attaining the 2020 goal and so weren't prepared to adopt a detailed plan. "We don't think this is the moment to push forward on our own like Don Quixote," Berlusconi declared at the summit. "We have time." At some point, the price of gasoline will fall so low that many drivers will once again engage in the wasteful driving habits they may have given up when the price of gas soared over $3 per gallon. This may not occur right away. But with crude oil at $70 per barrel, half of what it was in August, a corresponding drop in the price of refined products will eventually follow. And that could lead people to see cheap gasoline as the one bright spot on an otherwise dismal horizon.

2NC Turns Heg

Economic growth is key to hegemony

Beckley 12 (Michael Beckley, Assistant Professor in the Department of Political Science at Tufts University, 2012, “China’s Century? Why America’s Edge Will Endure,” http://china.praguesummerschools.org/files/china/4china2012.pdf)

Wealth functions as a source of power because it insulates a state from dependence on others and provides things of value that can be used in bargaining situations. As Robert Keohane and Joseph Nye point out, economic interdependence involves relations of asymmetric vulnerability.80 Wealthy states are better equipped to wield market access and economic sanctions as tools of influence over others. They also have more capital to fund technological innovation and military modernization. All states face the dilemma of balancing short-term spending against long-term economic growth. This predicament, however, is less acute for wealthy states, which can sustain significant investments in innovation and military power with a relatively small percentage of their total resources. The ability to innovate, defined as the creation of new products and methods of production, also constitutes a source of power. Like wealthy states, innovative countries are less dependent on others and more capable of producing goods that others value. Innovation also creates wealth and tends to beget further innovation as individual discoveries spawn multiple derivative products and improvements. Innovative activity therefore tends to cluster in [End Page 56] particular places and provide certain countries with significant technological and military advantages. As Joshua Goldstein has shown, “The country creating a major cluster of innovations often finds immediate military applications and both propels itself to hegemonic status and maintains that status by that mechanism.”81 Military power is generally considered to be the “ultima ratio” of power because it functions as a decisive arbiter of disputes when it is used and shapes outcomes among states even when it is not. Military capabilities can be used to destroy, to back up coercive threats, and to provide protection and assistance. When performed well, these actions can alter the behavior of other states. Military superiority can also generate wealth by, for example, making a country a more secure and attractive place to invest, as well as provide the means to coerce other countries into making economic concessions. The RAND study found that nuclear weapons were of less importance than conventional capabilities for national influence. Thus, I do not consider them in the following analyses. The authors of the RAND study explain: “Even though nuclear weapons have become the ultima ratio regum in international politics, their relative inefficacy in most situations other than those involving national survival implies that their utility will continue to be significant but highly restricted. The ability to conduct different and sophisticated forms of conventional warfare will, therefore, remain the critical index of national power because of its undiminished utility, flexibility, responsiveness and credibility.”82 The key point is that national power is multifaceted and cannot be measured with a single or a handful of metrics. In the analyses that follow, I allot more space to economic indicators than to military indicators. This is not because economic power is necessarily more important than military power, but rather because most declinist writings argue that the United States is in economic, not military, decline. Moreover, military power is ultimately based on economic strength. International relations scholars tend to view civilian and military realms as separate entities, but militaries are embedded within economic systems. In a separate study, I show that countries that excel in producing commercial products and innovations also tend to excel in producing military force.83 Part of this advantage stems from greater surplus wealth, which allows [End Page 57] rich states to sustain large military investments. Economically developed states, however, also derive military benefits from their technological infrastructures, efficient production capacities, advanced data analysis networks, stocks of managerial expertise, and stable political environments. In short, economic indicators are, to a significant degree, measures of military capability. Focusing on the former, therefore, does not imply ignoring the latter.

2NC Budget Cuts – Readiness

Increasing debt inevitably results in military budget cuts

Ratnesar 11 (Romesh Ratnesar, Deputy editor of Bloomberg Businessweek and a Bernard L. Schwartz Fellow at the New America Foundation, April 11th 2011, “Military Spending Must Be Part of the Deficit Debate,” http://content.time.com/time/nation/article/0,8599,2064468,00.html)

In fact, the one clear and present threat to the American way of life is the size of the national debt. It is already crowding out other national priorities, shrinking needed investments and leaving the U.S. susceptible to economic coercion. And as it consumes more government revenue, the cost of servicing the debt could directly weaken national security by constraining the ability of future policymakers to respond to unexpected crises, according to Travis Sharp of the Center for a New American Security. Given that the military accounts for 20% of the federal budget, any realistic way out of the debt trap will require that we spend less on defense.

Budget cuts obliterate readiness – causes wars in the Middle East and Asia and spurs terrorism

Dunn 13 (Richard J. Dunn III, Currently a private consultant on international security affairs. He is a retired Army colonel who led soldiers in Vietnam, Korea, and throughout the U.S. and has also worked in defense industry for 14 years, July 19th 2013 “The Impact of a Declining Defense Budget on Combat Readiness,” http://www.heritage.org/research/reports/2013/07/the-impact-of-a-declining-defense-budget-on-combat-readiness)

Combat readiness is defined as “[t]he ability of US military forces to fight and meet the demands of the national military strategy.”[1] This is the most important factor to our war fighters, but as basic as it is to them, it remains a complicated subject for others to understand. Due to its multidimensional and somewhat diffuse nature, it also has few natural supporters. For a state that builds ships, it is easy to support a policy that increases the number of ships in the Navy, but it is difficult to construct a constituency to support the complex issue of military readiness. Therefore, readiness may suffer significant harm in the increasingly fierce competition for resources. To fight effectively, the armed forces must be manned, equipped, and trained to operate under dangerous, complex, uncertain, and austere conditions—often with little warning. They require the right personnel operating the right equipment with the right training to win. Readiness is like a three-legged stool. The personnel, equipment, and training “legs” need to be balanced and in sync to support the load. The most modern equipment is useless without highly trained personnel to operate and employ it. Conversely, outmoded or unreliable equipment can hamper the effectiveness of the most highly motivated and skilled personnel. To fight effectively, personnel must train with their combat equipment, practicing their combat missions under realistic, demanding conditions. Quality personnel, equipment, and training are the essential dimensions of combat readiness. Failure to maintain an appropriate balance among these dimensions during the current period of budgetary uncertainty will significantly degrade America’s ability to respond to threats to its interests. This can lead to major strategic setbacks and significant loss of life. The challenging balancing act requires wise and effective leadership across all defense-related institutions. History repeatedly shows that unanticipated events often catch us by surprise and that as a nation, we have paid a high price in blood and treasure to compensate for our lack of preparedness. Lower levels of defense resourcing have not been the sole cause of unpreparedness. In many cases, there is an inability to answer the fundamental question of “what are we preparing to do?” Absent an effective answer that guides the allocation of resources, we can end up with forces that are inadequately manned, equipped, or trained to meet a comprehensive range of threats, some of them unanticipated. Answering the “what, when, and where” question is particularly challenging and complicated in the current era of strategic uncertainty. The world is still a violent and dangerous place, and major existential threats remain vague and unfocused. In the Pacific, U.S. relationships with emerging powers and the future threats they may pose remain unclear. In the Middle East, the political instability that accompanied the Arab Spring may vastly alter the geopolitical landscape established in the 1920s, creating opportunities for a wide spectrum of Islamist parties to advance their undemocratic agendas. Terrorism by non-state actors like al-Qaeda continues to metastasize. At the same time, warfare is expanding into the economically vital cyberspace domain, and revolutionary developments in unmanned systems may be changing the very nature of conflict. Rapid reductions in the defense budget are leading to the restructuring or elimination of many programs. This will damage the ability to deter and, if necessary, defeat threats to vital U.S. national interests. Maintaining a military posture capable of achieving these aims requires both sufficient forces of various types and the readiness of those forces for combat.

2NC Budget Cuts – Asia Pivot

Increasing debt inevitably results in military budget cuts

Ratnesar 11 (Romesh Ratnesar, Deputy editor of Bloomberg Businessweek and a Bernard L. Schwartz Fellow at the New America Foundation, April 11th 2011, “Military Spending Must Be Part of the Deficit Debate,” http://content.time.com/time/nation/article/0,8599,2064468,00.html)

In fact, the one clear and present threat to the American way of life is the size of the national debt. It is already crowding out other national priorities, shrinking needed investments and leaving the U.S. susceptible to economic coercion. And as it consumes more government revenue, the cost of servicing the debt could directly weaken national security by constraining the ability of future policymakers to respond to unexpected crises, according to Travis Sharp of the Center for a New American Security. Given that the military accounts for 20% of the federal budget, any realistic way out of the debt trap will require that we spend less on defense.

Budget cuts kill an effective Asia Pivot

Harper 14 (Jon Harper, Miltary.com news Writer, March 25th 2014, “Budget Cuts Could Limit Military's Pacific Pivot,” http://www.military.com/daily-news/2014/03/25/budget-cuts-could-limit-militarys-pacific-pivot.html)

WASHINGTON -- Budget constraints and force requirements in other regions will likely stall the Pentagon's plans to beef up the U.S. military presence in the Asia-Pacific and send more high-tech weaponry to deter a rising China, officials and analysts say. DoD released its $496 billion fiscal 2015 budget request earlier this month. Due to caps imposed by Congress' bipartisan budget deal in December, the Pentagon is requesting $45 billion less than what it anticipated it would need to carry out the national defense strategy when it submitted last year's budget request. DoD also released its Future Years Defense Program, which calls for $115 billion more in military spending than current law allows over the course of the next five years. "Right now, the pivot [to the Pacific] is being looked at again, because candidly it can't happen [due to budget pressures]," Katrina McFarland, the assistant secretary of defense for acquisition, said at an Aviation Week conference in Arlington, Va. on March 4, according to multiple news reports. Later that day, McFarland issued the following statement through a spokeswoman in what appeared to be an attempt to walk back her remarks. "When I spoke at a conference, I was asked a question about the budget ... and how it relates to our pivot to Asia. I was reiterating what Secretary Hagel said last week: that the shift in focus to the Asia-Pacific requires us to 'adapt, innovate, and make difficult budgetary and acquisition decisions to ensure that our military remains ready and capable.' That's exactly what we've done in this budget [proposal]. The rebalance to Asia can and will continue." "[McFarland] obviously was disciplined and retracted those remarks," Sen. John McCain, R- Ariz., said at a budget hearing the next day. Adm. Samuel Locklear, head of the U.S. Pacific Command, said the resources currently at his disposal are insufficient to meet operational requirements. "The ability for the services to provide the type of maritime coverage, the air coverage of some of the key elements that we've historically needed in this part of the world for crisis response, have not been available to the level that I would consider acceptable risk [due to recent budget cutbacks]," he told lawmakers March 5.

Successful Asia pivot solves Asia war

Friedberg 11 (Aaron Friedberg, Professor of Politics and International Affairs at Princeton University, September 4th 2011, “China’s Challenge at Sea,” http://www.nytimes.com/2011/09/05/opinion/chinas-challenge-at-sea.html?_r=1)

If the United States and its Asian friends look to their own defenses and coordinate their efforts, there is no reason they cannot maintain a favorable balance of power, even as China’s strength grows. But if they fail to respond to China’s buildup, there is a danger that Beijing could miscalculate, throw its weight around and increase the risk of confrontation and even armed conflict. Indeed, China’s recent behavior in disputes over resources and maritime boundaries with Japan and the smaller states that ring the South China Sea suggest that this already may be starting to happen. This is a problem that cannot simply be smoothed away by dialogue. China’s military policies are not the product of a misunderstanding; they are part of a deliberate strategy that other nations must now find ways to meet. Strength deters aggression; weakness tempts it. Beijing will denounce such moves as provocative, but it is China’s actions that currently threaten to upset the stability of Asia. Many of China’s neighbors are more willing than they were in the past to ignore Beijing’s complaints, increase their own defense spending and work more closely with one another and the United States. They are unlikely, however, to do those things unless they are convinced that America remains committed. Washington does not have to shoulder the entire burden of preserving the Asian power balance, but it must lead.

Asia conflict escalates and goes nuclear

Duz 14 (Sergui Duz, Voice of Russia Writer, January 2nd 2014 “Nuclear war more likely than ever: threat comes from South Asia and nuke terrorists,” http://voiceofrussia.com/2014_01_02/Nuclear-war-more-likely-than-ever-threat-comes-from-South-Asia-and-nuke-terrorists-1915/)

The humanity has inched closer to the precipice of an all-out nuclear war than ever before, closer than it was even at the height of the historic Cold War standoff between the US and the Soviet Union. The main reason for this is the ongoing erosion of the non-proliferation regime, experts say. The Non-Proliferation Treaty has been continuously bashed as "unfair," but it is in fact the exclusive geopolitical environment and ensuing nuclear responsibility of a handful of states that has so far kept mankind away from the total wipeout. The theory of reciprocal deterrence wasn’t there all the time. A long two decades after the A-bomb was invented, the powers who had it in their arsenals thought of it as fair game, a weapon you could actually use in a conflict, rather than a deterrent. The Cuban Missile Crisis came as a wakeup call. It brought home the danger of nuclear weapons and led to the non-proliferation regime as conceived by the so-called "nuclear club," which included the Soviet Union, the US, Britain, France and China. Under the NPT, only countries that made and set off a nuclear bomb prior to January 1, 1967 were granted the status of a nuclear power. Washington, London and Moscow were the first to sign the treaty in 1968, with Paris and Beijing committing themselves to it years later. But all of the signatories abided by the rules. Those times have passed. NPT controls have become so loose and new nuclear powers so numerous, there’s no counting them anymore. India, Pakistan, Israel and North Korea have never even applied for "nuclear club" membership. On the contrary, they created their own shadow club with no rules. The official club with all its nukes poses less threat to the human race than this bunch of neophytes. Volatility has spread, though South Asia plays a separate role in it. "Some South Asian countries have a full arsenal of nukes," says Pyotr Topychkanov, a senior researcher at the International Security Center of the Institute of World Economy and International Relations at the Russian Academy of Sciences. "They have enough nuclear warheads and vehicles. They have only one equal in the Middle East, which is Israel. Iran has no nuclear weapons yet." "The same is true of North Korea, which has weapon-grade fissile nuclear materials. They have built and tested explosive devices, but it’s still a long way to fully-fledged nukes for them." "The countries that really cause concern are India, Pakistan and China. China and Pakistan are longtime partners, including their nuclear agenda. India borders on China and Pakistan and is certainly aware of this partnership. It doesn’t have faith in either. Were a conflict to spark off, it would be trilateral and include not only India and Pakistan, but India, Pakistan and China."

AT: Black Swans

No impact to black swans – everything is predictable

John Tamny, editor of RealClearMarkets and Forbes Opinions, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading, August 22^nd 2013, “Black Swans Are a Myth, Government Intervention Is the Only Black Swan,” http://www.realclearmarkets.com/articles/2013/08/22/black_swans_are_a_myth_government_intervention_is_the_only_black_swan_100566.html

Are Austrian investors searching for the "black swans" or "tail events" that consume so much of the thinking of the average investor? The answer is no. As Spitznagel puts it, "When it comes to market events, there have been no impactful black swans." To the Austrian investor a "black swan" is an asteroid hitting the earth. Regarding big market events, Spitznagel writes that the "stock market plunges that have occurred over the past century most certainly were not black swans or tail events." In truth, they were entirely predictable events made that way by policy error that eventually led to crack-ups. Let's perhaps call government itself our black swan. The Austrian investor waits for corrections made inevitable by government error, and is once again conifer like in aggressively returning to the land cleared out by the small forest fire in search of companies that patiently and wisely invested their capital.

AT: Stimulus Good

No offense – Keynesian economics are false

Ross 11 (Ron Ross, Ph.D. and an economist who lives in Arcata, California, July 22nd 2011, “Fatal Flaws of Keynesian Economics,” http://spectator.org/archives/2011/07/22/fatal-flaws-of-keynesian-econo)

The stimulus was premised on the economic model known as Keynesianism: the intellectual legacy of the late English economist John Maynard Keynes. Keynesianism doesn't work, never has worked, and never will work. Without a clear understanding of why Keynesianism cannot work we will be forever doomed to pursuing the impossible. There's no real mystery about why Keynesianism fails. There are numerous reasons why and they've been known for decades. Keynesians have an unrealistic and unsupportable view of how the economy works and how people make decisions. Short-Run Focus Keynesian policy advocates focus primarily on the short run -- with no regard for the future implications of current events -- and they assume that all economic decision-makers do the same. Consider the following quote by John Maynard Keynes: "But the long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again." After passage of the stimulus package, Lawrence Summers, Obama's chief economic advisor at the time, often said that the spending should be "timely, targeted, and temporary." Although those sound like desirable objectives, they illustrate the Keynesian focus on the short term. Sure it would be convenient if you could just spend a bunch of money and make the economy get well, but it's not that simple. The implication of a Keynesian perspective is that you can hit the economy a few times with a cattle prod and get society back to full employment. Remember that so-called "cash-for-clunkers" program? Maybe it accelerated some new car sales by a month or two, but it had no lasting impact. The "Chicago School" is the primary source of serious research and analysis related to the Keynesian model. Two Chicago School conclusions, in particular, make it clear where Keynesian policies run aground. The two theories are the "permanent income hypothesis" and the theory of "rational expectations." The "permanent income hypothesis" was how Milton Friedman termed the findings of his research on the spending behavior of consumers. The MIT Dictionary of Economics defines the permanent income hypothesis as "The hypothesis that the consumption of the individual (or household) depends on his (or its) permanent income. Permanent income may be thought of as the income an individual expects to derive from his work and holdings of wealth during his lifetime." Whether consumers and investors focus mostly on the short run or the long run is basically an "empirical question." A convincing theoretical case can be made either way. To find out which focus actually conforms closer to reality, you have to gather evidence. Not Evidence-Based Much of the difference between the two schools of thought can be explained by differences in their methodologies. Keynes was not known for his research or empirical efforts. Keynesianism is definitely not an evidence-based model of how the economy works. So far as I know, Keynes did no empirical studies. Friedman was a far more diligent researcher and data collector than was Keynes. Friedman fit the theory to the data, rather than vice versa. The Keynesian disregard for evidence is reflected in their advocacy for more stimulus spending even in the face of the obvious failure of the what's already been spent. At a minimum, we are due an explanation of why it hasn't worked. (Don't expect that to be forthcoming, however). Failure to Consider Incentives Another of the Chicago School's broadsides against Keynesianism is the theory of "rational expectations." It's a theory for which the 1995 Nobel Prize for Economics was awarded to Robert Lucas of the University of Chicago. As economic theories go, it is relatively straightforward. It essentially states that "individuals use all the available and relevant information when taking a view about the future." (MIT Dictionary of Modern Economics) The rational expectations hypothesis is the simple assertion that individuals take into account their best guesses about the future when they make decisions. That seemingly simple concept has profound implications. The Chicago School's research led them to conclude that individuals are relatively deliberate and sophisticated in how they make economic choices. Keynesians and their liberal followers apparently think individuals are short-sighted and simple-minded. An elemental but too often overlooked reality about our economy is that it is based on voluntary exchange. Voluntary exchange is an even more fundamental feature of our economy than is the market. A market is any arrangement that brings buyers and sellers together. In other words, the primary purpose of a market is to make voluntary exchange possible. Voluntary exchange leaves large amounts of control in the hands of private individuals and businesses. The market relies on carrots rather than sticks, rewards rather than punishment. The actors, therefore, need to be induced to move in certain desired directions rather than simply commanded to do so. This is the basic reason why incentives are such an important part of economics. If not for voluntary exchange, incentives wouldn't much matter. In designing economic policy in the context of a market economy it becomes important to take into account what actually motivates people and how they make choices. If you want to change behavior in a voluntary exchange economy, you have to change incentives. Keynesian policies do not take that essential step. The federal government's share of GDP has gone from 19 percent to 24 percent during Obama's time in the White House. A larger government share of GDP ultimately necessitates higher taxes or more debt. In and of themselves, higher taxes retard economic growth because of their impact on incentives. The disincentive effect of higher taxes illustrates why big government is far costlier than it first appears.

Stimulus is bad – crowds out more productive private investment and has a net negative effect on the economy – empirics prove

Bandow 12 (Doug Bandow, Senior Fellow @ Cato, 8-6-12, “Federal Spending: Killing the Economy With Government Stimulus,” http://www.forbes.com/sites/dougbandow/2012/08/06/federal-spending-killing-the-economy-with-government-stimulus/)

President Barack Obama’s presidency hangs in the balance after another disappointing employment report. He continues to advocate new government “stimulus” programs to boost his reelection campaign. However, Washington is awash in government “stimulus,” without effect. Only productive private investment will spark economic revival. When both financial and economic crises hit, President George W. Bush backed a $170 billion “stimulus” bill and then massive industry bail-outs—of banks, Wall Street, automakers, and the housing industry. President Obama accelerated the latter efforts while adding his own $825 billion American Recovery and Reinvestment Act in early 2009. Several smaller “stimulus” efforts costing well over $100 billion followed. As a result, federal outlays and debts exploded. In 2008 federal red ink was “only” $479 billion. Since then Uncle Sam’s annual deficit has exceeded a trillion dollars. In addition, the Federal Reserve launched a massive “stimulus” campaign—costly bail-outs and mortgage purchases, near zero interest rates, and two rounds of “quantitative easing.” Economist Joseph Stiglitz noted earlier this year that “Beginning in 2008, the balance sheet of the Fed doubled and then rose to three times its earlier level.” None of these efforts have spurred economic growth. In fact, unemployment soared, hitting ten percent. The jobless rate is still over eight percent despite administration promises that it would fall below six percent by last April. Some “stimulus” advocates blame state and local spending which, they claimed, fell. However, Edward Lazear, former chairman of the President’s Council of Economic Advisers, pointed out that while real government spending was down a little in 2010 over 2009, GDP growth rates were higher. Outlays were up in 2011 while GDP growth dropped. Lazear added: “The White House forecasts that government spending in 2012 will exceed 2011 levels by 5 percent and will be 27 percent higher than it was in 2008.” If government could spend America to prosperity, good times would have arrived long ago. Yet President Obama won’t stop. Last year he proposed another “jobs” initiative, the $447 billion “American Jobs Act” grab-bag, which included subsidies for state and local governments. Literally millions of jobs, most of them in or for government, would be created, he claimed, by Washington borrowing more money America doesn’t have for government projects America can’t afford. In July the New York Times published an unintentionally hilarious editorial contending that “Mr. Obama’s big mistake was to turn prematurely from the need for stimulus to a focus on cutting the budget.” The Times apparently missed the $1.2 trillion deficit the administration will run this year. Or the president’s future budget submission: the Congressional Budget Office estimated that the president’s program would raise accumulated red ink over the next decade from $3 trillion to an astonishing $6.4 trillion. Where is the radical budget-cutting in Washington. A similar debate is occurring in Europe, with the contest presented as “austerity” versus “growth.” Yet many of the nations which practiced austerity have grown the fastest. Germany remains the continent’s powerhouse even though its post-2008 stimulus was far less relative to its GDP than in the U.S. and other European states. Both Germany and Sweden enjoyed strong growth as they brought their budgets into closer balance. My Cato Institute colleague Michael Tanner also pointed to the Baltic states of Estonia, Latvia, and Lithuania. All cut government outlays; all are growing. Canada and Switzerland similarly rejected profligacy as policy. He wrote: “All these countries are following the successful examples set by other nations such as Chile, Ireland, and New Zealand in the 1980s and ‘90s, and Slovakia from 2000 to 2003.” In contrast, Portugal’s Finance Minister, Vitor Gaspar, warned the New York Times: “My country definitely provides a cautionary tale that shows that, in some instances, short-run expansionary policies can be counterproductive.” He added: “There are some limitations to the intuitions from Keynes.” In fact, Portugal may be headed for a second European Union bail-out. Economic growth requires good spending, not more spending. After all, Washington could pay every American $10,000 to dig a hole in his or her neighbor’s yard and then another $10,000 to fill it in. It would be a ludicrous policy, yet Keynes argued that the unemployed would be better off if paid by the government to “dig holes in the ground.” Most jobs bills are little different than paying people to dig holes. Politics, not economics, dominates. University of Chicago economist Raghuram Rajan admitted “When people say austerity is not the answer, fine, if you have great things to spend on, let us know what they are.” The ARRA ignited a lobbying frenzy, turning the measure into a Christmas tree for legislators to hang long desired projects and favored social spending. By one estimate the bill “created” jobs at an average cost of $278,000. The cost of some individual jobs exceeded a million dollars each. Tom Evslin, who coordinated Vermont’s federal “stimulus” money, concluded that “much of the money ended up continuing bloated programs rather than providing a transition to a sustainable future.” He pointed to broadband and energy programs, where private investment “dried up as companies waited to see if they could build with taxpayer money. Entrepreneurial effort turned from innovation to grant-grabbing.” Last September the New York Times reported that critics “say the money has gone to areas where it is not needed, to promote broadband where it already exists and for industrial parks designed to attract business and jobs that may never materialize.” The heart of the case for government spending as stimulus is the fabled Keynesian “multiplier.” John Maynard Keynes claimed that after government spent a dollar others would spend it again and again, “multiplying” the economic effect. Pay me $20,000 to dig and fill two holes, and I will buy things. In turn, my sellers will buy things. And on it will go. It is a dubious theory. First, it costs government money to tax and spend. Observed Harvard economist Robert Barro, “it is wrong now to think that added government spending is free.” Second, the theory presumes that government will use the resources productively. Explained Barro: The argument “implicitly assumes that the government is better than the private market at marshaling idle resources to produce useful stuff. Unemployed labor and capital can be utilized at essentially zero social cost, but the private market is somehow unable to figure any of this out.” Economist Dwight Lee made a similar point: “increased real aggregate demand is the result, not the cause, of an increasingly productive and prosperous economy.” Nor is there compelling evidence of a large positive multiplier. Economists John Cogan and John Taylor reviewed the ARRA and concluded: “despite the large size of the program, the dollar volume of additional government purchases that it has generated has been negligible.” Their earlier research debunked federal attempts to stimulate the economy during the 1970s: government stimulus programs “did not work then and they are not working now.” Also criticizing the ARRA was a recent study from the Phoenix Center, which noted: “We are now several years on, and many economists and policymakers are beginning to doubt the ability of government spending and monetary policy to effectively correct our current employment problems.” Robert Barro reviewed the experience of World War I, World War II, the Korean War, and the Vietnam War, and came up with a multiplier of 0.8, which means that government outlays actually “lowered components of GDP aside from military purchases.” He and Charles Redlick figured that military spending generated a multiplier greater than one only with very high levels of unemployment, well above current levels. In extending his analysis to peacetime, Barro reported as multiplier “a number insignificantly different from zero.” Since the 1960s government spending has been tied to the business cycle; he and Redlick believed “that government spending increased in response to growing GDP, rather than the reverse.” He figured that roughly $900 billion in federal “stimulus” spending from ARRA probably resulted in only $600 billion in increased growth, a bad deal by any measure. He and Redlick concluded: “spending stimulus programs will likely raise GDP by less than the increase in government spending.” A 2009 IMF study of economic research suggested a multiplier in the range of 0.3 to 1.8, with some variation based on country size. In a paper for the National Bureau of Economic Research, Valerie Ramey of theUniversity of California (San Diego) reviewed the economic literature, which suggested that the multiplier probably was between .8 and 1.5, and almost certainly was between .5 and 2.0. However, she personally reached far more negative findings: “For the most part, it appears that a rise in government spending does not stimulate private spending; most estimates suggest that it significantly lowers private spending. These results imply that the government spending multiplier is below unity. Adjusting the implied multiplier for increases in tax rates has only a small effect. The results imply a multiplier on total GDP of around 0.5.” Similar was the result of a 2011 study from the Phoenix Center for Advanced Legal & Economic Public Policy Studies. The four authors found: “government spending has zero effect on private-sector job creation. This result is consistent with the apparent impotence of huge federal government spending increases in recent times aimed at reducing unemployment.” Historical experience argues against government’s ability to “stimulate” the economy. Franklin Delano Roosevelt was elected president during the Great Depression. He spent wildly and the economy recovered a bit, only to sink again. In 1939 Treasury Secretary Henry Morgenthau complained that “After eight years of this administration we have just as much unemployment as when we started … and an enormous debt to boot!”

Economic Decline Impacts

Economic decline increases chance of nuclear conflict

Richard Heinberg, Senior Fellow of the Post Carbon Institute and is widely regarded as one of the world’s foremost Peak Oil educators, November 16^th 2012, “Conflict and Change in the Era of Economic Decline: Part 1 - The 21st century landscape of conflict,” http://www.resilience.org/stories/2012-12-04/conflict-and-change-in-the-era-of-economic-decline-part-1-the-21st-century-landscape-of-conflict

When empires crumble, as they always do, the result is often a free-for-all among previous subject nations and potential rivals as they sort out power relations. The British Empire was a seeming exception to this rule: in that instance, the locus of military, political, and economic power simply migrated to an ally across the Atlantic. A similar graceful transfer seems unlikely in the case of the U.S., as economic decline during the 21st century will be global in scope. A better analogy to the current case might be the fall of Rome, which led to centuries of incursions by barbarians as well as uprisings in client states. Disaster per se need not lead to violence, as Rebecca Solnit argues in her book A Paradise Built in Hell: The Extraordinary Communities that Arise in Disaster. She documents five disasters – the aftermath of Hurricane Katrina; earthquakes in San Francisco and Mexico City; a giant ship explosion in Halifax, Canada; and 9/11 – and shows that rioting, looting, rape, and murder were not automatic results. Instead, for the most part, people pulled together, shared what resources they had, cared for the victims, and in many instances found new sources of joy in everyday life. However, the kinds of social stresses we are discussing now may differ from the disasters Solnit surveys, in that they comprise a “long emergency,” to borrow James Kunstler’s durable phrase. For every heartwarming anecdote about the convergence of rescuers and caregivers on a disaster site, there is a grim historic tale of resource competition turning normal people into monsters. In the current context, a continuing source of concern must be the large number of nuclear weapons now scattered among nine nations. While these weapons primarily exist as a deterrent to military aggression, and while the end of the Cold War has arguably reduced the likelihood of a massive release of these weapons in an apocalyptic fury, it is still possible to imagine several scenarios in which a nuclear detonation could occur as a result of accident, aggression, pre-emption, or retaliation. We are in a race – but it’s not just an arms race; indeed, it may end up being an arms race in reverse. In many nations around the globe the means to pay for armaments and war are starting to disappear; meanwhile, however, there is increasing incentive to engage in international conflict as a way of re-channeling the energies of jobless young males and of distracting the general populace, which might otherwise be in a revolutionary mood. We can only hope that historical momentum can maintain The Great Peace until industrial nations are sufficiently bankrupt that they cannot afford to mount foreign wars on any substantial scale.

Economic depression leads to global war

Richard Duncan, chief economist at Singapore-based Blackhorse Asset Management, former financial sector specialist at the World Bank and global head of investment strategy at ABN AMRO Asset Management, studied literature and economics at Vanderbilt University (1983) and international finance at Babson College (1986), February 24^th 2012,” The New Depression: The Breakdown of the Paper Money Economy”

The consequences of a New Great Depression would extend far beyond the realm of economics. Hungry people will fight to survive. Governments will use force to maintain internal order at home. This section considers the geopolitical repercussion of economic collapse, beginning with the United States. First, the U.S. government’s tax revenues would collapse with the depression. Second, because global trade would shrivel up, other countries would no longer help finance the U.S. budget deficit by buying government bonds because they would no longer have the money to do so. At present, the rest of the world has a $500 billion annual trade surplus with the United States. The central banks of the United States’ trading partners accumulate that surplus as foreign exchange reserves and invest most of those reserves into U.S. government bonds. An economic collapse would cause global trade to plummet and drastically reduce (if not eliminate altogether) the U.S. trade deficit. Therefore, this source of foreign funding for the U.S. budget deficit would dry up. Consequently, the government would have to sharply curtail its spending, both at home and abroad. Domestically, social programs for the old, the sick, and the unemployed would have to be slashed. Government spending on education and infrastructure would also have to be curtailed. Much less government spending would result in a dramatic increase in poverty and, consequently, in crime. This would combine to produce a crisis of the current two-party political system. Astonishment, frustration, and anger at the economic breakdown would radicalize politics. New parties would form at both extremes of the political spectrum. Given the great and growing income inequality going into the crisis, the hungry have-nots would substantially outnumber the remaining wealthy. On the one hand, a hard swing to the left would be the outcome most likely to result from democratic elections. In that case, the tax rates on the top income brackets could be raised to 80 percent or more, a level last seen in 1963. On the other hand, the possibility of a right-wing putsch could not be ruled out. During the Great Depression, the U.S. military was tiny in comparison with what it became during World War II and during the decades of hot, cold, and terrorist wars that followed. In this New Great Depression, it might be the military that ultimately determines how the country would be governed. The political battle over America’s future would be bitter, and quite possibly bloody. It cannot be guaranteed that the U.S. Constitution would survive. Foreign affairs would also confront the United States with enormous challenges. During the Great Depression, the United States did not have a global empire. Now it does. The United States maintains hundreds of military bases across dozens of countries around the world. Added to this is a fleet of 11 aircraft carriers and 18 nuclear-armed submarines. The country spends more than $650 billion a year on its military. If the U.S. economy collapses into a New Great Depression, the United States could not afford to maintain its worldwide military presence or to continue in its role as global peacekeeper. Or, at least, it could not finance its military in the same way it does at present. Therefore, either the United States would have to find an alternative funding method for its global military presence or else it would have to radically scale it back. Historically, empires were financed with plunder and territorial expropriation. The estates of the vanquished ruling classes were given to the conquering generals, while the rest of the population was forced to pay imperial taxes. The U.S. model of empire has been unique. It has financed its global military presence by issuing government debt, thereby taxing future generations of Americans to pay for this generation’s global supremacy. That would no longer be possible if the economy collapsed. Cost–benefit analysis would quickly reveal that much of America’s global presence was simply no longer affordable. Many – or even most – of the outposts that did not pay for themselves would have to be abandoned. Priority would be given to those places that were of vital economic interests to the United States. The Middle East oil fields would be at the top of that list. The United States would have to maintain control over them whatever the price. In this global depression scenario, the price of oil could collapse to $3 per barrel. Oil consumption would fall by half and there would be no speculators left to manipulate prices higher. Oil at that level would impoverish the oil-producing nations, with extremely destabilizing political consequences. Maintaining control over the Middle East oil fields would become much more difficult for the United States. It would require a much larger military presence than it does now. On the one hand, it might become necessary for the United States to reinstate the draft (which would possibly meet with violent resistance from draftees, as it did during the Vietnam War). On the other hand, America’s all-volunteer army might find it had more than enough volunteers with the national unemployment rate in excess of 20 percent. The army might have to be employed to keep order at home, given that mass unemployment would inevitably lead to a sharp spike in crime. Only after the Middle East oil was secured would the country know how much more of its global military presence it could afford to maintain. If international trade had broken down, would there be any reason for the United States to keep a military presence in Asia when there was no obvious way to finance that presence? In a global depression, the United States’ allies in Asia would most likely be unwilling or unable to finance America’s military bases there or to pay for the upkeep of the U.S. Pacific fleet. Nor would the United States have the strength to force them to pay for U.S. protection. Retreat from Asia might become unavoidable. And Europe? What would a cost–benefit analysis conclude about the wisdom of the United States maintaining military bases there? What valued added does Europe provide to the United States? Necessity may mean Europe will have to defend itself. Should a New Great Depression put an end to the Pax Americana, the world would become a much more dangerous place. When the Great Depression began, Japan was the rising industrial power in Asia. It invaded Manchuria in 1931 and conquered much of the rest of Asia in the early 1940s. Would China, Asia’s new rising power, behave the same way in the event of a new global economic collapse? Possibly. China is the only nuclear power in Asia east of India (other than North Korea, which is largely a Chinese satellite state). However, in this disaster scenario, it is not certain that China would survive in its current configuration. Its economy would be in ruins. Most of its factories and banks would be closed. Unemployment could exceed 30 percent. There would most likely be starvation both in the cities and in the countryside. The Communist Party could lose its grip on power, in which case the country could break apart, as it has numerous times in the past. It was less than 100 years ago that China’s provinces, ruled by warlords, were at war with one another. United or divided, China’s nuclear arsenal would make it Asia’s undisputed superpower if the United States were to withdraw from the region. From Korea and Japan in the North to New Zealand in the South to Burma in the West, all of Asia would be at China’s mercy. And hunger among China’s population of 1.3 billion people could necessitate territorial expansion into Southeast Asia. In fact, the central government might not be able to prevent mass migration southward, even if it wanted to. In Europe, severe economic hardship would revive the centuries-old struggle between the left and the right. During the 1930s, the Fascists movement arose and imposed a police state on most of Western Europe. In the East, the Soviet Union had become a communist police state even earlier. The far right and the far left of the political spectrum converge in totalitarianism. It is difficult to judge whether Europe’s democratic institutions would hold up better this time that they did last time. England had an empire during the Great Depression. Now it only has banks. In a severe worldwide depression, the country – or, at least London – could become ungovernable. Frustration over poverty and a lack of jobs would erupt into anti-immigration riots not only in the United Kingdom but also across most of Europe. The extent to which Russia would menace its European neighbors is unclear. On the one hand, Russia would be impoverished by the collapse in oil prices and might be too preoccupied with internal unrest to threaten anyone. On the other hand, it could provoke a war with the goal of maintaining internal order through emergency wartime powers. Germany is very nearly demilitarized today when compared with the late 1930s. Lacking a nuclear deterrent of its own, it could be subject to Russian intimidation. While Germany could appeal for protection from England and France, who do have nuclear capabilities, it is uncertain that would buy Germany enough time to remilitarize before it became a victim of Eastern aggression. As for the rest of the world, its prospects in this disaster scenario can be summed up in only a couple of sentences. Global economic output could fall by as much as half, from $60 trillion to $30 trillion. Not all of the world’s seven billion people would survive in a $30 trillion global economy. Starvation would be widespread. Food riots would provoke political upheaval and myriad big and small conflicts around the world. It would be a humanitarian catastrophe so extreme as to be unimaginable for the current generation, who, at least in the industrialized world, has known only prosperity. Nor would there be reason to hope that the New Great Depression would end quickly. The Great Depression was only ended by an even more calamitous global war that killed approximately 60 million people.

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