One of the consequences of the pandemic is the rise in government spending in order to support the economy and keep us from spilling into a deeper recession. The figures splashed across the media headlines is causing alarm with many wondering: Is this the right economic response? How will we ever pay this back? Will the future generations be burdened by these economic decisions?

In this episode, we explore whether we are collectively looking at the issue of government debt accumulation from the right lens and whether an alternative perspective is required for these alternative times.

Show Notes

Increase in government deficit during the COVID-19 pandemic. Is this the right economic response? Should we be worried? https://www.abc.net.au/news/2020-07-23/federal-government-coronavirus-deficit-economy-debt-frydenberg/12483360

1.09: In times of a pandemic what is the alternative? Fiscal response (i.e government spending) seems like the right course of action to keep us afloat during this current economic climate where unemployment is rising and households and businesses are struggling.

4.54: Government debt is not the same as personal debt. If the government is borrowing money to stimulate the economy, then that's not necessarily a bad thing. Effectively they are using debt to grow an asset, which is our economy.

7.34: There are a number of different ways you can manage an economy and Modern Monetary Theory (MMT) is one option that seems to be getting a bit of media attention. MMT looks beyond the cost of the debt, considering the broader social and economic impacts of government policy. MMT provides an alternative perspective of detaching ourselves from this notion that government debt is like household debt. https://www.businessinsider.com.au/modern-monetary-theory-mmt-explained-aoc-2019-3?r=US&IR=T#:~:text=MMT%20is%20a%20big%20departure,debts%20in%20their%20own%20currency.

13.40: Is MMT some kind of mystical fantasy where there is a pot of money governments can access that never has to be repaid just like the famous children's book "The magic pudding" which stars our anti hero Albert, the grumpy old pudding that replenishes itself each time it has been eaten. https://en.wikipedia.org/wiki/The_Magic_Pudding.

16.50: Taxes are not the only form of government revenue in offsetting government spending. And a government deficit does not automatically signal tax increases. Governments have alternative avenues.