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SPENDING DISADVANTAGE –
PRESEASON
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***2NC BLOCKS/ANSWERS ..................................................................................................................... 5
2NC Uniqueness Wall / They Say Spending High Now ......................................................................... 6
2NC Impact Overview ............................................................................................................................ 7
2NC Competitiveness Add-On ............................................................................................................. 10
2NC Consumer Confidence Add-On .................................................................................................... 14
They Say Economy Low Now .............................................................................................................. 16
***LINKS/INTERNAL LINKS ..................................................................................................................... 20
Generic Spending Links ....................................................................................................................... 21
Foreign Aid Links ................................................................................................................................. 28
Venezuela Oil Links ............................................................................................................................. 29
***IMPACT EXTENSIONS/TURNS .......................................................................................................... 31
Energy Turn ......................................................................................................................................... 32
Hegemony Turn ................................................................................................................................... 33
Mexico Turn ......................................................................................................................................... 34
Venezuela Turn .................................................................................................................................... 35
***2AC ANSWERS ................................................................................................................................... 36
Non-Unique: Economy Decline Now .................................................................................................... 37
Internal Link Turn – Spending Solves Recession ................................................................................. 38
***2AC IMPACT DEFENSE ...................................................................................................................... 44
Collapse Doesn’t Cause War ............................................................................................................... 45
They Say: Bad Economy  Poverty ................................................................................................... 47
They Say: Collapses Mexican Economy .............................................................................................. 49
They Say: Collapses Venezuelan Economy ........................................................................................ 50
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1NC Shell
A. Uniqueness – Government spending is decreasing and the economy is improvingthis trend will continue
Weisman, 7/8 [Jonathan, New York Times, “Projections Show U.S. Budget Deficit Will Shrink,”
http://thecaucus.blogs.nytimes.com/2013/07/08/projections-show-u-s-budget-deficit-will-shrink/, ALB]
The federal budget deficit will fall to $759 billion for the fiscal year that ends this September, a $214 billion
improvement from the projection made in March, as spending cuts, tax increases and an improving
economy begin to tame the government’s red ink, the White House budget office said on Monday. The
annual midsession review from the White House Office of Management and Budget was largely in line with
a recent forecast from the Congressional Budget Office. Both see a rapid decline in deficits expressed as a
percentage of the economy, the fastest since the years following World War II, according to Sylvia Mathews
Burwell, the White House budget director. The White House said this year’s deficit would reach 4.7 percent
of the gross domestic product, down from more than 10 percent four years ago, and would continue to slide
to 3 percent of the economy by 2017.
B. Link and internal linkNew spending destroys the economy – most conclusive research
Boccia 2/13 [Romina, an economist, is Assistant Director for the Roe Institute for Economic Policy
Studies at The Heritage Foundation. She holds a master’s degree in Economics at George Mason
University, “How the United States’ High Debt Will Weaken the Economy and Hurt Americans”, Heritage
Foundation, 2/13/13, http://www.heritage.org/research/reports/2013/02/how-the-united-states-high-debt-willweaken-the-economy-and-hurt-americans]
U.S. federal spending in 2013, combined with depressed receipts from a weak economy, is on track to result
in a deficit of $850 billion. Publicly held debt in the United States will exceed 76 percent of gross domestic
product (GDP) in 2013, and chronic deficits are projected to push U.S. debt to 87 percent of the economy in
10 years.[1] Debt is projected to grow even more rapidly after 2023. Recent economic research, especially
the work of Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff, confirms that federal debt at such high
levels puts the United States at risk for a number of harmful economic consequences, including slower
economic growth, a weakened ability to respond to unexpected challenges, and quite possibly a debt-driven
financial crisis.[2] The federal government is quickly exhausting its ability to manage its bills, with debt
having already reached the statutory debt ceiling. The resulting debate should focus on the need to reduce
federal spending immediately and over the long term by making necessary and prudent reforms to the
nation’s major entitlement programs, and thus reduce the continued buildup of debt and the expected
harmful consequences increasingly confirmed by academic research.
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C. Economic decline causes war – studies prove
Royal 10 [Jedediah, Director of Cooperative Threat Reduction at the U.S. Department of Defense, 2010,
Economic Integration, Economic Signaling and the Problem of Economic Crises, in Economics of War and
Peace: Economic, Legal and Political Perspectives, ed. Goldsmith and Brauer, p. 213-215]
Less intuitive is how periods of economic decline may increase the likelihood of external conflict. Political
science literature has contributed a moderate degree of attention to the impact of economic decline and the
security and defence behaviour of interdependent stales. Research in this vein has been considered at
systemic, dyadic and national levels. Several notable contributions follow. First, on the systemic level.
Pollins (20081 advances Modclski and Thompson's (1996) work on leadership cycle theory, finding that
rhythms in the global economy are associated with the rise and fall of a pre-eminent power and the often
bloody transition from one pre-eminent leader to the next. As such, exogenous shocks such as economic
crises could usher in a redistribution of relative power (see also Gilpin. 19SJ) that leads to uncertainty about
power balances, increasing the risk of miscalculation (Fcaron. 1995). Alternatively, even a relatively certain
redistribution of power could lead to a permissive environment for conflict as a rising power may seek to
challenge a declining power (Werner. 1999). Separately. Pollins (1996) also shows that global economic
cycles combined with parallel leadership cycles impact the likelihood of conflict among major, medium and
small powers, although he suggests that the causes and connections between global economic conditions
and security conditions remain unknown. Second, on a dyadic level. Copeland's (1996. 2000) theory of
trade expectations suggests that 'future expectation of trade' is a significant variable in understanding
economic conditions and security behaviour of states. He argues that interdependent states arc likely to
gain pacific benefits from trade so long as they have an optimistic view of future trade relations. However, if
the expectations of future trade decline, particularly for difficult to replace items such as energy resources,
the likelihood for conflict increases, as states will be inclined to use force to gain access to those resources.
Crises could potentially be the trigger for decreased trade expectations either on its own or because it
triggers protectionist moves by interdependent states.4 Third, others have considered the link between
economic decline and external armed conflict at a national level. Mom berg and Hess (2002) find a strong
correlation between internal conflict and external conflict, particularly during periods of economic downturn.
They write. The linkage, between internal and external conflict and prosperity are strong and mutually
reinforcing. Economic conflict lends to spawn internal conflict, which in turn returns the favour. Moreover,
the presence of a recession tends to amplify the extent to which international and external conflicts selfreinforce each other (Hlomhen? & Hess. 2(102. p. X9> Economic decline has also been linked with an
increase in the likelihood of terrorism (Blombcrg. Hess. & Wee ra pan a, 2004). which has the capacity to
spill across borders and lead to external tensions. Furthermore, crises generally reduce the popularity of a
sitting government. "Diversionary theory" suggests that, when facing unpopularity arising from economic
decline, sitting governments have increased incentives to fabricate external military conflicts to create a 'rally
around the flag' effect. Wang (1996), DcRoucn (1995), and Blombcrg. Hess, and Thacker (2006) find
supporting evidence showing that economic decline and use of force arc at least indirecti) correlated. Gelpi
(1997). Miller (1999). and Kisangani and Pickering (2009) suggest that Ihe tendency towards diversionary
tactics arc greater for democratic states than autocratic states, due to the fact that democratic leaders are
generally more susceptible to being removed from office due to lack of domestic support. DeRouen (2000)
has provided evidence showing that periods of weak economic performance in the United States, and thus
weak Presidential popularity, are statistically linked lo an increase in the use of force. In summary, rcccni
economic scholarship positively correlates economic integration with an increase in the frequency of
economic crises, whereas political science scholarship links economic decline with external conflict al
systemic, dyadic and national levels.' This implied connection between integration, crises and armed conflict
has not featured prominently in the economic-security debate and deserves more attention.
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2NC Uniqueness Wall / They Say Spending High Now
Government spending is low now, the economy is improving, and both of these
trends will continue in the future-That’s Weisman. Most conclusive and predictive
warrants-Past spending cuts will kick in and cause deficit to decrease.
Government spending decreasing now
Sutherlan, 7/8 [Paige, Medill News Service, “Military furloughs begin, aim to reduce $1.8 billion in
spending,” http://www.kansascity.com/2013/07/08/4335547/military-furloughs-begin-aim-to.html, ALB]
Eleven-day furloughs for military civilian employees began Monday; the Defense Department estimates the
furloughs will save $1.8 billion, part of the automatic spending cuts -- referred to as the "sequester" -imposed across the federal government. Over the next nine years, the U.S. plans to slash $1.2 trillion in
defense and domestic discretionary spending. In the 2013 fiscal year, the government has cut
approximately $85.4 million in spending, $46 million of that in defense. The furlough plan mandates that 85
percent of the 700,000-plus military civilian employees take temporarily unpaid leaves totaling 11 days or 88
hours per employee. The furlough time off will be scattered throughout the next few months.
Government spending falling now-decreasing deficit proves
Taylor and Kuhnhenn, 7/8 [Andrew and Jim, AP, “White House projects shrinking deficit,”
http://news.yahoo.com/white-house-projects-shrinking-deficit-200548597.html, ALB]
The White House said Monday that the federal budget deficit for the current fiscal year will shrink to $759
billion. That's more than $200 billion less than the administration predicted just three months ago. The new
figures reflect additional revenues generated by the improving economy and take into account automatic,
across-the-board spending cuts that the White House had hoped to avert.
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2NC Impact Overview
Government spending is decreasing now-Only the plan upsets that balance and
causes fiscal chaos-The brink is now-That’s Weisman and Boccia
Econ decline causes nuclear war – Huge risk of quick escalation-Most qualified
studies prove - That’s Royal - Turns the case
<INSERT ANALYSIS BASED ON SPECIFIC AFF>
And, nuclear war turns the case – undermines all policy objectives
Harris and Burrows 9 Mathew, PhD European History @ Cambridge, counselor in the National
Intelligence Council (NIC) and Jennifer is a member of the NIC’s Long Range Analysis Unit “Revisiting the
Future: Geopolitical Effects of the Financial Crisis”
http://www.ciaonet.org/journals/twq/v32i2/f_0016178_13952.pdf Increased Potential for Global Conflict
Of course, the report encompasses more than economics and indeed believes the future is likely to be the
result of a number of intersecting and interlocking forces. With so many possible permutations of outcomes,
each with ample Revisiting the Future opportunity for unintended consequences, there is a growing sense of
insecurity. Even so, history may be more instructive than ever. While we continue to believe that the Great
Depression is not likely to be repeated, the lessons to be drawn from that period include the harmful effects
on fledgling democracies and multiethnic societies (think Central Europe in 1920s and 1930s) and on the
sustainability of multilateral institutions (think League of Nations in the same period). There is no reason to
think that this would not be true in the twenty-first as much as in the twentieth century. For that reason, the
ways in which the potential for greater conflict could grow would seem to be even more apt in a constantly
volatile economic environment as they would be if change would be steadier. In surveying those risks, the
report stressed the likelihood that terrorism and nonproliferation will remain priorities even as resource
issues move up on the international agenda. Terrorism’s appeal will decline if economic growth continues in
the Middle East and youth unemployment is reduced. For those terrorist groups that remain active in 2025,
however, the diffusion of technologies and scientific knowledge will place some of the world’s most
dangerous capabilities within their reach. Terrorist groups in 2025 will likely be a combination of
descendants of long established groups_inheriting organizational structures, command and control
processes, and training procedures necessary to conduct sophisticated attacks_and newly emergent
collections of the angry and disenfranchised that become self-radicalized, particularly in the absence of
economic outlets that would become narrower in an economic downturn. The most dangerous casualty of
any economically-induced drawdown of U.S. military presence would almost certainly be the Middle East.
Although Iran’s acquisition of nuclear weapons is not inevitable, worries about a nuclear-armed Iran could
lead states in the region to develop new security arrangements with external powers, acquire additional
weapons, and consider pursuing their own nuclear ambitions. It is not clear that the type of stable deterrent
relationship that existed between the great powers for most of the Cold War would emerge naturally in the
Middle East with a nuclear Iran. Episodes of low intensity conflict and terrorism taking place under a nuclear
umbrella could lead to an unintended escalation and broader conflict if clear red lines between those states
involved are not well established. The close proximity of potential nuclear rivals combined with
underdeveloped surveillance capabilities and mobile dual-capable Iranian missile systems also will produce
inherent difficulties in achieving reliable indications and warning of an impending nuclear attack. The lack of
strategic depth in neighboring states like Israel, short warning and missile flight times, and uncertainty of
Iranian intentions may place more focus on preemption rather than defense, potentially leading to escalating
crises. 36 Types of conflict that the world continues to experience, such as over resources, could reemerge,
particularly if protectionism grows and there is a resort to neo-mercantilist practices. Perceptions of renewed
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energy scarcity will drive countries to take actions to assure their future access to energy supplies. In the
worst case, this could result in interstate conflicts if government leaders deem assured access to energy
resources, for example, to be essential for maintaining domestic stability and the survival of their regime.
Even actions short of war, however, will have important geopolitical implications. Maritime security concerns
are providing a rationale for naval buildups and modernization efforts, such as China’s and India’s
development of blue water naval capabilities. If the fiscal stimulus focus for these countries indeed turns
inward, one of the most obvious funding targets may be military. Buildup of regional naval capabilities could
lead to increased tensions, rivalries, and counterbalancing moves, but it also will create opportunities for
multinational cooperation in protecting critical sea lanes. With water also becoming scarcer in Asia and the
Middle East, cooperation to manage changing water resources is likely to be increasingly difficult both within
and between states in a more dog-eat-dog world.
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And that conflict escalates across the globe
Austin 09 [Michael, Resident Scholar – American Enterprise Institute, and Desmond Lachman – Resident
Fellow – American Enterprise Institute, “The Global Economy Unravels”, Forbes, 3-6,
http://www.aei.org/article/100187]
What do these trends mean in the short and medium term? The Great Depression showed how social and
global chaos followed hard on economic collapse. The mere fact that parliaments across the globe, from
America to Japan, are unable to make responsible, economically sound recovery plans suggests that they
do not know what to do and are simply hoping for the least disruption. Equally worrisome is the adoption of
more statist economic programs around the globe, and the concurrent decline of trust in free-market
systems. The threat of instability is a pressing concern. China, until last year the world's fastest growing
economy, just reported that 20 million migrant laborers lost their jobs. Even in the flush times of recent
years, China faced upward of 70,000 labor uprisings a year. A sustained downturn poses grave and
possibly immediate threats to Chinese internal stability. The regime in Beijing may be faced with a choice of
repressing its own people or diverting their energies outward, leading to conflict with China's neighbors.
Russia, an oil state completely dependent on energy sales, has had to put down riots in its Far East as well
as in downtown Moscow. Vladimir Putin's rule has been predicated on squeezing civil liberties while
providing economic largesse. If that devil's bargain falls apart, then wide-scale repression inside Russia,
along with a continuing threatening posture toward Russia's neighbors, is likely. Even apparently stable
societies face increasing risk and the threat of internal or possibly external conflict. As Japan's exports have
plummeted by nearly 50%, one-third of the country's prefectures have passed emergency economic
stabilization plans. Hundreds of thousands of temporary employees hired during the first part of this decade
are being laid off. Spain's unemployment rate is expected to climb to nearly 20% by the end of 2010;
Spanish unions are already protesting the lack of jobs, and the specter of violence, as occurred in the
1980s, is haunting the country. Meanwhile, in Greece, workers have already taken to the streets. Europe as
a whole will face dangerously increasing tensions between native citizens and immigrants, largely from
poorer Muslim nations, who have increased the labor pool in the past several decades. Spain has absorbed
five million immigrants since 1999, while nearly 9% of Germany's residents have foreign citizenship,
including almost 2 million Turks. The xenophobic labor strikes in the U.K. do not bode well for the rest of
Europe. A prolonged global downturn, let alone a collapse, would dramatically raise tensions inside these
countries. Couple that with possible protectionist legislation in the United States, unresolved ethnic and
territorial disputes in all regions of the globe and a loss of confidence that world leaders actually know what
they are doing. The result may be a series of small explosions that coalesce into a big bang.
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2NC Competitiveness Add-On
Spending guts US economic competitiveness
Bader, 11 – Counsel at the Competitive Enterprise Institute in Washington, studied economics and history
at the University of Virginia and law at Harvard, practiced civil-rights, international-trade, and constitutional
law (Hans, “Failed Stimulus Spending Erodes America’s International Competitiveness, Wipes Out Wealth”,
Open Market, 7/4/11, http://www.openmarket.org/2011/07/04/failed-stimulus-spending-erodes-americasinternational-competitiveness-wipes-out-wealth/)
In the Daily Caller, Chris Edwards has an interesting article about why government spending doesn’t
“stimulate” the economy over the short-run or the long-run. Rather than growing the economy, stimulus
packages are typically wasteful wealth transfers akin to a “leaky bucket,” which harm the economy in the
long run, whether or not there are any short-run stimulus effects. As Edwards notes, “Despite ongoing
federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to
‘create jobs.’” But if government spending creates jobs, it’s hard to understand why unemployment has
soared, even as government spending has exploded in recent years: “Federal spending has soared over the
past decade. As a share of gross domestic product, spending grew from 18 percent in 2001 to 24 percent in
2011.” As he notes, “government spending and taxing creates ‘deadweight losses,’ which result from
distortions to working, investment and other activities. The CBO says that deadweight loss estimates ‘range
from 20 cents to 60 cents over and above the revenue raised.’ Harvard University’s Martin Feldstein thinks
that deadweight losses ‘may exceed one dollar per dollar of revenue raised.’” Due partly to this “leakybucket” effect, Texas A&M economist Edgar Browning concluded that “It costs taxpayers $3 to provide a
benefit worth $1 to recipients,” and that “today’s welfare state reduces GDP — or average U.S. incomes —
by about 25 percent.” Stimulus spending also will undermine America’s international competitiveness. We
wrote earlier about how the stimulus package used taxpayer money to outsource American jobs to foreign
countries like China (in the name of promoting “green jobs”) and wiped out jobs in America’s export sector
by reducing purchases of American goods in Mexico and Canada. Edwards points out that recent stimulus
spending will undermine America’s international competitiveness in terms of tax rates. As he notes, the
recent massive spending increases, if not curtailed, will have to be paid for with equally massive tax
increases, wiping out America’s edge over other countries in taxes. “This year, government spending in the
United States hit 41 percent of GDP, meaning that more than 4 out of every 10 dollars that we produce is
consumed by our federal, state and local governments. We used to have a substantial government size
advantage compared to other countries. But . . . while government spending in the United States was about
10 percentage points of GDP smaller than the average . . . in the past, that gap has now shrunk to just 4
points. A number of high-income nations — such as Australia — now have smaller governments than does
the United States. This is very troubling because America’s strong growth and high living standards were
historically built on our relatively small government. The ongoing surge in federal spending is undoing this
competitive advantage that we have enjoyed in the world economy.” This surge in government spending is
projected to continue in the future. “CBO projections show that federal spending will rise by about 10
percentage points of GDP between now and 2035. If that happens, governments in the United States will be
grabbing more than half of everything produced in the nation by that year.” Despite all the “deficit-spending
stimulus, U.S. unemployment remains stuck at more than 9 percent and the recovery is very sluggish
compared to prior recoveries.” The Obama administration had claimed that “‘multipliers’ from government
spending are large, meaning that spending would give a big boost to GDP. But other economists have found
that . . . multipliers are actually quite small, meaning that added government spending mainly just displaces
private-sector activities. Stanford University economist John Taylor took a detailed look at GDP data over
recent years, and he found little evidence of any benefits from the 2009 stimulus bill” even in the short run,
while Harvard’s Robert Barro concluded that it will have a harmful effect on the economy due to “future
damage caused by higher taxes and debt.” A recent study by economists Bill Dupor and Timothy Conley
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found that the 2009 stimulus package has wiped out 550,000 jobs. After reviewing its harmful provisions,
Harvard University economist Jeffrey Miron concluded that the stimulus package was designed toreward
special-interest “constituencies,” not to boost the economy. The stimulus contained all sorts of welfare. The
stimulus was so poorly run that stimulus money wound up going to prisoners and dead people, bridges to
nowhere, and useless government buildings. In pushing the $800 billion stimulus package, Obama cited
Congressional Budget Office (CBO) claims that it would save jobs in the short run, while ignoring the CBO’s
own finding that the stimulus will actually shrink the economy over the long run, by exploding the national
debt and crowding out private investment. Nothing in the CBO’s findings supported Obama’s outlandish
claim that the stimulus package was necessary to avert “irreversible decline.”\
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Boosting economic competitiveness is vital to preventing military retrenchment –
risks great power wars
Khalilzad, ’11 – Bush’s ambassador to Afghanistan, Iraq, and the UN and former director policy planning
at the DOD [Zalmay, “The Economy and National Security”, National Review, 2-8-11,
http://www.nationalreview.com/articles/259024/economy-and-national-security-zalmay-khalilzad]
Today, economic and fiscal trends pose the most severe long-term threat to the United States’ position as
global leader. While the United States suffers from fiscal imbalances and low economic growth, the
economies of rival powers are developing rapidly. The continuation of these two trends could lead to a shift
from American primacy toward a multi-polar global system, leading in turn to increased geopolitical rivalry
and even war among the great powers. The current recession is the result of a deep financial crisis, not a
mere fluctuation in the business cycle. Recovery is likely to be protracted. The crisis was preceded by the
buildup over two decades of enormous amounts of debt throughout the U.S. economy — ultimately totaling
almost 350 percent of GDP — and the development of credit-fueled asset bubbles, particularly in the
housing sector. When the bubbles burst, huge amounts of wealth were destroyed, and unemployment rose
to over 10 percent. The decline of tax revenues and massive countercyclical spending put the U.S.
government on an unsustainable fiscal path. Publicly held national debt rose from 38 to over 60 percent of
GDP in three years. Without faster economic growth and actions to reduce deficits, publicly held national
debt is projected to reach dangerous proportions. If interest rates were to rise significantly, annual interest
payments — which already are larger than the defense budget — would crowd out other spending or require
substantial tax increases that would undercut economic growth. Even worse, if unanticipated events trigger
what economists call a “sudden stop” in credit markets for U.S. debt, the United States would be unable to
roll over its outstanding obligations, precipitating a sovereign-debt crisis that would almost certainly compel
a radical retrenchment of the United States internationally. Such scenarios would reshape the international
order. It was the economic devastation of Britain and France during World War II, as well as the rise of other
powers, that led both countries to relinquish their empires. In the late 1960s, British leaders concluded that
they lacked the economic capacity to maintain a presence “east of Suez.” Soviet economic weakness, which
crystallized under Gorbachev, contributed to their decisions to withdraw from Afghanistan, abandon
Communist regimes in Eastern Europe, and allow the Soviet Union to fragment. If the U.S. debt problem
goes critical, the United States would be compelled to retrench, reducing its military spending and shedding
international commitments. We face this domestic challenge while other major powers are experiencing
rapid economic growth. Even though countries such as China, India, and Brazil have profound political,
social, demographic, and economic problems, their economies are growing faster than ours, and this could
alter the global distribution of power. These trends could in the long term produce a multi-polar world. If U.S.
policymakers fail to act and other powers continue to grow, it is not a question of whether but when a new
international order will emerge. The closing of the gap between the United States and its rivals could
intensify geopolitical competition among major powers, increase incentives for local powers to play major
powers against one another, and undercut our will to preclude or respond to international crises because of
the higher risk of escalation. The stakes are high. In modern history, the longest period of peace among the
great powers has been the era of U.S. leadership. By contrast, multi-polar systems have been unstable, with
their competitive dynamics resulting in frequent crises and major wars among the great powers. Failures of
multi-polar international systems produced both world wars. American retrenchment could have devastating
consequences. Without an American security blanket, regional powers could rearm in an attempt to balance
against emerging threats. Under this scenario, there would be a heightened possibility of arms races,
miscalculation, or other crises spiraling into all-out conflict. Alternatively, in seeking to accommodate the
stronger powers, weaker powers may shift their geopolitical posture away from the United States. Either
way, hostile states would be emboldened to make aggressive moves in their regions. As rival powers rise,
Asia in particular is likely to emerge as a zone of great-power competition. Beijing’s economic rise has
enabled a dramatic military buildup focused on acquisitions of naval, cruise, and ballistic missiles, longrange stealth aircraft, and anti-satellite capabilities. China’s strategic modernization is aimed, ultimately, at
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denying the United States access to the seas around China. Even as cooperative economic ties in the
region have grown, China’s expansive territorial claims — and provocative statements and actions following
crises in Korea and incidents at sea — have roiled its relations with South Korea, Japan, India, and
Southeast Asian states. Still, the United States is the most significant barrier facing Chinese hegemony and
aggression. Given the risks, the United States must focus on restoring its economic and fiscal condition
while checking and managing the rise of potential adversarial regional powers such as China. While we face
significant challenges, the U.S. economy still accounts for over 20 percent of the world’s GDP. American
institutions — particularly those providing enforceable rule of law — set it apart from all the rising powers.
Social cohesion underwrites political stability. U.S. demographic trends are healthier than those of any other
developed country. A culture of innovation, excellent institutions of higher education, and a vital sector of
small and medium-sized enterprises propel the U.S. economy in ways difficult to quantify. Historically,
Americans have responded pragmatically, and sometimes through trial and error, to work our way through
the kind of crisis that we face today. The policy question is how to enhance economic growth and
employment while cutting discretionary spending in the near term and curbing the growth of entitlement
spending in the out years. Republican members of Congress have outlined a plan. Several think tanks and
commissions, including President Obama’s debt commission, have done so as well. Some consensus exists
on measures to pare back the recent increases in domestic spending, restrain future growth in defense
spending, and reform the tax code (by reducing tax expenditures while lowering individual and corporate
rates). These are promising options. The key remaining question is whether the president and leaders of
both parties on Capitol Hill have the will to act and the skill to fashion bipartisan solutions. Whether we take
the needed actions is a choice, however difficult it might be. It is clearly within our capacity to put our
economy on a better trajectory. In garnering political support for cutbacks, the president and members of
Congress should point not only to the domestic consequences of inaction — but also to the geopolitical
implications. As the United States gets its economic and fiscal house in order, it should take steps to
prevent a flare-up in Asia. The United States can do so by signaling that its domestic challenges will not
impede its intentions to check Chinese expansionism. This can be done in cost-efficient ways. While China’s
economic rise enables its military modernization and international assertiveness, it also frightens rival
powers. The Obama administration has wisely moved to strengthen relations with allies and potential
partners in the region but more can be done. Some Chinese policies encourage other parties to join with the
United States, and the U.S. should not let these opportunities pass. China’s military assertiveness should
enable security cooperation with countries on China’s periphery — particularly Japan, India, and Vietnam —
in ways that complicate Beijing’s strategic calculus. China’s mercantilist policies and currency manipulation
— which harm developing states both in East Asia and elsewhere — should be used to fashion a coalition in
favor of a more balanced trade system. Since Beijing’s over-the-top reaction to the awarding of the Nobel
Peace Prize to a Chinese democracy activist alienated European leaders, highlighting human-rights
questions would not only draw supporters from nearby countries but also embolden reformers within China.
Since the end of the Cold War, a stable economic and financial condition at home has enabled America to
have an expansive role in the world. Today we can no longer take this for granted. Unless we get our
economic house in order, there is a risk that domestic stagnation in combination with the rise of rival powers
will undermine our ability to deal with growing international problems. Regional hegemons in Asia could
seize the moment, leading the world toward a new, dangerous era of multi-polarity.
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2NC Consumer Confidence Add-On
Increased spending kills confidence
Wrobel 13 – Policy analyst at the University of Memphis, Ph. D, her works have been published in
several journals (Sharon, “Higher gov't spending could jeopardize investor confidence”, The Jerusalem Post,
1/7/13, http://www.jpost.com/LandedPages/PrintArticle.aspx?id=82842)
Economists warned on Wednesday that increasing the government's annual spending ceiling in the 2008
budget, as proposed by a new bill this week, could damage international investor confidence and threaten
the positive momentum spurring economic growth. Labor MK Avishay Braverman submitted a private bill on
Tuesday to increase the spending growth target of the 2008 state budget by 2.5 percent, or NIS 2 billion,
instead of the 1.7% originally set by the Finance Ministry. "After the government already passed the 2008
budget in a first reading, changes to the spending ceiling would have a very severe impact on the markets
and damage investor confidence of the international community," Prof. Rafi Melnick, Dean of the Lauder
School of Government, Diplomacy and Strategy at the Interdisciplinary Center Herzliya and former senior
economist at the Bank of Israel told The Jerusalem Post. "This is not the right time for Israel to deviate from
investors' expectations, a time when Sthere is much uncertainty over the state of the global economy, which
is poised to slow down and when borrowing money could become more expensive." Prof. Melnick added
that relative to other economies, Israel's economy was very stable and is growing at a fast pace; driven by
foreign investor confidence and adherence to fiscal discipline, which the government would not want to
jeopardize.
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Consumer confidence is key to economic growth – makes up 70% of economic
activity
Levin ’10
trades the S&P 500 at the Chicago Board of Trade, now known as The CME Group; the world’s largest and
most diverse financial exchange. Levin is the Founder of Trading Advantage.com, a leading trading
education firm specializing in empowering traders to achieve and surpass their financial goals. (Lerry, “How
Consumer Confidence Impacts the Markets”, April 1, 2010,
http://www.tradingmarkets.com/recent/How_Consumer_Confidence_Impacts_the_Markets-887024.html)
Consumer confidence is measured by the Consumer Confidence Index and acts as a benchmark in
determining economic health. When the index is low, the markets react, but how? Read on to understand
what the index is based on, what impacts the numbers and how the market is affected. What Is the
Consumer Confidence Index? The Consumer Confidence Index (CCI) is a benchmark to determine the
degree of optimism consumer’s express about the economy based on their spending and savings. It is a key
element in determining economic health, considering it makes up 70% of economic activity. The Conference
Board, an independent economic research organization, started the CCI in 1967. It is based on 5000
households and surveys their sentiment about current and future economic conditions on a monthly basis.
The more confident consumers are about the economy, the more likely they are to spend money. A healthy
CCI reading would be at 90. In strong economic conditions, the CCI would be at 100. According to a study
done by Thomson Reuters, economists expected the current CCI to be at 55. However, the actual February
2010 data read at 46, falling 10 points from January’s reading of 56.5. According to the study, economists
don’t expect levels to pick up for two years. What Impacts the Consumer Confidence Index? As you can
imagine, the gloomy economic outlook has significantly affected the Consumer Confidence Index. In fact,
readings have not reached these low levels since April of 2009 when the CCI was at 40.8. Many economists
point to low job prospects and concerns about income as a basis for the low CCI readings. According to the
Bureau of Labor Statistics, unemployment for most major working groups stood at 9.7% in January 2010
compared to the 7.6% reported in January 2009. Also, the weather may have impacted consumer’s
sentiment. Due to the snow, many stores have closed down which could lower the public’s confidence about
the economy. Another factor could be the concerns growing in Europe over Greece’s debt. The markets
have experienced a downturn since Greece’s challenges were made public earlier this year. How Consumer
Confidence Impacted the Markets? After the CCI report was issued, many investors transferred their cash
into the Treasury markets and interest rates, the cost of borrowing, took a tumble. The word “yield” in terms
of Treasuries, like bonds or notes, refers to the return the investor receives on a financial instrument. It is
the difference between the interest rate and the time it takes for the contract to mature. Yields on 2-year, 10year and 30-year Treasury contracts decreased due to the Consumer Confidence Index reports. For
example, the yield on the 2-year Treasury notes fell from 0.89% to 0.84%. The yield on 10-year Treasury
notes fell from 3.80% to 3.69% and the yield on the 30-year Treasury bonds fell from 4.73% to 4.63%. What
Consumers Can Do to Help the Economy Recover The Consumer Confidence Index measures the
consumer’s sentiment about the state of the economy. As the most recent report shows, the general public
is still pessimistic due to unemployment, income worries and Europe’s debt. To gauge where people think
the economy is going, continue to follow the Consumer Confidence Index. In past recessions,
unemployment didn’t pick up until after consumer spending and confidence improved. Knowing this, it
seems that we know what we need to do to help our economy get back on its feet.
Rebel Debate Institute 2013
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They Say Economy Low Now
Not true-Weisman indicates that the economy is getting its act together now-Most
recent data proves
The economy is growing slightly, but recent downgrade of first quarter GDP growth
rate proves that it’s still vulnerable
Gongloff, 6/26 – chief financial writer at The Huffington Post (Mark, “U.S. GDP In First Quarter Worse
Than Previously Announced, Exposing Austerity Folly”, Huffington Post, 6/26/13,
http://www.huffingtonpost.com/2013/06/26/us-gdp-q1-first-quarter-2013_n_3502310.html)
A dramatic downgrade of U.S. economic growth in the first quarter revealed the economy's lingering
weakness, exposed the folly of Washington's austerity obsession and slapped the Federal Reserve's
newfound optimism right in the face. Gross domestic product grew at just a 1.8 percent annualized pace in
the first quarter, the Bureau of Economic Analysis said on Wednesday, revising down its earlier estimate of
2.4 percent growth. Economists had expected no change in the BEA's third effort at estimating GDP, and
such sharp revisions are rare in a third estimate. The first quarter's dismal growth was at least better than
the 0.4 percent GDP growth of the fourth quarter of 2012. But it was still far from healthy, and economists
don't see it getting much stronger any time soon. Paul Edelstein, director of financial economics at the
research firm IHS Global Insight, now estimates the U.S. economy will grow by just 1.6 percent this year,
down from an earlier estimate of 1.8 percent. That is well below the economy's long-term average growth
rate of 3 percent or so. It means the economy is vulnerable to shocks and that it will be much more difficult
to bring unemployment down quickly from 7.6 percent. Nevertheless, the Fed recently announced plans to
slow down the pace of its bond-buying program known as "quantitative easing," in the belief that the
economy and job market will bounce back by the end of the year. That sunny view always seemed strange,
and financial markets clearly didn't buy it. Now it is even more questionable. "This report is a reminder that
the economy is not out of the woods," independent economist Robert Brusca wrote in an email. "We will
need a lot of magic to drop the unemployment rate as the Fed members see, given the sort of economic
growth that seems to be percolating. Good luck with that.”
Rebel Debate Institute 2013
Precamp Spending DA
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The economy is slowly gaining momentum – rising home prices and increased
consumer confidence – but growth is not guaranteed
Schoen, 5/30 – award-winning online journalist and a founder of msnbc.com, CNBC and public radio’s
Marketplace, has reported and written about economics, business and financial news for more than 30
years (John W., “There's light at the end of the tunnel for US economy, but DC obscures the view”, NBC,
5/30/13, http://www.nbcnews.com/business/theres-light-end-tunnel-us-economy-dc-obscures-view1C10118530)
Like a steam engine leaving the station, the American economy is gathering momentum. The wheels are
turning, the engine is pumping and the engineers have opened the throttle full bore. If only Washington
would get out of the way. The U.S. economy expanded at a 2.4 percent annual rate during the first quarter,
down a tenth of a point from an initial estimate, according to revised figures from the Commerce Department
released on Thursday. Economists had forecast a 2.5 percent gain, the initial reading reported by the
government last month. The report follows a string of economic data – from rising home prices to improved
consumer confidence - offering more evidence that the economy continues to repair the widespread
damage inflicted by the 2008 financial collapse. But the headwinds from federal spending cuts are expected
to blow harder later this year. That could test the underlying strength in spending by consumers and
businesses that is offsetting the drag from cuts in government spending, which accounts for roughly 20
cents of every dollar of GDP. “We've seen some false dawns in this recovery before - times where it looked
like the economy was ready to step it up, and then it kind of petered out,” said Joshua Feinman, chief global
economist with Deutsche Asset and Wealth Management. Government belt-tightening started five years ago
as a sharp drop in both property and income taxes forced state and local government to slash budgets, pare
services and lay off workers. A massive federal stimulus package helped blunt some of the pain, but those
funds have largely dried up. Now, as state budgets are stabilizing, an $85 billion federal budget-balancing
package of tax hikes and spending cuts is taking another bite out of gross domestic product. “The ongoing
fiscal contraction is now the biggest obstacle holding back the recovery,” said economists at Capital
Economics in a note to clients this week. Investors, Fed policy makers and business managers are watching
closely to see if the shrinkage in federal spending cuts more deeply into the economy later this year. The
five percent across-the-board reduction known as the sequester officially took effect in March. But the
impact may lag into the summer and early fall because of delays in implementing the cuts by government
agencies. As Uncle Sam has cut back, other sectors of the economy have taken up the slack. Consumers,
who account for 70 cents of every GDP dollar, are feeling much better about their financial well-being. Some
have seen their wealth buoyed by rising stock prices. Others are benefiting from the surge in home prices,
which have risen 10 percent in the past 12 months. Though wages remain stagnant and this year's payroll
tax hike is taking a bigger bite, falling gas prices and very low inflation are helping households make ends
meet. Lower interest rates are helping them carry mortgage and credit card debt more easily. The revival of
the housing market is also spurring a new wave of home building, which helps boost spending on everything
from appliances to landscaping. But the contribution from that corner of the economy is relatively limited:
residential investment made up only 2.7 percent of GDP in the first quarter, down from 6.1 percent in 2005.
Businesses continue to invest in new equipment at a healthy pace, even as they remain slow to hire more
workers until the economy shows more convincing signs of recovery. The result of that hiring reluctance is a
stubbornly high jobless rate that, five years into the recovery, remains one of the biggest forces holding it
back. Though the job market has been improving gradually for the last two years, some 11.7 million
Americans were still without a paycheck in April. Roughly a third of them have been out of work for a year or
more, double the level seen in any recession since World War II. “It's not that the economy isn't generating
enough jobs. It is,” said Feinman. ”It's just that we lost so many jobs in '08-'09 - we created such a deep
crater - that even with the pace of decent job growth that we've been having recently, it's just going to take a
long time to repair that damage.” So far, much of that repair job has fallen to the Fed, whose
unprecedented, massive money manufacturing effort has pumped more than $3 trillion in the system to help
fill in the hole created by the 2008 collapse of the housing market and financial system. At some point, the
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Fed will decide the economy has recovered well enough to shut off the money pumps. That’s why, ironically,
recent strength in the economic data has spooked investors. They're afraid that when the Fed turns off its
money machine, the resulting rise in interest rates could create yet another headwind to growth.
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The economy is gaining momentum – housing growth
Mutikani, 6/25 – Journalist at Reuters (Lucia, “WRAPUP 4-Upbeat data brighten U.S. economic outlook”,
Reuters, 6/25/13, http://www.reuters.com/article/2013/06/25/usa-economy-idUSL2N0F10EF20130625)
WASHINGTON, June 25 (Reuters) - The U.S. economy appears to be gaining momentum with data
showing strong gains in business spending plans last month and the largest annual rise in house prices in
seven years in April. Other reports on Tuesday showed new single-family home sales near a five-year high
in May and consumer confidence at its highest level in more than five years this month. The data suggested
the U.S. economy was starting to pull out of a soft patch and it supported the Federal Reserve's view that
risks to the economy have lessened. Fed Chairman Ben Bernanke said last week the central bank would
likely begin to slow the pace of its bond-buying stimulus later this year. "The economy is leaning forward
and the data underscore that it is time for the Fed to begin to move away from expanding its balance sheet,"
said Steve Blitz, chief economist at ITG Investment Research in New York. The upbeat economic signals
pushed up stock prices, which had been beaten up badly on investors' fears over the loss of the Fed's
stimulus. At the same time, prices for U.S. Treasury debt fell as dealers braced for less bond buying by the
Fed, while the dollar rallied against yen and the euro. Durable goods orders increased 3.6 percent last
month as demand for goods ranging from aircraft to machinery rose, the Commerce Department said.
Orders for these goods, which range from toasters to aircraft, had also risen 3.6 percent in April. Nondefense capital goods orders excluding aircraft, a closely watched proxy for business spending plans,
increased 1.1 percent. Economists had expected a gain of only 0.3 percent in demand for these so-called
core capital goods. "It signals increased confidence among the business community about the sustainability
of the economic recovery, which could itself become self-fulfilling," said Millan Mulraine, a senior economist
at TD Securities in New York. Core capital goods shipments, used to calculate equipment and software
spending for the government's measures of gross domestic product, rebounded 1.7 percent after a 2.0
percent drop in April. The gain pointed to moderate growth in business investment this quarter. In a second
report, the department said new home sales increased 2.1 percent to a seasonally adjusted annual rate of
476,000 units - the highest level since July 2008. It was the third straight month of gains in new home sales.
The housing market's strengthening tone was confirmed by the S&P/Case Shiller home price composite
index of 20 metropolitan areas, which increased 12.1 percent in April from a year ago, the largest annual
rise since March 2006. The now-entrenched housing recovery has helped lift consumer confidence and
made Americans less fearful about spending on big-ticket items. The Conference Board said in another
report that its index of consumer attitudes rose to 81.4 in June, the highest since January 2008, from 74.3 in
May. HOUSING ON A TEAR The housing recovery is boosting revenues for builders like Lennar Corp, the
No. 3 U.S. homebuilder. Lennar reported a stronger-than-expected 53 percent rise in second quarter
revenue on Tuesday. "Our second-quarter results together with real-time feedback from our field associates
continue to point towards a solid housing recovery," Chief Executive Stuart Miller said in a statement. The
pickup in the housing market has been driven by record-low mortgage rates engineered by the Fed. Though
mortgage rates have risen sharply in anticipation of less central bank stimulus, economists do not think the
recovery will be derailed. "Housing will remain a bright spot for the economy, even if rates do remain
somewhat elevated," said Diane Swonk, chief economist at Mesirow Financial in Chicago. In addition to
boosting household net worth, which supports consumer spending, the housing recovery has spilled over to
manufacturing by fuelling demand for construction materials and consumer items like stoves and
refrigerators. This has helped offset cuts in government spending and slowing global demand. Last month,
demand for durable goods rose in all categories, with the exception of motor vehicles. Other details of the
report also showed strength with unfilled orders and shipments both increasing, and inventories up only
marginally.
Rebel Debate Institute 2013
***LINKS/INTERNAL LINKS
Precamp Spending DA
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Rebel Debate Institute 2013
Precamp Spending DA
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Generic Spending Links
Spending reduces GDP, creates financial bubbles, and exacerbates bureaucratic
inefficiency
Powell 11 – senior fellow at the Cato Institutes, author of several books and publications (Jim, “Why
Government Spending Is Bad For Our Economy”, Cato, 11/13/2011,
http://www.forbes.com/sites/realspin/2011/10/13/why-government-spending-is-bad-for-our-economy/)
Though President Barack Obama has spent trillions of dollars, the U.S. economy is stagnant, fewer people
are employed than when he became president, the percentage of people unemployed for over a year has
doubled since then, the poverty rate is the worst in two decades, and more than 40 million Americans — a
record — are on food stamps. More government spending has been widely-touted as a cure for
unemployment, but support for that view seems to be eroding – not least because Obama has little to show
for his spending spree except about $4 trillion of additional debt. America needed more than 200 years to hit
that number, but Obama did it in only three years. The experience offers a reminder that there isn’t any net
gain from government spending since it’s offset by the taxes needed to pay for it, taxes that reduce private
sector spending. When Obama was sworn in, his top priority ought to have been reviving the private sector,
since the private sector pays all the bills. Government basically doesn’t have any money other than what it
extracts from the private sector. Yet Obama decided to indulge his progressive whims and make
government bigger. His administration drained resources out of the private sector via taxes, then he signed
his $825 billion “stimulus” bill, the American Recovery and Reinvestment Act of 2009 (ARRA), so that
money could be redistributed among government bureaucracies. For instance, Obama authorized spending
money to repair U.S. Department of Agriculture buildings, maintain the Farm Service Agency’s computers
and inform the electronically disadvantaged about digital TV. Obama essentially acknowledged that he
didn’t know or care about how to stimulate the private sector, since he provided hardly any specific guidance
for spending the money. For instance, ARRA awarded $600 million to the National Oceanic and
Atmospheric Administration, saying only that the money was “for procurement, acquisition and construction”
— which could have meant almost anything. If the aim was really to stimulate recovery of the private sector,
the most effective way of doing that would have been to leave the money in the private sector. After all,
people tend to be more careful with their own money than they are with other people’s money. Undoubtedly
people would have spent their money on all sorts of things to help themselves, things worth stimulating like
food, clothing, gasoline, downloads, cell phones and household repairs. Because of the federal
government’s taxing power, it commands vast resources, and politicians can be counted on to start new
spending programs they can brag about during re-election campaigns. Unfortunately, spending programs
often have unintended consequences that can make it harder for the private sector to grow and create
productive jobs. Nonetheless, interest groups that benefit from the spending lobby aggressively to keep the
money flowing, which is why, since the modern era of big government began in 1930, spending has gone up
88% of the time. If we exclude the demobilization periods following the end of World War II (three years) and
the Korean War (two years) when spending declined, it has gone up 95% of the time. Economists James
Gwartney, Randall Holcombe and Robert Lawson reported: “Evidence illustrates that there is a persistent
robust negative relationship between the level (and expansion of) government expenditures and the growth
of GDP. Our findings indicate that a 10% increase in government expenditures as a percent of GDP results
in approximately a 1 percentage point reduction in GDP growth.” Similarly, Harvard economist Robert J.
Barro found that “growth and the size of government are negatively related when the government is already
very large.” For example, every year the federal government funds tens of billions of dollars worth of student
loans for college. Altogether, the federal government has provided money for some 60 million students. In
2010, for the first time, student-loan debt surpassed credit card debt. There are about a trillion dollars of
student loans outstanding. By enabling more and more people to bid for a college education, the
government has promoted inflation of college costs — some 440% during the past quarter-century,
Rebel Debate Institute 2013
Precamp Spending DA
22
quadruple the overall rate of inflation. Vance H. Fried, author of Better/Cheaper College, reported that
nonprofit colleges make huge profits on undergraduate education, and they’re spent on “some combination
of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and
featherbedding.” Meanwhile, an increasing number of families have difficulty paying for college without
financial aid. Federal farm subsidies range between $10 billion and $30 billion annually. Subsidies are paid
on the basis of output or acreage, which means big farmers get more money than small farmers. Subsidies
are limited to the “program” crops like corn, cotton, rice, soybeans and wheat, that account for about a third
of farm production. Aside from enriching big farmers, the main impact of the subsidies is to encourage overproduction and inflate the value of land suitable for program crops. One study, by economists at North
Carolina State University, analyzed the different types of subsidies and concluded that each $1 of farm
subsidies per acre inflates the value of an acre of farmland between $6.38 and $27.37, depending on
applicable subsidies. Since the mid-1960s, federal, state and local governments have spent hundreds of
billions of dollars subsidizing government-run urban transit systems. Economist Randal O’Toole explained,
“The number of transit trips per operating employee have fallen more than 50%, and the inflation-adjusted
cost per trip has nearly tripled during the past four decades. Today urban transit is the most expensive way
of moving people in the United States, and it’s no better than cars in terms of energy consumption or
pollution.” Despite the endless subsidies, urban transit systems tend to be inadequately maintained, and
they’re loaded with debt. New York City’s transit system alone has $30 billion of debt plus $15 billion of
unfunded pension liabilities for its unionized employees. The federal government gathers tax revenue from
the general population and then channels about $2 trillion each year into the health care sector. The big
entitlements Medicare and Medicaid account for 46% of health care spending, according to the Kaiser
Family Foundation. Moreover, by establishing government as a third party payer for health care services,
the entitlements eliminate incentives for individuals to be concerned about health care costs. Employerprovided health insurance has a similar effect. No surprise, then, that health care inflation is currently going
up 9% a year, more than double the Consumer Price Index. In the name of “affordable housing,” Congress
passed the Community Reinvestment Act (1977) that required bankers to provide more sub-prime
mortgages for people who would have difficulty making the payments. Moreover, the government-sponsored
enterprises Fannie Mae and Freddie Mac spent several trillion dollars buying securities that were bundles of
sub-prime mortgages. This spurred Wall Street firms to churn out those securities. Result: more and more
people put all their money into a single asset – their house. They bid up housing prices until there weren’t
any more buyers, and the housing market collapsed in 2008. As we know, the federal government
subsequently spent trillions of dollars on housing-related bailouts. The Pew Research Center reported that
black households lost more than half of their money. Hispanic households lost two-thirds. These were
people supposedly helped by government spending. Ever higher taxes are required to pay for all this and
other government spending, which means draining more resources out of the private sector – making it
harder to create growth and jobs. As these examples suggest, government spending often makes things
more expensive, causes chronic inefficiencies, leads to more debt and disruptive financial bubbles. Far from
being an economic stimulus and a cure for unemployment, government spending increasingly turns out to
be bad for our economy.
Rebel Debate Institute 2013
Precamp Spending DA
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Government Spending has an inverse effect on the economy
Powell ’12 – senior fellow at Cato Research Institute (Jim, “Why Government Spending Is Bad for Our
Economy”, CATO, October 13, 2013, http://www.cato.org/publications/commentary/why-governmentspending-is-bad-our-economy)
Though President Barack Obama has spent trillions of dollars, the U.S. economy is stagnant, fewer people
are employed than when he became president, the percentage of people unemployed for over a year has
doubled since then, the poverty rate is the worst in two decades, and more than 40 million Americans — a
record — are on food stamps. More government spending has been widely-touted as a cure for
unemployment, but support for that view seems to be eroding – not least because Obama has little to show
for his spending spree except about $4 trillion of additional debt. America needed more than 200 years to hit
that number, but Obama did it in only three years. The experience offers a reminder that there isn’t any net
gain from government spending since it’s offset by the taxes needed to pay for it, taxes that reduce private
sector spending. When Obama was sworn in, his top priority ought to have been reviving the private sector,
since the private sector pays all the bills. Government basically doesn’t have any money other than what it
extracts from the private sector. Yet Obama decided to indulge his progressive whims and make
government bigger. His administration drained resources out of the private sector via taxes, then he signed
his $825 billion “stimulus” bill, the American Recovery and Reinvestment Act of 2009 (ARRA), so that
money could be redistributed among government bureaucracies. For instance, Obama authorized spending
money to repair U.S. Department of Agriculture buildings, maintain the Farm Service Agency’s computers
and inform the electronically disadvantaged about digital TV. Obama essentially acknowledged that he
didn’t know or care about how to stimulate the private sector, since he provided hardly any specific guidance
for spending the money. For instance, ARRA awarded $600 million to the National Oceanic and
Atmospheric Administration, saying only that the money was “for procurement, acquisition and construction”
— which could have meant almost anything. If the aim was really to stimulate recovery of the private sector,
the most effective way of doing that would have been to leave the money in the private sector. peAfter all,
people tend to be more careful with their own money than they are with other people’s money. Undoubtedly
people would have spent their money on all sorts of things to help themselves, things worth stimulating like
food, clothing, gasoline, downloads, cell phones and household repairs. Because of the federal
government’s taxing power, it commands vast resources, and politicians can be counted on to start new
spending programs they can brag about during re‑election campaigns. Unfortunately, spending programs
often have unintended consequences that can make it harder for the private sector to grow and create
productive jobs. Nonetheless, interest groups that benefit from the spending lobby aggressively to keep the
money flowing, which is why, since the modern era of big government began in 1930, spending has gone up
88% of the time. If we exclude the demobilization periods following the end of World War II (three years) and
the Korean War (two years) when spending declined, it has gone up 95% of the time. Economists James
Gwartney, Randall Holcombe and Robert Lawson reported: “Evidence illustrates that there is a persistent
robust negative relationship between the level (and expansion of) government expenditures and the growth
of GDP. Our findings indicate that a 10% increase in government expenditures as a percent of GDP results
in approximately a 1 percentage point reduction in GDP growth.” Similarly, Harvard economist Robert J.
Barro found that “growth and the size of government are negatively related when the government is already
very large.”
Rebel Debate Institute 2013
Precamp Spending DA
24
Government spending has a negative multiplier effect and crowds out private
spending
Boundless no date – online economic textbook (Boundless, “Impact of Government Spending on
Interest Rates and Investment”, https://www.boundless.com/economics/monetary-and-fiscal-policyinfluence-on-aggregate-demand/impact-of-fiscal-policy-on-aggregate-demand/impact-of-governmentspending-on-interest-rates-and-investment/)/
The past few section have discussed how the multiplier effect can magnify changes to income. However, in
the case of government spending, the size of the multiplier can actually be negative in some circumstances.
This is because government spending can have unintended consequences that reduce total output. This
section will discuss this phenomenon which is referred to as "crowding out." In economics, crowding out is
any reduction in private consumption or investment that occurs because of an increase in government
borrowing. If an increase in government spending and/or a decrease in tax revenues leads to a deficit that is
financed by increased borrowing, then the borrowing can increase interest rates, leading to a reduction in
private investment. There is some controversy in modern macroeconomics on the subject, as different
schools of economic thought differ on how households and financial markets would react to more
government borrowing under various circumstances. The macroeconomic theory behind crowding out
provides some useful intuition for those trying to gain a tight grasp of the concept. What happens is that an
increase in the demand for loanable funds by the government (e.g. due to a deficit) shifts the loanable funds
demand curve rightwards and upwards, increasing the real interest rate. A higher real interest rate increases
the opportunity cost of borrowing money, decreasing the amount of interest-sensitive expenditures such as
investment and consumption. Hence, the government has "crowded out" investment. If increased borrowing
leads to higher interest rates by creating a greater demand for money and loanable funds and hence a
higher "price" (ceteris paribus), the private sector, which is sensitive to interest rates will likely reduce
investment due to a lower rate of return. This is the investment that is crowded out. The weakening of fixed
investment and other interest-sensitive expenditure counteracts to varying extents the expansionary effect
of government deficits. More importantly, a fall in fixed investment by business can hurt long-term economic
growth of the supply side, i.e., the growth of potential output. Depending on the magnitude of the multiplier
effect and the crowding-out effect an increase in government spending can either increase output by more
than the magnitude of the spending or by less than the magnitude of the spending.
Rebel Debate Institute 2013
Precamp Spending DA
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Empirically proven – fiscal discipline is key to the economy
Jamison ‘11 – History Teacher and long time contributor to the Washington post (Dennis, “Unsustainable
Federal Spending Gone Bad”, The Washington Times, October 2, 2011,
http://communities.washingtontimes.com/neighborhood/history-purpose/2011/oct/2/unsustainable-federalspending-gone-bad)
The current contentious wrangling over federal spending and national debt limits continues to stimulate
political discourse throughout the nation, but it is not unusual that Americans express genuine concern over
excessive government spending. What is unusual is that many Americans today are clueless about where
the federal government obtains the money it so recklessly spends. Especially at this time when the
dominant political party is so adamant in spending so much of the taxpayer’s money, American’s should
know that unsustainable spending in the past has had disastrous consequences. One striking precedent of
excessive federal spending contributed to one of the most severe economic depressions and some of most
turbulent civil unrest in U.S. history. In an eerie parallel of history, one political party won control of the
Presidency and both houses of Congress and felt confident they had a mandate for change. They used that
mandate to aggressively pass whatever legislation the party desired. Unfortunately, their plan involved
manipulating the nation’s money supply and unprecedented federal spending. Their legislation led to
serious inflation and the destabilization of American’s currency, and ultimately a devastating economic
depression. In the election of 1888, Republican Benjamin Harrison, beat President Grover Cleveland by an
electoral margin of 233 to 168 despite losing the popular tally by 90,000 votes. In addition, the Republican
Party held a substantial margin of control in the U.S. Senate and took control of the House of
Representatives. Republicans interpreted their victory as a significant mandate and they chose to pursue a
course of spending unparalleled in previous administrations. Under Cleveland’s previous four years, the
nation enjoyed a fairly decent period of economic prosperity. Cleveland, a fiscal conservative and Democrat
(yes, they did exist), felt anxious about his surplus of around $100 million in the U.S. Treasury. He believed
that the money belonged to the people and if it continued to languish in the hands of the administration,
Congress would surely find some way to spend it. Indeed, Harrison and the Republican Congress had little
trouble initiating a spending spree that proved unprecedented up to that time. The large surplus was
essentially amassed by high tariffs on imported goods. This became a hot issue during the campaign of
1888. The Democrats wanted the tariff lowered, while the Republicans wanted tariffs to remain high. In
1890, the Republican controlled Congress passed the McKinley Tariff Act which raised duties on imports to
even higher levels, stimulating retailers to raise their prices. Higher prices angered millions of voters. During
Harrison’s term, a People’s Party (more commonly known as the Populists) rose to challenge both major
political parties. Additionally, the Democrats challenged the unsustainable spending of the Republicans.
They dubbed it the “Billion Dollar Congress” because for the first time in America’s history, an administration
had appropriated over $1 billion a year. Also in 1890, Republicans passed the Sherman Silver Purchase Act
which required the federal government to purchase 4.5 million ounces of silver each month at market prices.
Purchasing so much silver was a scheme to mandate silver coinage to benefit silver mining interests as well
as Western farmers who had heavily supported the Republican Party. Intended as a means to stimulate
inflation, farmers welcomed the law because it devalued the dollar and meant that farm loans were
technically repaid with fewer dollars. On a larger scale, the recent printing of so much paper money by the
Federal Reserve is an attempt at something similar. Reducing the value of the dollar through inflation can
technically reduce the dollar value of the loans the U.S. government has to repay to foreign nations. High
spending eliminated Cleveland’s surplus and the Billion Dollar Congress depleted the gold reserves at a rate
of nearly $50 million a year while dumping less valuable silver into the Treasury. Many historians believe
that the Sherman Silver Purchase Act was a fundamental factor in the destabilization of U.S. currency and
in the intensification of the depression in the aftermath of Harrison’s term. Best laid plans can go awry, and
the Republicans’ aggressive tampering with the economy backfired. Harrison and his party lost by an
overwhelming margin in 1892. Unfortunately, the actions of the Harrison government undermined the
economy. Cleveland and the Democrats faced a momentous job to repair the looming economic crisis. But
like a bad omen, just days before the former president’s second inauguration, the Philadelphia & Reading
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Railroad went bankrupt. In May, the Panic of 1893 ripped through the country. The stock market crashed.
More railroads and businesses failed, people panicked and inevitable runs on the banks caused numerous
bank failures. Unemployment rose to staggering levels. Some historians claim that at the height of this
depression, unemployment rose to between 17- 20%, but official records were not kept until during the
Great Depression. This period was scarred by company lockouts, labor strikes, and physical clashes
between workers and the government. One of the most violent strikes was the Pullman Strike of 1894.
Although Cleveland was determined to undo the damage wrought by Harrison, he could only do so much.
Despite bitter and divisive debates, he persuaded Congress to repeal the Sherman Silver Purchase Act.
But by January of 1895, only about $40 million of gold remained. Cleveland managed to persuade J.P.
Morgan and other bankers to purchase government bonds with gold which replenished the supply to over
$100 million, but the depression dragged on for four years. Ironically, after the election of 1892, Harrison
went back home to Indiana and Cleveland was left holding a ticking economic bomb. When he could not
“fix” the broken economy, Americans blamed Cleveland. He was not offered another chance. One may
wonder whether these events could have served as a lesson for future administrations. But, the follow up
question is: Do politicians ever learn from the past? Well, in this case, possibly. It may be where the
current Democratic leadership got their blueprints for their recent spending addiction.
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Deficit spending raises interest rates and decreases investment
Thoma ’11 - Thoma is a macroeconomist and time-series econometrician at U of Oregon (Mark,
"Government Deficits: The Good, the Bad, and the Ugly", CBS News, May 22, 2011,
http://www.cbsnews.com/8301-505123_162-39741324/government-deficits-the-good-the-bad-and-the-ugly/)
The main worry about deficits is crowding out. Crowding in was just described as it occurs when deficits
cause output to go up and business confidence is increased. Crowding out comes about when deficit
spending raises interest rates. There is a limited amount of funds available for investment, and when
government competes with the private sector for a share of these funds to finance its deficit spending, it
drives the cost of these funds . Interest rates are higher. The increase in the interest rates causes
investment to fall, and lower investment translates into lower output and lower economic growth. In addition,
to the extent that the private sector is more efficient than the public sector, crowding out, i.e. more
government spending and less private investment, can result in a less efficient use of resources (though in
the case of public goods government can be the more efficient provider, and hence it is not always the case
that efficiency falls). Another worry about deficits is that they will be monetized leading to inflation. Debt
monetization occurs when the Fed prints new money and uses it to purchase government bonds help by the
private sector. This removes debt from the private sector and replaces it with money, and if the money is
used to purchase goods and services, as it's likely to be, this can be inflationary (though when there is an
excess supply of goods, as in a deep recession, inflation is unlikely to be a problem). The Showdown Which
of these concerns is most important? Notice that in the short-run, the consequences of deficits are mostly
positive when the economy is in a recession. Deficits allow us to stabilize the economy (though it's important
we pay the bills when times get better), deficit spending can stimulate investment through crowding in, and
there's little danger that the spending will drive up interest rates or be inflationary due to the large amount of
slack in the economy. But in the longer run deficits are mostly problematic. As the economy nears full
employment deficits can lead to higher interest rates, crowding out, less investment, and slower growth.
Inflation can also be a problem, and if the debt burden gets bad enough, outright default is a possibility.
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Foreign Aid Links
Foreign aid has recently received budget cuts – any substantial increase triggers the
link
Lieberman 11 – reporter for Reuters (Susan, “U.S. foreign aid escapes slashing cuts in fiscal 2012”,
Reuters, 12/19/11, http://www.reuters.com/article/2011/12/19/us-usa-aid-idUSTRE7BI1KO20111219)//
Foreign aid not related to war spending was cut by $2.2 billion from 2011. The budget for operational costs
of the State Department and related agencies was slashed $2.6 billion from last year, and operations at the
U.S. Agency for International Development (USAID) were cut by $258 million from 2011. For the second
year in a row, the pay of U.S. foreign service officers was frozen. The 2012 spending plan is a mixed bag,
said Liz Schrayer, the executive director of the U.S. Global Leadership Coalition, which advocates for
diplomacy and development aid. "In the short term, we are pleased the agreement avoids the deep and
disproportionate cuts to these programs from earlier versions of the bill ... However, in the long-run, the cuts
to funding for non-war related program is of grave concern given the challenges and turbulence in the world
today."
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Venezuela Oil Links
Oil investment in Venezuela will be pricey
Snow 3-11 (Nick Snow, “Venezuela after Chavez” Oil & Gas Journal March 11 2013
http://search.proquest.com.proxy.lib.umich.edu/abicomplete/docview/1321668301/13EE71ADF6D9AD3D32/
48?accountid=14667
The problem in Venezuela is that Chavez and his followers quickly began to use Petróleos de Venezuela
SA to finance social reform. Seasoned PDVSA executives were among 18,000 employees fired in 2002
after nearly half the company's domestic employees walked off the job to protest Chavez's policies. "In
2006, Chavez implemented the nationalization of oil exploration and production in Venezuela, mandating a
renegotiation of a 60% minimum PDVSA share in projects," the US Energy Information Administration said
in an Oct. 3, 2012, update of its report on the country. "Sixteen firms, including Chevron and Shell, complied
with new agreements, while Total and Eni were forcibly taken over," it continued. "Venezuela is also
increasing pressure on foreign operators that remain in the country to increase investment to offset recent
production declines." EIA estimated that Venezuela produced 2.47 million b/d of crude, condensate, and
natural gas liquids in 2011. The Maricaibo basin remains its most prolific area, representing slightly less
than half of its total output. Mature production But many of the country's oil fields are very mature, requiring
heavy investment to maintain current capacity, EIA continued. "Industry analysts estimate that PDVSA must
spend some $3 billion each year just to maintain production levels at existing fields, given decline rates of at
least 25%," it said.
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No link turns – Comparative evidence that the cost is higher than the return
Sanati, 3/6 -A financial journalist, whose work has appeared in dozens of leading publications, including
The New York Times (Cyrus, “Chavez's death won't spur new Venezuela oil drilling”, CNN Money, March 6,
2013, http://finance.fortune.cnn.com/2013/03/06/hugo-chavez-death-oil/)
PDVSA says it will be investing some $140 billion in the Orinoco by 2015. It is hard to see how that can
happen given how much the government is siphoning off. In January, Chavez ordered PDVSA to increase
its payments to his off-the-books slush fund, Fonden, which is used to support the "revolution," further
draining its resources. Lastly, the government has saddled PDVSA with around $35 billion in debt, slapping
the company with fat interest payments, which will only augment its money woes. But probably the fatal
blow to Venezuelan oil investment came in 2007 when Chavez essentially "renationalized" the industry,
booting out a number of foreign oil companies who refused to (once again) renegotiate their contracts,
namely U.S. oil giants ExxonMobil and ConocoPhilips, which had each invested billions of dollars in the
country since the early 1990s. The new rules, which are more or less the same today, require foreign
investors to form partnerships with PDVSA in which the state-owned oil company would have a 60%
ownership. The foreign company, which would have 40% ownership, would still have to fund 100% of the
investment. Furthermore, whatever the foreign company made would be subject to a 50% tax rate and a
33% royalty (tax). Oh, and investors must agree that any dispute that may arise in the future concerning
their ownership with the government will be heard by Venezuelan courts, not those pesky impartial
international arbitration courts. But while the risk/reward ratio is clearly off, Venezuela says that it has
auctioned off 36 lease blocks in the Orinoco to 27 companies hailing from 21 nations. Most are bizarre
state-owned or controlled oil companies from places like Iran, Belorussia, and Cuba. But some of the big
publicly traded oil companies like Spain's Repsol, Brazil's Petrobras, Italy's Eni and France's Total have
stakes as well. Even Chevron was allocated a block -- albeit a small one. While it makes sense to have a
few foreign partners to help to spread out the risk, one can go too far, especially when those partners have
pretty much zero experience working with oil sands. Indeed, this split looks more like a bizarre public
relations stunt than a real division of labor. It should therefore come as no surprise to learn that there isn't
too much drilling going on in the Orinoco right now. While PDVSA says that it has started to drill wells with
its Russian and Vietnamese partners, the initial production numbers reported are trivial. Meanwhile, India's
ONGC and several other companies are reportedly holding back from investing any more cash until there is
some clarity as to the political situation in the country. You can bet even Venezuela's staunchest allies, like
China, which has loaned the Chavez regime some $46 billion in the last few years, will be among those
taking a breather.
Investment in Venezuela oil needs to be big to make a difference
Oxford Analytica 6-11 (Daily Brief Service, Publisher Oxford Analytica Ltd, “Venezuela: No rapid shift
in oil policy in the cards” ABI Inform
http://search.proquest.com.proxy.lib.umich.edu/docview/1366369959?accountid=14667)
Financial, and particularly profit, numbers for PDVSA are difficult to interpret, given the massive funding
devoted to social expenditure (more than 16.0 billion dollars in 2012) but the company reported: a 6.2%
drop in profit to 4.2 billion dollars; a fall in revenue to 124.4 billion; and an increase in debts to service
providers of more than 35.0%, despite an increase in crude oil realisations, from 101.06 dollars/barrel in
2011 to 103.42 in 2012. Despite falling production, revenue and income, PDVSA must support the massive
social expenditure (44 billion dollars in 2012) on which the government's political legitimacy depends.
Absent a sharp increase in foreign investment, the government could only finance a major rise in production
by reducing social expenditure and/or the gasoline subsidy, both potential sources of major social unrest (
see VENEZUELA: Fuel prices impose political, economic risk - April 5, 2011).
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Energy Turn
Economic collapse turns energy
Klare 8 (Michael Klare is author and Professor of Peace and World-Security Studies at Hampshire
College; Huffington Post; “The Economic Crisis and the Environment”; 9/17/08;
http://www.huffingtonpost.com/michael-t-klare/the-economic-crisis-and-t_b_135631.html)
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 financialrescue 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.
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Hegemony Turn
Economic collapse turns heg
Khalilzad 11
[Zalmay, was the United States ambassador to Afghanistan, Iraq, and the United Nations during the
presidency of George W. Bush and the director of policy planning at the Defense Department from 1990 to
1992, “The Economy and National Security,” 2-8, http://www.nationalreview.com/articles/259024/economyand-national-security-zalmay-khalilzad]
Without faster economic growth and actions to reduce deficits, publicly held national debt is projected to
reach dangerous proportions. If interest rates were to rise significantly, annual interest payments — which
already are larger than the defense budget — would crowd out other spending or require substantial tax
increases that would undercut economic growth. Even worse, if unanticipated events trigger what
economists call a “sudden stop” in credit markets fSor U.S. debt, the United States would be unable to roll
over its outstanding obligations, precipitating a sovereign-debt crisis that would almost certainly compel a
radical retrenchment of the United States internationally. Such scenarios would reshape the international
order. It was the economic devastation of Britain and France during World War II, as well as the rise of other
powers, that led both countries to relinquish their empires. In the late 1960s, British leaders concluded that
they lacked the economic capacity to maintain a presence “east of Suez.” Soviet economic weakness, which
crystallized under Gorbachev, contributed to their decisions to withdraw from Afghanistan, abandon
Communist regimes in Eastern Europe, and allow the Soviet Union to fragment. If the U.S. debt problem
goes critical, the United States would be compelled to retrench, reducing its military spending and shedding
international commitments. We face this domestic challenge while other major powers are experiencing
rapid economic growth. Even though countries such as China, India, and Brazil have profound political,
social, demographic, and economic problems, their economies are growing faster than ours, and this could
alter the global distribution of power. These trends could in the long term produce a multi-polar world. If U.S.
policymakers fail to act and other powers continue to grow, it is not a question of whether but when a new
international order will emerge. The closing of the gap between the United States and its rivals could
intensify geopolitical competition among major powers, increase incentives for local powers to play major
powers against one another, and undercut our will to preclude or respond to international crises because of
the higher risk of escalation. The stakes are high. In modern history, the longest period of peace among the
great powers has been the era of U.S. leadership. By contrast, multi-polar systems have been unstable, with
their competitive dynamics resulting in frequent crises and major wars among the great powers. Failures of
multi-polar international systems produced both world wars. American retrenchment could have devastating
consequences. Without an American security blanket, regional powers could rearm in an attempt to balance
against emerging threats. Under this scenario, there would be a heightened possibility of arms races,
miscalculation, or other crises spiraling into all-out conflict. Alternatively, in seeking to accommodate the
stronger powers, weaker powers may shift their geopolitical posture away from the United States. Either
way, hostile states would be emboldened to make aggressive moves in their regions.
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Mexico Turn
U.S. economic collapse spills over to Mexico
EIU 3 (The Economist Intelligence Unit; “Mexico economy: Economic link with US comes at a price”;
3/25/03; ProQuest)
A decade of tightening its links with the US has allowed Mexico to de- couple almost completely from the
rest of Latin America. Any doubt of that was extinguished early last year when, as the rest of the continent
reeled from the Argentine devaluation and debt default, Mexico was awarded investment grade status by
Standard & Poor's for the first time. By the end of year, Manuel Medina Mora, chief executive of Banamex,
Mexico's largest bank and a potent symbol of the growing ties with the US since its acquisition by Citigroup,
was able to boast that Mexico's gross domestic product now exceeded the combined GDP of Argentina,
Brazil and Venezuela. Rigorously tight fiscal and monetary policy since the "Tequila Crisis" of 1994,
combined with the new jobs attracted to the maquiladora in-bond manufacturing sector, allowed for sharp
Mexican growth. Earlier this month, Francisco Gil Diaz, Mexico's finance minister and a committed fiscal
hawk, offered a bullish assessment of the future, predicting annual GDP growth of 3 per cent for the first
quarter and a rebound in employment. He emphasised that "the economy continues in a state of stability,
which has been so important to us for so many years". Tumbling interest and inflation rates have allowed
the overdue growth of a capital market in Mexico, which has seen stratospheric rates of increase over the
past three years, from a low base. Peso-denominated corporate bond issuance grew to 44bn pesos in 2002,
from only 6.5bn pesos three years earlier. Volumes on MexDer, the Mexican derivatives market established
in 1998, grew 360 per cent in 2002 as banks sought to hedge liabilities they had taken on in the swaps
market. These changes have drastically lowered the cost of capital for Mexican companies. Rodrigo
Trevino, chief financial officer of Cemex, the world's third largest cement producer and one of Mexico's
biggest companies, likens Mexico's markets today to those of Chile in the 1980s, as that country established
a domestic capital market. Foreign reserves continued setting new records until they exceeded $50bn for
the first time this month when the authorities decided to start regular auctions of dollars to limit the growth
rate of reserves. The banking system - the weakest of any of the large Latin American economies following
the Tequila Crisis, when more than half of all Mexican bank loans were written off - has now been almost
completely taken over by large foreign banks. In the first month of this year, lending to the private sector
saw its sharpest growth in almost decade, in another sign of sharp recovery from a very weak base.
Meanwhile, the private pension system, overhauled in the wake of the Tequila Crisis, is growing fast - at a
rate of more than 100bn pesos per year. As Mexico is a young nation, with an average age of less than 25,
young, productive people should provide the pillars of a new and stronger financial architecture. There are
worries, however, trade being the most significant. The maquiladora sector is much less competitive on
labour costs than it once was and faces new competition from China. Employment in the border areas
where the maquiladoras are concentrated has dropped by as much as 20 per cent in some cases. And the
link with the US - through the North Atlantic Free Trade Agreement signed in 1992 - has also had its costs.
With more than 80 per cent of its exports going to the US, Mexican economic growth is now tied almost
totally to that of its neighbour. So while it avoided any contagion from the south, its economy has shared the
pain of the US. The Mexican peso is now almost totally correlated with the dollar, with investors selling it
against the dollar at the same time that they sell the dollar against the euro. Starting in April of last year, the
Mexican peso dropped 25 per cent against the dollar, falling from 9.01 to 11.24, until renewed optimism
about the situation in Iraq buoyed both currencies. Economically, Mexico's great fear is a renewed US
recession. Should this happen, there is little or nothing it could do to avert suffering even worse economic
pain than its neighbour.
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Venezuela Turn
The Venezuelan economy relies heavily on the US
Helios Globe 13 (Helios Globe; Fair Observer.com; “Change in Venezuela Yields Political and Economic
Uncertainty”; 6/4/13; http://www.fairobserver.com/article/change-venezuela-yields-political-and-economicuncertainty)
Despite a contentious bilateral relationship, Venezuela remains the fourth-largest supplier of imported oil to
the United States. Given the peculiarities of its oil, namely, the category of relatively low quality heavy crude
oil that represents the bulk of its oil capacity, Venezuela relies heavily on US refineries located in the Gulf of
Mexico that were designed to refine oil from Venezuela (and Mexico). Roughly 40 percent of Venezuela’s oil
exports are delivered to the United States. Consequently, the United States is Venezuela’s top trade
partner. This is the case even as US imports of Venezuelan oil have steadily declined in recent years. In
1997, the United States imported about 1.7 million barrels of oil per day (bpd) from Venezuela. In contrast,
only about one million bpd of Venezuelan oil makes its way to the United States today. Venezuela also
boasts major natural gas reserves, possibly the second-largest natural gas reserves in the Western
Hemisphere. At the same time, Venezuela’s oil production capacity continues to deteriorate due to
mismanagement, corruption, and antiquated infrastructure.
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***2AC ANSWERS
**Make sure you integrate with cards that are in your specific aff files already,
including the 1AC-These should be used to supplement your aff/1ac, not replace it in
the 2AC!
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Non-Unique: Economy Decline Now
Econ forecasted for decline now-Also proves alt causes
Sherter, 7/8 [Alain, MoneyWatch, “White House: Economy growing slower than forecast,”
http://www.cbsnews.com/8301-505123_162-57592740/white-house-economy-growing-slower-thanforecast/, ALB]
The White House on Monday revised downward its forecast for U.S. economic growth this year, citing
government spending cuts, the ongoing recession in Europe, and slowing expansion in China and other
emerging markets. In its so-called mid-session review, the Office of Management and Budget projected that
domestic GDP will expand in 2013 at an annual rate of 2 percent. That's down from the 2.3 percent rate of
growth that the Obama administration assumed in its annual budget in April. OMB also reduced its forecast
for growth in 2014 to 3.1 percent, down a tick from 3.2 percent. "Although Administration actions helped
spark the ongoing recovery, the economy has faced serious headwinds that have held down the growth rate
and limited gains in employment," OMB said in the report. The mid-year estimate updates the White
House's projections for government spending, revenue and the federal deficit.
Economy not improving now
Moore 13 economics, The Guardian (Heidi, “The housing 'recovery' is built on false confidence”, 6/20/13,
http://www.guardian.co.uk/commentisfree/2013/jun/20/housing-recovery-is-not-real)
The giddy rise in house prices, too, should be examined skeptically. For one thing, in a sane market, such
double-digit rises for so long are not sustainable. Housing prices depend on the economy and the health of
the consumer. The economy is not improving that fast; both unemployment and income is relatively
stagnant; and lending is not rising, we should be suspicious that housing - which depends on all of those - is
suddenly booming. House prices are rising when the rest of the economy is languishing; that's either a sign
of an overheated market or some external manipulation. In fact, that is exactly what is happening. The
biggest product in the housing market right now is not new homes or mortgages or rentals. It is confidence:
people are buying because they believe other people are buying. That's a weak foundation for a real
recovery.
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Internal Link Turn – Spending Solves Recession
Spending is key to stimulate the private sector and avoid recession
Harvey 13 – Professor of Economics at Texas Christian University areas of specialty are international
economics (particularly exchange rates), macroeconomics, history of economics, and contemporary schools
of thought(John, “The Coming Recession: How Fiscal Responsibility is Economic Suicide”, Forbes, 1/30/13,
http://www.forbes.com/sites/johntharvey/2013/01/30/the-coming-recession/)
It is in this environment that members of both parties are falling over themselves to show how fiscally
“responsible” they are. And we achieved this lofty goal in fourth quarter 2012 by reducing federal
government spending by 15%. The result? Real GDP shrank by 0.1% (Bureau of Economic Analysis;
consumers were able to keep this from being even worse due to a surge in spending on durables,
something that is not sustainable because once you get your new big-screen TV for Christmas, you don’t
buy another one for a while). This is a preliminary figure, but it contrasts sharply with third quarter growth of
3.1%. Not coincidentally, during that period federal government spending grew by 9.5%. We are primed for
another recession. The only thing wrong with the debt and deficit is that they are too small. We need to be
increasing government spending, not reducing it. What in God’s name are our policy makers thinking? Why
do they believe that, when we already have over 20 million Americans unemployed or underemployed, a
laid off federal employee would suddenly find herself swamped with job offers? And how will those in the
private sector replace the revenues that resulted from soldiers, Marines, park rangers, NASA scientists,
postal employees, etc., shopping in their store? The short answer is, they won’t. As you cut federal
spending, the economy–including the private sector–contracts, just as it would if you cut any other kind of
spending. Nor are we saving ourselves some sort of long-term cost by enduring this short-term pain. The
US cannot possibly be forced to default on debt denominated in its own currency, it is only inflationary if we
are already at full employment (no need to worry about that yet!), large deficits and debt do not cause higher
interest rates (stop by your bank and check current CD rates), and government deficits create private sector
surpluses. What is debt to Washington is a financial asset for you and me. Government spending stimulates
the private sector and makes profitable the production of goods and services at otherwise idle factories. This
is not to say that there are not types of federal spending that are wasteful. Of course there are, but that’s a
problem even if we are in surplus. And, controlling our politicians by creating unemployment hardly seems
just or efficient. All these fiscal cliffs, debt ceilings, and threats of sequester have us poised for disaster. For
the Republicans, the party that has traditionally been the least worried about the debt and deficit, budget
cuts appear to simply be a means of achieving their end of destroying programs they don’t like. The
Democrats, on the other hand, don’t seem to have any ulterior motive–they’re just ignorant. They also
desperately want to continue to use the Clinton surpluses (a result, not a cause, of the long 1990s
expansion) as a means of marketing themselves as the responsible party. But there is nothing responsible
about raising unemployment. Our economy is very weak, and the last thing we need right now is to reduce
yet another component of spending. The worst may be yet to come. To add insult to injury, it appears that it
is going to be self-inflicted.
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Deficit spending is key to generate consumer demand and stimulate the private
sector
Harvey 13 – Professor of Economics at Texas Christian University areas of specialty are international
economics (particularly exchange rates), macroeconomics, history of economics, and contemporary schools
of thought(John, “The Coming Recession: How Fiscal Responsibility is Economic Suicide”, Forbes, 1/30/13,
http://www.forbes.com/sites/johntharvey/2013/01/30/the-coming-recession/)
* We have plenty of idle capacity. Our problem is not one that requires that we each settle for less because
we have “spent beyond our means” and thus can no longer produce the goods and services we did five or
ten or fifteen years ago (if anything, that ability has grown). We have no logical need for layoffs, pay cuts,
and forced days off. All that will do is create even more idle capacity. * The reason for the idle capacity is the
systemic inability of the private sector to generate sufficient demand to hire every willing worker. Such levels
can be sustained for short periods, but in general consumers and firms are unable to spend enough money
to allow all those who want a job to find one. (See Why do Recessions Happen? A Practical Guide to the
Business Cycle for a more in-depth explanation of this point.) * The extra demand necessary to bring us
back to full capacity and employment can come from foreign countries (i.e., US exports) or the public sector
(i.e., the government). If we could export more, we would already be doing so. Furthermore, our trading
partners have no responsibility to help our economy. The federal government does. * Not only that, but the
federal government does not face a budget constraint. There is no debt denominated in dollars that we
cannot repay and thus the idea that the US could be forced to default is absolute, utter, ignorant nonsense.
Deficit spending can create inflation and capture of resources IF we are at or near full employment.
Otherwise, however, a public sector deficit is like having a trade surplus. * The basic accounting is
inescapable: public sector deficits = private sector income and public sector debt = private sector assets.
This is not to say that there are not good and bad ways for the federal government to create demand or that
abuse cannot occur. But those (very real) concerns are independent of whether or not we spend in deficit.
We can, we should, and we must. It’s not a drag on the economy, it is a vital boost.
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Replications of their studies prove them completely wrong – there’s no impact to a
high debt to GDP ratios and deficits are beneficial
Konczal 4/16 – fellow with the Roosevelt Institute, his blog has been named one of the 25 Best Financial
Blogs by Time Magazine (Mike, “Shocking Paper Claims That Microsoft Excel Coding Error Is Behind The
Reinhart-Rogoff Study On Debt”, Business Insider, 4/16/13, http://www.businessinsider.com/thomasherndon-michael-ash-and-robert-pollin-on-reinhart-and-rogoff-2013-4)
In 2010, economists Carmen Reinhart and Kenneth Rogoff released a paper, "Growth in a Time of Debt."
Their "main result is that...median growth rates for countries with public debt over 90 percent of GDP are
roughly one percent lower than otherwise; average (mean) growth rates are several percent lower."
Countries with debt-to-GDP ratios above 90 percent have a slightly negative average growth rate, in fact.
This has been one of the most cited stats in the public debate during the Great Recession. Paul Ryan's Path
to Prosperity budget states their study "found conclusive empirical evidence that [debt] exceeding 90
percent of the economy has a significant negative effect on economic growth." The Washington Post
editorial board takes it as an economic consensus view, stating that "debt-to-GDP could keep rising — and
stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic
growth." Is it conclusive? One response has been to argue that the causation is backwards, or that slower
growth leads to higher debt-to-GDP ratios. Josh Bivens and John Irons made this case at the Economic
Policy Institute. But this assumes that the data is correct. From the beginning there have been complaints
that Reinhart and Rogoff weren't releasing the data for their results (e.g. Dean Baker). I knew of several
people trying to replicate the results who were bumping into walls left and right - it couldn't be done. In a
new paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and
Rogoff," Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst
successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they
reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed
Herndon et al. to see how how Reinhart and Rogoff's data was constructed. They find that three main issues
stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second,
they use a debatable method to weight the countries. Third, there also appears to be a coding error that
excludes high-debt and average-growth countries. All three bias in favor of their result, and without them
you don't get their controversial result. Let's investigate further: Selective Exclusions. Reinhart-Rogoff use
1946-2009 as their period, with the main difference among countries being their starting year. In their data
set, there are 110 years of data available for countries that have a debt/GDP over 90 percent, but they only
use 96 of those years. The paper didn't disclose which years they excluded or why. Herndon-Ash-Pollin find
that they exclude Australia (1946-1950), New Zealand (1946-1949), and Canada (1946-1950). This has
consequences, as these countries have high-debt and solid growth. Canada had debt-to-GDP over 90
percent during this period and 3 percent growth. New Zealand had a debt/GDP over 90 percent from 19461951. If you use the average growth rate across all those years it is 2.58 percent. If you only use the last
year, as Reinhart-Rogoff does, it has a growth rate of -7.6 percent. That's a big difference, especially
considering how they weigh the countries. Unconventional Weighting. Reinhart-Rogoff divides country years
into debt-to-GDP buckets. They then take the average real growth for each country within the buckets. So
the growth rate of the 19 years that England is above 90 percent debt-to-GDP are averaged into one
number. These country numbers are then averaged, equally by country, to calculate the average real GDP
growth weight. In case that didn't make sense let's look at an example. England has 19 years (1946-1964)
above 90 percent debt-to-GDP with an average 2.4 percent growth rate. New Zealand has one year in their
sample above 90 percent debt-to-GDP with a growth rate of -7.6. These two numbers, 2.4 and -7.6 percent,
are given equal weight in the final calculation, as they average the countries equally. Even though there are
19 times as many data points for England. Now maybe you don't want to give equal weighting to years
(technical aside: Herndon-Ash-Pollin bring up serial correlation as a possibility). Perhaps you want to take
episodes. But this weighting significantly reduces the average; if you weight by the number of years you find
a higher growth rate above 90 percent. Reinhart-Rogoff don't discuss this methodology, either the fact that
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they are weighing this way or the justification for it, in their paper. Coding Error. As Herndon-Ash-Pollin puts
it: "A coding error in the RR working spreadsheet entirely excludes five countries, Australia, Austria,
Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in lines 30 to 44
instead of lines 30 to 49...This spreadsheet error...is responsible for a -0.3 percentage-point error in RR's
published average real GDP growth in the highest public debt/GDP category." Belgium, in particular, has 26
years with debt-to-GDP above 90 percent, with an average growth rate of 2.6 percent (though this is only
counted as one total point due to the weighting above). Being a bit of a doubting Thomas on this coding
error, I wouldn't believe unless I touched the digital Excel wound myself. One of the authors was able to
show me that, and here it is. You can see the Excel blue-box for formulas missing some data: This error is
needed to get the results they published, and it would go a long way to explaining why it has been
impossible for others to replicate these results. If this error turns out to be an actual mistake Reinhart-Rogoff
made, well, all I can hope is that future historians note that one of the core empirical points providing the
intellectual foundation for the global move to austerity in the early 2010s was based on someone
accidentally not updating a row formula in Excel. So what do Herndon-Ash-Pollin conclude? They find "the
average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually
2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim]." Going further into the data, they are unable to find
a breakpoint where growth falls quickly and significantly. This is also good evidence for why you should
release your data online, so it can be probably vetted. But beyond that, looking through the data and how
much it can collapse because of this or that assumption, it becomes quite clear that there's no magic
number out there. The debt needs to be thought of as a response to the contigent circumstances we find
ourselves in, with mass unemployment, a Federal Reserve desperately trying to gain traction at the zero
lower bound, and a gap between what we could be producing and what we are. The past guides us, but so
far it has failed to provide an emergency cliff. In fact, it tells us that a larger deficit right now would help us
greatly.
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They have the causal relationship backwards – slow growth causes a high debt to
GDP ratio, not the other way around
Berg and Hartley 4/29 – Ph. D students at University of Missouri-Kansas City (Matthew and Brian,
“Debt-to-GDP Ratios and Growth: Country Heterogeneity and Reverse Causation, the Case of Japan (Ultra
Wonky)”, Neweconomicperspectives, 4/29/13, http://neweconomicperspectives.org/2013/04/governmentdebt-to-gdp-ratios-and-growth-country-heterogeneity-and-reverse-causation-the-case-of-japan.html#more5311)
We find that the correlation between government debt-to-GDP ratios and future growth in Reinhart and
Rogoff’s (2010a and and 2010b) dataset results from outliers which come from the country most suggestive
of the hypothesis that slow growth causes high levels of government debt – Japan. This evidence
strengthens and reinforces criticisms recently made by Herndon, Ash, and Pollin (2013) of research
suggesting a negative relationship between government debt-to-GDP ratios and real GDP growth rates. As
Reinhart and Rogoff (2013) recently and quite correctly noted, “the frontier question for research is the issue
of causality.” We join Reinhart and Rogoff’s call for more research illuminating this important question. To
that end, we use Reinhart’s and Rogoff’s dataset, as corrected by Herndon, Ash, and Pollin (2013).
Following and reinforcing Dube (2013) and Basu (2013), we use LOWESS regressions and distributed lag
models and find evidence suggesting that correlation of government debt-to-GDP ratios and future growth
are much more likely explained by “reverse” causation running from slow GDP growth to high government
debt-to-GDP ratios than by “forward” causation running from high government debt-to-GDP ratios to slow
growth. Furthermore, what little evidence there is for forward causation appears to stem almost entirely from
Japanese outliers. Because – as economists generally recognize – Japan is the clearest of all cases of
reverse causation, this considerably weakens the argument for forward causation. In addition, we find
tremendous heterogeneity on the level of individual countries in the relationship between current
government debt-to-GDP ratios and future growth. This suggests that even if substantial evidence for
forward causation is eventually discovered in cross-country studies, the effect will likely be small in size and
unreliable, and therefore not relevant to economic policy decisions in any particular individual country. Our
findings are suggestive, but not conclusive, and more research is needed. We suggest that simultaneous
equations models may offer a way forward on the “frontier question” of causality.
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Government spending increases GDP and private sector spending – great recession
proves
Shah 12 – Economics reporter @Wall street journal(Neil, “Recession Looks a Bit Less Bad Thanks to
Government”, WSJ, 7/27/12, http://blogs.wsj.com/economics/2012/07/27/recession-looks-a-bit-less-badthanks-to-government/)
According to the government’s latest number-crunching exercise — they revised old economic data while
taking their first crack at how the economy performed in the second quarter — the Great Recession of 20072009 wasn’t as Great as we thought. Sure, it was the worst economic calamity since World War II, but the
abyss we sank into three years ago wasn’t as deep as we thought. The reason? Government spending
provided a cushion. Real gross domestic product shrank 4.7% between late 2007 and the middle of 2009 —
not the 5.1% initially estimated, the Commerce Department says. In 2009, America’s economy contracted
3.1%, much less than the earlier estimate of 3.5%. (The government’s “positive” revisions to the first and
second quarters of 2009 were the biggest ones they made.) So, what happened? It wasn’t consumer
spending or business investments; those estimates were pretty much left alone. Net exports of goods and
services abroad were a little stronger than initially thought, but that also doesn’t account for the change.
That leaves “government consumption expenditures and gross investment,” which jumped far more in 2009
than initially estimated. Instead of rising 1.7% in 2009 from the previous year, government spending soared
3.7%. Instead of shrinking 0.9%, spending by state and local governments actually grew 2.2% in 2009 —
probably a reflection of the Obama administration’s efforts to provide emergency cash to states during the
depths of the recession. This isn’t the only example of government policies fueling growth. In the fourth
quarter of 2011, the economy grew 4.1% instead of the 3% initially estimated, the government says. Privatesector spending on “structures” — meaning, non-residential commercial property like office buildings —
jumped 11.5% instead of declining 0.9%. One theory: Many American businesses may have waited and
waited, and then finally pulled the trigger on decisions to spend on commercial buildings to take advantage
of government tax credits set to expire in January 2012. Whether or not government spending is the right
prescription for America’s ailing economy is hotly contested among politicians. Democrats, including
President Obama, argue outlays on things like crumbling infrastructure help fill the gaping hole left when
private industries throttle back investment and hiring. Republicans counter that increased spending makes
America’s long-term financial problems even more insurmountable. When it comes to raw numbers, though,
it’s just simple math. The most popular measure of gross domestic product is called “expenditure-based”
GDP. This measure of all the goods and services produced in an economy counts up spending by
Americans on things like food and clothes, along with whatever the government shells out on military and
teachers. That means if the government spends, the economy will grow
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Collapse Doesn’t Cause War
Economic collapse does not cause war – prefer empirics
Ferguson 6 (Niall, MA, D.Phil., is the Laurence A. Tisch Professor of History at Harvard University. He is
a resident faculty member of the Minda de Gunzburg Center for European Studies. He is also a Senior
Reseach Fellow of Jesus College, Oxford University, and a Senior Fellow of the Hoover Institution, Stanford
University, Foreign Affairs, Sept/Oct)
Nor can economic crises explain the bloodshed. What may be the most familiar causal chain in modern
historiography links the Great Depression to the rise of fascism and the outbreak of World War II. But that
simple story leaves too much out. Nazi Germany started the war in Europe only after its economy had
recovered. Not all the countries affected by the Great Depression were taken over by fascist regimes, nor
did all such regimes start wars of aggression. In fact, no general relationship between economics and
conflict is discernible for the century as a whole. Some wars came after periods of growth, others were the
causes rather than the consequences of economic catastrophe, and some severe economic crises were not
followed by wars.
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Doomsday Predictions don’t take into account America’s resilience
Washington Times 8 (Washington Times; “LAMBRO: Always darkest before dawn”; 7/28/08;
http://www.washingtontimes.com/news/2008/jul/28/lambro-always-darkest-dawn/?page=all)
Is the U.S. economy coming to the end of its slump? A number of signals suggest it is, and some
economists say we may already be in a recovery. If so, that would be welcome news to beleaguered
Americans who have been hit hard by layoffs, rising food and gas prices, mortgage foreclosures, and a
bearish stock market that has been crushing 401(k) balance sheets and other worker-retirement accounts.
But last week’s economic developments suggest we may be hitting bottom and are slowly, but surely - no
doubt with some zigs and zags along the way - beginning to turn upward. There was, to begin with, the
sharp slide in oil prices throughout midweek when a barrel of light, sweet crude fell to $124 on the New York
Mercantile Exchange - down from a record $147 a few weeks ago. Several factors led to the price decline
on the futures market, but chief among them was the Energy Department’s report that domestic inventories
have risen as energy demands have fallen. People changed their driving habits or have been taking mass
transit more. That has led to increased oil and gas supplies and thus lower prices. The average price of gas
fell a bit, too, and will likely fall more if oil goes lower. President Bush’s executive order repealing the ban on
offshore oil drilling signaled that increased production may be in our future if we can overcome Democratic
opposition in Congress. Whatever the reason, the decline in oil prices is the equivalent of a huge tax cut
and, if sustained, would be good for the overall economy. The decline led to a mini-rally of short duration on
Wall Street that pushed up stocks and improved mutual-fund positions for the month. Bond prices fell as
investors moved into stocks to catch the rise in equities, moving the interest yield on the U.S. Treasury 10year note to more than 4 percent. The dollar has been strengthening, too, relative to overseas currencies.
Also improving the long-term outlook on Wall Street are better second-quarter corporate earnings reports
that showed many companies were doing better than expected. McDonald’s, AT&T and Pfizer reported
upbeat earnings that signaled there’s still a lot of resilience in the U.S. economy. Even the financials were
showing some life at midweek, despite the credit and mortgage debacle. Wells Fargo and troubled
Wachovia, the nation’s fourth-largest bank, saw their stocks jump significantly. Even so, that sector still has
a long way to go before it’s out of the woods. The brightest spot in the U.S. economy was exports. The
Commerce Department last week reported American companies sold a record $1.6 trillion in goods and
services overseas, and manufacturing accounted for 62 percent of those sales. Indeed, the United States
was “running a trade surplus in manufactured exports with our 14 free-trade-agreement partners,” the
department said. The doom-and-gloomers are still with us, of course, and they will go to their graves
forecasting that life as we know it is coming to an end and that we are in for years of economic depression
and recession. Last week, the New York Times ran a Page One story maintaining that Americans were
saving less than ever, and that their debt burden had risen by an average of $117,951 per household. And
the London Telegraph says there are even harder times ahead, comparing today’s economy to the Great
Depression of the 1930s. Wall Street economist David Malpass thinks that kind of fearmongering is filled
with manipulated statistics that ignore long-term wealth creation in our country, as well as globally.
Increasingly, people are investing “for the long run - for capital gains (not counted in savings) rather than
current income - in preparation for retirement,” he told his clients last week. Instead of a coming recession,
“we think the U.S. is in gradual recovery after a sharp two-quarter slowdown, with consumer resilience more
likely than the decades-old expectation of a consumer slump,” Mr. Malpass said. “Fed data shows clearly
that household savings of all types - liquid, financial and tangible - are still close to the record levels set in
September. IMF data shows U.S. households holding more net financial savings than the rest of the world
combined. Consumption has repeatedly outperformed expectations in recent quarters and year,” he said.
The American economy has been pounded by a lot of factors, including the housing collapse (a needed
correction to bring home prices down to earth), the mortgage scandal and the meteoric rise in oil and gas
prices. But this $14 trillion economy, though slowing down, continues to grow by about 1 percent on an
annualized basis, confounding the pessimists who said we were plunging into a recession, defined by
negative growth over two quarters. That has not happened - yet.
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They Say: Bad Economy  Poverty
The economy does not affect poverty; institutional flaws make sure the wealth stays
with the wealthy
World Bank no date (The World Bank; “Cameroon: Diversity, Growth and Poverty Reduction”; no date;
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPA/0,,contentMDK:20204277~
menuPK:435735~pagePK:148956~piPK:216618~theSitePK:430367~isCURL:Y~isCURL:Y,00.html)
Despite high rates of economic growth during the 1965-85 period, the 1983/84 Household Budget Survey
(HBS) found a high degree of poverty in rural areas and marked inequality in income distribution. In
1983/84, poor and very poor households accounted for only 20 percent and 8 percent, respectively of total
consumption and were concentrated in rural areas. Per capita food consumption (in CFA terms) of poor
households was one-quarter (and, for the poorest households, one-fifth) that of nonpoor households.
Disparities were even greater for total consumption. The poverty status of households is significantly
affected by their age and gender structure, size, education level, and location. Regional disparities in per
capita consumption were also marked. Geographic location is, therefore, a strong indicator of poverty in
Cameroon. Since the mid-1980s, Cameroon has experienced rapid impoverishment, with a very sharp
decline in per capita consumption and a marked increase in the incidence of urban poverty. While fewer
than 1 percent of households in Yaoundé and Douala fell below the poverty line in 1983, more than 20
percent of households in Yaoundé and 30 percent in Douala did so in 1993. In Yaoundé, the level of per
capita consumption is about 10 percent lower than it was in 1964. Rural areas have not been spared
Cameroon's recent economic collapse, and rural poverty is estimated to have increased considerably in
recent years. Incentive and Regulatory Framework Since 1985, there has been a sharp reversal in
economic performance, due to a variety of external and internal factors. GDP per capita declined by 6.3
percent per year from 1985 to 1993. Cumulatively, Cameroon has experienced a drop in average per capita
income of 50 percent in eight years. Early in 1994, the country embarked—along with the other countries of
the CFA franc zone—on a new economic course that has the potential to reverse the economic downturn. It
is still too early to assess the impact of, and response to, the devaluation. Preliminary estimates suggest
that agricultural exports rose by 11 percent in 1994. Inflation, estimated at 48 percent in 1994, and the
recent export taxes on coffee (25 percent), cocoa, rubber, and cotton (15 percent), tea and bananas, can be
expected to dilute its positive impact. Increasing land scarcity, changes in patterns of land ownership and
use, and the coexistence of multiple legal and customary frameworks for addressing land issues present a
critical long-term challenge for Cameroon. There is a risk of growing landlessness among the poor and, with
it, an incapacity to sustain livelihoods. Land policies need to be grounded in Cameroon's very diversity, and
build on an explicit recognition of functioning customary arrangements. This can be achieved if local
institutions are identified as providing the framework for land administration at the local level. Institutional
factors affecting poverty reduction include unclear mandates and duplication, the lack of transparency and
accountability, weak human and financial resource management, and cuts and imbalances in budget
allocations. The country's rich resource endowment leads many to believe that public mismanagement, not
lack of resources, is the core development problem that requires fundamental change. Public Expenditures
There are increasing demands on the public budget, with a continued squeezing out of non-salary
expenditures to cover salary costs. Actual non-wage expenditures in 1992/93 represented only 5 percent of
total expenditures for education and 13 percent for agriculture and health. Data indicate a strong degree of
centralization and marked regional disparities in allocations. The budgets for 1993/94 and 1994/95 suggest
that allocations continue to favor sectors that prima facie are not focused on poverty reduction. Safety Nets
Institutions in charge of social safety nets have become ineffective at providing minimum social security to
the poor and the vulnerable, principally as a result of budget shortages. Individuals and institutions have
adopted various mechanisms for coping with the impact of increasing poverty including: (a) diversifying
income sources and mobilizing family labor, with a greater role for women's informal sector income; (b)
having recourse to self-medication and traditional medicine; (c) making children, particularly girls, to drop
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out of school; and (d) savings in the informal sector (njangi or tontines). Poverty Strategy Future poverty
reduction can only take place in a context of sustained pro-poor growth. The strategy focuses on sustaining
and strengthening the economic reform effort initiated with the devaluation of the CFA franc in January
1994, including: (i) labor-intensive growth policies favoring the poor and (ii) restructuring public finance,
especially public spending, to emphasize critical human resource and infrastructure expenditures that will
benefit the poor. Increasing food security is at the forefront, through the promotion of small-scale food
production, processing, and marketing sectors, alongside associated investment in infrastructure, marketing,
and appropriate technology. More needs to be done to integrate women into the decisionmaking process,
and communities need to play a greater decisionmaking role in their own affairs. To address systemic
poverty issues, the strategy outlines some elements of a long-term agenda addressing environmental, land
tenure reform, and institutional performance issues as a foundation for sustainable development.
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They Say: Collapses Mexican Economy
The Mexican economy is resilient and does not rely on the U.S.
World Bank no date (World Bank; “Mexico Overview”; http://www.worldbank.org/en/country/mexico/overview)
Mexico, the second largest economy in Latin America, has remained resilient to the U.S. slowdown and the
financial turmoil from Europe. Although the country is closely integrated with the U.S. industrial production
sector and international capital markets; its strong fundamentals, sound policy frameworks and
management have resulted in favorable financial conditions that have supported national economic activity.
According to the National Council on Evaluation of Social Development Policy (sp), the number of Mexicans
living in poverty to 2010 was estimated in 52 million people. This implies that around 46.2% of Mexico’s total
population lives in poverty, mainly in urban areas. Meanwhile, extreme poverty – those living with less than
$978 (US$76) a month in urban areas, and less than $684 (US$53) a month in rural areas – reduced slightly
from 10.6% to 10.4% (11.7 million people). The fact that extreme poverty held steady over that period is
attributed to targeted social protection programs such as the Oportunidades conditional cash transfer
initiative and the Seguro Popular universal health insurance. President Enrique Peña Nieto took office on
December 1st, 2012. The new federal administration is focusing its efforts and programs along 5 working
lines included in the National Development Plan: “Mexico in Peace”, “Inclusive Mexico”, “Mexico with
Educational Quality for all”, “Prosperous Mexico”, and “Mexico an actor with global responsibility”. The
federal government is currently working in achieving two major and long-standing constitutional reforms on
energy and telecommunications, which intend to boost competitiveness and growth of these two key
economic sectors in Mexico. Mexico has a huge potential for accelerating economic growth. The country
has maintained a strong growth of 3.9% during 2012. This has been supported by both external and internal
demand, with a firmer expansion in services. Gross Domestic Product (GDP) is expected to grow 3.5%
during 2013 with a recovery in 2014.
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They Say: Collapses Venezuelan Economy
Venezuela’s dependence on the US has been declining, it is shifting toward China
Krauss 3/8 (Clifford Krauss has been a correspondent for The New York Times since 1990. He currently
is a national business correspondent based in Houston, covering energy. He covered the State Department,
Congress and the New York City police department before serving as Buenos Aires bureau chief and
Toronto bureau chief. Before working at The Times, he worked as a foreign correspondent for The Wall
Street Journal and was the Edward R. Murrow fellow at the Council on Foreign Relations. He is author of
“Inside Central America: Its People, Politics and History,” (1991). He has published articles in Foreign
Affairs, GQ and Wilson Quarterly, along with other publications.; The New York Times; “Dwindling
Production Has Led to Lesser Role for Venezuela as Major Oil Power”; 3/8/13;
http://www.nytimes.com/2013/03/09/world/americas/venezuelas-role-as-oil-power-diminished.html?_r=0)
American imports of Venezuelan oil have declined to just under a million barrels a day, from 1.7 million
barrels a day in 1997, according to the Energy Department. And while Venezuelan exports of oil are in
decline, its dependency on American refineries for refined petroleum products has grown to nearly 200,000
barrels a day because of several recent Venezuelan refinery accidents. Experts expect Venezuela to send
barrels no longer needed in the United States to China, as payments in kind under oil-for-loans contracts.
Venezuela’s broken refinery sector has left shortages of gasoline and diesel in parts of Latin America,
opening the door for valuable markets to American refiners.
Inflation and shortages make collapse inevitable
Metzker 13 (Jared, IPS Staff, 7/17/13, "Analysts Say Oil Could Help Mend U.S.-Venezuela
Relations",http://www.globalissues.org/news/2013/06/17/16843)
According to Michael Shifter, president of the Inter-American Dialogue, a Washington-based think tank,
Maduro has offered "conflicting signals"."Maduro has so far shifted in his position toward the U.S. between a
moderate approach and a more hard-line one," Shifter told IPS.3The new president's waffling may be a
reflection of his tenuous grip on power. By many accounts, Maduro lacks the political prowess and rabblerousing charm of Chavez, who enjoyed military backing as well as fervent support from the lower classes.In
addition to a strong anti-Chavista opposition that openly challenges the legitimacy of his narrowly won
election,Maduro has had to deal with a split within Chavez's own former political base.Shifter pointed out
that among the military, which was once a source of significant strength for Chavez, more support is given
to Diosdado Cabello, currently head of Venezuela's parliament and whose supporters believe he was the
rightful heir to the presidency.Maduro's legitimacy stems largely from his perceived ideological fidelity, the
reason for his selection by Chavez to lead in the first place. Shifter said this leads him to "emulate" his
predecessor and makes rapprochement with the United States less probable.Still, ideological concerns may
not ultimately decide the issue. Venezuela has inherited from Chavez an economy in difficult straits, which
continues to suffer from notorious shortages and high inflation.