One major reason why the Greece deal is a bad deal


It has many bad points. However, I’m going to ignore most of it and focus on a single part to keep the discussion brief.

First, we need to take a quick look at how governments usually operate during recessions.

Most nations have what are called automatic stabilizers. During a downturn, applications for unemployment assistance go up along with food stamps, etc. As a result, the deficit “automatically’ increases in an attempt to stimulate demand. If government were to enact willful cuts to the automatic stabilizers during a downturn, then demand would contract further and the recession would only deepen.  Continue reading