One of may favorite journalists, Fareed Zakaria, reports that the British are proposing to tackle the deficit as a means of convincing investors that England is a good place to do business:
the new chancellor, 39-year-old Tory George Osborne, [has] presented a budget that promised to get Britain’s fiscal house in order with sharp cuts in spending, coupled with tax increases. It landed in the midst of a heated debate across the industrialized world about how to best get the economy back on track. Osborne and his boss, Prime Minister David Cameron, have come down firmly on one side of this debate, hoping that a major effort to reduce the deficit will reassure bond markets and investors that Britain is a safe and compelling place to put their money.Meanwhile, the Washington Post's policy blogger Ezra Klein, characterizes the debate within the Obama White House as between those who wish to spend their way to prosperity vs those who argue, ala Osborne, that restraint is a quicker way to prosperity:
we're starting to hear rumblings of a fight within the White House. The political side, we're told, wants to focus on the swelling deficit, which it believes is contributing mightily to the public's sense that the economy isn't being effectively managed. Karl Rove, who's been on the political side of a White House himself, agrees with them: "People's concern about the spending and the deficits and the debt and the out-of-control government have been growing and growing and growing," he said on Fox News. "And it's one of the key drivers in the 2010 election."
The economists disagree: They see a weak economy that still needs government support.You got that? Those who believe in restraining borrowing are Karl Rove type political hacks, while the economists all support increased government spending. Economics is that black and white in Klein's world. All we need to do is keep spending and things will get better.
In fact, of course, there are economists on both sides of this vital question (and probably those who take different viewpoints all together). One thing IS for certain however: anyone who is telling you there's a painless way out, such as Klein, isn't being realistic.