Stimulus or Austerity?: That Is the Question

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The consensus is that federal stimulus spending helped to prevent recession from becoming depression and got recovery under way. President Obama is committed to pumping up the recovery with continued spending and to his campaign promise not to raise taxes on households earning less than $250,000 a year. Deficit hawks say it’s time to raise taxes and get spending under control. But would premature austerity measures stop the recovery in its tracks? From the G-20 conference to Capitol Hill, and even within the Obama White House, policy makers are sharply divided. White House budget director Peter Orszag has announced his resignation, and insiders say it’s due to frustration with the lack of aggressive action against the growing fiscal deficit. What are the lessons of history? Are states like New Jersey and countries like Ireland unwilling participants in what could be a dangerous experiment?




Warren Olney