Austerity and Spending

The financial crisis was devastating by every measure.  There have been positive results, however. Governments have had to reconsider longstanding assumptions about their relationships to markets, and average people have had a chance to see firsthand how bad governments are at moving economies.  The failure of the stimulus and the debt crisis in Greece, for example, have put Keynes back under scrutiny, and the Austrian economists are enjoying the newfound attention. 

Nixon may have declared the universality of Keynesian thought, but now decades later, we are reconsidering that proposition.  At last we are having a modern time debate where the loose money types don't own the floor.  Exhibit A in is the latest debate over Austerity vs. Spending, spurned on by the G20 meetings where European leaders rejected Obama's call for more spending and announced they were cutting government waste.  The debate centers around whether governments should "stimulate" further with more spending or cut spending to bring bond markets under control and bring confidence back to the consumer.  Unfortunately, there is not much talk of cutting spending and cutting taxes concurrently (the best way to put money back to work in the private sector), but the budget cuts are a good start.  

To enable the reader of Lasting Liberty to make up his or her own mind on the issue, below links lay out both sides fairly well.

Paul Krugman mocks everyone who disagrees with him

Economist Alesina argues austerity triggers growth (gasp)

Fareed Zakaria has it both ways

The Economist magazine says austerity is more dangerous

CNBC guests debate stimulus and austerity