Stimulus now, restraint later

Tension over timing the shift sets the G20 mood

When Prime Minister Stephen Harper sent a letter last week calling on the G20 countries to cut their budget deficits in half by 2013, Canadians didn’t blink. After all, Canada’s federal government is to be back in the black by about 2014. But his target would have sounded ambitious to much of Europe and in Washington, where President Barack Obama is warning against adopting strict deficit-cutting measures too soon. The U.S. President fears that moving quickly into an age of austerity will snuff out the unsteady flame of the economic recovery. The tension between the need to restrain spending and the imperative to keep growth alive is, according to this Associated Press story, the main undercurrent of the upcoming G20 summit in Toronto. The leaders who took on last year’s severe economic crisis with such remarkable solidarity are finding it harder to maintain a common front now. Ultimately, it’s a matter of timing. “The global economy is still very fragile,” said Mark Zandi, chief economist at Moody’s Analytics. “Countries have to balance the need for continued support now while also putting together credible deficit cutting plans that can be implemented down the road.”

LA Times