If you have been following the financial press as of late, you’re probably well aware that there is a contentious debate between deficit reduction hawks and those who call for the more state spending to boost global demand. At the latest juncture of this debate, Toronto’s G20 summit, the international community sided with the deficit hawks and committed to halve deficits by 2013. One would imagine this hysteria over public debt is a response to market pressure. Not so, say the bond markets. The latest calls for debt reduction, far from a reasoned response to economic reality, are products of an ideological opposition to a strong state sector:
Instead of bond market fears, the US has an intense political debate about deficits and whether to spend more on fiscal stimulus. Steny Hoyer, the Democratic leader in the House of Representatives, has talked of “spending fatigue”. His Republican opponents have set up “YouCut” – a weekly public vote on which spending to cut, American Idol-style.