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GORDON L. WEIL: Should government spend more or less to beat recession?

One single debate dominates all political decision-making today, whether it’s in Greece, Spain or the United States. Should the government try to cut spending and reduce its high debt, or should it borrow more and pump added funds into stimulating the economy?

Even in Maine, where a deficit is banned by law, the debate takes place, focusing on borrowing versus spending cutbacks.

Those who favor more stimulus spending make a good case that, without what has already been spent, the country would have fallen deeper into recession. Government is a big customer for goods and services, and when it spends, people find new jobs.

This is what used to be called “pump priming.” People with government-funded jobs spend money, thus creating more jobs. After a while, the need for government-backed jobs declines, and the new income tax revenues that are generated can be used to pay off debt.

On the other side are those who say that piling on more debt creates a burden on taxpayers, possibly for generations to come. If taxes have to go to pay off debt created years earlier, then government will have to raise taxes to fund its operations or cut back.

They say that if people do not get government support, they will be forced to try harder to find jobs. So denying extended unemployment benefits is the best way to get people back to work.

The problem with using benefit-denial as a way to motivate people to look for work is that jobs have to be available. No amount of job searching will create new jobs.

Still, that point aside, both sides of the argument have merit.

What complicates matters is that raising taxes is off the table for most countries. If taxes are increased on people who are already struggling, the chances for recovery are reduced.

Of course, some bonus babies on Wall Street could chip in a few more dollars. More tax revenues from the super-rich or “claw backs” of some profits from banks that received government support would help.

Yet another obstacle to resolving the question, especially in the United States, is the role of those, such as tea-partiers, who are intent on reducing the role of government. For them, deficit reduction is a good tool for forcing government to cut back. This position, while influential, has little to do with economic recovery.

At the recent meeting of the major economic players of the world, the Group of 20, the United States wanted governments to agree to pump more funds into their economies. But most participants were intent on deficit reduction.

If the majority is right, most of the world is in for a lengthy recovery during which people will have to learn to do without much of what they formerly routinely bought — from video games to big vacations to eating out. And it is quite possible that, when recovery has been achieved, our buying patterns will have to remain more modest.

That reality, however, is hard to sell politically. People blame the Obama administration for not creating jobs, but they oppose the only real tool available: spending public funds.

The political campaign this year, including in Maine, will focus on the proper role of government. Some will say government programs should be cut to the point that taxes can be reduced. They will say tax reduction is the best economic stimulus program.

To be sure, in most countries it is past the right time to screen government programs and eliminate some of them, even if they are worthy.

But tax-cutting arguments will run into popular sentiment, the kind of reaction that has caused riots in Europe. People like the programs from which they benefit. It is not yet clear that people are ready to accept the kind of austerity that deficit reduction would bring.

Opponents of tax and spending cuts will say the highest priority is getting people back to work, with which most people can agree.

Will it be possible for voters to understand the trade-offs being offered to them? Will they recognize that government cannot provide job creation and social safety nets and cut spending at the same time?

These big questions will make this year’s elections among the most important in decades.



Gordon L. Weil, a weekly columnist for this newspaper, is an author, publisher, consultant and former international organization, U.S. and Maine government official. 

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