Three years ago, as a new president took office in the depths of a staggering, world-wide recession, the US passed the American Reinvestment and Recovery Act (ARRA), better known as the “stimulus.” The idea was for the government to spend money on job-creating projects, even if that increased the federal government’s budget deficit. While many economists argued that the stimulus was a good idea but too small, those on the right called it the “porkulus,” and helped stir up the Tea Party protest movement against it.
In Europe, virtually every country took the opposite course. Instead of stimulating their economies with more spending, they turned to cuts to bring their budgets closer to being balanced.
Now, three years later, we can begin to see the results. The US economy has begun a modest recovery, with unemployment creeping down as sales begin to increase. In Europe, by contast, Greece is in a state of near collapse – and is having devastating budget cuts imposed on it – with serious worries about the fiscal stability of Spain, Italy, and France, and a real prospect that the entire Eurozone will collapse.
The US stimulated the economy by increasing its budget deficit, and is now experiencing a modest recovery. The nations of Europe sought to decrease their deficits by cutting spending, and is now threatened with economic collapse.
Which policy do you think was better?