Fiscal Fibs and Follies

BERKELEY – Across the globe, the debate over fiscal consolidation has the distinct sound of two sides talking past one another.

On one side are those who insist that governments must move now, at all cost, to rein in budget deficits. Putting public finances on a sustainable footing, they argue, is essential to reassure financial markets. If concerted efforts are taken to balance budgets, confidence will be bolstered. And if confidence is bolstered, consumption and investment will rise.