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The Perennial Debate: Spending or Austerity?
CNBC.com | March 14, 2012 | 05:33 AM EDT

The UK finance minister (known as the Chancellor of the Exchequer), George Osborne , presents his annual budget to parliament next week. So it seems a good time to consider economic ideologies, but this being an international column, we won’t be parochial and recommend a wish-list for Osborne. Rather we’ll discuss just some of the measures that all governments currently stuck in a sclerotic cycle of high unemployment and stagnant growth should be implementing.

The UK is as good a place to start as any. The government there has so far placed the strongest emphasis on what is inaccurately termed “austerity” rather than on “spending,” in order to get the economy back on track. Given that investors have been paying close attention to sovereign credit ratings since the crash, and that the UK’s borrowing costs are the cheapest they could be right now with the country’s AAA rating, this makes a lot of sense. It isn’t the whole picture though. The Chancellor’s predecessors from another era, the great “supply-side” reformers Geoffrey Howe and Nigel Lawson, would probably suggest that he needs to pay as much attention to the labor market and the complexities of taxation policy, in that order, as he does the budget deficit.

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