The age of austerity

Austerity is transforming economics and politics. The Age of Entitlement was about giveaways; the Age of Austerity will be about take-backs. The Age of Entitlement was about maximizing economic growth; the Age of Austerity will be about minimizing economic reverses. Similar dilemmas confront most advanced societies. Even Germany’s government debt as a share of the economy is large (73 percent in 2009).

Governments are caught in a vise. Without unpopular spending cuts and tax increases, unmanageable deficits may choke their economies. But those same spending cuts and tax increases also threaten economic growth. The United States is not exempt. Low American interest rates mean bond markets haven’t yet turned on us. We need not threaten the recovery by immediately slashing budget deficits. But we do need to act convincingly to curb future deficits. Austerity can’t be fun; but how painful is still partially up to us.