On one side, conventional economic theory holds that a large dose of government stimulus spending provides the best antidote to pulling the world economy out of recession. On the other, stimulus spending that increases budget deficits exponentially are not sustainable over the long haul. Ruin lies in both directions.
The question facing the G-20 members involved judging at what point the medicine becomes worse than the disease, and for many of the attendees, such as the leaders of Germany and Britain, that was a political question. They have recently heard from worried constituents about unrestrained spending and debt and have resolved to cut budgets in ways that should be a model for the rest of the world, at least in normal times.
But the whole point of governments spending big now has been that these are not normal times. The Nobel Prize- winning economist (and New York Times columnist) Paul Krugman is among those who, even before the G-20 summit, had been arguing that austerity measures threaten to kill the nascent economic recovery, recalling 1937 when FDR prematurely tried to balance the budget and succeeded only in plunging the economy back into recession. He now fears the start of another depression.
Together with Treasury Secretary Timothy F. Geithner, President Barack Obama, whose prodigious spending has given rise not only to the Tea Party movement but also disquiet across the political spectrum, urged his colleagues at the summit not to abandon the stimulus course entirely. He won half the argument.
The world leaders, Mr. Obama among them, finally agreed with a goal to cut government deficits in half by 2013 and stabilize the ratio of public debt to gross domestic product by 2016. This schedule, however, is understood to be an expectation, not a rigid timetable. Moreover, deficit reductions would be "tailored to national circumstances" and it was agreed that "existing stimulus plans" should not be abandoned.
It seems like a squishy compromise between divided delegates who could not really agree which was the greater threat, lagging economies or unrestricted debt. What they came up with is an echo of St. Augustine's famous prayer: "Lord, make me chaste, but not yet."
But at least it is a step back on the path to much-needed fiscal responsibility. We will applaud it with one hand -- and save the other to see if the middle way between a rock and a hard place works in an economic recovery that Mr. Obama rightly called "fragile."