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Spend! Spend! Spend! Cut! Cut! Cut!

As the latest G-20 meeting made clear, there's a big debate right now about how much money governments in big, rich countries should be spending. The two basic camps:

Austerity: Deficits are out of control. Governments need to start spending less right now, in order to prevent a loss of confidence in government debt and head off economic catasrophe.

Stimulus: Unemployement is high, and the economic recovery is fragile. If governments cut off spending right now, we'll shoot back into recession. Besides, goverments can still borrow money at superlow interest rates. Keep the short-term spending spigot open for a while longer, and deal with deficits in the longer term.

The FT has a bunch of big-name economists weighing in on the debate this week.

Berkeley economist and blogger Brad DeLong argues for more spending from economies where interest rates on government bonds remain low:

Here we have the crux: Greece, Ireland, Spain, Portugal and Italy need to be austere. But Germany, Britain, America and Japan do not. With their debts valued by the market at heights I had never thought to see in my lifetime, the best thing they can do to relieve the global depression is to engage in co-ordinated global expansion ... on a titanic scale. (Read more.)

But Harvard economist Ken Rogoff, author of a recent book on the history of sovereign defaults says those interest rates can rise sharply and unexpectedly: is folly to ignore the long-term risks of already record peace-time debt accumulation. ... The fact that the markets seem nowhere near forcing adjustment on most advanced economies can hardly be construed as proof that rising debts are riskless. ... an apparently benign market environment can darken quite suddenly as a country approaches its debt ceiling. (Read more.)

Harvard economic historian Niall Ferguson argues governments need to rein in spending in order to boost confidence in the private sector:

People are nervous of world war-sized deficits when there isn’t a war to justify them. According to a recent poll published in the FT, 45 per cent of Americans "think it likely that their government will be unable to meet its financial commitments within 10 years." Surveys of business and consumer confidence paint a similar picture of mounting anxiety. (Read more.)

And President Obama's economic adviser Larry Summers argues for lots of spending now, and less spending later:

Critics have complained that the continued commitment by the administration of President Barack Obama to support recovery in the short term and also to reduce deficits in the medium and long term constitutes a "mixed message." In fact, it is the only sensible course in an economy facing the twin challenges of an immediate shortage of demand and a fiscal path in need of correction to become sustainable. (Read more.)