At the G-20 summit in Toronto on Sunday, leaders of some of the world's most important economies pledged to cut government deficits in half over the next three years. The pledge comes at a time when the world's economy is being imperiled by a massive debt crisis in Greece and other countries. But world leaders remain at odds over how big a concern the debt crisis should be.
President Obama came to the summit hoping to persuade other leaders to pour money into government stimulus programs as a way of keeping the fragile recovery going. And though he had support from countries like Japan and Brazil, many others had different priorities.
Instead of spending money on stimulus programs, European leaders want to attack what they see as a dangerous and growing pile of government debt.
On Sunday, the summit's host, Canadian Prime Minister Stephen Harper, read a statement that attempted to paper over the differences. Harper said countries should spend stimulus money they've already committed to.
"But at the same time, advanced countries must send a clear message that as our stimulus plans expire, we will focus on getting our fiscal house in order," the statement said.
The statement said wealthy countries should cut their budget deficits by 50 percent over the next three years, and try to stabilize the level of their debt relative to the size of their economies by 2016.
Dean Baker, co-director of the Center for Economic and Policy Research, says this is exactly the wrong thing to be doing right now. Baker says that with the world economy recovering from a terrible recession, countries should be spending money — not cutting back.
"But in any case, these are large reductions in deficits during a period when everyone expects we'll still be way below potential output. That's a big hit to these economies," he said.
But deficit hawks held sway. Obama administration officials said that they, too, wanted to cut the deficit — it was just a question of how quickly it should be done.