Magazine article Newsweek International

The German Bombshell

Magazine article Newsweek International

The German Bombshell

Article excerpt

Byline: Stefan Theil

Remember the deficit hawks? The critics of blown-up government spending finally took center stage last week, after staying largely in the shadows as countries around the world threw hundreds of billions of dollars, euros and yuans at their banks and economies to help stave off the worsening recession. In Washington, fiscal conservatives in the U.S. Senate voted down a $15 billion bailout for Detroit automakers. In Britain, the opposition Tories unleashed fresh attacks on Prime Minister Gordon Brown for his $30 billion "fiscal stimulus." Shadow Chancellor George Osborne ridiculed the centerpiece of Brown's plan, a temporary 2.5 percent cut in the national sales tax, as an "expensive and ineffective" measure that would only leave British taxpayers with a "bombshell" of debt. The Tories took their cue from remarks made in this magazine last week by German Finance Minister Peer Steinbruck, that Britain--and, by implication, other big spenders around the world--was "tossing around billions" in a "breathtaking" switch from supply-side economics to a "crass Keynesianism." Brown, in turn, lashed back at both the Tories and Steinbruck, saying they were out of step with mainstream thinking on what's needed to fight the crisis.

Few argue that government should not be spending in the crisis. Germany itself has put together a $41 billion spending plan on top of its $670 billion bank bailout. Instead, the dispute centers on effectiveness and timing. …

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