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TAR OR HONEY? THE CURE FOR RECESSION DEBATE
Abstract
Recent global economic crisis has revived a longstanding debate whether government spending or austerity is the better way to stop financial downslide and to set economy straight. Two notably opposite schools of economic thought have crossed swords: one championing “honeyish” fiscal stimulus via increased government borrowing and spending, and another, advocating “tarry” public spending cuts. The major aim of this paper is to contrast and compare the working mechanisms behind spending and austerity measures, to identify specific conditions, under which each of the policy type brings the desired impact, as well as to draw attention to essential drawbacks and limitations of both financial stimulus and saving policies.
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