PALO ALTO, Calif. — Has the Obama administration learned anything from the string of fiscal setbacks it has suffered this summer?
First, at the Group of 20 Summit in Canada, President Barack Obama was soundly rebuffed by Canadian Prime Minister Stephen Harper, British Prime Minister David Cameron and German Chancellor Angela Merkel, among others, on his demand for additional fiscal stimulus (more government spending). They are pursuing fiscal consolidation, following the immense explosion of public debt in the 2008-2009 recession, and have called for cutting deficits in half by 2013 and stabilizing the government debt-to-GDP ratio by 2016.
Obama said at the summit that he will propose tough deficit-reduction measures next year. But talk is always cheaper than action. Thus far the Obama administration has followed the opposite strategy, letting rip with new spending, while hoping that concern over deficits and debt will lead to pressure for higher taxes, possibly even a European-style value-added tax.