Peter Costello, I notice, is banging on the evil deficits drum as if this Labor Government is going to undo all his good work by acting to try and stop the country going down a depressionary gurgler. The former Treasurer took a moment while speaking at the annual KPMG Couta Boat classic yacht race in Sorrento to say the Rudd Government was set for a "challenging year". "I think the Government will find it's much harder to build financial strength than it is to spend it," he told the assembled corporate yachties. Meanwhile in the United States the recent recipient of the Nobel prize for economics, was publishing something of a nightmare scenario in the New York Times where it takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. “As a result,” wrote Krugman, “the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going. So this is our moment of truth. Will we in fact do what’s necessary to prevent Great Depression II?”
If politicians listen to the likes of Peter Costello and Malcolm Turnbull with their continued desire to portray deficits as inherently evil things then I guess the horror scenario might actually come to pass.