Recent US economic policy has limited recessionary declines in spending. Proponents point to the shallowness of the downturn in the face of collapsing equity values, the September 11 terrorist attacks and geopolitical risks, and to the continued outsized contribution of the US to global growth. Critics point to the growing deterioration of the US fiscal position and current account deficit. The witticism of Herb Stein, the late chairman of the US Council of Economic Advisers, sums up their fears: "Something growing too fast forever will stop."

The author of the big shift in US fiscal policy, George W. Bush has recently suggested potent and gradual remedies to these imbalances - not currency high jinks but something straight from an economics textbook: tax reform and Social Security reform.