How can you have any pudding if you don't eat your meat?

In the Financial Times, economist Ricardo Hausmann tells the U.S. to stop whining and take its recession like a man:

The goal [of U.S. policy] seems to be to avoid a 2008 recession at all costs. As Larry Summers, former Treasury secretary, put it, failure to act would make Main Street pay for the sins of Wall Street.

It is easy to lose sight of the overall picture. Main Street consumers have overspent and over-borrowed and are unable to meet their obligations. The fact that households may have so behaved because they were enticed by “teaser loans” does not change the facts; it only assigns blame. Consumption has been above sustainable levels and needs to adjust down, whatever view one has about the responsibility of adults over their financial decisions.

The adjustment of private consumption to sustainable levels is necessary, but is likely to have a negative influence in the short run on the growth of aggregate demand, of which it represents more than 70 per cent. It is hard for this adjustment to take place without bringing down the rate of growth of gross domestic product, possibly to negative numbers.

It will also lower the US external deficit and put downward pressure on world growth. That is a consequence of the imbalances accumulated over five years of unprecedented world growth. Returning to a sustainable path is good for the US and the world economy over any horizon that assigns some value to what happens after 2008. Sustainable growth is not the consequence of an unsustain­able consumption boom but of the progress and diffusion of science, technology and innovation – which show no sign of slowing down.

An efficient adjustment to the US over-consumption imbalance (and Chin­ese under-consumption) in a way that does not hurt longer-term growth should be based on compensating for the decline of US consumption with an increase in domestic investment and in consumption abroad. It should not be based on giving the US consumer more rope with which to hang himself. [emphasis mine]

Hence, macroeconomic policy should not be based on a panicky attempt to avoid a 2008 recession at all costs but on a forward-looking strategy that achieves the needed reduction in consumption at the lowest cost in terms of the stable growth. This is not achieved by giving US households a $1,000 cheque by April, a trick that no macro­economic textbook would argue is particularly effective. If there is fiscal room – a big if, given the weak structural position of the US government and its likely cyclical worsening – it would be better spent in accelerating investments in plant and equipment via accelerated depreciation schemes, to improve the capacity of the economy to keep on growing after the crisis...

The US should face its need for adjustment with courage and reason, not fear. It should stop behaving as the whiner of first resort, ready to waste all its dry powder on a short-sighted attempt to prevent a 2008 recession. Many poorer countries with weaker markets and institutions have survived and benefited from an adjustment that involves a year of negative growth.

Now, as a tenured Harvard professor, Hausmann himself has little to fear from a recession. And once you see the human faces of the people who get hurt by a real-life recession, it's hard to be the heartless British schoolmaster telling Oliver he can't have any more.

But Hausmann has a point when he says that our goal should be sustainable consumption. The fact is that we - and "we" includes our government - have been spending way more than we earn for 7 years, and it just can't continue. Yes, I want Americans to have happy and luxurious lives, but there's just no way to keep going deeper into debt forever and ever. A recession is clearly not the best way to correct our profligacy, but that's what it's come to.

I agree with Hausmann's suggestion that investment, not consumption support, is the wisest measure our government can take. I'd add that investment in the middle class - particularly through better education - should be a big part of that. But we have to do our part - we can't keep maxing out the credit cards and expecting the government to bail us out every time.