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Around the world the idea of “austerity” is fiercely debated. The various strengths and weaknesses of the global economy make opportune a reconsideration of the principles that should guide fiscal policy: Paced by housing and energy, the U.S. recovery is likely to accelerate this year, and budget deficit projections have declined as well; meanwhile, the European economy remains stagnant, though there is evidence that stimulative policies are gaining traction in Japan. It is critical that policies be set in light of economic circumstances. A prudent government must balance spending and revenue collection in a way that assures the sustainability of its debts. To do otherwise leads to instability and slow growth; it courts default and catastrophe. Yet responsible governing also requires recognizing that when economies are weak and interest rates are constrained, changes in fiscal policy will have large effects on economic activity. In turn, this activity will improve revenue collection and reduce expenditures on social welfare. In such circumstances, efforts to rapidly reduce budget deficits may backfire.