Vince Fortunato, left, interviews a job applicant during a hiring event at a job centre in San FranciscoJustin Sullivan/Getty Images
Prime Minister Stephen Harper and President Barack Obama head into next week's Group of 20 leaders' summit at odds over how best to nurture the global recovery, one stressing prudence, the other vigilance.
The two leaders go into the summit emphasizing different short-term economic threats. For Mr. Harper, the danger that financial markets will revolt at high national debts looms large, so he is stressing the need for countries to move quickly, by next year at the latest, to slash deficits.
But Mr. Obama warns that weak demand could make the world slip back to recession, and he emphasizes the need for some countries to continue to spend - and that if a double-dip comes, governments might have to intervene again.
The two leaders are not divided on the need to cut deficits and other broad principles such as reforming the financial sector and pushing for steps to narrow global imbalances. But diverging views on how best to juice the economy highlight what will be a central theme of the summit, as many governments are already cutting back sharply amid global concerns over swollen public debt loads.
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In a letter Friday to his G20 colleagues, Mr. Harper urged leaders to agree next week to cut their budget deficits in half by 2013 and put their debt as a share of gross domestic product on a "downward path" by 2016.
"To sustain recovery, leaders from the advanced countries, to the extent possible, need to reaffirm their intent to follow through on delivering existing stimulus plans," Mr. Harper said in the letter. "At the same time, advanced countries must send a clear message that as their stimulus plans expire they will focus on getting their fiscal houses in order. This requires credible plans for fiscal consolidation to dispel the uncertainty and financial volatility that can impair future growth prospects."
Even as Mr. Harper argued that his proposed targets "should be a minimum, as some of us will meet these objectives sooner," the White House on Friday circulated a letter Mr. Obama sent to G20 leaders, cautioning that "it is critical that the timing and pace of consolidation in each economy suit the needs of the global economy, the momentum of private sector demand, and national circumstance."
Mr. Obama reiterated his administration's plan to cut the budget deficit in half by fiscal year 2013 and pledged to stabilize America's debt-to-GDP ratio by 2015. Still, the tone of Mr. Obama's letter suggests he may resist the notion that all G20 countries should aspire to the same targets, lest they move too quickly and hurt the exports that the president is counting on as a key source of growth as the U.S. recovery sputters.
Although the differences in the two approaches may seem subtle, they add to the notion that the U.S. is fairly isolated in its push to leave the door open for more, not less, stimulus if needed.
"The challenge will be that while there's a longer-term need to reduce deficits, an aggressive assault by all of the top 20 economies at once risks a lot of downward pressure on near-term growth," Avery Shenfeld, chief economist at CIBC World Markets in Toronto, said in an interview. "We've had much more job creation than the U.S., and Canadian consumers are therefore better positioned to at least help growth along when the government steps back. That's not yet a foregone conclusion in the U.S."
At a briefing Friday in Ottawa, Canadian officials downplayed those differences, saying the Toronto summit would bring "legitimate discussion" about how to secure the global recovery and insisted they're not advocating a "cookie-cutter approach."
Still, Dimitri Soudas, Mr. Harper's spokesman, told reporters at the briefing that Canada wants nations to start attacking their budget gaps no later than next year.
Getting most of the other nations onside shouldn't be a problem, though, because the targets Mr. Harper has proposed are rather modest, said Glen Hodgson, chief economist at the Conference Board of Canada and a former official at both the Finance Department and the International Monetary Fund. More important, Mr. Hodgson noted, Greece's near-meltdown last month has spooked European governments into action, he said.
With files from Kevin Carmichael in Washington and Campbell Clark in Ottawa
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