Which is the greater problem, too much debt or too few jobs?
The conventional wisdom these days is that debt is.
A toxic build-up of debt by Governments has to be purged, even while households are doing the same thing.
At what cost? Policymakers shrug. Whatever it takes.
It is a sign of the times that the wantonly irresponsible brinkmanship on display in Washington (which has already inflicted collateral damage on us via the exchange rate) is entirely about how to reduce the United States Government's chronic deficits and debt levels.
From this distance at least, it appears none of America's political leaders are particularly bothered by an unemployment rate of 9.2 per cent - roughly the equivalent of having the entire workforce of Australia or Canada idle and unproductive. The idea that in those circumstances expansionary fiscal policy has a useful, if not crucial, role to play seems to be entirely discounted, beyond a few Keynesian voices in the wilderness.
Three endings to the US fiscal farce are possible.
One is there is no deal to raise the debt ceiling and shortly thereafter the US defaults. Financial mayhem ensues, doing incalculable damage to the real economy there and in the rest of the world.
Alternatively there is a stop-gap deal which kicks the issue to touch. The US Government's credit rating might still be downgraded, raising interest rates, and a whole lot of hot money parked here to the detriment of New Zealand's export sector. Before long the whole issue flares up again.
The third and best option is a "grand bargain" which recognises that a durable programme to reduce the US deficit requires both spending cuts and revenue-raising tax reform.
That would require a degree of statesmanlike compromise that does not look likely at this point.
Is the situation in Wellington so very different from Washington?
True, we do not have the complications of divided Government, our gross Government debt is only about a third as high as the United States', the fiscal deficit is narrower as a share of GDP even in the year the earthquake costs hit and our unemployment rate is 6.6 per cent not 9.2 per cent.
But our systematically higher interest rates mean a corresponding higher debt-servicing cost for a given level of debt.
Right now the Government can borrow 10-year money for about 5 per cent - cheap by historical standards but costly compared with the 3 per cent the US Government has to pay.
In addition New Zealand's external debt, almost all of it run up by the private sector, is very high by international standards.
Last May's "zero" Budget was all about debt reduction. It froze operating spending for the next three years.
And that is in nominal terms. In real terms Government spending will reduce, and shrink even more in real per capita terms.
All in the name of returning to an operating surplus as soon as possible and, while increasing capital expenditure, keeping gross Government debt from threatening 40 per cent of GDP and keeping net debt below 30 per cent.
Yet the International Monetary Fund calculates the average gross general Government debt level among advanced economies is already over 100 per cent of GDP and forecasts it to keep rising over the next five years.
In NZ, Government debt is the only kind that has grown much lately.
The stock of loans outstanding by banks (and non-bank lending institutions) to the household, business and agriculture sectors combined as of the end of May was only 1 per cent higher than a year earlier.
Indeed it was also only 1 per cent higher than two years earlier.
Why then would governor Alan Bollard want to raise the cost of borrowing? We can rule out reining in runaway credit growth as a reason.
Curbing excess demand, perhaps? But from what quarter?
We will get fresh numbers next week on wage growth. It is more likely to be sluggish than rip-roaring.
In the year to March the average pay rise - this is for the 56 per cent of wage and salary earners who managed to get any increase at all - was the smallest for 10 years.
Inflation among the necessities - food, petrol and electricity - added up to nearly half the 5.3 per cent rise in consumer prices over the past year.
All else being equal that leaves less to spend on other things, and less pricing power for the businesses chasing the consumer's discretionary dollar.
Real household consumption - the lion's share of GDP on the expenditure measure - rose by just 0.4 per cent in the March quarter, no faster than its average quarterly growth through last year.
A lot of weight is being put on the boost to farmers' incomes from high export commodity prices.
And indeed, a recent Federated Farmers survey of sentiment in the sector found that a net 33 per cent of farmers expect to increase spending over the coming 12 months, up from a net 22 per cent in January.
But debt repayment remains the higher priority, with a net 46 per cent of farmers expecting to reduce debt in the year ahead, up from a net 25 per cent in January.
And no wonder when the last decade saw farm debt quadruple in nominal terms and nearly treble relative to agricultural output.
With dairy prices now falling and the dollar soaring, there is a risk that the boost to aggregate demand from the best terms of trade in 37 years may prove smaller and shorter-lived than forecasters have reckoned.
So the question is, with households, farmers and the Government all simultaneously focused on reducing debt, will there be enough demand growth to maintain the momentum the economy evidently had at the start of the year, get it over the hill of slowing trading partner growth and bring the unemployment rate down?
The unemployment rate is flattered by the fact that we have a common labour market with Australia. Without the net loss of 30,000 people to Australia over the past year it would be higher.
Those are not just friends and relatives flocking to the airport departure lounges. They are little bits of the workforce and the tax base.
It is more relevant to look at employment growth than the unemployment rate. We will get a fresh read on it next Thursday. It has been all over the place in recent quarters.
The Department of Labour has a leading indicator of employment which, when combined with the jobs increase recorded in the March quarter, would indicate employment growth of just over 3 per cent for 2011 as a whole.
That would be 68,000 jobs, of which about 30,000 would be needed to keep pace with workforce growth and the rest available to reduce the ranks of the unemployed. Such an increase is conceivable. Employment grew faster than that in 1992, 1993 and 1994 and again in 2003.
But it would require more benign conditions in the rest of the world than look likely right now. As the saying goes, you can have too much of a good thing. Debt is one of those good things, but fiscal austerity may be another.