Economists disagree on the benefits of reducing government deficits.
One view believes that government borrowing crowds out private investment while driving up interest rates that drag long-term growth. Others point out that government spending is no worse than either private sector or consumer spending and allocates resources to ensure continued growth. Both sides of the spectrum probably agree, however, that the Brazilian government must target the cost of borrowing, which is responsible for a large part of the deficit, by acting decisively to reduce debt and by cutting interest rates. With hyperinflation and ancillary indexation mechanisms erased from daily life in Brazil, the young generation became acquainted with a stable economy for the first time in their lives. Runoffs in October's gubernatorial elections left a majority of states squarely within the government camp, including the state government of S o Paulo, with population and economy comparable to Argentina.