There are essentially two Schools of Economics when a country is faced with a recession.
The first has been beautifully exposed in Naomi Klein's book: The Shock Doctrine yet it is the course of action the ConDem coalition parties in the UK have decided to take. The tabloids would call it "Slash & Burn" but the more serious would describe it as "Making a thinner state".....that is apparently you can create growth and employment by reducing the public sector. It is an almighty gamble and if it doesn't work this country will be plunged into the biggest depression it has ever seen. If it works, the Tories will be returned to Government in 2015 and the Lib Dems will be wiped out.
The second is what Nobel Economics prize winner Joseph Stiglitz outlined in The Guardian this morning as the Keynsian way. The State spends more (so borrows) to create employment as the private sector is not in a position to do so. This way the economy is buffered from major unemployment et al. It's worked in the 1930s as America and the UK can testify.
In case it isn't obvious, this writer is a Keynsian.