wasted spending is not a social problem in itself -- it just moves wealth around, but doesn't destroy wealth.

Wasted production -- on stuff no one wants (like wartime destruction), is a problem.

Opportunity cost is wasted production (paying people to lay bricks instead of building efficient brick-building machines, say), and that's the motivation for "free market instead of central planning", but that's what austerity means. Austerity means cutting government spending to raise the government's bottom line -- but the government's bottom line isn't like yours. If the country owes its own citizens money, it won't go bankrupt -- that's just taxation under a different name