Government policy economically illiterate... Britain's Fiscal Failure

BACKFRMTHEEDGE

angrypirate wrote: »

I think the issue is we have a right wing party in a coalition government with a left wing party and they cant agree on anything

Ian Duncan Smith proposed changes to the welfare system that totaled up to £10bn of cuts. This was flatly rejected by the Lib Dems and by the time it got to Parliament, the cuts had been cut down to a mere £3bn. Right now its a weak attempt to tackle the deficit as every cut the Tories proposed is watered down by the Lib Dems. Havinig this coalition has left this country in a state of limbo with no actual proper biting policies that are truely tackling the recession and the deficit.

Ha ha ! When you can no longer blame the Labour party blame the Lib Dems - priceless!

angrypirate

BACKFRMTHEEDGE wrote: »

Ha ha ! When you can no longer blame the Labour party blame the Lib Dems - priceless!

I was actually blaming the pair of them for failing to steer us in a definite direction.

And yes, i do think the Tories would be doing better on their own for the country as a whole but then I dont honestly know whether people dependant on the state would be doing better - i fear not.

Mr_Mumble

The majority of Economists, Academics, Analysts, etc can see right through the sham of current govt policy.

Where is your study on this Hamish? Because all you've done is quoted a left-wing commentator who uses the usual left-wing economists to back up his opinions.

I'd have more time for the likes of Felix Salmon, Martin Wolf, Krugman, Delong, et al if they were honest and admit they were wrong in demanding a huge hike in government spending. Now we have stuff like this from Wolf:

What truly is incredible is that Mr Cameron cannot understand that, if an entity that spends close to half of gross domestic product retrenches as the private sector is also retrenching, the decline in overall output may be so large that its finances end up worse than when it started.

It was the likes of Wolf and Krugman who demanded the stimulus of increased government spending in the first place! They demanded the increase to record levels of peacetime government spending - half of GDP - and now, after this 'stimulus' didn't work they're blaming 'the other' for their failings.

Cameron was wrong to whack up taxes and whack up government spending but this is what all these left-wing economists and political commentators demanded! Now the hoi polloi are supposed to take another dose of the left-wing establishments cool-aid when they don't admit their present failings?

There are some good points in the article you linked to Hamish (and some blithering nonsense regarding paradox of thrift and personal finance metaphor). However, you can't expect anyone to take an opinion piece this one-sided seriously.

LauraW10

Wookster wrote: »

Has it? I don't bother reading their drivel anymore as they are both on my ignore list.

Oh that hurts.

I guess you only read the posts that reinforce your immutable right wing opinions...

...a closed mind....

Conrad

Cameron is just far too timid and out of touch. For example the great dampening effect of FSA regulation and nothing like enough delivery on the 'bonfire of red tape' (I'm snowed under with it, and just this week the ONS demand I complete a lengthy survey). Clients of mine are saddled with lame duck staff and the lawyers tell em there's now't can be done.

End all but emmergency foreign aid, stick the dosh into enterprise.

We are just nowhere near radical enough.

The left are addicted to spending to solve every issue and halve the population are infantalised with this simplistic entitlment narrative.

PaulW1965

Debt matters. And it's becoming obvious to all that we need more, not less, government spending to get us out of the debt trap.And the wrongheaded, ill-informed obsession with austerity of the Torys is standing in the way of growth.

It's a great shame that we have fixed term parliaments because really we should be having an election now.....I can't believe that anybody would have voted for this bunch to be in power for 5 long years. ( Jeese have we really more than 2 years of this crap to go?)

angrypirate

PaulW1965 wrote: »

Debt matters. And it's becoming obvious to all that we need more, not less, government spending to get us out of the debt trap.And the wrongheaded, ill-informed obsession with austerity of the Torys is standing in the way of growth.

It's a great shame that we have fixed term parliaments because really we should be having an election now.....I can't believe that anybody would have voted for this bunch to be in power for 5 long years. ( Jeese have we really more than 2 years of this crap to go?)

If any party wanted to, they could borrow this country out of "recession" and the GDP figures would show we are out of recession. The figures do not take into account the country's borrowing. As such, this does not give a true reflection about the health of the economy. The much more difficult yet healthier way out of recession is private industry led spending. After all, how can you have a strong economy that will last where over 50% of the GDP comes from public spending? The answer is, you cant. The last time we did was 2007 and then look what happened

Mr_Mumble

The FT's economics editor (Chris Giles) has a response to Martin Wolf (the chief economics commentator of the FT) in today's paper, the pertinent (rather large) snippet:

For the opposition Labour party, for many commentators and for my colleague Martin Wolf, the government’s position is absurd because it condemns Britain to more stagnation. The evidence does not support this view but I still fear the chancellor is being too timid.

Three reasonable arguments underpin his position. First, Britain’s public finances are in a terrible state. Once government statistical fiddles are taken into account, the public sector is set to borrow more than 8 per cent of national income in 2012-13. The origin of the unsustainable fiscal position was a pre-crisis delusion that buoyant tax receipts were there to stay. Just as budget surpluses and low public debt in Spain and Ireland before 2008 masked an underlying malaise, so it was in Britain.Most of the deficit will not heal itself, so gradual but painful austerity over many years is required to put the public finances back on a sustainable footing.

Second, the evidence that austerity has inflicted more pain than expected remains circumstantial and feeble. Often, it amounts to little more than citing certain US academics or one faction within the International Monetary Fund without much of a nod to Britain’s recent economic experience at all.

In 2012, the UK economy expanded only 0.3 per cent after inflation, or 1.3 per cent in nominal terms. Both figures are horribly weak, far worse than the late 2010 or 2011 forecasts by the Office for Budget Responsibility.

No sensible person thinks deficit reduction had no effect on growth, but if austerity was to blame for the shortfall in nominal and real growth, you would expect to see it reflected in weaker than expected private consumption. Spending cuts and tax rises reverberating around the economy would hit household incomes and spending more than expected. You would also expect stronger than expected exports as companies put more effort into sales abroad than in the austerity-ravaged domestic economy. This pattern is indeed evident in Spain.

But the UK does not follow the pattern. In 2012, nominal private consumption growth was exactly as the OBR forecast in December 2012, faster than the late-2011 prediction and almost spot on the estimate in the 2010 Autumn Statement. A similar pattern exists after adjusting for inflation.

Instead of households tightening their belts more than expected, by far the most important cause of stagnation was the terrible export performance. Had foreign sales last year performed as the OBR forecast in late 2011, nominal gross domestic product would have been £13.6bn higher by the fourth quarter and the annual growth rate would have been 4.9 per cent not 1.3 per cent. In real terms, the export shortfall is the difference between growth of 2.7 per cent and the 0.3 per cent achieved."

http://www.ft.com/cms/s/0/e5e476e4-8b24-11e2-8fcf-00144feabdc0.html
(behind a paywall unfortunately)

HAMISH_MCTAVISH

Mr_Mumble wrote: »

the pertinent (rather large) snippet:

The more pertinent snippet...

In 2007, according to the IMF, UK net debt – at 38 per cent of GDP – was the second-lowest in the Group of Seven leading economies. These levels were also exceptionally low by UK historical standards.

In the March 2008 Budget, the Treasury estimated the structural cyclically adjusted deficit on the current budget at minus 0.7 per cent in 2007-08 and minus 0.5 per cent in 2008-09.

The collapse in output has caused the explosion in deficits and debt.

Almost everybody underestimated the vulnerability, the Conservative leadership among them: pre-crisis, it committed itself to continuing the plans that Mr Cameron now calls “reckless and unaffordable”.

Some think reckless spending explains the jump in government spending from 40.7 per cent of GDP in 2007-08 to 47.4 per cent two years later. Yet, between 1996-97 (the year before Labour came into office) and 2007-08 (the year before the crisis), the share of spending in GDP rose by only 1.2 per cent.

No: the collapse in GDP, relative to expectations, caused the jump in spending and decline in receipts, relative to GDP.

The Green Budget compares the forecasts for 2012-13 made in the 2008 Budget and the 2012 Autumn Statement: nominal GDP is down 13.6 per cent, receipts are down 17.6 per cent, spending is down 5.6 per cent and borrowing is up 372 per cent.

It is because the OBR (and others) believe most of this lost GDP is permanent that the position seems so grim.

http://www.ft.com/cms/s/0/1670a3d2-880f-11e2-8e3c-00144feabdc0.html#ixzz2NZ6XznG9

HAMISH_MCTAVISH

Mr_Mumble wrote: »

Felix Salmon, Martin Wolf, Krugman, Delong, et al.

Hmmm, Lead economics reporter for the Times, a Nobel Laureate Economist, or some random right winger on MSE?

Tough choice. Not.

Here's some more names for your list....

Simon Wren-Lewis of the University of Oxford and Jonathan Portes of the National Institute of Economic and Social Research, among others, have demolished the prime minister’s views.