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The War over Austerity v. Growth
Austerity vs Growth
Should governments focus on borrowing less to finance their spending — or rather focus on spending even more, to promote economic activity, giving debt reduction a lower priority? This is the austerity versus growth argument that divides economists into two increasingly vocal opposing camps offering policymakers conflicting advice. [Read more…]
The Fat Cat Bonus
Although there have been some populist backlash – the emergence of the Tea Party movement in the US, the electoral advance of the Far Right in Sweden – it’s surprising how generally apathetic voters have been towards the bias in policies in response to the bursting of the credit bubble. The score so far has been Fat Cats 10, Employees and Small Businesses nil. [Read more…]
Austerity
The Risks to Growth from Policies of Austerity
As this is now “a risky and dangerous time for the world economy,” the deep cuts in public spending the British government intends to implement next year will leave the UK “badly exposed to the new economic storm that is coming,” says Ed Balls, who for many years was a key policymaker as a close ally of former finance minister Gordon Brown.
A “perfect storm” is one where “continued deleveraging by banks and the private sector meets premature fiscal retrenchment from governments and a drastic tightening of consumer spending, as tax rises, benefit cuts and rising unemployment hit home.”
Balls says cutting public spending and raising value added tax in these circumstances is “economically foolish.” A lesson of history is that one should be wary of anyone who tells you that there is no alternative to a policy, or that something must be done because the markets demand it. [Read more…]
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