Friday, 19 February 2010

Cut now or cut later? 80 economists have it wrong!

The letters in today's Financial Times from a combined sixty economists are a welcome rebuke to the nonsense from 20 mates of David Cameron's (aka leading economists writing in the Murdoch press).

Today's letters point out some very salient facts that correct the Times letter. The letter headed by Lord Layard is spot on when it says:

"immediate cuts - even supposing they are practicable - would not produce an offsetting increase in private sector demand, and could easily reduce it."


"Britain's level of government debt is not out of control"

Likewise the letter headed by Lord Skidelsky and signed by David Blanchflower (among others) is correct and quite amusing in pointing out:

"In urging a faster pace of deficit reduction to reassure the financial markets, the signatories of the Sunday Times letter implicitly accept as binding the views of the same financial markets whose mistakes precipitated the crisis in the first place!"

The problem though is that both letters back cuts* - they simply argue about timing. The solution to this crisis would be to collect the taxes that are currently going uncollected, evaded and avoided - as much as £120bn a year. Then bring the banks into public ownership and invest their profits in public services.

Update 22/02: TUC now calling for petition to Darling and Osborne against 'premature cuts' in new press release. This is supported by the Fabians and others.

*let's be clear some cuts would be welcome: Trident, ID cards, military spending (including getting our troops out of Afghanistan)


Anonymous said...

The first thing who do you trust brown who has to be said is about a great as a empty can of coke. he has no fizz, he tells us he saved the world , then cries on TV about his child, pays money he over claimed from expenses and say trust Me again. Sorry i never trusted you or your New labour, Burnham says he has to get the elderly sorted out all of us Can agree but we must save eight billion by taking money off the most disabled and sick, DLA and AA.

And you want us to vote for the pack of crap.

I've been in Labour for to many years way to many totally wasted , but I'm born again and sadly I'm learning not to trust labour or new labour.

The Arthurian said...

Hey, Lefty. Good quotes. One thought however: Your "Britain's level of government debt is not out of control" sounds like something Paul Krugman would say... Wishful thinking that no one really believes.

I like your math: 60 disagree with 20, but 80 are wrong!

You seem to think you stand apart from the 80 because they stand for deficit reduction and you stand for the collection of taxes.

I say you 81 all stand together in the belief that the only options are to cut spending or to increase tax revenue.


Andrew said...

Arthur, let's be clear. LEAP does stand apart from the economic consensus that cuts to public services (now or later) are either desirable or necessary.

LEAP also advocates exapanding public ownership - and says so in the post, "bring the banks into public ownership and invest their profits in public services"

A policy of progressive public ownership would allow investment to be more clearly directed where necessary and surpluses to be reinvested not speculated with - and would stimulate growth, whereas cutting jobs would hurt demand and most likely lead us back into recession.

The post itself doesn't advocate any increases in taxation levels, just collecting the taxes that are owed. Sadly the Uk Government has spent the last five years cutting the staff who work in HM Revenue & Customs, with the inevitable consequence that more revenue is being missed.

The Arthurian said...

Hi, Andrew. Your paragraphs 2&3 there reminded me of Keynes (The General Theory, Chapter 24, section III). Well said.

Paragraph 4: I noticed that your post "doesn't advocate any increases in taxation levels" and I chose my words carefully. But there is so much outrage over taxes, I don't see how you could possibly win this argument.

Parag 1: Everybody stresses differences. I think our economic problems arise from points of agreement that don't ever get re-evaluated.