Sunday, June 05, 2011

Plan B is Balls

A warning from economists that the government's economic policies are not working is reported in the Observer. The article, focusses on recent disappointing economic data, but the quoted arguments don't make a lot of sense. For example Johathan Portes, until recently a government economist, is quoted as giving this opinion on growth:
It isn't just about the international environment, it's because of the strategy the government has followed.
Most government cuts only started to kick in with the new tax year in April, for which there is no economic data yet. So, what is he talking about? He could argue that its all going to be a disaster, but the cause and effect that he implies simply doesn't exist.

The proposed plan B is the usual sort of stuff you get from left-wing economists. They want more government spending and higher taxes, because there is a long and rich history of nations taxing and spending their way out of problems with economic growth. Except that there isn't. The one thing that the government's policy has done is kept Britain out of the eurozone crisis, as a prime victim that is. There are still a lot of UK liabilities in foreign failing economies, but at least we haven't joined them.

Of course, up pops Ed Balls, who is incredibly complaining about government borrowing. Huh? He wants higher spending and where does he think the cash would come from? The tooth fairy?

Meanwhile, grown-ups will be aware that we won't be able to start making a balanced judgement on the outturn of last year's budget until the end of this year at least. By that time one or more European countries may well have defaulted on their government debt.

That will put the real issues into sharp relief and, hopefully put Balls back into his box.

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