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In our rush to make cuts


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to our cancers, I have seen little on here about other cuts.....

 

This struck a chord with me....

 

British Fashion Victims

By PAUL KRUGMAN

Published: October 21, 2010

In the spring of 2010, fiscal austerity became fashionable. I use the term advisedly: the sudden consensus among Very Serious People that everyone must balance budgets now now now wasn’t based on any kind of careful analysis. It was more like a fad, something everyone professed to believe because that was what the in-crowd was saying.

 

The New York Times

Paul Krugman

 

And it’s a fad that has been fading lately, as evidence has accumulated that the lessons of the past remain relevant, that trying to balance budgets in the face of high unemployment and falling inflation is still a really bad idea. Most notably, the confidence fairy has been exposed as a myth. There have been widespread claims that deficit-cutting actually reduces unemployment because it reassures consumers and businesses; but multiple studies of historical record, including one by the International Monetary Fund, have shown that this claim has no basis in reality.

 

No widespread fad ever passes, however, without leaving some fashion victims in its wake. In this case, the victims are the people of Britain, who have the misfortune to be ruled by a government that took office at the height of the austerity fad and won’t admit that it was wrong.

 

Britain, like America, is suffering from the aftermath of a housing and debt bubble. Its problems are compounded by London’s role as an international financial center: Britain came to rely too much on profits from wheeling and dealing to drive its economy — and on financial-industry tax payments to pay for government programs.

 

Over-reliance on the financial industry largely explains why Britain, which came into the crisis with relatively low public debt, has seen its budget deficit soar to 11 percent of G.D.P. — slightly worse than the U.S. deficit. And there’s no question that Britain will eventually need to balance its books with spending cuts and tax increases.

 

The operative word here should, however, be “eventually.” Fiscal austerity will depress the economy further unless it can be offset by a fall in interest rates. Right now, interest rates in Britain, as in America, are already very low, with little room to fall further. The sensible thing, then, is to devise a plan for putting the nation’s fiscal house in order, while waiting until a solid economic recovery is under way before wielding the ax.

 

But trendy fashion, almost by definition, isn’t sensible — and the British government seems determined to ignore the lessons of history.

 

Both the new British budget announced on Wednesday and the rhetoric that accompanied the announcement might have come straight from the desk of Andrew Mellon, the Treasury secretary who told President Herbert Hoover to fight the Depression by liquidating the farmers, liquidating the workers, and driving down wages. Or if you prefer more British precedents, it echoes the Snowden budget of 1931, which tried to restore confidence but ended up deepening the economic crisis.

 

The British government’s plan is bold, say the pundits — and so it is. But it boldly goes in exactly the wrong direction. It would cut government employment by 490,000 workers — the equivalent of almost three million layoffs in the United States — at a time when the private sector is in no position to provide alternative employment. It would slash spending at a time when private demand isn’t at all ready to take up the slack.

 

Why is the British government doing this? The real reason has a lot to do with ideology: the Tories are using the deficit as an excuse to downsize the welfare state. But the official rationale is that there is no alternative.

 

Indeed, there has been a noticeable change in the rhetoric of the government of Prime Minister David Cameron over the past few weeks — a shift from hope to fear. In his speech announcing the budget plan, George Osborne, the chancellor of the Exchequer, seemed to have given up on the confidence fairy — that is, on claims that the plan would have positive effects on employment and growth.

 

Instead, it was all about the apocalypse looming if Britain failed to go down this route. Never mind that British debt as a percentage of national income is actually below its historical average; never mind that British interest rates stayed low even as the nation’s budget deficit soared, reflecting the belief of investors that the country can and will get its finances under control. Britain, declared Mr. Osborne, was on the “brink of bankruptcy.”

 

What happens now? Maybe Britain will get lucky, and something will come along to rescue the economy. But the best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it.

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Spot on - but if your right-wing small government low taxes dogma is fuelled by the idea you only have one term to get it done before you risk having those naughty leftist types over turn you and you allies of convenience desert and dish dirt on you, then you end up where we are now - looking into the abyss for the sake of what it believed rather than waht is true.

Edited by fyds
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Agree entirely with that article - I think one of the things the tories have done extremely 'well' over the last few months is to bang on about fairness. They repeat it at every opportunity, In every news conference, in every interview, in every article, in every speech. Repeat it often enough and people will automatically associate it with the cuts. People eventually take it for granted that they are fair purely because they hear it so often. The reality is far from fair of course but Joe Public never really questions it. They've managed to do very much the same with people on benefits - thanks to the tory smear campaign people on benefits are public enemy number one in this fight. As a matter of policy and approach it is utterly despicable, as a PR exercise it has been brilliant.

 

If it was really about fairness they wouldn't be cutting social spending they'd be increasing taxes for the middle and high income earners, they'd be cutting out the tax loopholes for the big businesses and multi-millionaires, they'd be making sure the non-dom's were being made to pay, they'd be making more of an effort to collect unpaid VAT from the self-employed....

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when there's a massive deficit making cuts is necessary, you can't keep spending more than your income year after year after year. they've just made the cuts in the wrong areas, the tories are making the less well off pay for the banking crisis and the state of the economy that it's led to and that's really unfair

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that argument sounds like believing what's convenient in a sticking your head in the sand kind of way. it's like having a gaping hole in LFC's finances and thinking the best thing to do is buy a few more players cause CL footie will solve everything.

 

31 billion is being spent on debt repayments, that's almost half the entire education budget . an interesting DIY overview:

http://www.guardian.co.uk/politics/interactive/2010/oct/19/comprehensive-spending-review-cuts

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that argument sounds like believing what's convenient in a sticking your head in the sand kind of way. it's like having a gaping hole in LFC's finances and thinking the best thing to do is buy a few more players cause CL footie will solve everything.

 

well no, it's NOT like that at all

 

Causing higher unemployment to increase will have a dramatic effect on the amount the government has to pay out in benefits AND will dramatically reduce the amount they bring in in taxes. This will clearly work AGAINST reducing the deficit. The only real question is whether the net sum of the effects is positive or negative and, while that's less clear, as the article from Krugman explains, the historica evidence is that it typically has a net negative result.

 

George Monbiot (really in fact Naomi Klein) then gives some explanation of what motivates this apparent madness: http://www.guardian.co.uk/commentisfree/2010/oct/18/conservative-financial-crisis-opportunity

Edited by John am Rhein
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I'm really really worried about finding a job when I finally leave education. The unemployment is going to be far worse than it already is. And its already disgraceful.

I'm seriously considering moving to Canada.

Edited by Sion
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Walking round Tocky could make a grown man cry. Granby is f*ckin shameful.

 

And it is going to get a lot, lot worse. Like me and many others, you remember what Thatcher and co did to Liverpool. It's gonna get really grim again, isn't it?

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I'm really really worried about finding a job when I finally leave education. The unemployment is going to be far worse than it already is. And its already disgraceful.

I'm seriously considering moving to Canada.

What's the state of the nation over there? Australia seems to be thriving from what I've read and hears from friends out there.

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What's the state of the nation over there? Australia seems to be thriving from what I've read and hears from friends out there.

 

They avoided the worst of it because of a similar crisis over there in the a few years ago making them more prepared and conservative.

I think the unemployment rates at the moment as quite similar, around 8%. But wouldn't be surprised to see the U.K approach, if not exceed, 15% in the next 4 years.

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Canada got t***tted by it's own severe austerity measures some years ago - it's public services and infrastructure still haven't recovered yet and now they're catching the breeze from across the lakes.

 

Still potentially a better shout thasn hanging around here depending on what your stock in trade is. Certainly our own Huw and Phil (Softy) have done very well there and love the place.

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that argument sounds like believing what's convenient in a sticking your head in the sand kind of way. it's like having a gaping hole in LFC's finances and thinking the best thing to do is buy a few more players cause CL footie will solve everything.

 

31 billion is being spent on debt repayments, that's almost half the entire education budget . an interesting DIY overview:

http://www.guardian.co.uk/politics/interactive/2010/oct/19/comprehensive-spending-review-cuts

 

the case for privatising 10% of roads looks compelling

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