Wouldn't it be better if he was more forceful in presenting his views to Cabinet and getting them implemented, rather than constantly appearing like an embarrassing old uncle that everyone has to make excuses for?

Maybe he and Brown could form the a new party called "Brilliant but Bonkers"? The Monster Raving Loony party is old hat (literally) now and needs replacing something more pertinent to the current world situation.

There is of course collective responibility where the Cabinet is concerned. Cable's line is "things'd be a lot worse if it wasn't for me" Bear in mind that Cable is a former member of the Labour Party and as such is probably still at heart a social democrat. I wouldn't be surprised to see him do a "Hesletine" but he'll probably pick the moment he can have most effect.

Yes - Alastair Darling cut VAT to 15% for a year in 2009 but when the Tories came in they were quick to say that the cut in VAT 'made no difference' hence they hiked it up even higher than it had originally been. But of course when it comes to higher taxes for top earners, they are full of warnings about how this will devastate the economy because all the rich will go to Switzerland etc.

The Office for Budget Responsibility analysis released at the time of the election said that they estimated 48% as the optimum upper tax rate, which begs the question if Osborne was cutting from 50% why not choose 48% rather than going to a sub optimal rate of 45%...

I expect over the next few years we will see a similar story - the top 1% rich increase their wealth disproportionately whilst the other 99% become relatively poorer, as there is never any real evidence of 'trickle down' effects, but the argument then will be that the reason it isn't trickling down is because top tax rates are too high, and wages at the lower end are also too high, and you need to cut taxes for the top earners and allow wages at the bottom end to adjust downwards and THEN you will see some trickle down effects....

I'd expect to see quite the opposite over the medium term. Low wages for the majority stifles demand and over time causes the rich to lose out.

So the rich will be campaigning for a 'living wage'. I look forwards to it because their strong lobbying power might see it be delivered.

And you can add to that another excuse for the economy not picking up that employ laws are too restrictive and what we really need is "reform" making the labour market more flexible which is euphemism for making everyone fearful for their job and for wages to be driven down further as a result.

I used to associate the word "reform" with good things. Reform of bad practice, stopping child labour and so on. These days whenever anyone says a phrase like "Reform of the labour market" you just know they really mean the erosion of hard won and [unecessary[/u rights that [iwill[/i lead to abuses.

Osbourne



Tim Nice-But-Dim


i do wish this hadn't been pointed out to me.

I think this is important, as it doesn’t get sucked into pseudo-Keynesian multiplier mythology; if you invest it has to be in something that genuinely creates growth, but that’s the incredibly hard part in Western economies. It may be a populist meme that fat cat banks aren’t lending their bailout dosh to poor hard pressed businesses, but the real problem is businesses aren’t going to the banks with robust investment opportunities, instead you’ve got some firms sitting on reserves because they cannot see the investment opportunities they really would like to go after, you’ve got some firms choosing to pay down debt rather than borrow more because of economic uncertainty and then there are the ones who keep the myth alive, the failing businesses and highly speculative “opportunities” who would have struggled to raise finance before the financial crisis.

The reality is just so much harder the fit in with the populist narrative where it’s the banks who are at fault, firstly because it’s harder for people to conceptualise a structural lack of robust opportunities than have the idea of a general unwillingness to lend (no matter how misleading it is in practice), and secondly because it makes better viewspaper copy to talk about anecdotal businesses going down the tube because the bank wouldn’t plug the losses than it does to talk about how banks plugging losses on unviable businesses won’t lead to economic growth.

It’s the absence of genuine opportunities for economic growth that is the real problem in the UK economy and in many other Western economies, it is not an unwillingness to hike debt and indulge in half-baked New Deal style money pits which don’t deliver growth, but simply hang on the myth that you can load up with debt to do productive stuff and get a positive multiplier going. Conspiracy theories about this politician or that political party or this pantomime villain are just clumsy bits of misdirection, and building this or that political pet project, or appeasing this or that client group with a subsidy won’t bring growth.

Some of your post made sense ... but "pseudo-Keynesian multiplier mythology" tells me there's not much chance of your view overlapping with mine.

Except he's not very "nice" is he.

Now, "Tim, complete c**t, and thick as pig$h!t" , possibly more accurate.

I think Osborne has more than a look of a well-fed Stan Laurel about him

These two combine to.....

It pretty simple really:
pseudo-Keynesian because much of the vogue for "Keynesian" economics in recent times is pure opportunism based on the idea of governments increasing aggregate demand by deficit spending (stimulus), but it's only pseudo-Keynesian because where this tends to diverge from Keynes is that his management of aggregate demand would mean contracting it at the top of the economic cycle whereas pseudo-Keynesians would retch at the idea (for example New Labour didn't support it in office, and to be fair most governments would find it a hard sell to cut back in good times). So it's a kind of unviable half Keynesian idea that a deficit spending government keeps kicking the can until there's no road left. Also because Keynes was a clever man and he would have mocked the unfalsifiable supporting argument for such a strategy, that if your stimulus fails then it just wasn't big enough (repeat ad infinitum).

The second part is that much pseudo-Keynesian interest hangs off the idea of the multiplier, that if the government spends it will stimulate economic activity that will be multiplied throughout the economy, only problem is, in practice multiplier type effects are a bit of a myth. You could force banks to give £100 vouchers to every unemployed person in the country to spend in their local shops within one month of receipt, it would certainly pump money into the economy, but if those businesses just use the money to pay down their debts or increase their reserves you don't get much of a multiplier and you don't really get economic growth.

So I'm not a fan of pseudo-Keynesians and I don't think much of multiplier myths that underly much of their thinking, it's all a bit silly. If people want growth then they probably need to lobby the Government to do things they may not actually like or want, things only governments can really drive, like commissioning big infrastructure projects: airports, strategic rail links, better roads etc, things that will keep facilitating economic activity year after year, but then those sorts of things are years in the making.

Why does any of this apply currently? We are where we are with the economy whether it is part of a cycle or not. Any lack of contraction under Labour is completely irrelevant what can or should be done today.

Also back in 2008 lets not forget the banking crisis was a game changer and so no one has any idea what Labour would have done without it and IIRC Darling was not going to let the government carry on spending anyway.



Well the government has been printing money pretty fast recently and this hasn't stimulated the economy. Things like a VAT cut and investment in social housing (which would help solve the ever increasing housing benefit bill) are not giving £100 vouchers but are more direct form of government action that I thik they should be taking at this time. Rather than giving a darn sight more than £100 to rich higher rate tax payers in the vain hope this will "trickle down".



At the moment how would you tell a pseudo-Keynesians from a Keynesian? They would both be spending to invest in infrastructure. You could only tell the difference in several years time when (if) we emerge from the recession part of the cycle we are in now.

The economy would be in a different state now had Labour spent less (which they should have). That would have put us in a better position borrow the money we need to spend now. It doesn't help us, now the mistakes have been made, but Labour have to take their [ishare[/i of the blame for our current economic situation.



None of this excuses Labour's overspending prior to 2008.

Whoah.
We can borrow money (via selling government bonds) cheaper than I can ever remember, there are plenty of funds out there who would love to lend us their money.
The problem is supposed to be that it would increase the overall debt ... but a lot of that debt is underwritten the by bank shares that we own.
We may argue about how much they are worth and whether they are worth holding onto but the fact remains that those shares are still worth something even though it's less than we paid, so the debt-minus-assets isn't really as bad as it looks.

Bear in mind that Labour's "overspending" (as you put it) left them with a debt no higher than the debt they inherited.
Even after bailing out the banks, it was still way, way below that with Greece or the US and it makes us look pretty frugal.

Osborne's warnings about us being like Greece and on the brink of bankruptcy were absolute and total rubbish.

I loathe the man but I think he is not quite as thick as he appears.
He is a Tory and is simply pursuing Tory ideology, which is to ensure the rich stay rich and sod everyone else.
He and Cameron and their clique want to roll back as much of government spending as they can, regardless of what it would have been spent on and regardless of whether that would have been a good way to spend it.
In their book, the poor are their pawns and can (and should) only be motivated by hardship.
To them, ANY government spending is a source of regret, they see it as money that could be jingling in their mate's pockets instead of making everyone's lives better.
To them, decent schools and hospitals should be a source of cash profit, allowing it to be free at the point of supply makes them choke, I mean what's the point of being rich if everyone gets the benefit of education and health care?

Equality of opportunity is absolutely not what they are about.
Preserving their advantage .... that is what motivates them.

I'm constantly amazed that no Tory Government has ever suggested that anyone who spends their own money on education (via private schools) or on health (via private health providers) should have a corresponding discount on their NIS contributions.

Its just so blindingly obvious to follow the political dogma to its natural conclusion that I don't understand why its never been suggested - or has it ?

The problem with debt is the cost of servicing that debt, not just in the short term but also in the medium and long term. The source of the debt doesn't have a massive affect on that.



At a completely different point in the economic cycle. At the end of a long, sustained, boom period.

Here's a graph of budgets' surplus/deficit. The question is what happened in 2001 which [irequired[/i running a deficit for the next six years?


[url=http://lostalumni.wordpress.com/2011/03/21/looking-to-the-future/Source[/url

I'd hazard a gues that it was at least some attempt to reverse 18 years of underfunding by the tories in things like hospitals and schools. Wasn't there also a fooking great big war/wars to fund too?

And in more good news for Osborne: [url=http://www.independent.co.uk/news/business/news/treasury-borrowing-fails-to-contract-7878431.htmlBorrowing fails to contract[/url

Wrong bloke for the job it would seem

I'm not sure about a cut in VAT, especially if it was only in temporary, need to think that one through. It depends on what sort of investment you actually mean, but for many reasons I wouldn't want to get into at this hour, I seriously doubt whether a major new investment in social housing would actually stimulate growth (that's not to say there aren't arguments for this, just that growth probably isn't one of them). But when people start bringing phrases like "trickle down" into a thread it generally means they've run out of serious ideas and are just going for derailment.



The easy way would be that the Keynesians would be the ones who five to eight years ago would have been calling for the government to contract spending so to bring down aggregate demand, so in the case of New Labour it would have been contracting the public sector rather than growing it. I could be wrong but I don't remember that many voices calling out for that, and as I wrote in previous post it would have been a pretty hard sell for any government.

Tony Blair did, this was one of the splits at the heart of the party when they were in power. Blair thought public spending had grown too much in the 2001-05 parliament and wanted to contract after the election, Brown didn't, and Brown played hardball over a PM with diminishing power as it was known he wasn't going to fight another election.

Still though even if the UK had been running balanced budgets or small surplus going into the recession it wouldn't have made much difference to the fact the public finances ended up in a shocking state given the size of the recession and the bailout of the banking sector. The real problem was a failure to regulate the banking sector as it was the collapse of the banking sector that ruined the economy. Ireland got in a worse mess than us, and they were running budget surpluses going into 2008, same as Portugal.

Investment in social housing would certainly stimulate a building trade that is currently on its knees, a trade that employs many low skilled easily-unemployed people (as well as skilled labour of course) so in that respect it would make a difference and anything that gets people into work with money in their pockets will stimulate growth.

On the other hand the concept of a Conservative government encouraging an increase in the social housing stock is bizarre, particulalry with the news today that the latest kite to be flown is to remove housing benefit from the under 25s, the very people on the bottom rung of the ladder that social housing is designed for.