Quite right too

David Cameron doesn’t “see a time” when the government’s austerity programme will end and is poised to extend public spending cuts until 2020.

Seriously:

1) They are spending our money, raised at gunpoint: of course we want them to continue to be frugal with doing so.

2) If the bad times continue then there won\’t be any money to be anything but frugal.

3) If boom times return then we need to do Keynesianism right this time around. A booming economy is exactly when you need to be taking the fiscal stimulus out: when you need to be running that mythical budget surplus.

13 thoughts on “Quite right too”

  1. the great redacto

    It was a great mistake to say that the cuts (what cuts?) would be over after five years. At least Dave has put that right this morning. Actually, one wonders when it’ll ever end.

  2. What bloody cuts?

    Tiny amounts trimmed here and there,in the highly capable style of BluLabour, mostly in places that allow the left to construct their bogus “austerity” narative. This government are still running up unpayable debts at a stunning rate.

  3. I’d argue that to put a date on the expiry was always ridiculous. The worry is that Miliballs, backed by the likes of Richard Murphy and all the High profile Twitterati (Owen Jones, Polly Toynbee, Hary Younge) will merely take things back to 2006 and start splurging money on expanding the Guardian’s Society section back to 148 pages of ‘Socially useful’ (but practically useless) jobs which will bankrupt the country along the lines of Greece. Who can honestly say, wth the polls where they are and the Leftists cock a hoop, that isn’t going to happen?

  4. “What cuts ?”

    There’s clearly been massive cuts in certain government departments. You really don’t think there’s been any cuts in military or police spending ?

    Yes, overall government spending is increasing, but that doesn’t mean there are no cuts.

  5. Shinsei,

    That’s not cuts, that is re-organising (which is business as usual in any company with any sort of competition to take into account) however good the times are. Cuts is when there is less money overall spent

  6. And the media carry on talking about cuts.
    Still, at least all those who have attended rallies in the past couple of years with signs saying ‘no cuts’ can be vindicated. There are indeed no cuts, government listened to them….

  7. All you clever economists on here – have you never heard of “automatic stabilisers”? Government spending automatically increases when there is an economic downturn, as unemployment and in-work benefits increase to compensate for wage repression and job losses. There HAVE been real cuts in government departments. These have unfortunately been overtaken by increases elsewhere. For there to have been real cuts overall there would either have had to have been much deeper cuts in government departments or interference with automatic stabilisers. Greece, of course, has had to do both.

  8. As Frances says, haven’t you all heard of stabilisers? Two other things.

    To do the real Keynsian thing as Tim suggests, do you really need to run surpluses in good times? With growth at 2% and inflation at 2%, a 1,2 or 3% deficit means you’re reducing the burden of debt? Happy for someone to tell me why I’m wrong.

    What is Cameron trying to say? We have to cut now ‘cos we have no money? Right or wrong, it’s arguable. But in 10 years that cutting will mean we still have no money – but can afford tax cuts? If you want to reduce the size of the state and piss off to Spain, France or Portugal, just say so.

  9. Emil @9 , please expand. Was debt to GDP higher or lower at the end of the 70s than the beginning? And that’s not an an answer to my question anyway. To repeat, with inflation @ 2% and growth at 2%, do you need a budget surplus?

  10. Luke: you’re right, and Emil’s channelling the Bundesbank in his bizarre inflation paranoia.

    Tim adds: No, Luke’s not right. Because the point of the surplus is not to pay down the debt. The point of Keynesianism is demand management. This does not mean only boosting it in the slumps. This also means restraining it in the booms. That is, we need fiscal restraint in booms: we need the gap between taxes and spending to be negative…..a surplus.

    You can indeed argue against this: but then one is arguing against demand management which is the heart of the Keynesian idea.

  11. Keynes did indeed advocate deflationary policies in a boom. But cutting the deficit is deflationary even if you don’t make it negative. When the boom comes, we can talk about what sign and size of deficit would be sufficient restraint.

    Cameron wants to reduce the size of the state – he calls it “exciting, radical, and Conservative”. But he’s talking about continuing austerity not because of any countercyclical restraint but because he thinks the economy is going to be in trouble for a decade. Oddly, he thinks “this is a period for all countries…where we have to deal with our deficits…” I can’t tell whether he thinks all countries are running deficits, or whether “all countries” doesn’t include the ones that are in surplus. But I hope Osborne’s thinking is less fuzzy than Cameron’s, because unlike Cameron I’m not excited about his government’s keeping the UK in or near recession for a decade.

  12. No. The reason we pay off debt in the booms is in order to be able to borrow for stimulus in the slump.

    If there were an external source of unlimited low-interest credit with no pesky concerns about credit ratings, being paid back, and so on, then obviously it would make sense to continue permanently binging on said source. Free money from foreigners, bring it on!

    The problem is that there isn’t such a source, and if we want to borrow we do actually need to demonstrate at least a vague ability and intention to pay it back. But since we borrow in our own currency, we can easily reduce the amount we have to pay them back through a dose of inflation.

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