Chris Giles Gets It
The excellent Chris Giles is worth his weight in FT subs:
This week Ed Balls, shadow chancellor, again said: “Cutting spending and raising taxes too far and too fast has backfired, with the resulting slow growth and high unemployment meaning the government is set to borrow an extra £150bn.”
Let’s apply his logic and calculations to an earlier period. In late 2008 Labour cut taxes and raised public spending and this too-far and too-fast “fiscal stimulus” resulted in an unemployment surge, meaning the government had to borrow an extra £273bn. How can you generate such a glaring contradiction as to the effects of fiscal policy? Simple. The calculation is an irrelevance because, guess what, other things affect the economy as well. Blaming changes in deficit forecasts on the pace of austerity alone is not worthy of a serious politician.
There’s more good stuff in there.