Austerity kills - evidence for Keynes and against cuts is ever more clear(11 Posts)
the evidence mounts - the intellectual argument for cuts in a recession/depression has been shown to be based on basic mistakes in maths, economists are finally realising that cuts have a wider impact beyond the economy but actually cost lives (severe examples in Greece atm) and the US is doing loads better than Europe.
What do you think?
I think Hayek shades it myself
I think the Tories know full well that Austerity won't bring about economic recovery, but they don't care: they are using the recession as an excuse to make as many cuts to the state as they can get away with: their motivation is ideological, not practical, and certainly not about improvin ghte quality of life for the general population.
I hope that the evidence is compelling enough and gets enough publicity for the public to vote the fuckers out at the next election. We are being royally screwed atm.
Keynes did indeed argue for running a deficit to boost the economy in a recession.
But many who are very keen on this are much less keen on another aspect of Keynesian economics:
That you should run a surplus during an economic boom.
The problem is that Gordon Brown - the most economically illiterate Chancellor since Heath's Tory government of the early 1970s - ran a deficit during a boom. When this came to an end and we had the crash of 2008 we were left with a massive debt which was and is unsustainable.
We are currently spending between £50-60 billion pa just on interest payments on our debt.
The Tories have not even begun to get a grip on this.
A particular problem is that their attempts to cut spending are falling disproportionately on restricted areas because of their ring-fencing from cuts of areas such as health and education, which account for massive amounts of public spending.
At the same time we are giving fuel allowances to even well-off pensioners and handing over money to the EU in return for precious little.
Interesting stuff about Keynes. I didn't know the part about surplus. I do wish people would stop about the Winter Fuel Allowance. It really is a small amount of the benefit budget. Really really tiny. There is a massive problem going on with the economy and WFA isn't it.
I agree that the flip side of spending out of a recession is saving during a boom. The welfare state got so big in the first place because Labour did not save during the boom: no more boom and bust, remember? Now that we need to spend, the coffers are empty. I dont necessarily agree that we should print more money, but the Tories could certainly have more infrastructure projects to pump money directly into the economy rather than indirectly through the banks via quantitative easing.
Yes that may be true and it was perhaps not the best example. But these things do have an administration cost as well as the up-front value. Instead of WFA and Freedom Passes would it not be better to just abolish them and add the amount to the state pension.
In general pensions are a massive burden on public expenditure, with many people living 20-25 years beyond retirement. Of course we shouldn't push poorer pensioners into an even poorer state but I think the situation with better-off pensioners needs to be addressed. (I'll be one such myself within the year so I'm not talking out of self-interest.)
My understanding was that the bulk of the benefit budget was on pensions. And, that will get bigger. Things like JSA must go up and down because sometimes there are more jobs. But, it's a given (isn't it?) that the pension budget will get bigger and bigger.
Anyway, the OP was about the economy rather than benefits, so perhaps I've derailed things a bit.
Labour had to fill the holes left by the Tories. The NHS was on its knees - people were dying on waiting lists for operations lasting up to 18 months and more. One small example - there's a surgical procedure for certain heart patients that is most effective within six months of a heart attack. After that point, it may well be useless. The waiting list for surgery under the last Tory govt. was a year. The surgeon who told me about this was in despair - he said it would actually be more effective just to operate on people whose names began A-M and ignore N-Z as at least then some people would benefit.
Same applies to education - Tory cuts had left children in damp, dilapidated, leaking miserable schools. Labour had to put right the damage.
However, to assuage the city and look like 'New' rather than 'Old' Labour. Brown dreamed up hideously expensive ways of filling in the gaps, such as PFI. It was a way of stuffing money into the pockets of private sector firms. The Tories were all in favour, but it is doing us tremendous damage - all in the name of placating the City, the Tories and the economists who preach 'public sector bad, private sector good'.
Yes, it would make sense to run a surplus in good times, and you could do that far more effectively by building schools and hospitals out of government borrowing, rather than raising money far more expensively via PFI.
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