Where’s the contradiction? Remember one can be in favour of the cuts but see them as being handled unfairly, or being too deep.

I know it’s weird that some apparently think they are necessary but are bad for the economy, but that can be explained. Either its similar to the above, or they just love seeing benefits taken away so much that they don’t care about the side effects.

What Chaise says.

Only the first result is contradictory: the other three are perfectly compatable with each other. It’s possible to believe in cuts but think they are being administered unfairly.

In fact, the first result could simply mean that the cuts are temporarily bad for the economy in the short run but necessary in the long run.

They’re wrong but not necesserily inconsistent.

I don’t see most of that as hugely contradictory.

The majority think cuts are bad for the economy, unfair and too deep. All consistent. There is a slight overlap, but on the whole people who believe the cuts to be bad economically also think they are bad socially, as you would expect.

The majority also think they are necessary, which is slightly contradictory, although you could believe they were unfair/too deep but also good for the economy. It depends whether you see the primary problem with cuts as social or economic. The left tend to see the social consequences of cutting as the most important, the right, the economic consequences of not cutting as most important.
There might also be some polling biases in play, some respondents wouldn’t want to appear to be in favour of cuts, even in they thought they were a good thing.

Try Martin Wolf on: George Osborne should not be so complacent

Despite the cuts (or, for the followers of “Vulcan” John Redwood, because they are grossly inadequate) the government is still spending far more than its income. We must hope that Sunny is never examined on his understanding of the English language by someone asking the meaning of “austerity”!
Everyone who pays taxes wants tax cuts, *most* of those receiving benefits don’t want benefit cuts – interestingly the %age who think the cuts are too deep is less than the %age of those receivi8ng benefits. So some benefit recipients want a cut in transfers from workers to benefit recipients!
Equally, as Chaise said, some taxpayers may feel that payments to those in genuine need should NOT be cut (e.g. I have always been happy for the 40-odd years since I graduated to pay taxes to support those in need, although I have sometimes moaned about the uses to which my taxes were put)

Relating to policies for boosting growth, try this fascinating “conversation” between Larry Summers (Harvard) and Martin Wolf (Financial Times)
http://www.youtube.com/watch?v=Vgg5DoPkgYc

This is a highly erudite, informed and informing conversation about controversies over policy and the causes of the financial crisis but perhaps not for the more faint-hearted.

A columnist in the FT has called for Larry Summers to be appointed successor to Ben Bernanke as chairman of the US Federal Reserve Bank when Bernanke retires on 31 January 2014. Polling suggests the current favourite successor is Janet Yellen, who is Ben Bernanke’s present deputy.

@ #6 Bob B
Larry Summers who denied the possibility of global warming and Martin Wolf who thinks a £120billion budget deficit is “austerity” – sorry, no. Tomorrow you might recommend Hannibal Lecter on psychiatric policy?

John77: “Larry Summers who denied the possibility of global warming and Martin Wolf who thinks a £120billion budget deficit is “austerity” – sorry, no. Tomorrow you might recommend Hannibal Lecter on psychiatric policy?”

By reports they also believe 2 + 2 = 4. By your (predictably juvenile) argument, we have to reject that too – unfortunately, my supermarket checkouts don’t accept that.

Osborne makes no secret of his policy to cut the budget deficit. The issue for grown-ups is whether Osborne is doing that too quicky, thereby unnecessarily depressing growth of Britain’s economy. Lost GDP is lost forever.

Summers makes many illuminating points, including that we have had a series of financial of crises in the last decade or so – such as the Asian currency crisis of 1998 or the Dot.com boom from “irrational exuberance” or the asset-price bubbles on the way to the financial crisis of 2008-10. Financial crises are the norm, not exceptional. That can hardly be reconciled with “rational expectations”.

Keynesian economics still pervades mainstream macroeoconomic texts – such as Blanchard: Macroeconomics (Pearson 6th edition). Blanchard is currently chief economist at the IMF. Kenneth Rogoff, a predecessor in that post, is co-author of: This Time is Different – Eight Centuries of Financial Folly (Princeton UP)
http://www.reinhartandrogoff.com/

Try the recent IMF report of 22 May on Britain’s economy:

The United Kingdom could boost growth by bringing forward measures already included in its fiscal plan, such as spending on infrastructure and job skills, the International Monetary Fund said as it wrapped up its annual check of Europe’s third largest economy.

In the full mission statement of the Article IV Consultation, the IMF says:

“4. Risks remain tilted to the downside. The key risk is that persistent slow growth could permanently damage medium-term growth prospects—this could arise if private sector deleveraging is larger than expected, credit conditions fail to improve, external demand does not pick up, and the drag from fiscal consolidation is greater than anticipated. In addition, despite recent market calm, growth in the euro area is likely to be weak, and the re-emergence of market tensions cannot be ruled out, with the potential for continued spillovers to the UK from depressed exports, higher bank losses and funding costs, and reduced confidence.”
http://www.imf.org/external/np/ms/2013/052213.htm

Shatterface: “In fact, the first result could simply mean that the cuts are temporarily bad for the economy in the short run but necessary in the long run.”

Or it could mean that they think they are bad for the economy and the population full stop – but “there is no money”.

People generally don’t pay much attention to how the financial affairs of government work. I suspect quite a few people really do believe there is no choice, that the banks wouldn’t lend the government any more money even if it asked.

In addition, there’s still a substantial minority (especially among the older generation) who disapprove of the entire concept of the government (or indeed anyone at all) borrowing money on moral/religious grounds, and think that if the country committed the sin of borrowing money then austerity is the natural moral punishment for that.

It’s perfectly possible to think that cuts are bad for the economy but nonetheless to think the Government’s finances will head over a cliff if they don’t happen.

This presumably is the reason Labour also supports cuts. Ed Balls has never said his cuts (not as far or as fast as the Tory ones, but still cuts) will actually be good for the economy. Taking money out of the economy is never likely to be good for it, or not in the short term anyway. But he says they are necessary.

‘It’s interesting how contradictory they are, illustrates the point that most ordinary people rarely see politics in a linear fashion.’

Or alternatively haven’t got a clue!

Bob B as usual substitutes insults for rational argument. He does not deny that Martin Wolf gives the impression that he thinks a £120 billion budget deficit is “austerity”, so his views on 2+2 (which equals 11 in arithmetic base 3) are not enough to give him credibility.

John77

You evidently can’t resist being obtuse. Ignorance is your strength.

1. At various times, Larry Summers has reportedly said several things I don’t accept – notably, his assessment of women scientists when he was President of Harvard. It doesn’t follow that I must therefore reject everything he says. As a uni student I didn’t accept unquestioningly everything my teachers said. The main purpose of higher education is to develop the capacity to think independently and critically.

2. Government borrowing in the last financial year at £120bn was virtually the same as the year before. On the facts, Osborne’s policy of fiscal austerity has therefore failed to bring government borrowing down so far. Suppressing economic growth by fiscal austerity reduces tax revenues. Lost GDP is forever lost.

3. The issue for adult discussion is whether the economy would grow faster and tax revenues increase if Osborne relaxed his austerity measures since other sources of demand – consumer spending, business investment and net exports aren’t increasing sufficiently to compensate for public spending cuts. We should be watching out for the next set of business investment figures to see what is happening with business confidence.

4. Osborne has implicitly accepted the argument of his critics that there is deficient demand – hence his recent agreement with the IMF recommendation that he should increase investment in infrastructure, which he had slashed in 2010.

5. He has made encouraging comments about the Bank of England’s policies for Quantitative Easing and Funding for Lending, both of which have the effect of increasing aggregate demand. His policies for supporting mortgage lending OTOH have been widely criticised – for example: “Osborne’s plan to help housebuyers ‘could cause another crash’: Sir Mervyn raises fears of US-style sub-prime crisis” [Mail Online]

6. In Wednesday’s ominous news: “UK retail sales fell at their fastest annual pace for 16 months in May, according to a survey by the CBI.” [BBC website]

What I don’t understand is the idea that the private sector will somehow “take up the slack” when the public sector contracts when it never has in the past as the market has never provided anything approaching full employment and is probably weaker now than it has been since the early 1950s.
Virtually every penny spent by government ends up in the hands of the private sector, whether it’s a big infrastructure contract, or a civil servant going shopping. When public spending increased in the 00s, the private sector boomed, why do the tories seem so convinced that cutting public sector spending now will somehow stimulate the private sector. Large parts of the private sector (Defence, Pharmaceuticals, Civil Engineering, er management consultancy) would barely exist without public sector spending. If 100 Policemen are cut, the private sector doesn’t produce 100 Policemen to replace them.

15

“What I don’t understand is the idea that the private sector will somehow ‘take up the slack’ when the public sector contracts when it never has in the past as the market has never provided anything approaching full employment and is probably weaker now than it has been since the early 1950s.”

This current debate over policy is partly about rival macroeconomic theories. Theories following the keynesian tradition regard the economy as driven in the short run by aggregate demand: consumption spending, public spending on goods and services, business investment and exports of goods and services less imports of goods and services.

The issue then becomes whether economic growth is constrained by insufficient demand or supply-side constraints, such as shortages of production capacity and employee skills. With production currently running several percentages below the previous production peak in 2008Q1 and average real earnings back at the levels of 2003, it is difficult to believe that the economy is supply-side constrained. But there is a real danger that with continued sluggish growth, production capacity will drop out thereby limiting future growth possibilities until capacity is replaced by new business investment. In the news today there is an estimate that 1 in 5 high street shops may close by 2018 as the result of low growth in consumer spending and the switch to online shopping.

Rival theory sees new jobs popping up as other jobs disappear because supply generates its own demand as the economy is always at or close to equilibrium. Those who subscribe to these notions regard concerns about aggregate demand as irrelevant and put over-arching priority on cutting the budget deficit regardless of what that does to aggregate demand.

But capacity is hardly an immediate concern, the high level of unemployment, empty offices, shops and business parks demonstrates there is plenty of it.
In any event, the private sector won’t invest to create capacity because of the lack of demand, so its a circular argument.
Also not convinced by the new jobs argument. A large demographic swathe is retiring in the coming decade, mostly from secure and relatively well paid jobs. The evidence is that these jobs are being either offshored, contractorised or simply made redundant by new technology. If you close a shop and sack 5 shop assistants plus lose say 2 jobs in the supply chain, 7 jobs are not created in the UK by Amazon supplying those same goods. The issue as I see is we have the wrong kind of economy, a service economy based on the City, which will be gradually killed off by EU regulation and BRIC competition. China is already producing a magnitude more of the worlds accountants than the UK. In 20 years time “London was once a world financial centre” will be taught in history classes. We need to make stuff again, its the only way.

Bob B thinks that a £120 billion deficit is equivalent to a demand-destroying fiscal surplus. Has he been listening to Ed (“I couldn’t get a scholarship so my parents paid fees to send me to the school where Ken Clarke got a free education as a scholar”) Balls or is he drunk?
Osborne talks “austerity” to the bond markets because he, unlike Bob B, realises that paying Greek interest rates until he can reduce the structural government deficit to a level that would not turn Alastair Darling’s hair white would put the UK economy into a downwards spiral. Brown obviously learned a lot from the 1812 campaign.
The reduction in demand is IN NO WAY due to Osborne who has run a highly inflationary fiscal policy – it is more than entirely due to the reduction in spending beyond their incomes by consumers who overspent by more than £1 trillion in the decade 2000-10 (see Bank of England statistics) and the million who declared themselves insolvent under New Labour are just the tip of the iceberg.
FYI *Lack* of ignorance is my strength: I can actually read economic data, which doubtless upsets Bob B.

People only believe the cuts to be “necessary” because the media doesn’t offers few, if any, opposing voices to the neoliberal economists and hacks who are interviewed on television. They have been fed a seemingly never-ending pro-cuts narrative. Is it any wonder there’s a contradiction?

Cuts only serve the interests of the dominant class.

Messed up that last post. I meant to say “the media presents a one-sided economic narrative that is predicated on the need for cuts and austerity”.

@15. Derek Hattons Tailor

This completely misses the fundmental economic point. In turn:

“What I don’t understand is the idea that the private sector will somehow “take up the slack” when the public sector contracts”

A market does not take up slack person for person in the same roles. The idea is that using the knowledge of millions, the market will be able to more accurately reflect the employment needs in the economy, and if left to its own devices will fill that capacity. It does not mean that a job will be replaced with a like job.

“when it never has in the past as the market has never provided anything approaching full employment”

No true. Those places were employment is flexible, employers are free from many restraints, and where compnay taxes are low have the lowest levels of unemployment. See Hong Kong and Switzerland.

“Virtually every penny spent by government ends up in the hands of the private sector”

This again misses the point. It is not a question of where money lands up. Money doesn’t actually land up anywhere as it is always moving. The question is whether that money represents effective use of labour. You misunderstand the nature of money in a fundamental way. It is only represented by notes and coins. What it actually ‘is’ is a representation of someones ability to access labour. In this respect the payment of that money to an oversized public sector means that efficiency in the system has been lost, and therefore real value lost. Keynes of all people had some interesting things to say on efficiency, and of course Smith on explaining labour.

“cutting public sector spending now will somehow stimulate the private sector.”

This is in one way correct. Unfortunatly the type of action taken by the government has seen public expenditure cut, but not enough supply side reform to promote growth in the private sector. They are only implementing half the necessary measures. The cut in corp tax is a start, but really far more action needs to be taken on the tax system as a whole, and in regulation.

“Large parts of the private sector (Defence, Pharmaceuticals, Civil Engineering, er management consultancy) would barely exist without public sector spending.”

This is just completely wrong. The public sector does not need to spend for these industries to exist, the govt just needs to reduce barriers. I use Switzerland as an example. The government does not spend on pharmaceuticals but it has one of the biggest pharma industries in the world…why? because they have reduced taxation and implemented regulation that allows the pharma companies to operate efficiently.

“If 100 Policemen are cut, the private sector doesn’t produce 100 Policemen to replace them”

See above. The question is whether those 100 policemen are needed. Police is a slightly different situation however, because you touch on one area where govt should spend money, even by the opinion of the most hardend free-marketeer.

John77: “Bob B thinks that a £120 billion deficit is equivalent to a demand-destroying fiscal surplus. Has he been listening to Ed ”

Wrong again. I’ve been reading up the IMF findings after its recent consultation visit to Britain – see the link @9 – and Martin Wolf in the Financial Times on: Why George Osborne should not be so complacent [FT 23 May 2013]

“In 1816, the net public debt of the UK reached 240 per cent of gross domestic product. This was the fiscal legacy of 125 years of war against France. What economic disaster followed this crushing burden of debt? The industrial revolution.”
Martin Wolf: Austerity loses an article of faith [FT 23 April 2013]

And a seminal article by Olivier Blanchard on: Fiscal Consolidation: At What Speed?
http://www.voxeu.org/article/fiscal-consolidation-what-speed

@ #22 Bob B
The IMF report is overwhelmingly in favour of Osborne’s policies, e.g.
“14. The commitment to a medium-term plan has earned the government credibility. Reducing the large structural fiscal deficit over the medium term is essential. ”
And there is nothing in there to suggest that a £120 bn deficit is austerity – there asre telling him to *reduce* the deficit, not increase it and the word “austerity” just isn’t there at all
So there is no way that you can claim reading it is the cause of you thinking that Osborne’s inflationary budget deficit is austerity.
Martin Wolf’s comment about Debt/GDP is deliberately (I don’t he’s *that* incompetent) misleading. Vast number of items are now included in GDP when their equivalents were not in 1814 – GDP only included paid work so the work a mother did looking after 6 kids counted for nothing while today a childminder looking after three is included in GDP. Nearly a third of GDP is attributed to totally unproductive bureaucracy – not just in the public sector: in one private sector conforming with regulations absorbs more than 10% of gross revenue, compared to a tiny percentage in the Georgian era.
Martin Wolf seems to want, like David Blanchflower, the government to carry out a concealed default on its debts by debasing the coinage (aka inflation). But if we lose credibility with lenders before debt starts to reduce and they stop lending then there will be a economic disaster.

John77:

“Martin Wolf seems to want, like David Blanchflower, the government to carry out a concealed default on its debts by debasing the coinage ”

That is more complete rubbish. As I have repeatedly posted, the adult issue is the speed of fiscal consolidation. The IMF called for more spending on infrastructure projects, which Osborne had slashed in 2010 – try the link @9. By what he is saying recently, Osborne seems to be agreeing with that.

With government borrowing at £120bn in the last fiscal year, which is virtually the same as the year before, Osborne’s austerity programme has not reduced government borrowing so far.

The policy issue is whether lower public spending cuts would speed up economic growth and raise tax revenues sufficiently to pay for the extra spending with some left over to reduce government borrowing. Lost GDP is forever lost.

Note the Eurozone announcement in the news that it is relaxing austerity by allowing some Eurozone countries more time to reduce their busget deficits.

@ 21 Glad to hear I “fundamentally misunderstand money” I seem to have got away with it so far, given that I’m a chartered accountant. But anyway…

“A market does not take up slack person for person in the same roles. The idea is that using the knowledge of millions, the market will be able to more accurately reflect the employment needs in the economy, and if left to its own devices will fill that capacity. It does not mean that a job will be replaced with a like job.”

I know that the exact same jobs won’t be replaced, but that just means a different face on the dole, not greater employment. Employment is a consequence of the market, not a “need”. Companies don’t exist to create jobs, they exist to make profits. Profits which they increasingly offshore, untaxed, never to circulate in the UK economy again. I believe economists call this “leakage”.

“No true. Those places were employment is flexible, employers are free from many restraints, and where compnay taxes are low have the lowest levels of unemployment. See Hong Kong and Switzerland.”

Er yes, better to be exploited than unemployed eh ? I note you miss the “flexible labour markets” of India and China and omit to mention the eye wateringly high indirect taxes in Switzerland

“This is just completely wrong. The public sector does not need to spend for these industries to exist, the govt just needs to reduce barriers. I use Switzerland as an example. The government does not spend on pharmaceuticals but it has one of the biggest pharma industries in the world…why? because they have reduced taxation and implemented regulation that allows the pharma companies to operate efficiently”.

Difficult to see who is a legitimate customer for say a nuclear submarine, other than governments. Defence and pharmaceuticals are heavily regulated here too, and are two of our most successful industries. I don’t hear either of them crying out for de-regulation either, possibly because their huge R&D costs and long payback periods are too high risk for the private sector. As is nuclear power, another “privatised” industry looking to back risk off to the taxpayer.

“See above. The question is whether those 100 policemen are needed. Police is a slightly different situation however, because you touch on one area where govt should spend money, even by the opinion of the most hardened free-marketeer.”

And who decides if they are needed – the market ? Funny how free marketeers always want the bits of the public sector that keep them rich paid for by others.

This where mainstream economics was in 1958 on causes of Market Failure: Francis Bator on: The Anatomy of Market Failure
http://instruct1.cit.cornell.edu/courses/econ335/out/bator_qje.pdf

This a recent, widely acclaimed book: John Cassidy: How Markets Fail (Penguin, 2010)

Even Adam Smith identified causes of market failure in The Wealth of Naions (1776):

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.” [The Wealth of Nations; (1776), Book 1, Chapter 10, Part 2]

“The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.” [The Wealth of Nations (1776), Book 5, Chapter 1, Part III or P.590]

For more on market failure, try the late Ralph Turvey: On Divergences Between Social Costs and Private Costs (1963)
http://www.colorado.edu/economics/morey/externalitylit/turvey-economica1963.pdf

Another seminal paper on market failure: George Akerlof: The Market for ‘Lemons’ – Quality Uncertainty and the Market Mechanism (1970)
http://socsci2.ucsd.edu/~aronatas/project/academic/Akerlof%20on%20Lemons.pdf

Frankly, economists are much better at criticising economics than those who kow little about the subject.

Yet another seminal paper on market failure: Joseph Stiglitz and Andrew Weiss: Credit Rationing with Imperfect Information (1981): http://pascal.iseg.utl.pt/~aafonso/eif/pdf/crrinf81.pdf

Bob B changing the subject when he has been exposed as utterly misrepresenting the IMF.
Now claiming that inflating away the value of debts is not concealed default.
How stupis does he think we are?

John77: “Bob B changing the subject when he has been exposed as utterly misrepresenting the IMF.”

That’s more demonstrable nonsense from you. Quoting the IMF:

4. Risks remain tilted to the downside. The key risk is that persistent slow growth could permanently damage medium-term growth prospects—this could arise if private sector deleveraging is larger than expected, credit conditions fail to improve, external demand does not pick up, and the drag from fiscal consolidation is greater than anticipated. In addition, despite recent market calm, growth in the euro area is likely to be weak, and the re-emergence of market tensions cannot be ruled out, with the potential for continued spillovers to the UK from depressed exports, higher bank losses and funding costs, and reduced confidence.

16. But planned fiscal tightening will be a drag on growth. . Discretionary measures for this fiscal year amount to £10 billion. These will pose headwinds to growth, as expected, coming on top of domestic deleveraging and a weak external outlook, notably at a time when resources in the economy are underutilized.

18. Within the context of the medium-term fiscal framework, several growth-enhancing initiatives could be considered now to offset the drag from consolidation and bolster the recovery.

20 … Investment in infrastructure, notably in transport and energy, could be supported by streamlining the planning application process and removing regulatory uncertainty. To accelerate the implementation of infrastructure projects, more authority over planning decisions should be devolved to local authorities, with financial incentives provided through greater revenue sharing.
http://www.imf.org/external/np/ms/2013/052213.htm

“UK Should Restore Growth, Rebalance Economy . . . The United Kingdom could boost growth by bringing forward measures already included in its fiscal plan, such as spending on infrastructure and job skills, the International Monetary Fund said as it wrapped up its annual check of Europe’s third largest economy.” [From IMF Survey of UK economy 22 May 2013]

From Friday’s news in the FT: “Infrastructure projects to receive £15bn boost”

The question is: How many years will it before before this boost to demand from investment in infrastructure projects is delivered?

I switched to posting on causes of market failure because that is where the debate here had moved on to.

Another seminal paper on market failure:

Hyman Minsky: Financial Instability Hypothesis (1992)
http://www.levyinstitute.org/pubs/wp74.pdf

“The financial instability hypothesis has both empirical and theoretical aspects. The readily observed empirical aspect is that, from time to time, capitalist economies exhibit inflations and debt deflations which seem to have the potential to spin out of control.”

More bad news on Friday about the slide in business confidence:

“Bank of England figures showed on Friday that net business lending dropped nearly £3bn after a £545m contraction in March, and was 4pc down on the year, dealing a blow to hopes that investment might spur growth.”
http://www.telegraph.co.uk/finance/economics/10090899/Lending-to-UK-businesses-drops-sharply-in-April-BoE.html

Recap from @14: “UK retail sales fell at their fastest annual pace for 16 months in May, according to a survey by the CBI.” [BBC website]

The IMF was obviously correct in its recent assessment: “Risks remain tilted to the downside”

So much for the claim by John77 @18: “I can actually read economic data, which doubtless upsets Bob B.”

So I am to be deemed illiterate if I fail to paste a link on LC before the mighty Bob B, am I?
Does that apply to every poster or just the ones that point out some of his egregious mis-statements?
He missed http://www.ft.com/cms/s/0/f966d3b2-c9d9-11e2-8f55-00144feab7de.html#axzz2UsDcNEtO
which shows that the Eurozone without Osborne’s inflationary fiscal and monetary policies has record unemployment and even spots of price deflation.
Also from the BBC website “British Chambers of Commerce raises UK economy forecast”
http://www.bbc.co.uk/news/business-22723384
but his wonderful research finds a headline without a single absolute figure in the article or CBI press release, just how many stores out of a really massive sample of 69 retailers said sales were up or down. Hard facts – oh, no – too difficult for Mr B
His selective quotation from the IMF report para 4 without para 5 which says “5. Restoring growth momentum and rebalancing the economy is vital. Strong growth is needed to restore incomes, ensure the sustainability of public debt, and restore bank balance sheets. For long-term prosperity and resilience against future shocks, the economy has to be diversified and not reliant on domestic consumption. These imperatives have supply as well as demand dimensions—after five years of relatively weak activity, additional measures are needed to raise long-term expectations of potential growth, while rebalancing necessitates a transformation to a high-investment and more export-oriented economy. 2
i.e. DO NOT concentrate on boosting domestic demand, SORT OUT the supply-side problems that New Labour created.
He added para 16 as if it was a major policy recommendation instead of a minor qualifier to par 15
“15. While adhering to the medium-term framework, the government has shown welcome flexibility in its fiscal program. The government has accommodated a slowdown in the pace of structural consolidation, notably in the context of weakening potential growth; allowed automatic stabilizers to operate freely; and public sector net debt is forecast to fall in 2017-18, two years later than set out in the Supplementary Debt Target. Furthermore, several measures to support growth have been introduced, such as increases in personal tax allowances and reductions to corporate tax rates. The government has also used its balance sheet to provide support through the use of guarantees.”

John77: “His selective quotation from the IMF report para 4 without para 5 which says ’5. Restoring growth momentum and rebalancing the economy is vital’”

Of course it is – water is wet. But as I keep posting, the adult debate is about the speed of fiscal consolidation (or austerity measures). Try again the link to Olivier Blanchard @22 on: “Fiscal Consolidation: At What Speed?”

Predictably, you omit to mention the IMF saying: “Risks remain tilted to the downside”

Lost GDP is lost forever. Britain’s economy is still running below 2008Q1. From the ONS, since you insist that you understand economic data:

In real terms, the average earnings of UK employees in 2012 were at roughly 2003 levels, a new article from ONS has shown. After three decades of strong growth, real wages peaked in 2009. Since then inflation has outstripped wage increases in cash terms.

Median gross earnings in 2009 were £10.97 an hour in current prices, and have since increased slightly to £11.21 in 2012. However, after adjusting for inflation, the 2009 figure was the equivalent of £12.25 an hour in 2012 prices. This represented a peak in the real value of pay, with average pay in 2012 prices falling to £11.92 in 2010 and £11.41 in 2011. This represents an annual average drop in real pay of nearly 3% in 2010-12.

Although it is too early to be sure whether there has been a permanent change in the long-term trend, the decline in real wages has now been sustained for three consecutive years.
http://www.ons.gov.uk/ons/rel/mro/news-release/real-wages-fall-back-to-2003-levels/realearn0213.html

Bob B has made a Freudian slip – the adult conversation about the emperor’s new clothes, for which read “austerity”
Then he goes onto the perpetual motion machine of “increasing government spending will reduce the deficit” – obvious tripe. It could not be true even in a closed economy and in an open economy where people purchase non-essential goods from abroad it is obvious nonsense as some of that money will leak out of the UK economy

John77: “Then he goes onto the perpetual motion machine of ‘increasing government spending will reduce the deficit’ – obvious tripe.”

That’s even more mendacious nonsense.

I’ve repeatedly posted that the adult debate is about the speed of fiscal consolidation – or austerity measures. Try the link to Olivier Blanchard on: Fiscal Consolidation: At What Speed? – link @22

Depending on the magnitude of fiscal multipliers for the British economy, it is feasible that a reduced pace of cutting public spending will boost tax revenues and thereby reduce government borrowing.

As it is, government borrowing in the last fiscal year at £120bn was virtually unchanged from the year before – Osborne’s austerity policy demonstrably isn’t working. The news this week indicates falling business investment and falling retail sales. The obvious question is where is extra demand coming from to replace the cuts in public spending?

From the graph on this BBC website, see how the recovery of Britain’s economy from the 2008/09 recession compares badly with the recoveries from previous recessions.
http://www.bbc.co.uk/news/10613201

For any readers here looking (nostalgically) for the earlier discussion on causes of Market Failure, try this paper by John Sutton at the LSE on how economists might cope with dropping their usual casual assumption that most markets are perfectly competitive:

Market Structure – Theory and Evidence
http://personal.lse.ac.uk/sutton/market_structure_theory_evidence.pdf

Bob B said (and I quote verbatim)
“The policy issue is whether lower public spending cuts would speed up economic growth and raise tax revenues sufficiently to pay for the extra spending with some left over to reduce government borrowing.”
I await an apology.

John77: “I await an apology.”

No apology is necessary or due. You really do need to read Olivier Blanchard on: Fiscal Consolidation: At What Speed?
http://www.voxeu.org/article/fiscal-consolidation-what-speed

Why do you suppose the IMF, after its recent visit to Britain, was calling on Osborne to increase investment in infrastructure projects which he had slashed in 2010?

The sad thing is that you don’t appreciate how dense and ignorant you really are. Try reading Martin Wolf’s pieces in the FT cited @22:

Martin Wolf on: Why George Osborne should not be so complacent [FT 23 May 2013]

“In 1816, the net public debt of the UK reached 240 per cent of gross domestic product. This was the fiscal legacy of 125 years of war against France. What economic disaster followed this crushing burden of debt? The industrial revolution.”
Martin Wolf: Austerity loses an article of faith [FT 23 April 2013]

@ Bob B
You may think that an apology is not necessary but it is certainly due for accusing me of mendacious nonsense after I quote back your own words.
And you have obviously forgotten that you have already included that quote from Martin Wolf and I have already debunked it.

John77: “And you have obviously forgotten that you have already included that quote from Martin Wolf and I have already debunked it”

You have not debunked Martin Wolf in the FT. Nor have you:

1. Debunked Olivier Blanchard on: Fiscal Consolidation: At What Speed?

2. Explained why the IMF called for investment in infrastructure projects which Osborne had slashed in 2010.

Osborne has subsequently said that he will increase infrastructure investment but it matters how soon and whether that will be at the expense of other public spending.

Osborneconomics demonstrably isn’t working: government borrowing in the last fiscal year was virtually the same as the year before. Meanwhile, in Wednesday’s news from the BBC: “UK retail sales fell at their fastest annual pace for 16 months in May, according to a survey by the CBI.”

From the Telegraph on Friday: “Bank of England figures showed on Friday that net business lending dropped nearly £3bn after a £545m contraction in March, and was 4pc down on the year, dealing a blow to hopes that investment might spur growth.”

@ # 42 Bob B
This has got beyond ridiculous: I am supposed to get articles published in the FT?
Actually, I *have* debunked Martin Wolf in ft.com (on another article he wrote).
I haven’t debunked Oliver Blanchard because I haven’t chosen to read his article, nor have I read “War and Peace” in the original Russian. If I ever lack anything better to do, I may get round to it.
And I pointed out in #34 that there is no hard data whatsoever behind the BBC article which is selectively quoting from a survey of just 69 retailers and judging from how many of them saw sales rise or fall without taking any note of the extent of the rise or fall.
The IMF has NOT “called for investment in infrastructure projects which Osborne had slashed in 2010.”
See a anti-Tory comment on this in http://www.guardian.co.uk/politics/2010/oct/17/george-osborne-cuts-spending-review
The big infrastructure project that got cancelled – Heathrow Runway 3 – was not a budget cut because it wasn’t going to be government-funded. So (apart from a few “pork-barrel” projects announced as part of Labour’s election campaign), the capital spending cuts were mostly New Labour programmes that were a complete disaster (NHS computers etc) or building new motorways in preference to maintaining existing ones.
The cut in bank lending to business is wholly or largely due to the Co-op bank http://uk.reuters.com/article/2013/05/24/uk-co-op-bank-lending-idUKBRE94N07320130524
When Alastair Darling decided to change the capital requirements for UK banks, someone overlooked the Labour Party’s own bank and once a plan to top up its capital with a £600m subsidy from Lloyds foundered it has started to shrink its balance, coincidentally in way that favours the Co-operative MP for Morley and Outwood.
As for Osbornomics not working – well unemployment in the UK is lower than it was under Gordon Brown, while in the Eurozone it is at record levels. In a typical post-bubble deflation most of the pain is suffered by the poor while those with savings remain in comfort – Osborne has overseen a disproportionate amount of pain suffered by the well-off (except public-sector pensioners) whose income from their savings has been worse than decimated while those on state pensions and other benefits have been protected (benefits have actually risen relative to earnings since 2010) and the tax burden on the top 10% of earners has increased significantly. Osborne is a sheep in wolf’s clothing.
You end by pointing out, as I did in #7 that the PSBR is £120bn. You said “The issue for grown-ups is whether Osborne is doing that too quicky,” then complain that he is not doing it fast enough.
I have grown bored with your habitual resort to insults when you lack rational arguments and it seems everyone else has too since the last thirds-party post started
@ 21 Glad to hear I “fundamentally misunderstand money” I seem to have got away with it so far, given that I’m a chartered accountant. But anyway…
If you want to rant on feel free, but after demonstrating your failure to read what others, and even yourself, have already written, your disregard for truths that do not suit you, and your belief that “grown-up” debate involves using school-yard insults over the internet where you cannot get the bloody nose that they would have got you at school, don’t expect me to waste any more of my time refuting you. I have already spent too much.