Tories end tax squabble, but Brown has left them standing…

On the right side of British politics there has been a long term tussle over taxation in play for some time. Some seem to think it has been resolved now, but the solution they appear to have chosen (fiscal tightening of public expenditure) looks as though they could be missing some more pressing issues in the global market place. Over on Brassneck I argue that there is a cultural problem attached to the fiscal issues the Tories want to address in government… In the meantime, decrying the appalling fiscal irrectitude of Brown only gets you so far. But you don’t have to dig very deeply to find the roots of that ‘boom’ in public sector spending in the long public ‘bust of the eighties and early nineties.

Whatever the day to day victories in the Commons, the Tories are now the ones faced with having to play catch up…

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  • Rory

    …meanwhile theNew York Times reports that close confidantes of Hilary Clinton have declared that she has accepted the nomination to be Obama’s Secretary of State.

  • Mick Fealty

    Great breaking news Rory… but an email would have done it..

  • willis

    Mick

    Well done referencing Phillip Blond. I hadn’t realised that he had finally got stuff published in the Guardian.

    I initially came across these articles in First Post:

    http://www.thefirstpost.co.uk/8406,opinion,blame-the-feral-kids-on-the-middle-classes

    http://www.thefirstpost.co.uk/8968,opinion,conservatives-must-reject-capitalism

    And thought Woo Hoo!

    I can now see that he has been getting published in the Guardian since the summer. Why though has the Torygraph not been interested? Oh yes, he is a thinker!

  • Ann

    I beg to differ mick. Thatcherite policies may cause deflation I will grant you but Browns policies don’t have much to merit them either. (Borrowing over £100 bn?) I think thats why there is talk of them cutting and running in January with speculation of an early election. Even the BBC are running with that now.
    http://news.bbc.co.uk/1/hi/uk_politics/7741397.stm

    If Brown is preparing to cut and run how is it the Tories are the ones you see as being left behind.

  • It was Sammy Mc Nally what done it

    Mick,

    Why no thread on TUV Jimbo’s and Neo Cons Wee Reggie’s criticism of the DUP – if there had been criticism of SF Pete B. would have had multiple threads packed with quotes about the DUP had outfoxed them.

    Anybody seen a proper analysis of the deal – it looks clear that SF are going to ditch the army council in return for the DUP movement.

  • Mick Fealty

    It’s a big world Sammy,

    Whilst I’m not a fan of the deficit theory: http://www.sebsteph.com/Professional/sebsportfolio/journals/sbe.htm… I offer the mitigation that there are lots of other things happening…

    That said, if you have got some deadly dope on that, dish it… and we’ll be on it like a shot…

  • kensei

    Ann

    I beg to differ mick. Thatcherite policies may cause deflation I will grant you but Browns policies don’t have much to merit them either. (Borrowing over £100 bn?)

    Thatercite policies in the early 1980’s were deflationary. Which could be argued as appropriate, since inflation was so bloody high. And unemployment did get very high as the conomists predicted but came back round.

    The talk in the US is of the need for a $600-700 Billion stimulus, so perhaps £100bn is not all that far out. It depends on the size of the gap that has been left by the private sector. Deflation is a large danger, potentially much worse than even high inflation. At some point the deficient will need repaid – either as high taxes, slower spending increases (or cuts) but you don’t worry about the cost of the damage while your house is on fire. Your argument seems entirely based on it being a big number.

    Brown certainly has consensus on his side, and this is coming from both left and right. There are, as always, some dissenting voices. If you want to call Brown on it maybe you should investigate their objections and have some kind of coherent response.

  • Ann

    Ken my comment about the Thatcherite policies was in response to Mick’s article

    Burdened with debt and broken by speculation, voters want an alternative to the economic orthodoxy of the last 30 years. The irony is that Conservative social thinking should allow them to dispense with this ideology. Instead, they sound as if they plan to practise Thatcherite austerity in the face of a deepening and deflationary recession.

    He is discussing the disagreement within the right of the blogsphere, not the merits of Thatchers economics par se.

    Your argument seems entirely based on it being a big number.

    I wasn’t putting forward my argument, like Mick I don’t know how the UK will get out of this economic crisis. But mick has argued that the Tories are being left behind, because the tories are playing a tatical game. tactical game Cameron has been playing. Tight victories on the floor of the commons, and dominance of the media agenda for a day at time, does not add up to a coherent political philosphy, or a programme for action.

    I don’t see it this way, that is why I differ from mick. I see a Tory strategy that is different to the labour one, which is setting out the stall for both parties for the speculated early election. I can of course see both arguments, and both have merits, the problem with labours spending our way out of it and kick starting the economy by borrowing is the fear that we may end up like Iceland or having to go again with cap in hand to the IMF.

    Its best ken if you read the links, like those deals you didn’t know off 🙂 Being in full possession of the argument can help alieviate confusion. 🙂

    night night 🙂

  • deirdre nelson

    I hate canvassing in the winter. Could we not do it in the sunshine for a change 😉

  • It was Sammy Mc Nally what done it

    Mick,

    it’s not the big world stuff being here I’m lamenting it’s the wee six stuff not being here -on a site which specialises in wee six stuff.

    I hope you have noted my dreadful “futuring” above about the army council which acording to Robbo (from BBC) has just been confirmed.

  • kensei

    Ken my comment about the Thatcherite policies was in response to Mick’s article

    Yes, funny enough I read the article too. The point stands. Deflationary measures are good against high inflation. They are not good in an already deflationary environment. The US Government in 1929-32 raised both rates and taxes and allowed businesses to go to the wall. I assume you’ve heard of the result?

    He is discussing the disagreement within the right of the blogsphere, not the merits of Thatchers economics par se.

    But you choose to defend those policies and attack Brown’s. So, I called you on it. Whatcha ya got?

    I don’t see it this way, that is why I differ from mick. I see a Tory strategy that is different to the labour one, which is setting out the stall for both parties for the speculated early election. I can of course see both arguments, and both have merits, the problem with labours spending our way out of it and kick starting the economy by borrowing is the fear that we may end up like Iceland or having to go again with cap in hand to the IMF.

    You “don’t put forward an argument. But insist on extolling perceived weaknesses of Brown’s plan while giving Cameroon a pass. You haven’t even reallys aid much of the merits of tactics versus strategy here, really.

    Cameroon’s stance is not at least coherent. But he looks to be both coherent and wrong. If Brown has forced him into that position it is a master stroke.

    Its best ken if you read the links, like those deals you didn’t know off 🙂 Being in full possession of the argument can help alieviate confusion. 🙂

    Those deals that didn’t exist except in your mind? Riiiiiight.

  • frustrated democrat

    I think we are in danger of becoming a sub prime nation as our government follows the lead of those houseowners who borrowed heavily and couldn’t afford to repay.

    There is talk of tax cuts – they aren’t cuts they are loans which have to be repaid and probably not by those who get the loans.

    I forsee disaster in the next 10 years as we struggle to get out of the hole we are digging!

  • kensei

    frustrated

    There is no such thing as a free lunch. Borrowing will need brought under control over the long term. And when we start getting out this, the government should be ridden very hard on how it is going to be done. But borrowing is going up regardless – simply sustaining suspending during the downturn will result in decreased revenues as the tax receipts fall as part of the recession. Do you propose cutting spending?

    National economics is not household economics,

  • Ann

    But insist on extolling perceived weaknesses of Brown’s plan

    My main concern with Browns fiscal stimulus is the time it takes to come into effect. By the time the stimulus kicks in the country could be in boom again and the effect could be destabilising. A lot will depend upon the stimilus he will choose, and we won’t really know the full story until monday. Taxes would seem to be on the agenda.

    There is a huge argument against tax cuts, particularly temporary tax cuts, and any increase in spending could lead to inflation led by imports. If all countries worked together then the fiscal stimulus would have a better chance. Working alone I think it will be anybodys guess as to how it will work.

    These are my main objections to Browns’ plan. I don’t think it merits looking into the tory plans for purposes of argument here as they are in opposition, and found it best to deal with the party that is actually in power.

    However, I do feel only time will tell whether Browns plan will work or not, I don’t think any predictions from the media will be in any way accurate, the outlook is much too cloudy. But I’d venture to say its a gamble for both sides, but Brown is taking a bigger gamble than Cameron, since his policies will not have such far reaching consequences for the country if they were to go wrong than browns will have. I also think it will be well into the new year before we will actually know if what Brown proposes will work, which is why I’m surprised by the election speculation.

    Either Brown is definite what he will do is going to work, or he is hedging his bets because he really isn’t too sure.

    Anyway thats me for now, I’m off. I look forward to your post on the state of the economy and how to fix it 🙂

    Re the deal. You didn’t know of it 🙂 because you were only ten remember :0) 🙂

    Catch you later, nice debating with you.

  • Ann

    they aren’t cuts they are loans which have to be repaid and probably not by those who get the loans.

    There is no such thing as a free lunch.

    Ken you should take note of what FD is saying. This is a major problem with Browns’ plan which you are failing miserably to see. When the population see tax cut they automatically think I’ll have to pay this back at some stage so I’m going to hold on to my money. Once you grasp that then you will see that the pit fall of what Brown is proposing. Thats why there is as danger with tax cuts particularly temporary ones.

  • Ann

    Oh and another thing..

    But you choose to defend those policies and attack Brown’s.

    No. If you listen to the media on Monday, it won’t only be sceptical tories who will attack Browns’ policies, the biggest attacks will come from city analysists – the money men and their watchers. Of that I am confident.

    As I already said, both plans have merit, where Brown doesn’t do so well is IF things go wrong, which they could quite easily.

  • Ann

    Oh and another thing.

    Remember ken this speculation about the election.

    The outcome of Browns plan, to cut taxes and spend will only put the pain off for a while, when Labour loses the next election it will be the big bad tories who will have to do the bad deed by raising taxes to pay for this stimulus. Can you imagine if Labour were to win the next election, the irony of a labour govt putting up taxes and cutting public spending later on when things are better to pay for this!!!!

  • Ann

    Ken

    Tories are now the ones faced with having to play catch up…

    Do you agree with this. If so why? If not why not?

  • kensei

    Ann

    Quickly:

    Re the deal. You didn’t know of it 🙂 because you were only ten remember :0) 🙂

    There was no deal. There was tactical voting. They are different things. [Please learn the distinction. And note: no winky smilie.

    My main concern with Browns fiscal stimulus is the time it takes to come into effect. By the time the stimulus kicks in the country could be in boom again and the effect could be destabilising.

    Fiscal stimulus usually have a delayed effect. Fortunately, the chances of us being in boom time any time soon are slim and none. We have not even entered the full force of the recession. And if we are recovering, then monetary policy will have regained the traction it has lost and it will be possible to adjust that way.

    Ken you should take note of what FD is saying. This is a major problem with Browns’ plan which you are failing miserably to see. When the population see tax cut they automatically think I’ll have to pay this back at some stage so I’m going to hold on to my money. Once you grasp that then you will see that the pit fall of what Brown is proposing. Thats why there is as danger with tax cuts particularly temporary ones.

    Correct. But that is an argument against tax cuts, not against borrowing. It may be better to spend the money in infrastructure spending and increased unemployment spending other than tax cuts. It is also why the government is carefully avoiding mentioning the later consequences. Tax cuts have an element fo the confidence trick about them.

    the biggest attacks will come from city analysists – the money men and their watchers. Of that I am confident.

    What the ones who have just had a giant bailout?

    The outcome of Browns plan, to cut taxes and spend will only put the pain off for a while,

    No. If you have a cold then sitting outside could give you pneumonia. If you are better it might only be an annoyance. The pain we will get on the way out does not equal the pain of contracting fiscal policy now. We are not in an inflationary or stagflationary environment. We are moving into a deflationary one.

    Can you imagine if Labour were to win the next election, the irony of a labour govt putting up taxes and cutting public spending later on when things are better to pay for this!!!!

    It isn’t an electoral bribe. It merely has the bonus of laying danger for Tories. It is a prescription backed by a lot of theory and well regarded economists. In fact, it’s the current consensus view on both sides of the Atlantic. If Labour does have to raise taxes after the next election then they will have 5 years to sort it out. I believe Thatcher may even have raised taxes for a while, so it is not a complete handicap.

    Do you agree with this. If so why? If not why not?

    Catch up? On the economy, currently they aren’t relevant enough to be in the race.

  • Ann

    There was no deal. There was tactical voting. They are different things. [Please learn the distinction. And note: no winky smilie.

    What ever it was you didn’t know about it did you? Please learn to be more informed.

    Do you agree with this. If so why? If not why not?

    Catch up? On the economy, currently they aren’t relevant enough to be in the race.

    I’m afraid thats not good enough. Either you agree or you don’t, and you must have reasons for doing so, otherwise you are dodging the argument by sitting on the fence.

  • Ann

    And if we are recovering, then monetary policy will have regained the traction it has lost and it will be possible to adjust that way

    Frankly that is bollox. At some stage any borrowing done will have to be paid for. We are reaching a level that has eleven digits on the end, you are like many others only looking to get out of this and not seeing the pain further down the line.

    the biggest attacks will come from city analysists – the money men and their watchers. Of that I am confident.

    What the ones who have just had a giant bailout?

    Discard everything they say? What is your point?

    Correct. But that is an argument against tax cuts, not against borrowing. It may be better to spend the money in infrastructure spending and increased unemployment spending other than tax cuts. It is also why the government is carefully avoiding mentioning the later consequences. Tax cuts have an element fo the confidence trick about them.

    So what was all this about then?
    frustrated

    There is no such thing as a free lunch. Borrowing will need brought under control over the long term. And when we start getting out this, the government should be ridden very hard on how it is going to be done. But borrowing is going up regardless – simply sustaining suspending during the downturn will result in decreased revenues as the tax receipts fall as part of the recession. Do you propose cutting spending?

    National economics is not household economics,

    Posted by kensei on Nov 22, 2008 @ 12:29 PM

    Answering FD’s comment re tax cuts with a rant about borrowing?

    We are not in an inflationary or stagflationary environment. We are moving into a deflationary one.

    But you said we were:
    Deflationary measures are good against high inflation. They are not good in an already deflationary environment.

    Frankly you are all over the place…..

  • Ann

    We are not in an inflationary or stagflationary environment. We are moving into a deflationary one.

    But you said we were:
    Deflationary measures are good against high inflation. They are not good in an already deflationary environment.

    To be honest ken I find that endemic in all of your arguments, and if you are not prepared to do it in a civilised way:

    And note: no winky smilie. Only a guffaw!!!!! Haw Haw

    LOL Catch yourself on Ken!

  • Ann

    To be honest ken I find that endemic in all of your arguments, and if you are not prepared to do it in a civilised way:

    That didn’t come out fully, should be:

    To be honest ken I find that endemic in all of your arguments, and if you are not prepared to do it in a civilised way:

    Then I’m going to laugh at you

    HEH

  • Alan

    Ann,

    Not sure whether you’ve been wanting to have the last word or found the cherry bigger than your appetite. You are, however, comprehensively wrong on the Brown / Cameron comparison.

    Brown is making decisive moves on the economy, pro-actively positioning the economy to come out of recession more rapidly than we would otherwise see. Cameron is in a bind because he can’t follow Brown ( where Cameron would actually prefer to be ) because he has to differentiate Tory and labour positions. Cameron has the luxury of being able to argue without responsibility for the real economy and therefore choses the position on borrowing that he does.

    Cameron knows that his policy on borrowing would lengthen the recession, but it really doesn’t matter to him as long as he is seen to differ from Brown. It is damp squib economics.

    Decisions at any level have to balance the opportunities offered by success as well as the risks of failure. You fail to lay any measure against the opportunities of investing now – which is a fundamental error in planning.

    Brown is being entrepreneurial in his planning for the future. He is balancing risk and opportunity. Evaluating his response solely on the basis of risk is, therefore, disingenuous.

    You are right about needing to have agreement internationally about the way forward. We are in the midst of developing that international consensus.

  • frustrated democrat

    Ireland is ready the same as sub prime mortgage borrower and the UK will find itself in the same boat. Have those borrowers taught the governments nothing, the lesson should have been don’t borrow what you can’t afford to repay, in both cases the medicine will do more harm than the disease.

    In the UK what we seem to be hearing is about tax cuts that will have to be repaid for many years by those who didn’t get the cuts.

    If that is considered good economics then we need new economists.

  • Ann

    Brown is making decisive moves on the economy, pro-actively positioning the economy to come out of recession more rapidly than we would otherwise see.

    Those plans are not yet published. Where will the money come from for cutting tax and spending? Will it lead to a run on the pound? A run on the pound will lead to more unemployment. As for borrowing. How will it be paid back? You do realise that not only will the debt have to be paid back but interest on it too?

    FD is right.

    Cameron is in a bind because he can’t follow Brown

    Follow where Brown has led? Are you serious.

    I haven’t bitten a cheery to big to follow. I know exactly what is being proposed. Borrowing and spending our way out of this will bring a day of reckoning, anyone who thinks other wise fails the basic economics test.

  • Ann

    Evaluating his response solely on the basis of risk is, therefore, disingenuous.

    Alan you cannot ignore risk.

    You fail to lay any measure against the opportunities of investing now

    Would you invest in an economy not based on sound economics? Or would you prefer to invest in an economy based on spending and borrowing? If you want people to invest we won’t get growth, if we don’t get growth the recession will be longer.

  • Ann

    If you want people to invest we won’t get growth, if we don’t get growth the recession will be longer.

    Should read if people don’t invest we won’t get growth,if we don’t get growth the recession will be longer.

    I appear to be having some difficulties with my keyboard at the moment.

    But no alan I’m not interested in simply having the last word, infact I’ll give it to you 🙂

  • kensei

    Ann

    Those plans are not yet published. Where will the money come from for cutting tax and spending?

    We know the answer — it will come from increased borrowing. There is merit in the argument that the public finances should have been in better shape and more able to handle borrowing, but we are past that point now.

    Will it lead to a run on the pound?

    Possibly but not yet likely. The pound will probably stay weak. This is not necessarily bad from an export perspective.

    A run on the pound will lead to more unemployment.

    Not necessarily. Depends on the long run effects. In the immediate term it makes foreign goods more expensive. Perhaps it would also move the UK closer to the Euro, which may be a bad thing.

    As for borrowing. How will it be paid back? You do realise that not only will the debt have to be paid back but interest on it too?

    Hello. I’ll give you the answer again. The possibilities are:

    1. Taxes will rise. Which taxes and when, who knows?
    2. Spending cuts. If the economy is growing, then if the public spending does not growth as fast as growth then money can be paid back. There could be real terms spending cuts or indeed absolute spending cuts. Where and how the cuts are to be made would be decided later.
    3. Most likely, a mix of the above.

    It is better that this is deferred because the economy will be better able to handle it while growing rather than risk amplifying the effects of the turndown and getting into a deeper recession or deflationary spiral like Japan got caught in through the 90s. This is the essence of borrowing:: moving money from when you have it but don’t need it, to when you need it but don’t have it.

    Would you invest in an economy not based on sound economics? Or would you prefer to invest in an economy based on spending and borrowing? If you want people to invest we won’t get growth, if we don’t get growth the recession will be longer.

    The economics behind the stimulus idea are both sound and long established. We are going into a recession. There will be a contraction. The idea is to limit the length of that and move to growth as quickly as possible, avoid a deflationary spiral and return to growth. Monetary policy has lost a lot of its traction, not quite as badly as in the US where the interest on 3 month treasuries are almost 0%, but the transmission mechanisms are badly broken and could still head towards a liquidity trap. That leaves fiscal policy as the only lever available.

    fd

    Ireland is ready the same as sub prime mortgage borrower and the UK will find itself in the same boat. Have those borrowers taught the governments nothing, the lesson should have been don’t borrow what you can’t afford to repay, in both cases the medicine will do more harm than the disease.

    Undoubtedly the UK can “afford” more borrowing, even well outside the parameters it would consider normal. It cannot borrow forever, but the very nature of a stimulus means it cannot be forever.

  • frustrated democrat

    Ken

    The UK is made up about 60 million people, debt when PFI etc is taken into consideration, is already above 100% of GDP, and you think they can afford more. Many people are aready much too much in debt without having to pay back more in future to finance the Goverments uncontrolled borrowing frenzy.

  • Ann

    All you have done is put a more positive spin on the negatives I already highlighted. You admit there could be a run on the pound, that the pound will remain weak, you do not mention inflation led by imports, that in the long term taxes will rise, and at the end of it all you give a ringing endorsement that fiscal policy is the only one left.

    What I think you are doing ken is swallowing Browns policies whole without looking at them a little more closely.

    At the end of it all I don’t think we’ll agree….borrowing got us where we are in the first place.

  • Comrade Stalin

    Sammy etc,

    Anybody seen a proper analysis of the deal – it looks clear that SF are going to ditch the army council in return for the DUP movement.

    I think this has been clear for quite some time. The idea of the army council announcing it’s own disbandment is a red herring, but if it makes the unionists happy it’s an easy concession for SF to make. This will help, to some extent, in facing down Allister.

    Ann:

    Where will the money come from for cutting tax and spending? Will it lead to a run on the pound? A run on the pound will lead to more unemployment.

    I don’t think this has true. The US dollar and Euro were, in the recent past, a lot weaker than they are right now. Devaluing the pound will relieve some of the pressure on British exports and work to discourage imports. I can only see one downside, and that is the increase in the price of energy and raw materials that need to be imported.

    The alternative is to sit here and do nothing. Historically, I am aware of no precedent where this has worked.

    How will it be paid back? You do realise that not only will the debt have to be paid back but interest on it too?

    We’ll need to tighten control over public spending and increase taxation in the future. This has been done before and it didn’t kill us. Bill Clinton did not destroy the US economy by paying down the national deficit during an economic boom.

    kensei, you can’t possibly be a republican, you have much too strong a grasp of economics.

    I think the deflationary spiral experienced by Japan had a lot to do with the business (kiretsu?) and personal finance (saving a lot) culture over there ..

  • kensei

    fd

    The UK is made up about 60 million people, debt when PFI etc is taken into consideration, is already above 100% of GDP, and you think they can afford more. Many people are aready much too much in debt without having to pay back more in future to finance the Goverments uncontrolled borrowing frenzy.

    I suspect with that trick you are counting debts that have corresponding assets, should as the stakes that were taken in the banks.

    Ann

    All you have done is put a more positive spin on the negatives I already highlighted. You admit there could be a run on the pound, that the pound will remain weak, you do not mention inflation led by imports, that in the long term taxes will rise, and at the end of it all you give a ringing endorsement that fiscal policy is the only one left.

    It is the only one left. Perhaps you heard of the credit crunch? Bank of England base rate is 3%. The Building Society I was in was offering a fixed rate deal of 5.25% for 2 years.

    It is highly unlikely you’ll get inflation led by imports. You will get people substituting locally made goods for foreign. They could well be of poorer quality, since people were buying the foreign goods for a reason.

    Energy prices could be a risk, but on balance it looks to me that the judgement is with Brown. It is better to err high as going to low and not working is worse.

    What I think you are doing ken is swallowing Browns policies whole without looking at them a little more closely.

    Wrong. You are assuming. I spend a fair bit of my time browsing the economic blogosphere, That tends to be focused on the American economy, but you get bits about the UK too. On balance from what I’ve read, I’m fairly convinced this is the way to go. Nothing is certain. There are dangers. Happy to recognise them. If you can put a more compelling argument then I’m open. It’s my taxes that’ll be impacted after all. But so far, all I’ve got is you, really, really really like Dave.

    Also as a Republican interested in the Southern economy. They have went the xact opposite wya. Now, it’s a little tricky as that is a much smaller economy and the history indicates danger, but I’d guess they’d have been off with a bit looser policy too. We’ll find out.

  • kensei

    CS

    I think the deflationary spiral experienced by Japan had a lot to do with the business (kiretsu?) and personal finance (saving a lot) culture over there ..

    A lot has been written about that one. But there were bigger problems in that the banks didn’t fully recognise their debts and the government pursued policies that allowed them to limp on, rather than let them go under or forcing them to take the hit and providing support. Compare Sweden, which Nationalised all its banks temporarily.

  • Ann

    CS fair comment. I did say both arguments have merit, its the pitfalls in the Kenysian argument I have a problem with. I don’t think the tories are proposing that nothing is done, I think thats a little unfair. We really won’t know until we’re in the new year the results of what Brown is proposing.

    We’ll need to tighten control over public spending and increase taxation in the future. This has been done before and it didn’t kill us.

    We can only hope eh?

    If it works he will be the next PM, if not buy a paddle 🙂

    Cheers.

  • kensei

    So funny thing, turns out the borrowing for a stimulus is largely irrelevant.

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/11/taxes_to_fall_and_then_rise.html

    The problem is the fall in tax receipts, mainly from the screwed financial sector. Now that is scary. I would less squabble over what is being done, and more start praying it works.

  • Comrade Stalin

    A lot has been written about that one. But there were bigger problems in that the banks didn’t fully recognise their debts and the government pursued policies that allowed them to limp on, rather than let them go under or forcing them to take the hit and providing support. Compare Sweden, which Nationalised all its banks temporarily.

    I can see the parallels there. I’m reasonably optimistic that Brown’s idea of taking preference shares in the banks is a reasonably good compromise between those two extremes – and two banks have been nationalized already anyway, probably three if the HBOS deal doesn’t go through.

    Ann,

    I did say both arguments have merit, its the pitfalls in the Kenysian argument I have a problem with.

    I don’t see keynesian economics as being the root of all evil; it is monetarism which has got us where we are. The UK is probably the least keynesian oriented economy in the EU, but that doesn’t seem to have made us any better off than any other EU states with respect to the problems we’re facing right now.

    Once the problems are fixed and we manage to keep unemployment under control, tax raises will be necessary to start getting the debt paid down and what you said earlier does not seem to be materializing, the government are admitting this. Personally, I’d slap a couple of percent on the top rate of income tax and stick a windfall levy on the energy and privatized utility companies.

    I don’t think the tories are proposing that nothing is done, I think thats a little unfair.

    I don’t see them proposing anything in particular.

    We really won’t know until we’re in the new year the results of what Brown is proposing.

    We’re still on the downward slope right now, as kensei said earlier, the full force of this thing hasn’t hit yet. There will be further pain to come, the question will be if we have been able to cushion the blow. Even after it’s over and done with, I doubt that there will be consensus on that.

  • It was Sammy Mc Nally what done it

    Economics is not a science – but you would never guess that by listening to Economists who like Psychologists makes claims about their area of ‘expertise’ suggesting that they both fully understand their subject matter and have a theoretical framework to predict future events and to explain what the feck is going on.

    The Banks are stuffed full of economists and even months after the ‘credit crunch’ those with very little knowledge and possibly even less that qualified Economists in the banks and elsewhere can give the latter a-good-run-for-their-money in any debate. lol

  • Ann

    Comrade that sounds perfectly plausable, until I read what this stimilus will involve. Perhaps the tories are waiting to see what actually unfolds before they counter labours argument. I did read an excellent post on this over on Iain Dale. I’ll be the first to admit that I’m not fully up on this argument yet, I’ll need to read and hear a little more on argument before I come to any conclusions. Except to say that on face value what is being proposed looks gimmicky. I read on Dale’s blog that cigarettes can now come down for the first time in twenty years. That the tax they’re focusing on is value added tax and theres nothing actually going into peoples pockets….

    If that is what is involved this stimulus looks over rated and over exposed. Beginning to look like much ado about nothing.

    I don’t see them proposing anything in particular.

    In fairness they are. Getting back to good sound basic economics worked before. I realise these are desperate times and there are calls for desperate measures, but whats coming from this stimilus will hardly cushion the blows to come much nor help those on low incomes.

    Anyway we shall see how it unfolds.

  • Comrade Stalin

    Ann,

    Indeed, we shall see. I can’t see tobacco levies being reduced.

    A time like this creates a good opportunity to invest in the national infrastructure. Because there’s a slowdown, the government is in a better bargaining position to be able to get a good price for any public works projects it wishes to get going – road improvements, rail improvements, new bridges or rail links, hospitals etc.

  • kensei

    Ann

    In fairness they are. Getting back to good sound basic economics worked before.

    I’m sorry but this is a complete disengagement of the brain. Huge deficit spending has worked in the past — it pulled the US very effectively out of the Depression during WW2 for example.

    “Sound basic economics” Put two economists in a room and you’ll have a disagreement. Monetarist policies were appropriate for the time they were applied, with wage-price spirals and stagflation. That does not mean that it is appropriate now. What is the context? What is the problem you are trying to solve? Monetarism versus Keynesian was an argument buried in the 80’s, when they tried to strictly regulating money supply as a silver bullet solution and found that it had unexpected effects. Any sensible policy reflects a tool box of measures including both fiscal and monetary policy and looks to work out a solution to the problems given the tools at hand. There is no right or wrong answer or universal solution that works every time.