Gideon or Balls

[Sprotyrover]

If you found yourself in a room with those two Cretins who would you baseball bat first? I really would strugle with this problem and i'm usually quite decisive

[BillyStubbsTears]

Sproty

Thing is. One of them had called every single economic decision correctly in the last 5 years. Every one. Every prediction he has made has been borne out by the record.
Ed Balls might be an unpleasant annoying t**t, but so was Churchill. That has got little to do with his ability to do his job.

[big fat yorkshire pudding]

I couldn't comment, nobody actually knows what Ed Balls wants to do yet, just that he doesn't agree with what is being done.  What is his solution?  He seems to criticise cuts to spending but then on the other hand also refuses to say he wouldn't do the same, I don't quite get what he would do.

Osbourne's done some good things and some poor ones IMO.

[BillyStubbsTears]

BFYP

Balls is doing what anyone in opposition would do. You don't spell out in detail what you will do from 2015 onwards until you get much closer to the Election. Consider. Back in early 2008, Osborne was saying that he was perfectly happy with Labour's spending plans!


What Balls DID do was to set out back in 2010 what he saw as the errors of Tory Austerity. He was the only major politician to realise that we were in a once-in-a-century liquidity trap, and that Austerity would accentuate the problem. That;s why he had such a big bust up with Darling before the Election in 2010. Darling wanted to go for Austerity-lite. Balls wanted to keep the stimulus going until the private sector had re-found its confidence.

It is quite clear what Balls would have done back in 2010 if he'd had his way. He'd have kept the Govt spending in 2010-11 at about the same level that it was in 09-10, before beginning to reduce it thereafter.

That would have mean that the deficit would have been about £60bn higher by the end of 2011-12 than it was under Osborne.

But. Here's the rub. How did Osborne save that £60bn? Almost all of it came from two sources.

1) Increasing VAT from 17.5% to 20%. That reduced the debt by about £20bn over two years.
2) Hugely cutting back on Govt infrastructure investment. That saved around £30-40bn over two years.

But those are two savings that any basic economics textbook will tell you will hammer demand.

Increasing VAT makes everything more expensive. So fewer things are bought. So there is less demand to provide things. So companies produce less. So people have less money in their salaries. So there is less money to buy things.

And every economist accepts that the multiplier effect on Govt investment (especially in a liquidity trap) is huge - much larger than 1. So cutting back £1 on infrastructure investment saves the Govt £1. But it costs the economy as a whole something like £1.50+. Lokk at it that way, and making savings on debt by that route is utter lunacy.

So yes, Balls's plan in 2010 would have put up the overall debt. But crucially, it would have also put up the overall economic output. He called it in 2010 and he was bang on correct. He clearly and unequivocally predicted that Austerity measures would lead to depressed GDP for a long time. He was ridiculed by the Right-wing who were in the grip of the mythical concept of Expansionary Contraction, where they believed (without a single shred of any theoretical or empirical evidence to back up the belief) that if they cut Govt spending, the private sector would have such confidence that growth would flow.

Did you hear Larry Summers last night on the TV? One of the most respected economists of the last 20 years. Hardly a raving lefty. His comment was:

Britain has been a powerful and empirical test of the efficacy of determined, resolute austerity.

The results so far have not been encouraging to advocates of that strategy.

The results so far have suggested that in line with predictions that austerity has led to reductions in demand which has led to reductions in output, to an even greater extent than pessimists predicted.

In other words, what has happened over the past 3 years has directly agreed with what Balls predicted would happen. If anything, Balls's predictions were not pessimistic enough.

It is truly depressing that we have CHOSEN to follow this experiment. We did not have Austerity forced on us by the markets. Our bond rates fell through the 07/08 crash and they have continued to fall ever since. There is not one shred of evidence to support the assertions that interest rates will explode if we don't cut hard. Not one. If there was, then I would agree that cutting Govt spending was paramount. But there isn't. So instead, we have willingly chosen a path that Balls predicted would lead us into a perma-slump. Which is where we are now. It will take us decades to catch up the growth that we have chosen to lose since 2010. And the ones who will suffer are the young of today. They are the ones who will have to deal with a country that is permanently poorer than it needs to be.