Monday, March 29, 2010

Accepting Reality

The phrase the most annoy me at the moment is "accepting reality", when used in the context of government spending. Last Sunday night on Radio 4 an SNP politician who suggested that they weren't all that keen on cuts was accusxed of living in an economic fantasyland. It appears again today in Nick Robinson's "Labour Cuts would be tougher than Thatcher" where he states "This is not the first time the chancellor has caused a stir by accepting reality."

When I first saw the figures for the budget deficit I remember making the suggestion that cuts might be needed, in hindsight that was the wrong thing to say. Admitting the need for cuts is not accepting "reality" it is nothing more than accepting the doctrine of fiscal conservatism, a doctrine that I just don't accept.

One thing that really hasn't been mentioned yet is that often cutting back on government spending doesn't even solve the problem. It's already being suggested that Greece's austerity measures are making their situation worse and there are plenty of other examples from the pages of history.

The problem is that if public sector demand is withdrawn there has to be some kind of other demand to replace it. On this score things are not exactly looking hopeful, private sector demand is slowly coming back, but not in a major way, the British consumer is still suffering under the burden of it's debt. The exports front also looks dim with other countries embarking on austerity measures it looks unlikely that we can look abroad for a source of demand.

Altogether things are not looking hopeful, but concentrating on the deficit at the exapense of everything else is not accepting reality, it's economic suicide.

1 comment:

Anonymous said...

27 days until the end of Bottler Brown and NuLab!

27 days until the end of ID cards!