austerity

Austerity is a choice

You don’t have to be a modern monetarist to believe that the UK has a debt crisis. There are a number of well evidenced and widely believed economic theories that support the use of a Government deficit to induce growth which is the surest way to reduce national debt. Those that argue austerity is a choice are bang on the money.

Debt fetishists need to get this, but so do those who argue that we should fund some desirable programme, be it pensioners winter fuel allowances, doctor’s recruitment or student debt forgiveness because we can fund a defence budget. How we use and deploy our military is of course a matter of other priorities but arguing we need to accept austerity but applying the cuts elsewhere is ignorant. …

Labour and the Cuts (again)

Two comments on the Reeves announcement to cut albeit fake investment projects and the pensioner’s winter fuel allowance. On the fuel allowance payment, this is not means testing the entitlement, it will be linked to Pension Credit entitlement, the threshold for which which is slightly less than the state pension paid to someone with full contributions record. It also ignores the fact that additional income is taxed. This entitlement limit is £11,500, about half, under the national living wage, and the amount required to sponsor an immigrant is £29,000. I quote these figures to show how necessary and low the contribution-based pension is. This is mean and unnecessary.

On the macro-economics, the “golden rules” were designed to protect investment against short-term debt management fetishism. Until now no-one has ever argued that you shouldn’t borrow to invest, and while I usually argue that investment in human capital is a legitimate use of the state’s borrowing capability, which some consider to be a stretch, that can be no doubt the roads and railway lines warrant being borrowed for.

Jeremy Hunt and Owen Jones both accused Reeves of implementing cuts that she had always planned to do. If the labour front-bench did not know that the last Tory budget was fake, then they should have done. I’m also taken with the Twitter correspondents here and a thread here who point out that it is not just modern monetarists who state that the constraint on the capacity of the economy is its inputs and neither the money supply or the borrowing capacity. …

And now Spain turns to the Left

The mould has been broken in Spain. Yesterday, in Spain’s general election, yesterday, the two Parties that have dominated Spain’s post fascist democracy both lost seats and votes. The new parliament has no natural majority. The PSOE, in particular, has some interesting challenges in front of it and the next few weeks and months may act as a signpost for the politics of Europe. …

On parliament and the EU budget

In parliament, Labour voted with Tory europhobes last week to express the view that the next seven year budget for the EU should be less than the previous seven years budget. I think this is playing with fire. In voting with the Tory backwoodsmen, Labour gives credibility to their xenophobia and also to their austerity agenda. It is also committing to cuts for seven years. However it is a fact that the EU budget is about 1% of EU GDP and can thus not have much impact on the growth of the European economy, although the pump priming aspect of the expenditure programmes is one of the reasons that the majority of the EU member states want to see an increase in expenditure. …