The debt hawks are to economics as the creationists are to biology.
This should be interesting.
Here are some quotes from The Economist:
“The budget, unveiled by George Osborne, the new chancellor of the exchequer, in June: To balance the books, he raised some taxes, notably VAT, but three-quarters of the savings will come from spending cuts. Most government departments will shrink by a quarter, though Mr Osborne excluded the National Health Service from his savagery. In the heated debate between Keynesian economists (who worry that a weak world economy needs more government spending) and fiscal hawks (who believe deficits must be tackled now to stave off Grecian disaster), Britain is the prime exhibit for tough love.”
“Mr Osborne plans to get the job essentially done by 2014-15. If all goes to plan, the deficit will fall from 11% of GDP in 2009-10 to 2.1% in 2014-15. The structural deficit, which strips out the effects of the economic cycle, will drop from 8.7% of GDP to 0.8%. On a similar basis, the government will by then be running a small surplus on the current budget, which excludes net investment (due to be slashed anyway over the next couple of years). This is a much faster retrenchment than the previous Labour government envisaged. It planned to return the cyclically-adjusted current budget to balance in 2016-17. Labour’s fiscal consolidation would have amounted to 4% of GDP by 2014-15; Mr Osborne is aiming at 6.3%.”
Never mind that Britain can’t have a “Grecian disaster.” Britain is monetarily sovereign. Greece is not. Completely different situations. Raise taxes; cut spending. Government runs a surplus. That is the debt hawk mantra. If Britain actually follows through on these steps (doubtful), it will suffer terribly.
All you debt hawks out there; what is your prediction?
Rodger Malcolm Mitchell
No nation can tax itself into prosperity