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George Osborne Is Out Of His Depth

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http://www.guardian.co.uk/commentisfree/2011/apr/19/george-osborne-uk-economy-growth

Can you remember the last time a British chancellor sounded so shrill? After 18 years of measured tones from Tory grandees followed by 13 years of Scottish gravitas, we are not used to hearing our chancellor sounding excitable and impulsive. Yet if George Osborne's recent outburst on AV and the Electoral Reform Society has received most attention, it is his rush to give partisan interpretations of events in Europe and the US that has caught my ear.

First he made the extraordinary claim that Britain could have gone the same way as Portugal if it were not for his deficit reduction plan. Leave aside the fact that Portugal is locked into the eurozone – so has no exchange-rate flexibility and the same interest rates as growing countries like Germany – or that Britain's debt is more long term than any advanced economy.

Osborne's logic is that if only Portugal had made cuts and tax rises on the scale and speed of his plan, it would not be facing this crisis. Yet Portugal has had austerity packages including two VAT rises in the last year. But just like Ireland and Greece, it has found that it does not matter how much the government cuts spending or raises taxes – if it cannot create jobs and growth, its deficit problem and the loss of market confidence will get worse, not better.

This scaremongering didn't work, so last weekend we witnessed the rather desperate and unstatesmanlike sight of a British chancellor using an International Monetary Fund meeting in Washington to make a partisan attack on the opposition back home.

Osborne claimed President Obama's plan to cut the US deficit went further than his and left Labour isolated in the world. But Labour's plan to halve the deficit over four years is what all the major economies agreed to do at the G20 last year. And while Obama says he wants to eliminate the deficit in 12 years, Osborne wants to do it in four.

The reality is that it is Osborne himself who is isolated. He is going further and faster with deficit reduction than any other major economy in the world, and on a foundation of stalled growth and higher unemployment – the opposite of what we have seen in the US.

But there is a deeper concern about what's happening in America and the events of the last fortnight. A highly partisan Republican Congress is pushing for a deficit reduction plan that includes drastic cuts to education, healthcare and social security while preserving tax breaks for the very richest.

etc more plausible sounding excuses for firing up te printer at the link

Your next chancellor wants printy printy.

Theres a reaonable point in there somewhere about not cutting taxes for the rich while cutting medicine for the poor, probably.

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The reality is that it is Osborne himself who is isolated. He is going further and faster with deficit reduction than any other major economy in the world, and on a foundation of stalled growth and higher unemployment – the opposite of what we have seen in the US.

Well, ed, maybe because every other major economy in the world (other than the US which has leeway due to its reserve currency status) has n't inherited nigh on 15% GDP scorched-earth liebour deficits, just an idea.

Why any sane politician would want to follow the US's lead is beyond me. Why no mention of Germany? They seem to be the ones actually running a sound economy. The US is all smokes and mirrors. Yes, the US has GDP 'growth', but only because they lie about inflation.

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once in a while,Blinky reaches the right conclusion,but as ever,it's for totally the wrong reasons.

you can jsut imagine the damage he'll do when labour get a 50 seat majority with 25% of the vote at the next election.

Damage? Come off it, it'll be a gift from the gold gods :ph34r:

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The reality is that it is Osborne himself who is isolated. He is going further and faster with deficit reduction than any other major economy in the world, and on a foundation of stalled growth and higher unemployment – the opposite of what we have seen in the US.

Said the offical mouthpiece of the Labour party

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When did they change the definition of gravitas from seriousness, weight, dignity and importance to ignorance, self-importance and utter failure?

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"followed by 13 years of Scottish gravitas"

:blink:

What's he on about?

"13 years of a Scotchman pulling policies out of his ass" is what he meant.

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The man who was so impressed with the Irish 'miracle' economy and thought it

would be simply spiffing if the UK followed that route.

The economic genius that is Osborne Osborne.

mwahahaha.

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The man who was so impressed with the Irish 'miracle' economy and thought it

would be simply spiffing if the UK followed that route.

The economic genius that is Osborne Osborne.

mwahahaha.

to be fair, everyone in the world, except us on HPC, was impressed by the Irish 'miracle' at the time.

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The reality is that it is Osborne himself who is isolated. He is going further and faster with deficit reduction than any other major economy in the world, and on a foundation of stalled growth and higher unemployment – the opposite of what we have seen in the US.

Would that be the same deficit reduction that involves the deficit growing month on month or are we talking about another one?

Cutting further and faster my hairy ass, I've seen snails move faster...

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I think you'll find a degree in Modern History more than qualifies Osborne for the position of Chancellor of the Exchequer.

....your irony is not amusing....all he needs is common sense....and that is far far away.... :rolleyes:

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The reality is that it is Osborne himself who is isolated. He is going further and faster with deficit reduction than any other major economy in the world, and on a foundation of stalled growth and higher unemployment – the opposite of what we have seen in the US.

What deficit reduction is he one about? The tiddling bit of money he's saved was blown bailing out the Ireland/Portugal. Not seen any deficit reduction yet! :unsure:

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What deficit reduction is he one about? The tiddling bit of money he's saved was blown bailing out the Ireland/Portugal. Not seen any deficit reduction yet! :unsure:

At least they'll pay us back.

Won't they...? :unsure:

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Sounds like a lot of squabbling over nothing.

The crux is, the Tories want the budget balanced in 4 years, Labour want the deficit cut by 50% in 4 years (presumably reaching a balanced budget by 2019).

Personally I would rather see the budget balanced as soon as possible.. Not much in it though. The truth (as is often pointed out), is that neither party are actually making any nominal spending cuts.. public spending will increase whether under Tories or Labour so it really won't make a huge amount of difference either way.

The only "growth" strategy either party has is to keep borrowing.. and if rates* rise just trash the currency further by printing to directly fund government spending again. It's a zero risk strategy. The only by product is inflation.. and the people will just blame the supermarkets and oil companies for that.

*Bond yields - for clarity

Edited by libspero

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The tiddling bit of money he's saved was blown bailing out the Ireland/Portugal. Not seen any deficit reduction yet! :unsure:

The bail out Darling signed up to once the election was lost. :(

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Sounds like a lot of squabbling over nothing.

The crux is, the Tories want the budget balanced in 4 years, Labour want the deficit cut by 50% in 4 years (presumably reaching a balanced budget by 2019).

I thought it was the tories who just wanted to halve the deficit in 4 years? Get it down to a mere 75bn extra debt per annum by the next election?

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I know Ed Balls is the least popular politician on this forum.. but I still think he is right on this one point that pushing for austerity is a failed policy. You have to spend your way out of depressions. Labour's big mistake was they forgot the other side, you have to be conservative during the good times, not go crazy giving luvvies endless money.

In fairness to the Tories, they haven't actually cut the deficit at all. They talked big coming in, but haven't actually done anything. The deficit was still £175 billion a year last time I checked.

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I know Ed Balls is the least popular politician on this forum.. but I still think he is right on this one point that pushing for austerity is a failed policy. You have to spend your way out of depressions. Labour's big mistake was they forgot the other side, you have to be conservative during the good times, not go crazy giving luvvies endless money.

In fairness to the Tories, they haven't actually cut the deficit at all. They talked big coming in, but haven't actually done anything. The deficit was still £175 billion a year last time I checked.

Malinvestment by both the public and the private sector need to work through. Both have already borrowed too much and spent it on the wrong things. You don't need more spending, you need better spending... I wouldn't consider the government as the best entity to do this, as they don't have the pricing signals which individuals trading in a market do.

The mistake you (and Labour*) make is to consider the government to be the centre of the economy, dictating where it will lead, through its spending choices. This is a fallacy. The government is just one, big, entity in a sea of entities (individuals and companies). It is not the only source of credit, nor is it the most agile or effective at spending it... it is just a big blob of borrowing power, which is largely rudderless. How can it possibly be otherwise, when just a few wise (I'm being kind! ;) ) men are making decisions, which would be better off done by individuals and businesses instead?

While I'm no Tory (or any main party, really) lover, at least they seem to get that they need to return borrowing power back to individuals and businesses in the market place. We've had enough governmennt malinvestment, including shoddy taxation which has encouraged private malinvestment (housing boom)... the last thing we need is more of that.

If you stop thinking of the government as something special which lives at the centre of the economy, then you will start to see the obvious alternative routes to growth, which need to be allowed to flourish.

EDIT: * Well, all the main parties do tend to say how they will change the country, but Labour seem to have themselves on a particularly high pedestal.

Edited by Traktion

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I know Ed Balls is the least popular politician on this forum.. but I still think he is right on this one point that pushing for austerity is a failed policy. You have to spend your way out of depressions. Labour's big mistake was they forgot the other side, you have to be conservative during the good times, not go crazy giving luvvies endless money.

In fairness to the Tories, they haven't actually cut the deficit at all. They talked big coming in, but haven't actually done anything. The deficit was still £175 billion a year last time I checked.

Depression? What planet are you on. The World economy is larger today than it was just before the crash and it is growing gangbusters at about 5% per annum. Depressions have soup kitchens, mass unemployment and no hope of a job. So why is unemployment falling in the UK even with public sector job cuts, why are retail sales growing, why are UK exports higher now than before the crash if we are in a depression?

We are not even in a recession now all we are in is a moaning season by people that have got used to unlimited credit to fund lifestyles they could not afford and now they feel poor and are having to pay extra taxes for the lifestyle they thought they were entitled to.

Oh and the PBSR have been released this morning and it was 141 bill for last fiscal year so a reduction of 34 bill of 20% on your figure of 175 bill, not bad for a first year and it has not crashed the economy either.

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Malinvestment by both the public and the private sector need to work through. Both have already borrowed too much and spent it on the wrong things. You don't need more spending, you need better spending... I wouldn't consider the government as the best entity to do this, as they don't have the pricing signals which individuals trading in a market do.

The mistake you (and Labour*) make is to consider the government to be the centre of the economy, dictating where it will lead, through its spending choices. This is a fallacy. The government is just one, big, entity in a sea of entities (individuals and companies). It is not the only source of credit, nor is it the most agile or effective at spending it... it is just a big blob of borrowing power, which is largely rudderless. How can it possibly be otherwise, when just a few wise (I'm being kind! ;) ) men are making decisions, which would be better off done by individuals and businesses instead?

While I'm no Tory (or any main party, really) lover, at least they seem to get that they need to return borrowing power back to individuals and businesses in the market place. We've had enough governmennt malinvestment, including shoddy taxation which has encouraged private malinvestment (housing boom)... the last thing we need is more of that.

If you stop thinking of the government as something special which lives at the centre of the economy, then you will start to see the obvious alternative routes to growth, which need to be allowed to flourish.

EDIT: * Well, all the main parties do tend to say how they will change the country, but Labour seem to have themselves on a particularly high pedestal.

In depressions I think the state has unique features that allow it to spend its way out. First it has the central bank and can literally create new debt free money. It has the power of taxation. It has scale that no private company has.

The problem individuals and companies have is while they can attempt to stimulate the economy, unless millions of other individual also try to stimulate the economy at the same time it doesn't have an effect. This is why the media tries to pump up the economy.

Say I own a business I can't go out and borrow money and raise wages or build new capital.. if my sales are falling off. But the national government can do that.

I'd also say sadly and out of neccessity the national government is the center of the economy in 2011 in all developed nations. In Britain its about 50% of the economy. A century ago it was only 5% of the economy. But the problem today is the private economy doesn't really function on its own anymore. People just don't earn the money to buy the production in the modern automated economy.

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