Dean Baker has a great article in the Guardian this morning under the above title.
As he concludes:
[W]e don't have a coherent story as to how reducing the budget deficit will boost growth — just as the creationists don't have a coherent explanation for what we know about the plant and animal kingdoms. The big difference is that the deficit hawks are determining economic policy.
That's about it, in a nutshell.
And the comparison with the creationists is a vey good one.
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I prefer this section. Very applicable to the UK:
“There is another story that the deficit hawks occasionally push. This one says that if we lay off workers in the public sector, that will increase employment in the private sector. The story here is, presumably, that mass layoffs of public sector workers will depress the wages of workers further, thereby making it more profitable for employers to hire them. There’s a simple problem in this picture. In order for wages to actually fall, the additional employment in the private sector must not be as large as the job loss in the public sector”
Another viewpoint:
http://newsthump.com/2011/06/13/miliband-uses-speech-to-acknowledge-importance-of-the-moron-vote/
Wondering whether Dean Baker copied the analogy from a piece appearing in the ASI?
http://www.adamsmith.org/blog/economics/vince-cable's-faith%11based-economics/
I discussed the analogy more than a decade ago
It’s pretty common
You’re creating conspiracy where only the ASI could
The faith is in the fact that a reduction in the level of government costs encourages investment and hence employment.
http://uk.reuters.com/article/2011/06/13/uk-britain-jobs-manpower-idUKTRE75C65X20110613
Coupled with the fact that heavily indebted nations tend to lose their credit rating and thus their capacity to borrow
http://www.bbc.co.uk/news/business-13758305
It is worth pointing out that sovereign debt ratings influence the amount of credit that international lenders are prepared to lend not just to governments,. but also to the companies and individuals living in those countries. Thus a government that doesn’t control its deficits is likely to impair the borrowing ability of its private sector too.
Ah, so although there is no evidence that business is investing now – it is in fact sitting on a cash mountain – the policy is supposed to work. This isn’t evidence based, is it? After all, haven’t you noticed the biggest single customer for business is gov’t and when they cut back business loses? Maybe the theory forgot that bit.
And second, if part (1) does not work we’ll reinforce it through the ratings agencies – the people who precipitated the 2008 crash. Excellent!
Only a fool could believe this stuff
BMW praises UK staff as it invests £500m in Minis
http://www.independent.co.uk/news/business/news/bmw-praises-uk-staff-as-it-invests-163500m-in-minis-2295444.html
To be honest, I can’t think of any industrial investment on this scale (outside oil & gas, utilities, transport) since the 1990s.
Does an exception prove a rule?
Get real
NO an exception disproves “there is no evidence that business is investing now”, and BMW was the second exception in less than a week after Nissan’s announcement that it will spend over £100 million to build the new Qashqai (or however it is spelt) in Sunderland.
“The exception proves the rule” meant that if one had to detail an exception that implied there was a rule from which it was an exception; this referred to English grammar, not accounting.
You’re still being a pedant
The cash pile is enormous – read Martin Wolf in the Ft on it
Firstly, as a science side student I had to take Use Of English despite having passed *two* English ‘O’ levels (while Arts side students did not, even if they had not), so tough; secondly, I habitually grit my teeth to read Martin Wolf; thirdly, I am right. Why not just say “there isn’t enough investment”?
The cash pile reflects the low expectation for returns on investment.
Diddums: can’t face that nasty Mr Wolf. Can’t face reality more like
You said it all
You even recognised why there’s such a lack of investment
You really have made my case for me
And as you seem to be trolling this site to waste my time please don’t bother again