Think tank boss, Jonathan Portes - who resigned recently as chief economist of the coalition's cabinet office - says a longer deficit reduction period "is not only feasible, but sensible and prudent".
The head of an independent economics think tank has raised serious questions about the rationale for the Government’s rapid spending cuts. Jonathan Portes – who resigned recently as chief economist of the coalition’s cabinet office to take over as Director of the National Institute for Economics and Social Research – writes in this week’s New Statesman that a longer deficit reduction period “is not only feasible, but sensible and prudent”.
After a summer of riots and collapsing media empires, the economy has quickly returned as the major news story. Figures in the last fortnight show that consumer confidence continues its downward slide, unemployment is on the rise, the number of young people out of employment, education and training (NEETs) is at a new high, export performance is faltering, and Britain is bottom of the growth league table. The only silver lining is that confidence in manufacturing is rising.
Against this backdrop, Jonathan Portes uses the economics essay in the New Statesman to critique three of the arguments used by David Cameron to justify closing the fiscal deficit within four years rather than eight. With historical evidence to support his arguments, Portes writes that the size of the UK debt, the rising debt interest bill, and the threat to confidence were all straw men used by Cameron, Clegg, and Osborne to justify their preferred policy.
Referring to attempts soon after the formation of the coalition to liken Britain’s economic performance to that of Greece, Portes writes:
“Cameron, George Osborne and Nick Clegg repeatedly likened the UK to Greece, even though no one with even a cursory knowledge of Greece’s economic position thought that such a comparison made any sense at all.”
He ends with a stinging rebuke to the Chancellor:
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“Stretching out the fiscal consolidation, and moderating some of the front-loaded spending cuts, is not only feasible, but sensible and prudent. In an op-ed piece published in the Daily Telegraph on 8 August, Osborne described those of us who share this perspective, including not only Krugman but also his fellow Nobel laureates Amartya Sen, Joseph Stiglitz and Christopher Pissarides, as being “on the outer fringes of the international debate”.
“Embarrassingly for him, a few days later, we were joined by the new managing director of the IMF, Christine Lagarde, who argued in the Financial Times of 16 August that “there is scope for a slower pace of consolidation combined with policies to support growth”. This argument is neither radical nor old-fashioned Keynesianism, nor is it in any way unorthodox. It is just standard, common-sense macroeconomics; or, more simply, just common sense.”