back to article Why is that idiot Osbo continuing with austerity when we know it doesn't work?

That austerity doesn't make the economy grow, is one of those things we all know to be true. And yet we've also got a government insisting that a recession, when there's spare capacity and we'd really rather like the economy to grow, is a great time to be cutting government spending and thus instituting that austerity. This …

@BB

While I concur with your sentiment that England has finally chosen steady hands, it is obvious you don't read the comments here very often. El Reg is filled with exactly the sort of leftists who eat up this leftist claptrap. Especially when it comes from someone claiming to be right-wing but rational.

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What austerity?

We haven't had any proper austerity or swingeing cuts in budgets yet (across the whole budget), we should have though. Now that the Tories have a majority and are in power by themselves we might actually get some.

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Re: What austerity?

Yep.

So what to cut..

They could cut the benefits paid to those working (£30 billion/yr+)

They could cut the amount paid to pensioners £75 billion/yr (plus assorted other benefits such as pension credit/housing benefit/council tax benefit)

Cut health spending? £103 billion

We could always cut the money to the unemployed...although JSA is only about £3 billion directly..

We could cut the £20/30/40 billion in corporate welfare spending....and we could cut the amount of money redirected by tax avoidance/evasion.

Tough decisions.

Piss-off the people (some)

Or piss-off your donors and supporters....

Although we should also look at the chancellor...who is not an economist (of any sort) but is intensely political....is doubtless planning for life after Call-Me-Dave has gone/been made gone...

But wait...

NHS is ringfenced

Pensioners are ringfenced.

Education is fenced...whether ring or barbed wire I do not know...

That puts Call-Me-Dave in direct opposition to Call-Me-What-You-Like-Gideon.

Things could get interesting soon....

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Re: What austerity?

"They could cut the benefits paid to those working (£30 billion/yr+)"

If those are cut _and_ taxable income points are simultaneously raised you can have a paradoxical effect of not reducing what's in the pockets of those working whilst also saving a fair amount of money. This is achieved by laying off those in inland revenue who only exist to take in, handle and disburse those credits and is an ongoing year-upon-year savings.

There are two sides to taxation:

1: Gross amount taken

2: Net money available

The more complicated the tax structure is, the less ends up in #2 and conversely if the structures are simplified with loopholes eliminated, you can reduce #1 whilst simultaneously increasing #2.

This was done in New Zealand. 30% of the inland revenue department was made redundant over the following 5 years and staffing levels are now 1/3 what they were in 1984.

Some of this is down to increasing computerisation, but NZ had already been reducing its staffing levels under this model - unlike the UK which has been hiring more and more people to work for the inland revenue since computerising, whilst providing worse and worse service (Hint: the more people a manager has under them, the higher their position, which means more pay and higher retirement benefits. There's no real auditing of the usefulness of departments and their staff which in turn results in rampant "Featherbedding" across the civil services - other EU countries do it more blatently but the UK is still bad in terms of public sector inefficiency.)

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Trollface

Top trolling

Typical Tim article structure: Populist/wrong opinion in the first couple of paragraphs then examine it in more detail in the rest of the article. Gets me every time.

Doesn't do much for my blood pressure though.

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Re: Top trolling

I find the pills the doctor gives me help.

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Worstall? Lefty?

Blimey, tough crowd.

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Re: Worstall? Lefty?

No, just TL:DR

Hint, engage brain before posting

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Holmes

Re: Worstall? Lefty?

You've (perhaps inadvertently) given us a bit of a social experiment here. How many commentards read beyond the title and first paragraph or two before posting?

Well, OK, not a social experiment or result. Even if you'd designed it that way, posting it here on a Sunday and under your name means many (though evidently not all) of us have preconceptions. Just an illustrative example.

Anyway, now that Osborne proposes to outlaw running a deficit through a boom, maybe we'll finally see some real cuts in reckless government profligacy. Hmmm, dream on ....

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Re: Worstall? Lefty?

But you are a lefty, you just believe in right wing ways of achieving your left wing ambitions.

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If devaluation were the secret to economic success, we'd be the most successful country in Europe.

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Anonymous Coward

It always worked for Italy. Economic problems? Devalue the lira and export more cheap cars. Of course now they're stuck in the Euro they can't do it any more, which is why things have gone a bit shit.

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It helps to actually read the article before commenting...

Unless I've just read a different article to the rest of you the title just summarises the position that the rest of it undermines. My reading:

1) Some economists put the argument in the title, saying that there is no alternative to spending vast wodges of cash...

2) But they forget monetary policy. QE has given us the room to cut.

3) Which we did in the 1920s when it worked like a charm. That time in wasn't QE but leaving the Gold Standard but the effect was much the same.

4) Meaning that whilst you can still advocate spending more, original argument that there is no alternative is a load of dingo's kidneys.

Hardly the lefty diatribe that some of you seem to think.

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Re: It helps to actually read the article before commenting...

QE: printing extra money

QE by giving iot to banks or QE by paying people/companies to do things _should_ both achieve the same result from the financial point of view (more money in circulation with a lower overall intrinsic value per instrument)

However the fact that the banks have largely hoarded what was given to them has thoroughly blunted the intent of printing more money - which was to stimulate growth by encouraging economic activity and getting more money circulating. Someone forgot to give the banks the memo that if money's not actually circulating then the plan doesn't work and the govt might just as well have printed the money and stashed it at the royal mint.

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What spare capacity?!

"a recession, when there's spare capacity"

Nothing like today then, with our 5% unemployment rate. Nor do we have factories lying idle, nor airports half-empty, nor any other possible indicator of spare capacity.

So whatever the lessons of this article, they aren't relevant to the present situation.

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Re: What spare capacity?!

Productivity is way down, that's the spare capacity.

Fortunately, this time around most employers have realised that sacking the workforce cost-saving measures actually have an extremely high price, and often severely damage the business as the skilled workers leave.

So they're mostly holding onto their employees.

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Re: What spare capacity?!

Holding on to employees for a year or two, perhaps; but for seven years? Your theory is implausible.

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Re: What spare capacity?!

Productivity has stopped increasing, but I don't think it is "way down". In my field of business, productivity increased in the past due to the introduction of computers into the business, and people figuring out how to make the best use of them. I left college at the time when most of them were getting their first computers at the end of the 20th century. I'm not really seeing anything new coming onto the market now that would improve our productivity any further.

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Re: What spare capacity?!

" I'm not really seeing anything new coming onto the market now that would improve our productivity any further."

The British Civil Service are by-and-large still using antiquated, outdated pre-computer methods and employing too many layers of management to be able to effectively run the organisation.

That makes it inefficient and ripe for cost savings, unless you're using it as a way of hiding real unemployment figures (arguably the case in many post-industrial areas where the govt has taken the place of t'mill or t'mine as the employer which brings money into the area from outside and everything else is support industry that takes money from civil servants and spreads it around.)

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Spending money

does work.

But its has to be spent in the right way.

Blowing 10 billion quid into council budgets to fix potholes is liable to result in 1 billion being given to private sector contractors to do the cheapest job possible while the other 9 billion is spent on admin and multi-cultural lesbian single mother awareness campaigners* to make sure the contractors staff are aware of the issues.

Its better to use the money to invest in the economy, and given you cant very well tell where the best place is (unless you like forcing the unemployed to build autobhans), the money should be invested in education.

Need more doctors..... grants to medical students.

need more nurses . grants to nursing students.

need more engineers ... goes without saying really.

need more IT techs ... need more lobotomies..

(the last one is a joke btw)

The result would be the spending going into the economy as a general as no student I've known ever has any money.

"But spending would rise adding to the deficet" comes the wail from the right..

And 4 years down the line those same students are in jobs that have a 40% income tax rate attached to them.. plus we have well skilled people who can start their own businesses, and we dont have to import(actually steal) so many skilled people from abroad who are really needed in their home countries

thus reducing the housing pressure and house prices.

*substitute any council non-job here and we all know of them

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Re: Spending money

Unfortunately for your argument, creating more students doesn't create more jobs requiring graduate qualifications - ask any recent university leaver.

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Re: Spending money

I'm not sure what you mean by "going into the economy". What difference does it make if money is spent by private contractors or multi-cultural lesbian single mother awareness campaigners? Isn't the point that as long as they spend the money, the economy grows? I can understand that you might prefer better roads to increased awareness, but is that not just a matter of personal taste? Others might prefer better pizzas. (So why not just increase welfare benefits for that matter?) These are honest questions. This economics stuff hurts my head.

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Anonymous Coward

Re: Spending money

Pretty sure lobotomies would increase demand for IT techs. Seems like a large percentage of the customer base already had them.

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Re: Spending money

Can't we just have a war?

That involves lots of government spending into the economy very quickly, we get a boost to industry (better if we lose enough kit) and it distracts the public.

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Re: Spending money

"substitute any council non-job here and we all know of them"

That was part of "spending out of the recession" we used last time around. Unfortunately, we never got rid of those people in the "good" times so can't repeat that jolly wheeze.

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Re: Spending money

There is a benefit to the country from having decent roads over and above the money paid out to tarmac layers. There is no such benefit to be had from increased awareness of the existence of ethnic minority disabled lesbian single mothers.

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Anonymous Coward

Re: Spending money

Or lobotomies increase demand for Apple products...

<ducks>

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Re: Spending money

Go on, I'll bite, on the grounds that you might actually be that stupid, and other people certainly are.

Supporting minorities or the disadvantaged is not because the council wants to be *nice*, it's because they think it will save them money in the long run, either by getting or keeping people in work, improving health or decreasing crime..

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Re: Spending money

> creating more students doesn't create more jobs requiring graduate qualifications

"I don't often talk to arts graduates, but when I do, I ask for mine with extra fries"

Students in the current environment take "soft" and "cheap" degrees. Those are the ones which have no real job market, but you get a "degree" attached to your name.

Hard sciences and vocationally-related jobs are still in demand. The problem is that graduates incur such high levels of debt that they may never be able to pay it off.

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Re: Spending money

"What difference does it make if money is spent by private contractors or multi-cultural lesbian single mother awareness campaigners? "

In the one case you should get some hard infrastructure (and therefore long-term public benefit) for your money. In the other it's ephemeral.

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Re: Spending money

"There is a benefit to the country from having decent roads over and above the money paid out to tarmac layers. There is no such benefit to be had from increased awareness of the existence of ethnic minority disabled lesbian single mothers."

If we ignore the cliches and the stereotyping, it's arguable that the benefit of such schemes lies in furthering the Public Good.

That may appear a somewhat quaint concept, but it does rather lie at the heart of whether the UK and its Government exist in order to serve the people of this country or whether they exist to serve the interests of the business community.

I'd be the first to accept that a healthy and successful business community contributes greatly to the Public Good but the concept of 'what's good for business is good for the country' seems to me to be a quite nonsensical one.

We affluent IT types can wibble on all we like about welfare dependancy and the evils of employee rights, but if we dont look after the vulnerable in society and provide checks and balances against the powerful exploiting the powerless, then I think we should be questioning why we have a government at all.

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Re: Spending money

One of the issues here is that a university makes the same money from students whether it awards 10,000 degrees in Art Appreciation, or 10,000 degrees in Electrical Engineering.

If we adjusted university funding to depend on the tax paid by recent graduates, we'd see a change in places offered over time to those courses that (a) are likely to lead to a decent job, and (b) won't have you leave the UK ASAP.

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Paris Hilton

Article idea

Tim, any chance of an article on the gender pay gap? I'd understand if you didn't want to touch it with a bargepole though.

Paris, because she's worth it.

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Re: Article idea

Yes, will add to the list. Short answer: there's a motherhood pay gap, not a gender one.

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Anonymous Coward

Re: Article idea

Compare like to like and the alleged gap disappears.

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Re: Article idea

Don't forget the studies that show pay strongly correlated to height (so an average woman is paid more than an average man of her height). Not a particularly exciting result, but might just put a crack in the pedestal we tend to put under other equally-meaningless results.

Oh, and the I always put to those who count bums-on-seats (or pay gaps) and infer discrimination. What would you propose to do about the biggest inequality of all - namely the prison population? Shouldn't those who have a problem with inequality be making strenuous efforts to imprison more women?

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The best reason for not increasing spending...

... Is that it's nigh on fucking impossible to reduce it later. Look at the maniacs screaming about austerity in the coalition government when every single year they spent more than Prudence Brown's handout regime.

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Cheques vs cash

//Sending out stimulus cheques in the US (George Bush essentially saying, send everyone cheques for dollars as a method of stimulus) did work. But it was noted that if people were sent one for a few hundred, or a reasonable portion of a thousand or so, then they would indeed save it, use it to pay down debt, and that's not stimulative activity.//

When I get a check it goes into my bank account as a matter of course. I might put it in savings while I'm at the bank.

Would it be more efficient to give out cash?

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Re: Cheques vs cash

."Sending out stimulus cheques in the US (George Bush essentially saying, send everyone cheques for dollars as a method of stimulus) did work. But it was noted that if people were sent one for a few hundred, or a reasonable portion of a thousand or so, then they would indeed save it, use it to pay down debt"

Or a still running argument in Oz. The then govt gave an extra $ 900 tax refund when people put in their 2008 tax form. Coincidentally tax time was the same time as the GFC crash. The mantra was go hard go early go households. Allegedly everyone's $ 900 was spent on brand new TVs. Current govt is still whingeing about this. But weird that Oz seemed to avoid worst of the GFC.

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Re: Cheques vs cash

If I received cash, I would skip a visit to the ATM, and leave more of my salary in the bank account.

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Re: Cheques vs cash

If you mailed out cash, you'd certainly stimulate the criminal economy. Not sure if that's what the government really wants, however.

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Re: Cheques vs cash

>But weird that Oz seemed to avoid worst of the GFC.

Only in the sense that we didn't have a recession and the economy actually grew during the quarter with the GFC.

The current government is right though. If only Rudd had spent less on stimulus and more on new NBN logos....

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Re: Cheques vs cash

//If you mailed out cash, you'd certainly stimulate the criminal economy. Not sure if that's what the government really wants, however.//

Actually I had visions of emptying bags of loose notes out of skyscraper windows...

Hey, I think I've got it.

Who spends all their money?

Children.

Let's give them... say, 30 pence or so per day they go to school.

By my calculations this would drop about a million pounds into local economies per schoolday.

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Reasoned debate is good to read whether I agree or not.

I generally enjoy your columns Tim, but please leave the hysterical headlines, political opinions and slagging off to the rags where it belongs. Stick to your economics as I am not interested in your political views.

Shame we can't down vote an article... -1 from me.

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Why is the The Register becoming more and more politicized? It's a IT news site.

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Coat

That's commie talk!!

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I don't worry particularly about the politics on El Reg but it would be nice to see better balance with articles and contributions which counter Tim's particular point of view.

I think everyone would benefit from a comprehensive "why Tim's wrong" article even if they don't particularly agree with that perspective. We have had weeks of economic and political argument presented from a single viewpoint and that isn't healthy in my opinion nor good for El Reg.

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Anonymous Coward

Quote quiz:

"I don't want no commies in my car. No Christians either."

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Anonymous Coward

If we assume that a downtuurn is bound to come at some point in the next 5 years as part of the normal economic cycle then the government would definitely rather have it sooner so that the good times are rolling again by the time they're due for re-election. Whether or not that impacts their behavior I don't know, but it seems to me like it would.

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"Stimulus" Does Not Work

So-called "stimulus" does not work because government is stupid. Keynes doesn't count value, only expenditures. Government is not smart enough to buy value, while individuals spending their own money shop hard for value.

If one didn't need value from one's CPU cycles then the greatest program in the world is "10 goto 10". This is what "stimulus" does. If government would leave money in the pockets of those who earned it then it will get spent as soon as something of value appears. If government spends they don't wait for something of value, they take the first pork project a favored politician asks for.

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