Post on spending cuts - 1/11/2010
Posted by Jacob Rees-Mogg, MP for North East Somerset, at 11:28, Mon 1 November 2010:
After last week’s spending cuts the question is, will they work?
Economic forecasts need to be made with caution and humility. Anyone who looks back to what economists were saying in 2007 knows this to be true. Nonetheless, some lessons can be drawn both from history and economic theory.
There are two examples in the last 100 years of significant cuts being made without being a response to wartime expenditure. These were in the 1930s and the 1980s. On both occasions balancing the books was a successful exercise and led to subsequent economic revival. Many people confuse the 1930s in England with the experience in the United States; this is a mistake. Government spending was cut by 9.6 per cent from 1931 to 1934 while the economy grew by 9.4 per cent over the same period. The more recent experience in the 1980s led to a period of sustained prosperity which only really ended in 2008. So history is on the side of cuts.
Economic theory is less certain. It has often been said that if you have three economists you will have four opinions. However, Keynes’ view has been used by the critics of the Government. This is a mistake. Keynes assumed that governments would build up surpluses in good years to spend when times were hard. This did not happen. He also worked when government spending was about a quarter of national income when it is now half. Both of these facts make it difficult to assume he would oppose the current cuts.
This is encouraging because it means overall history and economic theory are on George Osborne’s side.
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Posted by Leslie Poynter, 09:38, Wed 3 November 2010: (Is this post abusive?) #
You may well be right to suggest that economic theory and history are on Mr.Osborne's side. On the other hand his demeanour is not. He may well be a very pleasant individual for all I know, but he comes across as arrogant, unsympathetic and irritating and as for humility, I see little evidence. I agree in the most part with the cuts he is promoting, but his manner makes it difficult to be supportive. I suspect he is most unpopular among the less well off!
Had someone like Ken Clarke been in the driving seat,the Government might have secured more support!