Well heck, whodda thunk it?
Business support for the government’s austerity plan started to fracture on Thursday after one group called for a small stimulus funded through extra public borrowing.
The British Chambers of Commerce, which represents more than 100,000 businesses, said the UK had enough “wiggle room” to use a “moderate fiscal stimulus” to help lift the stagnant economy.
“[George] Osborne’s built up a lot of credibility with the markets, a clear continued commitment to deficit reduction is important, but coupled with that we’ve got to get growth,” John Longworth, the BCC’s director-general, said.
“If we can’t get growth, and tax revenues fall, we’re just as much at risk of having the bond markets react to that as we are from failing to have a deficit reduction plan.”
Ok, so they’re still talking about the bond market as if it’s God Almighty, but at least they are acknowledging that austerity isn’t working. Baby steps.
But the government, so far, isn’t listening. Here’s Krugman:
In a lot of ways George Osborne, the Chancellor of the Exchequer (finance minister) is Britain’s answer to Paul Ryan. True, he’s a toned-down version — no Ayn Rand, please, we’re British — but other aspects of package are there in full force: he’s articulate, has a vision that’s completely at odds with everything we actually know about macroeconomics, and he was for a while the darling not just of the right but of self-proclaimed centrists on both sides of the Atlantic.
Osborne’s big idea was that Britain should turn to fiscal austerity now now now, even though the economy remained deeply depressed; it would all work out, he insisted, because the confidence fairy would come to the rescue. Never mind those whining Keynesians who said that premature austerity would send Britain into a double-dip recession.
Strange to say, Britain’s recovery stalled soon after Cameron/Osborne began their new policies, and the country is now in a double-dip recession.
So is Cameron rethinking his faith in Osborne? According to the FT, no:
But Mr Osborne continues to enjoy David Cameron’s backing and will stay as chancellor when the prime minister this week conducts his reshuffle, expected to take place on Tuesday.
Instead of a real policy rethink, what Cameron and Osborne apparently have in mind is rearranging the deck chairs on the Titanic a set of basically minor twiddles involving credit and planning authorizations, which seem highly unlikely to make any significant difference.
And the Tories are doubling down, calling for “shock therapy” austerity, the problem apparently being that people just aren’t suffering enough. Not kidding.
And here in the US, we are in grave danger of being led down that same garden path as soon as the election is over. We’re preparing to do some kind of “austerity-lite” — which is likely to have similar results.
In case you wonder what those irrelevant elements called “the people” think about all this, check out the reaction to George Osborne at the paralympics:
He looks surprised.
By the way, supporting candidates like this will help. These people are running on prosperity Economics, not Austerity economics and we desperately need more representation of this idea in congress.