In a discussion of George Osborne’s plans for the deficit, I suggested that – if we were to take them seriously – they could only be rationalised as an attempt to fundamentally reduce the size of the state, writes Professor Simon Wren-Lewis.
Chris Dillow, following Rick and Giles, seems to prefer the cock-up theory, whereby the destruction of the state is an accidental result of an obsession with the deficit. I’m afraid they are wrong – this is no accident.
The argument I use in my earlier post is that there is no sound macroeconomic case for a rapid reduction in the share of debt to GDP at a time when interest rates are still at or near their lower bound and there are risks to the recovery. So, if the macroeconomic argument for deficit reduction is unsound, there has to be another motive.
Here on Vox Political we call it ‘Starving the Beast’, an old George W Bush policy in which he cut taxes in order to worsen his administration’s fiscal position, necessitating spending cuts. He turned a surplus of millions into a deficit of billions, if memory serves. Read the rest of this article on Mainly Macro.
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