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Economy
In reply to the discussion: STOCK MARKET WATCH -- Wednesday, 21 March 2012 [View all]xchrom
(108,903 posts)31. U.K. Conservatives Come Up Short in Austerity Experiment
http://www.bloomberg.com/news/2012-03-20/u-k-conservatives-come-up-short-in-austerity-experiment.html
Since 2010 Britain has been a laboratory for an important experiment in economic policy. The question: When economies slump and public borrowing soars, can fiscal restraint speed the recovery? Preliminary findings: No, and whatever made you think it could?
The unemployed werent asked whether it was all right with them, but Britain was a good place for the experiment. For a start, its government actually controls fiscal policy. On Wednesday, Finance Minister George Osborne will set out his new budget in the House of Commons and, strange as it seems in Washington, that will be that. Osborne wont call for Parliament to change tax rates or urge it (perhaps seriously, perhaps not) to do one thing or another. He will set policy, period.
As a place for this test, Britain had another advantage. Like the U.S. but unlike France or Germany, it has its own currency and runs its own monetary policy. Osborne doesnt have to frame his budgets knowing, as governments in the euro area know, that interest rates will be set somewhere else according to somebody elses needs.
Sharp Break
Britain therefore had a lot of freedom to get fiscal policy right when the recession bore down in 2008. The Labour government then in power let automatic fiscal stabilizers work unimpeded and added a moderate amount of discretionary stimulus on top. Public borrowing surged. The Treasury said it was suspending its fiscal-policy rules until the economy was back at full strength.
Since 2010 Britain has been a laboratory for an important experiment in economic policy. The question: When economies slump and public borrowing soars, can fiscal restraint speed the recovery? Preliminary findings: No, and whatever made you think it could?
The unemployed werent asked whether it was all right with them, but Britain was a good place for the experiment. For a start, its government actually controls fiscal policy. On Wednesday, Finance Minister George Osborne will set out his new budget in the House of Commons and, strange as it seems in Washington, that will be that. Osborne wont call for Parliament to change tax rates or urge it (perhaps seriously, perhaps not) to do one thing or another. He will set policy, period.
As a place for this test, Britain had another advantage. Like the U.S. but unlike France or Germany, it has its own currency and runs its own monetary policy. Osborne doesnt have to frame his budgets knowing, as governments in the euro area know, that interest rates will be set somewhere else according to somebody elses needs.
Sharp Break
Britain therefore had a lot of freedom to get fiscal policy right when the recession bore down in 2008. The Labour government then in power let automatic fiscal stabilizers work unimpeded and added a moderate amount of discretionary stimulus on top. Public borrowing surged. The Treasury said it was suspending its fiscal-policy rules until the economy was back at full strength.
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