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Reply #54: UK Stimulus: "Bold, imaginative – and it might just work " (Guardian) [View All]

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Ghost Dog Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Nov-25-08 09:13 AM
Response to Reply #52
54. UK Stimulus: "Bold, imaginative – and it might just work " (Guardian)
* Will Hutton

This was an almost great economic statement – rising to the seriousness of the situation with boldness and sometimes real imagination. It is a stimulus to the economy in a full year of £20bn, which has been organised to come through in 2009/10 when it is most needed. The centrepiece is a temporary £8.6bn reduction in VAT to 15%. In the 1950s, governments used changes in the then so-called purchase tax on goods and services to regulate spending, and the "Regulator" was a fast and effective means of increasing or decreasing demand.

Although tax credits to the low paid had powerful attractions as a way of stimulating demand, the chancellor has chosen to go no further than making the big £600 increase in personal allowances permanent, while adding another £130. The American example is that in current conditions taxpayers tend to save any income tax giveaways. Hence the cut in VAT to make spending more attractive. I suspect it might work rather better than received opinion thinks, which together with bringing forward £3bn of capital spending into 2009 credibly adds 1% to demand at the moment it is most needed. He is to be congratulated.

But the PBR is only almost great, because the chancellor could have done more to mitigate the inevitable risks and hazards. He has chosen to wait until next spring to introduce measures to restore the flows of mortgage finance – far too late – and he has been far too minimalist in measures to get bank lending going. As it is his economic forecast for 2009 is at the optimistic end of expectations, relying on the effectiveness of his intervention. But if the economy does not respond to his measures as well as he hopes he will find borrowing exceeding his already high forecast of £118bn in 2009/10. As bank lending is at the root of the crisis, I would like to have seen him extend the approach he has taken to small business – guaranteeing loans and working capital through an insurance scheme – more widely deployed.

Those reservations aside, there is much to admire. The rapid response initiative to help people newly unemployed is imaginative; so is the Employment Partnership to make sure that the vacancies that do exist are as quickly filled as possible. It was also vital that he deliver a credible plan to reduce the deficit beyond the peak, and the proposed increase in the top rate of tax and national insurance contributions do that. However, there is £5bn of so-called efficiency savings pencilled in from public spending, and when the markets look at this more closely in the days ahead this will be an area they question. Yet if the plans work he will have slowed down public spending growth, protected capital spending, got back to a balanced budget in 2016 and created a fairer tax system. And if the efficiency savings don't transpire he can always increase VAT, which is much easier than increasing income tax.


Just like the 70s - without a 3-day week

* Larry Elliott, economics editor

There's no three-day week and the lights have yet to go out. But in every other way yesterday's pre-budget report (PBR) was a throwback to the 1970s. For a start, we had a chancellor admitting that the country was in an awful - but unexpected - jam. What's more, we had a good old-fashioned remedy for the crisis, oodles more public borrowing to finance a VAT holiday, accelerated public spending and a package of help for small businesses.

Finally, there was a vague echo of old Labour class-war rhetoric, with the commitment to raise the top rate of tax to 45% on those earning more than £150,000. This is less of a risk than it once would have been for the government. Ministers sense, almost certainly correctly, that the public blames City fat cats earning more than £150K a year for the country's current predicament and want them to suffer financially for their reckless speculation.

In truth, Alistair Darling could probably have put it up to 50% without much resistance from a chastened City.

But if the decision to abandon the commitment not to raise the top rate of tax - one of the bedrock beliefs of New Labour - was no gamble, the rest of the PBR most certainly was.

The prime minister and his chancellor are betting the farm on the 2.5 percentage point cut in VAT prompting a splurge in spending that will limit both the depth and the duration of a recession neither of them saw coming.


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  -STOCK MARKET WATCH, Tuesday November 25 ozymandius  Nov-25-08 04:39 AM   #0 
  - Good Morning, Ozy!  Demeter   Nov-25-08 04:44 AM   #1 
  - Good morning Demeter.  ozymandius   Nov-25-08 04:59 AM   #7 
     - And the Beat Goes On  Demeter   Nov-25-08 05:16 AM   #10 
     - Krugman is 'sick of it' too.  ozymandius   Nov-25-08 05:48 AM   #25 
     - And didn't Citigroup announce something like 50,000 layoffs?  tclambert   Nov-25-08 06:14 AM   #30 
     - Well, they took the billions, and created 1,000 call center jobs in the Phillipines!  Dr.Phool   Nov-25-08 06:34 AM   #38 
     - And who is responsible? the booosh team or the incoming team?  Tansy_Gold   Nov-25-08 08:16 AM   #49 
     - I think it's a co-operative effort or a criminal conspiracy. Take your pick.  Dr.Phool   Nov-25-08 09:25 AM   #56 
     - I'm somewhat skeptical, but reserve judgement for now. Will he lead? We'll have to  54anickel   Nov-25-08 12:37 PM   #83 
        - Hey! I find I often think in wind/sailing terms  Ghost Dog   Nov-25-08 12:55 PM   #90 
           - Beautiful tune, thanks. Let us hope to stay out of Baffin's Bay whichever way the wind may blow.n/t  54anickel   Nov-25-08 06:23 PM   #116 
     - Thank you for being here and for not shrugging, Tansy  Ghost Dog   Nov-25-08 09:29 AM   #57 
     - Ah, sweetheart, you're welcome. You and the good doc upthread.  Tansy_Gold   Nov-25-08 09:39 AM   #60 
        - Right back at ya kiddo!  Dr.Phool   Nov-25-08 09:50 AM   #62 
        - You warm the heart  Ghost Dog   Nov-25-08 12:44 PM   #86 
     - I'm glad you're here Tansy  DemReadingDU   Nov-25-08 09:37 AM   #59 
     - My sentiments exactly. Ugh. It's so damn scary.  Tansy_Gold   Nov-25-08 09:41 AM   #61 
     - I'm still thinking on this, Tansy_Gold.  Prag   Nov-25-08 10:03 AM   #63 
     - On the contary, Prag. What you think DOES matter  Tansy_Gold   Nov-25-08 10:06 AM   #66 
     - bless you, Tansy Gold!  UpInArms   Nov-25-08 05:35 PM   #115 
        - We aren't alone: Greider - "Treasury Pick Has All the Wrong Ideas"  Tansy_Gold   Nov-25-08 06:24 PM   #117 
           - In support of your view, Tansy Gold..  dixiegrrrrl   Nov-25-08 09:58 PM   #121 
              - "hoping for the best" here, too.  Tansy_Gold   Nov-25-08 11:35 PM   #122 
     - did i read right ?  muleboy303   Nov-25-08 08:46 AM   #50 
     - that pretty much sums up how they spread the wealth around after  UpInArms   Nov-25-08 10:13 AM   #67 
        - perilous parallels  muleboy303   Nov-25-08 10:29 AM   #70 
     - Brainstorm! the Next Kid's Book: "If You Give Citibank a Bailout"  Demeter   Nov-25-08 12:41 PM   #84 
     - Others are sick of it too: We can't afford the Citigroup deal: Commentary: The government's credit i  UpInArms   Nov-25-08 07:31 AM   #44 
  - Portugal’s electric car deal leads way  Demeter   Nov-25-08 04:45 AM   #2 
  - Germany rejects General Motors' plea for state aid  Demeter   Nov-25-08 04:46 AM   #4 
  - Why the GM - Cerberus - Chrysler Bailout is Bad for Taxpayers  Demeter   Nov-25-08 05:45 AM   #24 
     - GM - Cerberus - Chrysler Bailout is Bad for Taxpayers??? but  DemReadingDU   Nov-25-08 06:16 AM   #31 
     - Sure is an awful lot of unanswered questions!  Roland99   Nov-25-08 07:15 AM   #41 
  - Great news. Even if it is entering the new world backwards.  Gregorian   Nov-25-08 01:49 PM   #96 
  - Market WrapUp  ozymandius   Nov-25-08 04:45 AM   #3 
  - Let me guess  tama   Nov-25-08 05:30 AM   #16 
  - You Ain't Seen Nothing Yet By Mike Whitney  Demeter   Nov-25-08 04:55 AM   #5 
  - G'Morning Demeter....ty for posting this piece.  dixiegrrrrl   Nov-25-08 05:11 AM   #9 
  - Tough Sledding Ahead: Surviving A Coming USD Collapse By Christopher Laird  Demeter   Nov-25-08 05:40 AM   #22 
  - If cash is bad, stocks lousy, gold is tanking, how do you hedge what little money 's left?  tclambert   Nov-25-08 06:25 AM   #34 
  - What does USD collapse mean?  tama   Nov-25-08 10:48 AM   #73 
     - What you say makes a lot of sense  Ghost Dog   Nov-25-08 12:02 PM   #77 
  - Try This Link  Demeter   Nov-25-08 05:59 AM   #28 
  - workers gulag; Siberia on Lake Michigan  DemReadingDU   Nov-25-08 06:21 AM   #33 
     - Thank You, Me Too!  Demeter   Nov-25-08 06:25 PM   #118 
  - Internet fraudsters beat the crunch By Philip Stafford in London  Demeter   Nov-25-08 04:57 AM   #6 
  - Today's Reports  ozymandius   Nov-25-08 05:09 AM   #8 
  - Why Would ANYONE Expect Consumer Confidence to Go Up?  Demeter   Nov-25-08 05:18 AM   #11 
  - Somebody mis-read the populace.  ozymandius   Nov-25-08 05:28 AM   #15 
  - My prediction (worthless as always): GDP will be very, very bad  SarahBelle   Nov-25-08 05:22 AM   #13 
  - Good morning FinnFan/SarahBelle.  ozymandius   Nov-25-08 05:34 AM   #17 
  - U.S. Q3 GDP down 0.5% vs. down 0.3% prev. est. - and other reports:  UpInArms   Nov-25-08 07:32 AM   #45 
  - Consumers smokin' crack - confidence @ 44.9  UpInArms   Nov-25-08 10:21 AM   #68 
     - That's Got to Be a Lie  Demeter   Nov-25-08 12:43 PM   #85 
        - If the survey was taken after 11/5, consider the psychological  Tansy_Gold   Nov-25-08 02:13 PM   #104 
  - Oil falls below $53 in Asia after rising overnight  ozymandius   Nov-25-08 05:18 AM   #12 
  - GLOBAL MARKETS-Shares fall in Europe as Citi euphoria fades  Ghost Dog   Nov-25-08 05:25 AM   #14 
  - Nikkei rises, but Citi euphoria seen limited  Ghost Dog   Nov-25-08 05:35 AM   #18 
  - Maybe it's sinking in that we live in a world with Citi still "too big to fail".  ozymandius   Nov-25-08 05:38 AM   #21 
     - A lot will depend on the degree of classical/imaginative Keynesianism  Ghost Dog   Nov-25-08 06:18 AM   #32 
     - EU exec to urge short, sharp economy boost - draft  Ghost Dog   Nov-25-08 09:05 AM   #52 
        - UK Stimulus: "Bold, imaginative – and it might just work " (Guardian)  Ghost Dog   Nov-25-08 09:13 AM   #54 
     - WRAPUP 2-Obama to outline cuts to U.S. budget  Ghost Dog   Nov-25-08 11:40 AM   #75 
     - He'd Better Cut BOTH Wars and Whatever They're Spending In Somalia and Latin America First  Demeter   Nov-25-08 12:46 PM   #87 
        - So, any news on that (those) front(s)?  Ghost Dog   Nov-25-08 01:55 PM   #98 
        - Considering  tama   Nov-25-08 02:00 PM   #100 
     - America's "little guys" - Too big to fail?  TalkingDog   Nov-25-08 12:57 PM   #92 
  - European shares briefly turn positive, banks help  Ghost Dog   Nov-25-08 05:36 AM   #20 
     - Europe shares end higher on banks, energy stocks  Ghost Dog   Nov-25-08 11:42 AM   #76 
  - BHP Abandons $66 Billion Rio Tinto Bid as Commodities Collapse  ozymandius   Nov-25-08 05:35 AM   #19 
  - Treasury, Fed Said to Unveil Plan to Bolster Consumer Financing  ozymandius   Nov-25-08 05:44 AM   #23 
  - Still No Jobs Programs, Though  Demeter   Nov-25-08 05:53 AM   #27 
  - Note that Goldman Sachs is to sell the securities  dixiegrrrrl   Nov-25-08 06:28 AM   #35 
  - Consumer bankruptcies in October top 100,000  Demeter   Nov-25-08 05:49 AM   #26 
  - Bankrupt consumers bailed out: 0  tclambert   Nov-25-08 06:28 AM   #36 
  - "encouraging" !?!?!  bain_sidhe   Nov-25-08 02:15 PM   #106 
  - A glimpse into the vapid thought process of Citi executives  ozymandius   Nov-25-08 06:00 AM   #29 
  - Denial is a powerful mechanism.  dixiegrrrrl   Nov-25-08 06:49 AM   #39 
  - I'm not sure how valid this is, but I found it quite, um, interesting  Tansy_Gold   Nov-25-08 03:03 PM   #110 
  - Furthermore, New England In the 80's Had a Massive Deflation in Housing  Demeter   Nov-25-08 12:48 PM   #88 
  - ArcelorMittal may lay off 2,400 in Indiana  Dr.Phool   Nov-25-08 06:29 AM   #37 
  - dollar watch  UpInArms   Nov-25-08 07:13 AM   #40 
  - Euro extends gains vs dollar, hits three-week highs  Ghost Dog   Nov-25-08 08:53 AM   #51 
  - Saving Citi May Create More Fear.  MattSh   Nov-25-08 07:25 AM   #42 
  - Fed to loop kids into more debt - no promise of jobs ever  UpInArms   Nov-25-08 07:26 AM   #43 
  - An army of Wal Mart greeters?  MilesColtrane   Nov-25-08 07:48 AM   #46 
  - "Watching the pot come to a boil": One, Two, Three ... Infinity  DemReadingDU   Nov-25-08 07:51 AM   #47 
  - Debt: 11/21/2008 10,655,468,648,978.00 (UP 11,419,055.70) (Tiny day.)  Festivito   Nov-25-08 08:05 AM   #48 
  - Debt: 11/24/2008 10,654,259,430,730.10 (DOWN 1,209,218,247.90) (Tiny drop.)  Festivito   Nov-25-08 04:00 PM   #112 
  - Bailout Pledges Hit $7.7 Trillion  DemReadingDU   Nov-25-08 09:06 AM   #53 
  - FACTBOX-What is deflation and why is it feared?  Ghost Dog   Nov-25-08 09:18 AM   #55 
  - Much good in deflation  tama   Nov-25-08 10:04 AM   #65 
     - Absolutely necessary, yes.  Ghost Dog   Nov-25-08 10:40 AM   #71 
     - true, but  DemReadingDU   Nov-25-08 12:18 PM   #79 
        - Work, somehow, obviously;  Ghost Dog   Nov-25-08 12:21 PM   #80 
        - suffering, that is what worries me  DemReadingDU   Nov-25-08 12:50 PM   #89 
           - I foresee Mr. Obama working with  Ghost Dog   Nov-25-08 01:28 PM   #94 
           - Empty shelves  tama   Nov-25-08 01:45 PM   #95 
              - Soviet collapse... People...  Ghost Dog   Nov-25-08 02:08 PM   #102 
                 - Time to bring those old late Soviet era jokes out of retirement  fedsron2us   Nov-25-08 02:31 PM   #108 
        - Can be problematic, yes  tama   Nov-25-08 12:31 PM   #82 
           - sounds like a good plan  DemReadingDU   Nov-25-08 12:56 PM   #91 
           - Feels like a good plan to me, too.  Ghost Dog   Nov-25-08 01:14 PM   #93 
              - Sure  tama   Nov-25-08 01:50 PM   #97 
                 - Cool, then.  Ghost Dog   Nov-25-08 01:57 PM   #99 
  - Bailout could make Citi more attractive acquisition target  antigop   Nov-25-08 09:30 AM   #58 
  - Blinged Out Paulson Family Raises Questions  Dr.Phool   Nov-25-08 10:03 AM   #64 
  - Heh. Why stop there? Why not build that tower (with slave-labor) on Mars?  Ghost Dog   Nov-25-08 10:48 AM   #72 
  - Soooo.... almost all the numbers reported last month...  Zenlitened   Nov-25-08 10:27 AM   #69 
  - Loonie Watch  TrogL   Nov-25-08 11:13 AM   #74 
  - Disappointment. A post labelled "loonie watch" yet no mention of Ann Coulter.  tclambert   Nov-25-08 02:13 PM   #105 
     - LOL!!!  MadinMo   Nov-25-08 03:22 PM   #111 
  - What to do with all those deflated stocks.  TalkingDog   Nov-25-08 12:18 PM   #78 
  - Leveraged ETF's  Joanne98   Nov-25-08 12:21 PM   #81 
  - We are living through the absolute looting of America  specimenfred1984   Nov-25-08 02:03 PM   #101 
  - I agree, but...  Juneboarder   Nov-25-08 02:11 PM   #103 
  - Thank the Gods I have no children  dumpbush   Nov-25-08 07:14 PM   #120 
  - FDIC adds 54 more banks to its 'problem list'  DemReadingDU   Nov-25-08 02:18 PM   #107 
  - Krugman: The Fed is Confusing Me  antigop   Nov-25-08 02:45 PM   #109 
  - Considering The Recent Past, The Mind Boggles  Demeter   Nov-25-08 06:32 PM   #119 
  - Here's how it all shook out.  ozymandius   Nov-25-08 04:13 PM   #113 
  - Bonds  tama   Nov-25-08 05:04 PM   #114 

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