Governments on both sides of the Atlantic would do well to remember that premature measures to reduce budget deficits can be just as fiscally irresponsible as excessive government spending
The organisers of the original Boston Tea Party objected to paying UK taxes. Their descendants object to paying taxes to the US government as well. Whatever the outcome of the frantic negotiations about the appropriate "ceiling" on the level of US government debt, the background to it has been beyond satire.
The absurdity of it all was well captured by the economist Paul Krugman when he wrote recently that Paul Ryan, the Republican chairman of the House of Representatives' budget committee, had "proposed a supposed deficit-reduction plan that included huge tax cuts for corporations and the wealthy, then received an award for fiscal responsibility".
In the short term the US economy, in common with the UK and others, is experiencing a shortfall of demand, so that businesses are operating way below capacity and unemployment is disturbingly high. The last things an economy in such a position needs are tax increases and public spending cuts. It has to be emphasised that measures to reduce deficits, if introduced prematurely, can be irresponsible, for all the talk of fiscal "responsibility".
Over here, as the figures for growth, or lack of it, in the second quarter have underlined, the coalition's economic strategy is in trouble, with business secretary Vince Cable calling upon the Bank of England to print more money and the mayor of London, Boris Johnson, urging a reduction in the top rate of tax.
It is true that Johnson has also called for a reduction in national insurance contributions, which would mean that any Plan B-style tax cuts were not confined to higher earners. Nevertheless, the mere suggestion that the top rate should be reduced when there is so much hardship being experienced by those lower down the scale is an indication of just how out of touch the mayor is on this issue.
But Johnson has easily been outdone by the man who is supposed to be David Cameron's "strategy director". According to the Financial Times, Steve Hilton "has startled colleagues by proposing the abolition of maternity leave and all consumer rights legislation as part of an initiative to revive the sluggish economy". His novel solution to the unemployment problem is, apparently, to close all job centres. With strategists like this, our beleaguered PM might as well install a few astrologers in No 10.
Even the chancellor appears to be, if not losing his nerve, then at least beginning to recognise that something may have to be done. So far the hints have been about incentives for business ? adjustments to corporation tax and the like. Indeed, there is much talk about the wonders of "supply side" measures along the lines that supposedly revived the British economy in the 1980s under the premiership of Margaret Thatcher.
What the new generation of Tories do not seem to be aware of is that a huge amount of damage was done to the supply side of the economy in the 1980s ? damage from which our industrial base has yet to recover, as can be seen from our abysmal overseas trading performance. A prolonged period of overvaluation of the pound, under both Tory and Labour administrations in recent decades, had a painfully negative impact on the supply side. The devaluation after 2007 helped to restore price competitiveness, and until recently manufacturing exports were helping to prevent the advent of a much-feared "double-dip" recession.
However, the CBI's latest quarterly industrial trends survey shows a marked deterioration in business confidence and in industrialists' assessment of prospects for the rest of the year, including for exports.
Incidentally, one often hears that these occasional "devaluations" do no good, and that the cultivation of a strong currency is much to be preferred. Well, it all depends. Devaluations are a necessary condition for revival when price competitiveness has been lost. But they are not sufficient, and not a panacea, as the British economy has demonstrated on many occasions. The maintenance of a relatively low exchange rate is one of the unspoken aspects of current policy. It is certainly not enough, but we are probably better placed than Italy, which, as a consequence of membership of the eurozone, has indubitably lost competitiveness vis-�-vis Germany.
Businessmen will always go on about red tape, planning constraints, labour laws and other irritants, with a ready audience in Conservative governments or coalitions dominated by the Conservative party. Such complaints are not necessarily without foundation. But the big constraint on sales, recruitment and investment is lack of demand, now or in the future. And the deliberate cultivation of an atmosphere of austerity turns out, predictably, to have aggravated the recessionary tendencies that were already apparent.
Keynes talked about the importance of "animal spirits" among the entrepreneurial class. But he also taught that the worst thing a government could do, when capitalist economies demonstrate their propensity to follow a boom with a bust, was to impose further downward pressure.
Developments in both the US and the eurozone do not present a pretty picture. The G20's action in 2009 to ward off a 1930s-style Depression undoubtedly limited the damage. But the policy challenges facing finance ministers and central bank governors at the annual meeting of the International Monetary Fund in September are formidable. And goodness knows what we will face if the Tea Party has its way this week.
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