Newspapers push back at Tory cuts with the right approach


12:55 am - June 30th 2010

by Sunny Hundal    


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The front-pages of the Guardian and Indy today are, to my mind, the best possible way of pushing back at the Tory cuts narrative.

They couldn’t be any better in fact.

As I’ve been saying almost constantly for the last two weeks: the best push-back strategy should be focused on mass unemployment, a prolonged recession and how the budget will create instability.

It’s no wonder the Tories are already spitting blood. These messages have to be repeated constantly over the next two years to associate the Tories with a worsening economy.

Lefties (including Labourites) should photocopy both these images and make them into a leaflet and flood their local areas with them. Job done.

Update: I like how Tories are using “projections” (based on what?) of 2.5 million jobs created as evidence that they actually will. You mean, despite falling consumption and spending (from job losses and VAT rise)? Fantasy-land economics.

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Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


Apart from the fact the Guardian article says that the Treasury expects up to 2.5m new jobs to be created. Not really such great reporting by them then.

There’s a bit of a difference between the 1.3m jobs that *will* be lost through the cuts (which the government is directly in control of) and the 2.5m jobs that the government hopes will be gained through economic recovery (which the government is not directly in control of).

Apart from the fact the Guardian article says that the Treasury expects up to 2.5m new jobs to be created.

And we should buy this fantasy economics because…?

Osborne expects that 2.5m jobs will be created out of thin air even though spending will fall massively (because of increased public sector unemployment and VAT rise). Just because they expect it doesn’t mean it will happen. And it’s very unlikely to happen – especially if govts around the world follow our lead and also cut spending/investment, thereby depressing demand even more.

Re the Guardian story – yes, definitely. That’s *the* key story published since the new government took office, and the quote from the CIPD gives the lie to the 2.5m job creation predictions (I wonder if the Treasury will publish the evidence on which this assertion was based?)

Re the Independent story – maybe. Though I’m not convinced it should be any kind of government priority to keep house prices inflated and housing unaffordable (a focus on employment would make negative equity less of a problem).

But I totally agree re the Guardian story.

If those 1.3m jobs are what the Tories call non-jobs or pen-pushers I can’t imagine public sympathy will be that great.

Sunny,

1) the “Tory cuts narrative” appears to be, in part, an invention of the Left and Media, for, as you may have seen, spending is, we are told, not growing as much as previously expected. Any erosion of spending is to do with inflationary effects, not quantitative. Actual cuts might even be a better idea to end the deficit and erode the debt.

2) The jobs that are “guaranteed” to go are in the public sector. The rest of that figure is surely part of the “based on what?” estimate you dismiss, no?

3) The housing bubble is out there. It can either slowly inflate away or it can go pop. One thing is for certain, we should not be racking up debt or giving false signals to the market in terms of interest rates to keep up the housing bubble – that was how we got into this mess. Remember, the bubble was created in no small part by Gordon Brown using the wrong price inflation figures that masked the reality due to distortions from falling import prices by a growing China (operating under a fixed exchange rate of the RenMinBi, distorting prices still further).

4) Falling consumption? What is your alternative? Higher taxes will not solve it, for that is just and quite literally, robbing Peter to pay Paul – you cannot and should not kid yourself that one can maintain “consumption” by taxing the private sector to pay the public sector* to go out and spend. Continue borrowing? As you say, “fantasy-land economics”.

* but the public sector pays taxes I hear. So what? Every penny they pay in taxes was collected as taxes, so it is irrelevant.

“Any erosion of spending is to do with inflationary effects, not quantitative.”

Stop being ridiculous. Nominal figures are completely useless and irrelevant; the only relevant figures are real ones. If I get a pay rise that’s below inflation, I’m getting a pay cut, and anyone who tries to deny that is either clueless or deliberately obfuscating.

“The rest of that figure is surely part of the “based on what?” estimate you dismiss, no?

No, because the private sector jobs in question are those which have actually been identified as dependent on the relevant public sector spending.

The ‘based on what?’ jobs, meanwhile, are those which will be created somewhere by the New Tory Economic Miracle, Gideon hopes.

Remember, the bubble was created in no small part by Gordon Brown using the wrong price inflation figures

…except that the general consensus among economists globally was that they were the right price inflation figures, which is why the Treasury and BoE shifted to using them.

8. astateofdenmark

Houses are still too expensive for those on low and lower-middle incomes (In fact they are barely affordable for even middle incomes in parts of the country) so real falls in house prices would be a good thing. Personally I think the market will just stagnate for years whilst housing benefit cuts, inflation and wages effect real falls in housing costs.

9. Ken McKenzie

@Chris

Literally nobody independent of Government (and, I understand, nor can the OBR) believes that 2.5m private sector jobs will be created in the next five years.

Seriously, half a million new jobs a year? Where on earth from? Think about it for a moment. That’s the equivalent of an employer bigger than Tescos (440,000 employees) appearing, out of nowhere, every year, for five years.

There is no scenario under which that can or will take place.

@Chris

You really buy that 2.5m job creation figure?!

One born every minute…

11. Flowerpower

As I’ve been saying almost constantly for the last two weeks: the best push-back strategy should be focused on mass unemployment, a prolonged recession and how the budget will create instability.

Weren’t you the guy having a go at Osborne for talking down the economy?

That’s the equivalent of an employer bigger than Tescos (440,000 employees) appearing, out of nowhere, every year, for five years.

Or a rather high proportion of the 3,000,000 small and medium sized enterprises in England taking on one employee each.

I suspect it is the small biz sector the government will be looking to for jobs growth, but it will be tougher than they think. Most SMEs are happy being sole traders/family concerns. Only about 250,000 are start-ups looking to hire.

@JohnB

“Stop being ridiculous.”

Taking into account inflation, these “savage cuts” will be around 4% over 5 years, i.e. AFTER 5 years it will be 96% of what we spend now in real terms. The hysteria over cuts narrative is “ridiculous”.

“No, because the private sector jobs in question are those which have actually been identified as dependent on the relevant public sector spending.”

You cannot discard totally one figure out of hand and grab another from the same source. That is just cherry picking and irrational. I don’t really believe the 2.5m figure either, btw, but the assertion of “1.3m jobs lost” asserts that ZERO jobs will be created elsewhere, which is, I predict, in error, to put it politely.

“…except that the general consensus among economists globally was that they were the right price inflation figures, which is why the Treasury and BoE shifted to using them.”

Now who is most certainly being ridiculous? Apart form the fact that “general consensus” means nothing*, the truth is what matters. The evidence was plain to see that without including the house price increases, by not factoring in a growing China with a RenMinBi pegged to low levels, import price reductions would distort the price inflation figures and this enabled Brown to keep interest rates artificially low, masking his spending binge, keeping the population sweet until it all came tumbling down, exposed by, but not caused by, the misbehaviour in the banking sector.

My point still stands – I see no alternative set of ideas here. Spending other peoples’ money, continuing to borrow to prop up “jobs” is just piddling into the bathwater hoping to warm it up. You can huff and puff all you want but really we DO NEED ALTERNATIVES, even if it is to make sure that the least bad actions are being taken, which I doubt.

* and you would then support the actions of the banks pre 2007, which was a “general consensus”…

14. Luis Enrique

Seriously, half a million new jobs a year? …. There is no scenario under which that can or will take place

I’m not sure what everybody is basing their opinions about likely net private sector job creation up. What is a “non-fantasy land” forecast of net private sector job creation?

Here’s pdfsome data I found with a quick google. From 1997 to 2008 net private sector job creation averaged 0.25m per year. (gross, 2.6m jobs were created each year). Obviously over that period there will be hears where job creation is faster/slower as net unemployment expands/shrinks.

I’m not here to defend the 2.5m forecast. It requires an average of 0.5m net private sector job creation each year, compared to the 97-08 average of 0.25m. If the economy recovers an unemployment shrinks somewhat over the next few years, a figure above 0.25m per year could be expected (although that’s begging the

I like how Tories are using “projections” (based on what?) of 2.5 million jobs created as evidence that they actually will.

This is the Tory mentality. They do not have continual assessment (that would be “micro managing”) instead, they have a mindset of kill or cure. “Let’s try this, and we will only know after wards if it has succeeded. Tough if it hasn’t.”

Take for example “outcomes not targets” in the NHS. On the surface it sounds sensible, but when you realise that as a patient you have to wait until you have had your treatment, and seen what the outcome is, before anyone will be bothered to think that there might be something wrong with the clinic. Targets have been chosen as being best practice: the continual monitoring for targets is there to keep quality high.

Then: Need a cataract replacement? The target is 18 weeks, so you WILL get the replacement within 18 weeks. 18 weeks later: have you had your operation? Oh good, they met their target and you got your sight back.
Now: Need a cataract replacement? We will put you on the list. 18 weeks later: have you had your operation? No, oh well let’s hope you have it soon. 26 weeks later: had it yet? Oh good, can you see? Good. So we will mark them down on the outcome on the time to have the operation. Have a nice day.

Outcomes are after the effect, which means that improvements are only made when someone has had a bad outcome. Who wants to volunteer to be that patient?

What about schools? The idea is that “Free Schools” / “Charter Schools” / “Toby Young schools for his and his mates’ kids” or whatever Gove will call them, are supposed to flourish (brilliant idea that they are supposed to be) and so the LEA school next door will fail and close. Sorry? Gove is actually saying that in his mind you have to give kids poor education before you decide that a school will close. Are you mad Gove? Again, the philosophy is that you only take action after there are problems, the Tories are philosophically against monitoring and taking action before a problem becomes damaging.

It pains me to say this, but give me New Labour’s from-the-centre, micro-managing, control-freakery any day.

16. Luis Enrique

oops. to continue

… that’s begging the question). I’m merely pointing out that 0.5 net private sector job creation is not quite as outrageous as some people seem to think, relative to recent history.

I’m muddling up here net job creation in the economy (which moves unemployment around) and changes in sectoral allocation (from state to private) which may leave net jobs unchanged.

17. Luis Enrique

oh dear, I really would like that edit facility back. Here is that pdf.

[8] astateofdenmark

Houses are still too expensive for those on low and lower-middle incomes (In fact they are barely affordable for even middle incomes in parts of the country) so real falls in house prices would be a good thing.

Or how about some radical thinking like, say build several million social housing so that people priced out of a home can rent one from a local authority?

Of course, if house prices fall, then the failure to get the IHT threshold raised will be irrelevant because most estates affected by IHT are because of the property. So Osborne will have delivered that part of the Tory manifesto – a promise to make sure that fewer people pay IHT.

[9] Ken McKenzie

Seriously, half a million new jobs a year? Where on earth from? Think about it for a moment. That’s the equivalent of an employer bigger than Tescos (440,000 employees) appearing, out of nowhere, every year, for five years.

There is no scenario under which that can or will take place.

Of course it will happen, this will be an export lead recovery. There will easily be that number of jobs created, easy-peasy, because we will be exporting to Germany and France and to the US, they have so much money to spend on imported goods at the moment, and they simply adore restricting themselves to only buying British made goods.

Oh dear, this hot weather seems to have made me addled for a minute and slipped into fantasy land… (why is it that my fantasies involve “export lead recovery” rather than Angelina Jolie?)

20. Luis Enrique

UPDATE! Actually, the period 1997 to 2008 for which I got data was a period over which unemployment fell, so rather than being some sort of average “baseline” the 0.25m annual net private sector job creation is more like a what happens when unemployment is falling number. So 0.5m per year looks more of a stretch, with that in mind.

A 2007 study by a team from Nottingham Uni showed just how dynamic the private sector labour market is. They found 2.65 million jobs were ‘destroyed’ annually, but 2.67 million created.

Against that background, the loss of 100-120,000 public sector jobs as reported in the Guardian story doesn’t seem so terrifying.

22. Luis Enrique

Jerry,

your number show 0.02 net job creation annually, which if true really would mean we’re in shit, if the public sector is about to shed 1.3 net.

luckily, I think you’ve got your numbers wrong:

here’s quote from Nottingham:

A total of 47,000 private-sector
jobs are destroyed in Britain
every week – equal to 2.35
million a year.
• Another 53,000 a week – 2.6
million a year – are created.

here’s link because my attempt above failed again:

http://www.nottingham.ac.uk/gep/documents/press-releases/2010/small-firms-and-job-creation-17-03-10.pdf

23. Ken McKenzie

2.5m new jobs is the equivalent of building 2 extra NHSs in 5 years.

Just saying.

Perhaps it is time both parties listed the government jobs created since 1997 and their full remuneration packages, including holiday entitlment . Ruth Sutherland of the Observer basically defined Brown’s economic policy of taking money from the south and increasing state employment in the regions.

“I like how Tories are using “projections” (based on what?) of 2.5 million jobs created as evidence that they actually will.”

Umm, you mean projections created by the same team, using the same assumptions, as the projections of job losses? Those “projections”?

And Jerry @21 has the most important point. Millions of jobs are created every year and millions are destroyed every year. Changes in unemployment are of course the net balance of these two forces.

“Literally nobody independent of Government (and, I understand, nor can the OBR) believes that 2.5m private sector jobs will be created in the next five years.”

Entirely wrong. Absolutely everyone agrees that many more than 2.5 million private sector jobs will be created over the next five years. In fact, we all pretty much assume that some 12.5 million private sector jobs will be created over the next five years. Maybe it’ll be 11 million, maybe 14 million.

What we’re not sure about is whether gross job creation will be higher than gross job destruction.

Please note that I’m not therefore defending Gideon’s plans or forecasts. Just trying to point out that “no way will there be 2.5 million private jobs created” is simply nonsense. You need to have a “net” in there for the statement to have any hope of making sense.

26. Luis Enrique

clearly those numbers are meant to understood as net (if we’re talking gross, more than 2.5m are created each year)

So if the dynamism of the private sector is maintained at the same rate as 1997-2008, we can look forward to 53,000 – 47,000 = 6,000 net new jobs per week = 312,000 per year = 1.56m over five years.

Excellent.

28. Luis Enrique

cjcjc

“excellent”, but 1m short of the 2.5m Tory projection, and also begging the question that we will see unemployment fall at same pace as it did 97-08.

By revised ONS data, business investment was 7.7% down in the first quarter of 2010 compared with the same period a year ago:
http://www.statistics.gov.uk/pdfdir/bi0610.pdf

This doesn’t look too encouraging about prospects for job creation in the short term but it’s worth keeping track of what is happening to the ONS series on business investment.

“New lending targets for the bailed-out banks are being drawn up by the government amid mounting concerns that the growth of small and medium-sized businesses is being stifled by the lack of credit from the banking industry.

“With a green paper on business finance promised before the summer recess, George Osborne and Vince Cable will now begin hammering out the lending they want to be achieved by Royal Bank of Scotland and Lloyds Banking Group this year.”
http://www.guardian.co.uk/business/2010/jun/27/coalition-plans-bank-lending-targets

Whoopee – a White Paper! But I’m wondering what will happen to bank lending to business with the worries that banks have about possible losses from sovereign debt restructuring although today’s news is reassuring:

“The euro climbed and stocks rose after Europe’s banks appeared to be in better financial health than markets had feared”
http://www.guardian.co.uk/business/2010/jun/30/european-banks-borrow-132-markets-relieved

Luis Enrique @ 22

your number show 0.02 net job creation annually, which if true really would mean we’re in shit, if the public sector is about to shed 1.3 net.

I don’t think it’s as bad as that. The Guardian story has it as between 100,000 and 120,000 public sector jobs lost per year.

Labour increased the public sector headcount by 850,000, so even after all the cuts the public sector at the next election will still be bigger than in Labour’s early years.

That’s another reason not to go OTT in terms of attack. So long as the Tories are careful not to sack doctors, nurses and teachers but concentrate their fire (sorry about the tasteless pun) on less popularly loved/esteemed categories, they may well retain public support for trimming back to roughly the figures employed under Labour before 2007.

Sure, but even with those caveats the Guardian front page hardly provides the ammo which the left is still so desperately seeking.

As I keep saying, attacking plans that might work is a high risk strategy since it can leave you looking very stupid; doing so by using only part of the figures projected and ignoring the rest, cherrypicking if you will, is just silly… I think a better left-wing response is to produce positive plans about what you would do, and keep updating these in accord with the underlying logic as the situation develops.

Also, if you are relying on newspaper headlines to lead the fight, it suggests that there is a clear lack of direction.

Btw this book, hot off the presses, is certainly worth reading IMO:

Roger Farmer: How the economy works (OUP 2010)

For a review, try:
http://openeconomicsnd.wordpress.com/2010/04/09/radically-mainstream-roger-farmers-new-paradigm/

Papers by Roger Farmer – a Brit by graduation, who is now distinguished professor and chair of the economics department at UCLA – summarising his analysis:

Macroeconomics for the 21st century – Part 1: Theory
http://www.voxeu.org/index.php?q=node/4688

Macroeconomics for the 21st century – Part 2: Policy
http://www.voxeu.org/index.php?q=node/4690

@32

As I keep saying, attacking plans that might work is a high risk strategy since it can leave you looking very stupid; doing so by using only part of the figures projected and ignoring the rest, cherrypicking if you will, is just silly…

Watchman, you are SO right. Just seen Harriet Harman making a complete fool of herself at PMQs by doing just that.

1. She didn’t seem to grasp the concept of ‘net’.
2. According to the OBR Labour were planning even bigger public sector job losses over the next two years than the Coalition have announced.

Fiasco.

This should serve as a warning not to go off ill-briefed, half-cock and opportunistically on either cuts or jobs. The Tories are well prepared with counters.

I would genuinely like to know from the right-wing contributors here where they see growth coming from in the coming years particularly given the state of the eurozone. It’s all very well slamming the public sector but what’s your vision for private sector-led recovery? And something more sophisticated than “cut taxes and everything will be alright” please.

“what’s your vision for private sector-led recovery?”

OK, being lightly serious at least.

We know that taxes aren’t the only thing which reduce growth (yes, really, taxes do reduce growth: even if the things which the tax money is spent on increase it the taxes themselves create distortions and deadweights which reduce growth).

1) Different taxes have different distortionary effects. You can raise the same amount of money from different places, obviously, but those different places will have different effects upon growth.

Roughly speaking taxes upon property reduce growth the least. Then taxes upon consumption, then upon income and finally, capital taxes and corporation taxes reduce growth the most for each unit of money raised in tax.

No, this is not some whacko neo-liberalism, this is just straight, absolutely standard, economics of taxation.

So, if we’re worried about growth (which we are), there’s a free lunch there. We can move taxation from, say, corporation tax to a consumption tax (umm, say VAT), raise the same amount of money as before and yet have faster future growth.

As, for example, the Nordics do: they have lower corporation tax than we do and higher VAT than we do. And, umm, as Gideon has just done, lowered corporation tax and raised VAT.

2) There are also other things which reduce growth, other than taxes. Regulation for example. Just as an example, insisting that anyone who works with children (you know, the supermarket shelf stacker who supervises a couple of 14 years olds working for pocket money on a weekend) gets a records check is a) a regulation and b) a restriction upon economic growth. It causes a delay in the hiring of the 14 year olds while the check is done (or of the supervisor, either way) and that delay is pure economic loss. b) it also reduces the liklihood that kiddies will get a bit of work experience, supermarkets of a couple of willing paid hands: for the regulation increases the cost of employing the kiddies and as we know, things that cost more happen less often.

Now, yes, of course, that specific regulation is trivial. But the economy is festooned with such regulations. Remove some/many/all of them and we will have faster economic growth.

This second is what is known as “supply side” economics. No, supply side does not mean just lower marginal tax rates. It means reform of the supply side of the economy.

37. Flowerpower

Clifford Singer @ 35

I’d expect most of the early jobs growth to come from medium sized enterprises currently employing around 250 people. Innovation will be key – best sector bets will be software, bioscience, healthcare, education and tech.

The bigger company contribution will depend on the performance of the world economy. 75% of the earnings of FTSE 100 companies comes from overseas as remitted profits or export receipts. If the WE picks up, it’ll drag us along behind. Yes, the Eurozone will probably be sluggish. Exporters will have to range more widely in search of opportunities: many are already actively scouring South America, which survived the financial storm in pretty good order.

Manufacturing, which suffered terribly under the Brown Incompetence will be important for jobs in areas where there is an urgent need to re-balance employment in favour of the sustainable private sector. Uncle Vince will have to show some tender, loving care. The scrapping of the appalling RDAs and their replacement with more focused growth catalysts is a good start. Ditto NI holidays.

Only about 20% max will come from smaller businesses but 20% isn’t to be sneezed at. Easing the compliance and regulatory burden will help.

Retail sales won’t plunge (who winced at January’s VAT hike?) but there’s not going to be any firecracker leap in consumer demand either. Slow but steady recovery here.

And yes, slash taxes as soon as wise to do so.

38. Luis Enrique

Tim,

I presume you don’t mean “yes, really, taxes do reduce growth” on net, because of course the pro-growth effects of what they pay for may outweigh the any anti-growth distortionary effects. The correlations between taxation and growth in OECD countries do not indicate that high taxation means lower growth. An excellent paper, for those interested is:

Bleaney, Michael F., Norman Gemmell, and Richard Kneller. 1999. “Fiscal Policy and Growth:
Evidence from OECD Countries.” Journal of Public Economics, 74(2): 171-90.

(link to ungated version here

but Tim, I know that’s not what you’re arguing – you are just proposing changing the tax mix to reduce its distortionary effects. I am just trying to forestall some objections, if people grasp your stick by the wrong end.

I’m not going to get stuck into regulation, but of course some regulations may help growth by allowing markets to function better.

The classic answer to “where is growth going to come from?” is: technical / process / product innovation, competition etc. There’s no reason to think that’s stopped, although it requires investment to realize those gains and business investment is looking very weak.

however, one might ask the left “where is growth going to come from?” – outside of “in a liquidity trap, fiscal expansion soaking up idle resources” temporary sort of argument (which I do not dispute) it’s not at all obvious that the public sector is a source of growth.

39. Luis Enrique

NB that paper I link contains evidence for both sides – it shows distortionary taxation reduces growth (as Tim says) and that productive government expenditure increases it.

@Tim Worstall

Roughly speaking taxes upon property reduce growth the least. Then taxes upon consumption, then upon income and finally, capital taxes and corporation taxes reduce growth the most for each unit of money raised in tax.

I call this out as absolute cobblers.

“I call this out as absolute cobblers.”

Sorry, no, it ain’t.

You can find an OECD table here:

http://freethinkingeconomist.com/2010/03/25/while-i-do-hate-the-argument-from-authority/

An explanation of why this is the conventional economic wisdom is here:

http://worthwhile.typepad.com/worthwhile_canadian_initi/2007/06/doing-it-by-the.html

It really is true that taxes differ in how much they reduce future growth.

The best we can hope for from headlines in the Grauniad and the Indy is that they make us feel better for a bit.

I used to buy The Observer in the 80s. The angry exposees every Sunday threatened to shake Thatcherism to its foundations. Every Monday nothing had changed.

They mean nowt.

43. astateofdenmark

I take it you all now know that this leak, was actually Labour’ plans drawn up before the election?

@Tim Worstall

Yet long run economic growth was higher in the 50s, 60s and early 70s when income and corporate taxes were higher and VAT was almost non existent?

Indeed growth started falling away just when the ideas you cling to started to dominate so unjustly.

Weird that?

Here’s a linky-poo of my own, just for fun (it looks at the US, but the principles are general):

http://www.huppi.com/kangaroo/L-taxgrowth.htm

Key quote:

People who claim that tax rates affect growth are not serious economists; more often they are journalists, radio-talk show hosts, politicians and other types of snake oil salesmen with easy solutions to complex problems.

As I keep saying, attacking plans that might work is a high risk strategy since it can leave you looking very stupid; doing so by using only part of the figures projected and ignoring the rest, cherrypicking if you will, is just silly

Not really. The 2.5m job creation won’t happen unless we have a boom more spectactular than the last one.

Those figures will be revised down within a year.

46. Luis Enrique

Sunny @45. I’m with you on that one. Predicting a double-dip recession, or increasing unemployment might be risk, rubbishing forecasts of that much net job creation, less so.

Well what a fantastic lessen in economics. Personally I found it fascinating. Yet, in it all I don’t see where the models are that will give people homes, a living wage and security.

There are a lot of numbers and equations that I am sure will thrill people like me – but, when you have millions unemployed, those people would like a job. Quoting statistics and theories does not put food on the table.

Sunny,

I have to say from my non-expert perspective 2.5 million looks too much, but I am not sure of the net fall that you need for this line to work. If the government cuts jobs and reduces the numbers on benefits but the number unemployed just stays stable, there is no way not to declare that a success (reduced spending without increased unemployment). I think on those terms this strategy could go wrong too easily.

Not to mention the Labour party seem to be incapable of realising that it does not work now, as David Cameron has the statistics predicting more jobs, so it becomes ‘he says, she says’ all the time, rather than a proper argument. And people at the moment trust the Conservatives far more than Labour in such cases (as is normal after a change in government). So by pushing this line now, Labour do themselves no favours.

49. astateofdenmark

Its 300k a year by the by.

Over the 6 years to 2016, Public Sector is forecast to lose 600k Jobs. Total Employment is forecast to rise 1.3 million. Ergo, private sector is forecast to rise 1.9 million. Divide by 6 and that is just over 300k per year.

http://budgetresponsibility.independent.gov.uk/d/employment_forecast_300610.pdf

@watchman

Oh, so Labour should stand passively by while the Tories wreck the economy again?

Not this time, pal. This ain’t the 80s. Tory ‘ideas’ aren’t untested.

The self evident stupidity of the coalition budget will be attacked again and again.

51. Luis Enrique

Will Rhodes

I’m not sure how much scope there is for providing people with a living wage etc. by typing in blog comments. But you know, don’t let that stop you having a go for us failing to do it.

Personally, I think looking at actual job creation numbers is a useful thing to do in the context of a post about job creation numbers. You may be one of those who thinks a lack of knowledge about “the statistics” is no barrier to having strong opinions on the subject. I don’t agree.

As for the theorising you disparage, well somebody did ask where growth is going to come from, and he got a couple of answers. You’ve got a better answer, that doesn’t waste time with all those theories and statistics, let’s hear it.

“Yet long run economic growth was higher in the 50s, 60s and early 70s when income and corporate taxes were higher and VAT was almost non existent?

Indeed growth started falling away just when the ideas you cling to started to dominate so unjustly.

Weird that?”

Not weird at all. You’ll note that in the 30 s and 40 s economic growth wasn’t very much? And yet productivity growth was quite high?

Umm, so, two decades worth of high productivty growth but little economic growth then feed though into several decades of economic growth despite, not because of, high taxes?

Be a right pisser if that were true, wouldn’t it?

53. Luis Enrique

Tim,

that’s not very convincing, imho. Productivity growth is supposed to respond to distortionary taxes (or lack of them) and productivity growth is supposed to cause output growth contemporaneously. You can’t just start attributing growth to something that happened decades earlier when it suits you. Is growth today always explained by productivity trends two decades prior, or just in the USA in 1980? If those decades (50, 60) grew like stink with all those nasty distortionary taxes messing with investment incentives, how bad can those disincentives be?

Another response might be that growth was caused by other factors, and that perhaps over that period countries with lower distortionary taxes still did better. Or maybe the taxes we paying for all sorts of growth enhancing goodies, and the scope for that ran out in the 70s. I don’t know. A careful statistical study controlling for a variety of factors, like the one I link to above, ought to handle these questions better. Ben M, you ought to take a look at that. It might answer some questions.

54. Peter Ward

The OBRs projections linked to the increase in private sector employment of 2.5 Million net are based on a level of growth in private investment that has occurred only once since records began in 1966. We are in the middle of a global recession, with our largest market, the Eurozone, deflating also, any export led recovery is unlikely. At least in the timeframe indicated in the OBR. The job and expenditure cuts in the economy will decrease aggregate demand, Put simply, the banks took our money to the casino, Boy George is doing the same with our economy and by extension our society.

“Is growth today always explained by productivity trends two decades prior, or just in the USA in 1980? If those decades (50, 60) grew like stink with all those nasty distortionary taxes messing with investment incentives, how bad can those disincentives be? ”

Another way of my making the original point again.

Go look at a chart of GDP growth over the 20th century. Or even plot it yourself, why not, you’re doing the advanced economics degree, not me.

Plot actually, year by year, growth (and falls in the 30s etc). Then fit a trend line to it.

What you’ll see is that the 30s were (not surprisingly) below that trend. The 50s and 60s above it. The 80s and 90s pretty much on it.

One way of explaining this is simply to remark, hmm, yes, when you’ve got long term trends and if you go below them for some time the next period or two is quite likely to be above trend. That’s just a simple mathematical observation.

When we add in some economics, what might we say about it? In the long run economic growth is all about productivity. And it’s advances in technology (where management is a technology just as much as computer chips) which drive productivity.

If we have a period where technology advances (which it most certainly did in the 30s and 40s) and thus productivity potentially does so, but economic growth does not occur, we’re really not all that surprised when economic growth speeds up in subsequent periods.

I think it’s irrefutable that some of the growth which occured in the 50s and 60s was simply a return to long term trend. This will be clearest in the US which was, for the 20th century, the economy at the technological frontier (we wouldn’t use the Soviet Union as an example given their much lower starting point: catching up is a great deal easier).

Now, how much of it was due to that is another matter. But those saying that the 50s and 60s were some golden period never acknowledge any of it was. I’d actually be very interested to see if anyone has tried to detail this point.

@52. Tim Worstall

If I was to indulge your ideas for a bit – I hope you don’t mind my asking… Three decades in and – for the UK – your ideas have conspicuously failed to generate the productivity growth you allude to. How much longer do we have to wait?

Moreover, the article I linked to showed how productivity in Western European economies – with their high corporation and income taxes – rapidly caught up the United States through the period in question. Doesn’t that rather scupper your theory?

57. Luis Enrique

Tim,

Well yes, that is a restatement of your earlier comment, and I don’t think it looks any better the second time around. We can discuss it over email if you like, but this probably isn’t the place. Questions we might discuss in include why productivity growth in the 30s and 40s didn’t turn into economic growth until the 50s and 60s.

In the meantime, I think when you propse a theory in which distortionary taxes slow growth, when present with data showing high distortionary taxes and high growth, and low distortionary taxes and low growth, you ought to acknowledge that is something of a problem for your theory, and you should slow down a bit before chucking out an ad hoc explanation in which productivity trends + some unexplained lag just happen to have been what you need to explain it away.

“rapidly caught up the United States through the period in question. Doesn’t that rather scupper your theory?”

Absolutely not. You’ll note that I already mention this:

“This will be clearest in the US which was, for the 20th century, the economy at the technological frontier (we wouldn’t use the Soviet Union as an example given their much lower starting point: catching up is a great deal easier).”

Catching up is a great deal easier than pushing out the technological/productivity envelope. I mean, obviously, right? Knowing that something can be done and then working out how to do it is easier than wondering whether something can be done and then going and finding out, no?


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