‘The Economist’ and deficit reduction
I didn’t expect to enjoy the article in the latest edition of ‘The Economist’, entitled “Speak softly and carry a big chainshaw”, about tackling the US fiscal deficit. Indeed, the macho rhetoric of the article’s title sums up my reservations. But I found this paragraph revealing:
“There is legitimate concern that, done hastily, austerity could derail a weak recovery. But this strengthens the case for a credible deficit-reduction plan. By reassuring markets that America will control its debt, the government will have more scope to boost the economy in the short term if need be – for instance by temporarily extending the Bush tax cuts.”
OK, so I’m not sure about extending the Bush tax cuts, but I like the broader principle. The economy can be boosted, if need be, so long as the markets know that deficit reduction is taken seriously. Why can’t the UK take this measured approach? Why is paying off the deficit over the lifetime of a Parliament, which is incredibly risky even to its supporters, taken to be the only responsible approach to deficit reduction?
In his Hugo Young lecture last night, Nick Clegg described the Coalition’s approach to tackling the deficit as “acting decisively” (As if there is something indecisive about reducing the deficit at a pace that does not threaten the economic recovery).
The TUC can find sensible common cause with ‘The Economist’ on this one. Only the extremists in the Government take a different view.