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The IFS Green Budget - the 2013 version of which was published last week - is as ever essential reading for anyone interested in UK macroeconomic and fiscal policy. Catching up with it a little after the event, the following passages jumped out at me:
Global Economic Forecast
The continued dismal performance of the UK economy is entirely consistent with the predictions of those of us who have argued consistently for the last two years that premature fiscal consolidation would be severely contractionary in the short term, and risked doing significant long-term economic and social damage.
Last night I got into a Twitter "debate" with Michael Fabricant, who is Vice Chairman of the Conservative Party. I replay it here to set out the facts (which are fairly simple) and perhaps to give Mr Fabricant one more change to correct his position gracefully.
[Updated, 2.45pm: Mr Fabricant has done exactly that, tweeting:
At the Treasury Committee in October, I came under sustained questioning as to my view that low long-term interest rates in the UK reflect economic weakness (domestic and global) and expectations that short-term interest rates set by the Bank of England will remain very low (again, reflecting economic weakness); and not, in any meaningful sense, the "credibility" of government fiscal policy or economic strategy more generally.
[My chapter in the Fabian Society pamphlet "The Great Rebalancing: How to fix the broken economy", edited by Andrew Harrop, which also features chapters by Maurice Glasman, Stephany Griffith-Jones, Chi Onwurah, Duncan Weldon, Mariana Mazzucato, Vicky Pryce, and Chris Leslie].
Brad Delong has posted the full (rough) transcript of the panel that he chaired at the San Diego meetings of the American Economic Association:
STIMULUS OR STYMIED?: THE MACROECONOMICS OF RECESSIONS
Here are my answers to the Financial Times' annual economists' survey (the survey is reported in full here):
Brad Delong calls for economists to "mark their beliefs to market" - that is, reassess their position when the facts suggest that they might have been wrong - and commendably shows us the way here.
[This article. by Adam Posen, Director of the Peterson Institute for International Economics, and formerly a member of the Bank of England's Monetary Policy Committee, originally appeared here on the Peterson Institute website. He has very kindly agreed to allow me to reproduce it here as a contribution to the UK policy debate. Obviously the views below are his, not mine or NIESR's, although for what it's worth I am, as readers of this blog will know, in broad agreement.]
I have frequently argued two, related, points. First that, unlike countries in the eurozone, the UK's fiscal policy is not constrained by potential market fears of default; and second, that since the ratings of the credit rating agencies are in principle intended to reflect this non-existent default risk, the UK's AAA rating, and any possible downgrade, is meaningless and irrelevant. For these reasons, paying any attention to the ratings agencies when making policy is a serious mistake.
Just as talk about a "double-dip recession" after the unusually bad second quarter growth figures was overdone, so was the euphoria about Britain "surging out of recession" after the third quarter figures. The official forecasts from the Office of Budget Responsibility today are for growth of 1.2 percent in 2013 and 2 percent in 2014; very similar to NIESR's forecast. These, further downgraded, forecasts mean the economy won't be growing faster than trend until 2015.