Cutting government borrowing: damned if you do and damned if you don't?
At first glance, the dispute in February among economists about how and when to cut the level of government borrowing, waged through letters to newspapers, seems to have had no decisive impact.
The comfort that the Conservatives could take from the first letter to the Sunday Times, calling for faster cuts, was neutralised by the comfort that Labour could take from the responses to it in the Financial Times broadly supporting the government’s current plan.
As the dispute subsided, the general view among commentators, the BBC and others seems to have been that the difference between the two sides was fairly slight anyway. A reading of the letters that pays close attention to the qualifications each side attaches to their argument may seem to support this view.
We believe this interpretation is not just wrong but dangerous.
These economists are not engaged in some academic parlour game. Rather, they are trying to alert outsiders – politicians and policy makers of course but also the general public who are shortly to give their verdict on those politicians – to the perils that they see in the present situation.
Instead of being lulled by the similarity of their conclusions, we should be alarmed by the fact that the perils highlighted by each side are different – and not in the least mutually exclusive.
This article, the first in a series of economic posts over the coming months, explains why.