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March 15, 2010

Comments

Dan

The basic problem here is this: the average voter is much, much thicker than the average blogger. Voters tend to work on the principle that if their money seems to buy the same amount of stuff that it bought earlier, then the Government in power must be OK; they don't get upset about the truly mindboggling state of public finances because all of this potential trouble has yet to actually impact upon them.

For this reason, all the major parties are being extremely coy about making cuts and tax raises and so on; they all know (with the possible exception of Gordon Brown whose stability of mind is reputedly to be largely down to the art of several highly skilled pharmacologists) that something is going to have to be done about the deficit and that the current "spending like a drunken sailor on payday" policy cannot continue. However, the average voter is fool enough to believe that this debt will magically go away if left alone, and in the mean time won't actually do anything to hurt him.

So, to the average thick voter the deficit doesn't exist. What does exist is the cocept of tax rises; these the voter does understand and most certainly doesn't want. Ditto cuts; cuts mean that the Great Government Money Machine won't be so generous so his ration of cheap lager and smuggled fags will be harder to come by; this the voter doesn't want to happen.

And here's where that bludgeoning stupidity comes in. The average voter thinks (dimly, very dimly) and believes that if he votes for a party that doesn't say it is going to cut things, then this won't happen, despite Labour having by comprehensively demonstrated that election manifesto promises are worth less than some mang cur's idiot yapping in the night.

So, all the major parties are therefore playing to the intellect of the average voter, and keeping well and truly schtumb over cuts so as not to scare the fuckwits with whom the future of the country is entrusted.

Jim

Dan nails it.

Frank H Little

Presumably you are not worried by the latest OECD report and believe that this government will not be either.

Econoclast

I'm with Dan. It's fairly clear there is a high degree of economic illiteracy among the electorate. The electorate is currently in denial about the scale of the fiscal tightening to come. (Even the bankers don't yet seem to have worked out what's about to happen to their personal tax bills.) But it's the same illiteracy that convinced them to increase their leverage to buy houses because prices would always rise. I fear the consequences when reality bites.

On your point about the structural deficit, I agree the pseudo-scientific precision is unhelpful. But let's be clear here. Gordon Brown fiddled around with his estimate of potential output growth (and the output gap) to engineer his own estimate of the structural deficit and justify fiscal easing. A structural deficit is a useful concept provided you recognize the judgment necessary to estimate it. If politicians are going to massage fiscal policy in this way, perhaps we need our own version of the CBO. Then, we could have a more considered discussion about fiscal policy.

Laura

Maybe what we're actually facing is a high degree of political literacy, rather than economic illiteracy. It is pretty much a certainty that whatever party is elected to power will not keep its election promises. There always seems to turn out to be a reason why they couldn't stick to what they said before the election ("politicians lie", "party X lies", "we didn't have all the information when we were in opposition", pick your own preferred reason). So why should the voter in the street worry if the parties' current policies seem economically impractical? It's not as if they're going to use them.

vimothy

Dan does not "nail it". The deficit is merely what's left when you take everything else into account. There is no reason to cut the deficit, unless you are some kind of conservative knave who thinks that the country would be better off with a higher rate of unemployment. It's obviously not that easy to reduce something that is not set by the government (i.e. automatic stabilisers and tax revenue).

Agree that monetary policy *could* help to balance investment and saving flows. But given the state of private sector balance sheets, it's not clear that even very low interest rates could convince the public to go back into debt.

Ben

On your point about the structural deficit, I agree the pseudo-scientific precision is unhelpful. But let's be clear here. Gordon Brown fiddled around with his estimate of potential output growth (and the output gap) to engineer his own estimate of the structural deficit and justify fiscal easing. http://www.fullmediafire.com

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