The incumbency advantage

Imagine if, last week, someone had proposed a small short-term fiscal easing followed by a £13.9bn tightening in 2019-20*. Pretty much everyone would have scorned such an idea. Political journalists would point out that unspecified spending cuts at the end of the parliament lack credibility. And economists would say that the threat of higher corporate taxes then would dampen capital spending now – and, they’d add, there’s no point tightening so much merely to achieve a budget surplus that’s pointless anyway.

Nobody for one moment would think this remotely sensible, and nobody would want to entrust its proposer with high office.

However, although Osborne has attracted criticism from sensible (pdf) people across the political spectrum, and – in fairness – lacklustre press coverage, the mainstream does not seem to be giving him the scorn and derision that his buffoonery deserves. I reckon there are at least five reasons for this.

One is deference. People respect power and overconfidence – even if unmerited – more than they should.

Another obvious one is plain vested interests. There’s a noisy client group that benefits from cuts to capital gains tax, the raising of the higher rate threshold and a £1000 a year handout – which is what the Lifetime Isa is. Nobody complains about being given free money.

Thirdly, Budgets are what Rodney Barker calls rituals of self-legitimation. They come surrounded with their own rhetoric of “judgment”,“prudence” and “long-term”. People infer that a 150-page report must be sensible, even if much of it is drivel. And there’s a tendency for folk to assume that if a man is wearing a suit and talking about money, he must be serious and trustworthy – a habit which financial advisers have exploited royally for years.

Fourthly, the “gimmicks” of which Martin Wolf complains serve a purpose – they throw up smoke. The tax on sugary drinks might be silly, but it distracts from the Lifetime Isa, which in turn distracts us from the dubious claims to be closing tax loopholes, which distract us from the macroeconomic judgement, and so on.

Finally, there’s a form of the status quo bias; existing policies are more tolerable than proposed ones. As the old saying goes, it is easier to ask forgiveness than permission. Some neat research by Christoph Merkle has established this. He shows that, after losing money, investors are less unhappy than they thought they would be: the fear of a loss is worse than the reality. I suspect that this translates into politics: policies that seem unconscionable when they are proposed become bearable after they have been enacted.

My point here is a simple and depressing one. It’s that, as I’ve said, Osborne has huge advantages over the Labour party, regardless of the merits of their arguments.

* Table 2.1 here is the Budget: the speech was a different thing.  

Comments

[Ralph Musgrave]

No.6: the emperor has no clothes phenomenon. (Or perhaps that's a re-statement of some elements of 1-5.)

[Dave Timoney]

The "gimmicks" that Martin Wolf complains of don't just distract the media, they perpetuate the idea that budgets are about winners and losers and therefore a zero-sum game - i.e. microeconomics rather than macroeconomics.

The essence of this "highly political" Chancellor is his belief that he is at the mercy of external factors, from the the "legacy inherited from Labour" to the "global economic outlook". This makes the opinion poll finding that the Tories are more "trusted" with the management of the economy all the more ironic.

[An Alien Visitor]

"This makes the opinion poll finding that the Tories are more "trusted" with the management of the economy all the more ironic."

More importantly it shows that the actual opinion of a majority of people is full of shit, based on a sustained level of brainwashing.

[aragon]

A week is a long time in politics:

People are now writing Osbourne's political epitaph, in the Torygraph.

http://www.telegraph.co.uk/news/politics/12199093/Moral-missions-make-no-sense-to-those-who-treat-politics-as-a-branch-of-PR.html

http://www.telegraph.co.uk/news/politics/conservative/12199009/IDS-has-made-Osbornes-downfall-a-certainty.html

http://www.telegraph.co.uk/news/newstopics/eureferendum/12198214/The-Chancellor-has-little-purpose-beyond-his-own-political-success.html

http://www.telegraph.co.uk/news/politics/georgeosborne/12197540/Morning-Briefing-Osbornes-bittersweet-Budget.html

"The sugary coating to the Budget has worn off, with MPs now left with a particularly bitter taste in their mouths over George Osborne’s plans to cut the welfare claims of 640,000 disabled people to save £1.3 billion."