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March 27, 2020


Mike Cooke

I think ERGers will go further and say that any problems going forward are due to the covid-19 shutdown and beyond the control of anyone.


"One lesson of the crisis is that western governments have much more fiscal space than austerians pretended."

Is part of that space because austerity happened? Would there have been the same amount of space if Corbyn had been elected in 2017 or 19, or if Sanders had become US president?


Well on the face of it at least arguably, the lesson from Japan seems to indicate that yes we would have still had the headroom to act at least up to the levels of Japan, which has gov debt to GDP ratios of three times that of the UK.
The other thing to consider in your Labour splurge scenario is to what extent would the 'additional spend" have increased GDP as opposed to 'just debt' and since growth did at first decrease under Cameron when austerity was implemented and subsequently growth increased when austerity was relaxed there
are solid arguments for thinking that the answer to your question is yes.

Re Sanders v Trump the question is somewhat moot seeing as the latter has engaged in fiscal profligacy of his own in the form of big tax reductions which whilst providing increased growth for a few quarters also skyrocketed the deficit.


I was thinking more that although there is a small overlap between the spending promised in Corbyn's program and the spending promised now, the great majority isn't on the same things. So the question is more, is there the fiscal space to do all the other things that were pledged, and the new stuff too?

 Darina Confidus

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derrida derider

"This time next year we’ll be seeing the economic damage done by post-Brexit trade barriers. But these will look small compared to the drop in output we’ll see in the next few weeks and they will therefore seem tolerable to some"

Not if the EU recovers much faster than the UK. Which is the likely way that any damage from those trade barriers would manifest; they won't cause recession so much as delay recovery. Investment will flow to the EU more than the UK.

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