Want a fright? part 2

I’m putting this on this blog because not many of you look at my economics blog and I want you to understand the dynamics of the public sector deficit crisis. This is from a US blog and shows Obama’s proposed long-term budget path. The US has more or less refused to come up with a credible fiscal consolidation plan. In contrast, the UK has a credible plan. It may not work, it may be blown off course but it least the UK government is serious. Despite the forest sell-off debacle, I’d rather have a government that recognises the problem and tries to rectify it, even if it makes some wrong decisions. For Obama, in the UK, read Ed Balls.

Source: Keith Hennessey


11 thoughts on “Want a fright? part 2”

  1. Well that’s a scary graph! I’m very much afraid that when Obama was elected, it was because he talked a good job. Unfortunately, it hasn’t been borne out in practise.

  2. The problem is that politicians, Democrats and Republicans, have convinced the America public (see Wisconsin) that the free lunch is really free. We need people like Chris Christi on the national stage to communicate the wake up story.

  3. Under the 22nd Amendment, Obama cannot be President beyond 2018. The graph runs to 2060! It doesn’ts scare me as it’s B.S. Long term economic forecasts are about as accurate as long term weather forecasts, or climate change predictions for that matter.

    1. Keith Hennessey is a repected commentator on US economic policy. I don’t think he is suggesting that Obama would be in office until 2060. He’s merely projecting forward Obama’s current economic plans. Yes forecasts usually prove to be wrong, but they are valuable in trying to frame policy. This graph will not turn out to be reality as the US will default on its debt well before 2060 on this course. Whether you take any notice is your choice.

      1. I know Keith Hennessey isn’t suggesting Obama will be in power until 2060. What I’m saying is that projecting this far forward is futile, the graph will change come 2016 when a new present is elected and new policy is implemented. Other factors e.g. exchange rates will also impact. If the U.S. defaults in the meantime, then we’re all up the creek, and whatever Lord Snooty and his pals do in this country is in that case irrelevant.

      2. I think it’s better to view this as a projection rather than a forecast. If policy isn’t changed then catastrophe beckons. What it suggests is that fiscal consolidation will have to be even more severe at some time in the future to compensate for current profligacy. The reason for highlighting this is that I don’t think that Ed Balls has been challenged sufficiently on his “let’s not do too much at the moment” view on the budget deficit. The longer the delay, the more savage fiscal consolidation will have to be in the future to compensate. Just look at the mess Japan is in through repeated postponment of fiscal consolidation. Ed Balls is being disingenuous at best, and at worst a downright liar.

  4. I have just been on holiday for the week and ended up listening to Ed Balls on the R2 Jeremy Vine show. I don’t normally like Jeremy because I somehow always find him inferior to Jimmy Young, who he replaced. However, on this occasion Ed was such an easy target with his don’t cut anything and spend even more approach that he gave Jeremy an opportunity to shine. Ed seemed clumsy and does not seem to have learned anything from his previous experience. What is frightening though is that Ed and Labour could easily regain power in few years time and send us straight back on to the road to oblivion probably with the reasoning that it must be sensible if the USA are doing it.

    1. Ed Balls appears still to be inhabiting the Blair/Brown parallel universe. As you say, it is frightening to think that he could be back in power in a few years.

  5. There seems to be an assumption here that Ed Balls is not a politician. Occam’s would suggest that he is letting his desire to give the coalition plans a good kicking over-ride any desire to be more forthright over what is actually practicable.

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