Coming in minutes into Paul Mason’s report on Newsnight I thought he seemed to be saying that the IMF had done a Dept of Transport: got its sums wrong. They had been working on the assumption that for every pound/dollar or euro cut in govt spending only half would be lost to the economy. Newsnight seemed to be saying that in fact the figure was 1.7, an enormous multiplier effect.
If true, this is a bombshell: what is at stake is not who will run the trains to Glasgow but the entire world economy. That 1.7, if true, means the savage cuts will increase the deficit. Pain in vain.
I expected the papers and blogs to be heavy with it this morning but all I could find was an item tucked away on an Irish website to the effect that this wasn’t an IMF statement but a minority footnote by two people in the report suggesting that the multiplier might be 0.9 to 1.7.
It always seemed likely that high-spending governments (which all the governments in crisis are) trying to make savage cuts would incur a double whammy from a decreased tax take and increased welfare spending. A multiplier of more than one seemed likely. But then I’m not an economist.
I now eagerly away the expert enlightenment of Peston, Mason, Flanders et al. I think we should be told.
If true, this is a bombshell: what is at stake is not who will run the trains to Glasgow but the entire world economy. That 1.7, if true, means the savage cuts will increase the deficit. Pain in vain.
I expected the papers and blogs to be heavy with it this morning but all I could find was an item tucked away on an Irish website to the effect that this wasn’t an IMF statement but a minority footnote by two people in the report suggesting that the multiplier might be 0.9 to 1.7.
It always seemed likely that high-spending governments (which all the governments in crisis are) trying to make savage cuts would incur a double whammy from a decreased tax take and increased welfare spending. A multiplier of more than one seemed likely. But then I’m not an economist.
I now eagerly away the expert enlightenment of Peston, Mason, Flanders et al. I think we should be told.
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