Ad-hoc PFM Boards > The Sector PFM Boards

VOTE NOW!! Budget Cuts

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harnett:
In the face of the current crisis in the world economy, the majority of the world's countries are implementing significant budget cuts.  Many (Kenyesian orientated) economists question the stringency of these cuts, highlighting the negative impact on growth.  Others (monetarist orientated) claim that this policy is the only way to safeguard long term growth, fending off inflationary pressures. 

Getting the balance right is possibly the most important economic question of our time.

Here are some articles to help you decide:

http://www.imf.org/external/np/ms/2011/060611.htm?intcmp=239  (IMF Report on UK June 2011)
http://www.nytimes.com/2011/05/23/opinion/23krugman.html?_r=1&ref=paulkrugman (Krugman in NYT)

Napodano:
Chosing an option depends from the country you are in.

I am in Italy and I voted 'Yes' because without budget cuts Italy would go belly up due to its bulging debt. I voted 'mostly' because I do not like the policy of 'linear', across-the-board cuts adopted by the Italian MoF. That is for me 'deciding not to decide' and reduce the effectiveness of the budget cuts as they are not based on spending reviews.

harnett:
Well I can't have the "cuts mongerers" out in the lead from the beginning.  I'm in UK and the debate has really been hotting up with yet another reduction in growth predictions from the IMF and criticism of adhering to cuts coming from not only the left but former members of the governnment's treasury team!  Jonathan Portes, the director of the National Institute of Economic and Social Research, who until February was chief economist at the Cabinet Office, advising the prime minister, said: "You do not gain credibility by sticking to a strategy that isn't working."

We have the most austere cuts in Europe (apart from Ireland and Greece), but more room to manouevre than most.

STONE:
I'm in France - it's spend spend spend - but will we know how it is to be financed and by whom and when?

On Portes - If I was working for the Cabinet Office, I'd toe the line or leave - if I left to direct NIESR and NIESR forecasters were suggesting current policy mix is not the "best" (sense to be defined) then it's a perhaps a case of: "when the (employment) facts change - I change my mind" - good 'Keynesian' stuff.   Same holds true for the of the ex-MPC lot.  I'm with cut what you can when you can; protect what you shouldn't cut.  We know that stability is important especially for the poor in the short term but there is a trade-off - who is writing down their social welfare function so we can see if it has a balanced response to VFM components within the current electoral cycle?

No help I'm afraid - just fence sitting.

harnett:
On Portes - if you are in the Cabinet Office you are politically compromised - if Director of an Institute then you can say what you think!!!

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