Osborne Wants to Take Us Back to 1948. Time to Look Forward Instead

George Osborne, Chancellor of the Exchequer

THE OBSERVER: Plans in the Treasury's autumn statement to return state spending to 1948 levels will do permanent damage to Britain

It is an incidental sentence, but it brought me up short. By 2018, general government consumption will be proportionally no larger than it was in 1948. So declared the Office for Budget Responsibility in its report accompanying the autumn statement. The work of three generations in building the sinews of a state that support systems of health, transport, education, environment, policing, science and the rest is to be summarily withdrawn over the next five years. It is a landmark moment in our national life.

Next year the coalition – deputy prime minister Nick Clegg supporting Cameron and Osborne – is aiming to legislate that the reduction of the deficit on this scale and speed should be a statutory obligation. Stunningly – apart from some allegedly effective new measures against tax avoidance, and asking non-residents to pay capital-gains tax on the sale of their homes – all of the work is to be done by cutting spending, by a cumulative £75bn in ways yet to be specified.

The IMF, after assessing the experience of 107 countries between 1980 and 2012, recommends that, after a credit-crunch deficit, there should be a balance between tax increases and spending reductions. In Osborne-land over the next five years more than 95% is to come from spending cuts – a global first in self-harm. » | Will Hutton | Sunday, December 08, 2013

US Warned Over Debts, as S&P Cuts Outlook to 'Negative'
THE DAILY TELEGRAPH: America's ability to tackle its deficit has been given a strong vote of no confidence, after leading rating agency Standard & Poor's said the chances are rising that the country will lose its prized AAA status.

S&P downgraded the outlook for the US government's debt to negative from stable on Monday in a clear shot across the bows of Congress and The White House.

In sharp contrast to every other developed economy, the US has increased its budget deficit in the last year in an effort to accelerate the economic recovery here.

While President Barack Obama and the Republicans have in the last month laid out plans to reduce the deficit, S&P warned that a plan needs to be agreed upon within the next two years for the US to retain its status as a top borrower.

"More than two years after the beginning of the recent crisis, US policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," said Nikola Swann, an analyst at S&P.

The move by S&P sparked an immediate reaction in financial markets, with US government bond prices falling alongside the S&P 500. Gold prices jumped to a new record of $1,496. » | Richard Blackden, US Business Editor | Monday, April 18, 2011

U.S. Treasury Chief Geithner Urges G-20 Leaders to Continue Government Spending
LOS ANGELES TIMES: The Treasury secretary, speaking at the summit in Toronto, says the global recovery remains fragile and that ill-timed austerity measures could derail gains. Obama meets privately with other leaders.

U.S. Treasury Secretary Timothy Geithner holds a news conference during the G-20 summit in Toronto. Photograph: Los Angeles Times
Reporting from Toronto — They smiled for photos and announced agreement on everything from nuclear containment to development efforts in Africa on Saturday, but world leaders gathered in Toronto have a tougher challenge as they get down to brass tacks on the best way to keep the global economic recovery from stalling.

Going into Sunday's meetings with the Group of 20 industrialized and emerging nations, the Obama administration was pressing leaders to stay the course they set more than a year ago to promote growth through government investment in the economy.

Spooked by economic meltdowns in Greece and elsewhere on their continent, European leaders came to those talks concerned about racking up a damaging level of debt. Their proposal of a punitive global tax on banks to fund future bailouts was meeting opposition from other nations but remained under consideration late Saturday.

But U.S. and Canadian leaders predicted that a common purpose would emerge before the G-20 summit ends Sunday, one representing a balance between economic stimulus and plans for deficit reduction.

"We have to find the right balance, and that balance is going to differ across countries," Treasury Secretary Timothy F. Geithner said. "But I think you're going to see a strong commitment again by these major economies to do what is necessary to make sure that we are supporting recovery and getting that balance right." >>> Christi Parsons, Los Angeles Times | Sunday, June 27, 2010

Barack Obama Requests $50 Billion in Emergency Funding from Congress
THE SUNDAY TELEGRAPH: Barack Obama has sought to shore up the US economy with a request for $50 billion (£34 billion) in emergency funding from Congress to save the jobs of "hundreds of thousands" of teachers, firemen and policemen.

He said the aid, which also included measures to help small businesses, was essential to ensure that the country did not "slide backwards just as our recovery is taking hold".

"It is essential that we continue to explore additional measures to spur job creation and build momentum toward recovery, even as we establish a path to long-term fiscal discipline," Mr Obama wrote in a letter sent to party leaders in Congress.

Pointing out that 84,000 public sector jobs had been lost so far this year, he said keeping people employed in the short term would cost less than their unemployment.

The demand to inject further government spending into the economy puts America on the opposite course to its major trading partners in the developed world. Britain, Germany, Japan, France and Italy have all announced cuts after boosting spending to counter the recession in recent years.

Mr Obama is also likely to encounter stiff domestic opposition. Republicans immediately criticised the president for seeking to spend more money when the national debt has risen to £9.6 trillion.

John Boehner, the Republican leader in the House of Representatives, said spending more public money without offsetting the costs was irresponsible.

"The spending spree in Washington continues unabated, though the American people are screaming at the top of their lungs: 'Stop'." >>> Alex Spillius in Washington | Sunday, June 13, 2010

Obamonomics©: A Definition >>>