Monday, 12 May 2014

Fiscal Policy , Budgets and proposed cuts

I am staggered to read at times people advocating strong expenditure cuts and then assuming they have no impact on the economy.

It reminds of dear old Samuel J who used to 'write' over at Catallaxy. One of his great bits of economic understanding was to say if the ALP had not spent money in their first budget then the budget would have still have  been in surplus  . In Samuel's world the economy has no impact on the budget!

We see it again with the proposed budget by the Liberal Democratic party.
M0nty and Steve from Brisbane have written about it.

I thought I would just add something else. On the numbers their budget is more contractionary than Wayne Swan's budget. That budget cut 0.7 percentage points from GDP. The only reason Australia did not then go into recession was monetary policy which could not fully offset fiscal policy.
( Isn't it great that those lovers of classical economics NEVER EVER talk about this budget!)
As it is We got the LOWEST Nominal GDP rate in Australia's history.

It is as like the GFC never occurred. the reactions by countries are ignored.As I have repeatedly said they are so similar to the 1950s communists. Evidence is always ignored and  ideology is paramount.