Economists slam Tory calls for cuts

The Keynesians strike back.

So, after last week's letter to the Sunday Times from 20 economists, supporting the Tory demand for the government to begin cutting spending this year, it's the turn of the Keynesians to strike back.

Today's Financial Times carries not one, but two letters from 67 economists in total, warning that early spending cuts could tip the economy back into recession and rebutting claims that the deficit is "out of control".

The second, written by Lord Skidelsky and signed by 57 others, including Joseph Stiglitz and our economics columnist, David Blanchflower, is the more significant.

Here are the key passages:

In urging a faster pace of deficit reduction to reassure the financial markets, the signatories of the Sunday Times letter implicitly accept as binding the views of the same financial markets whose mistakes precipitated the crisis in the first place!

They seek to frighten us with the present level of the deficit but mention neither the automatic reduction that will be achieved as and when growth is resumed nor the effects of growth on investor confidence. How do the letter's signatories imagine foreign creditors will react if implementing fierce spending cuts tips the economy back into recession? To ask -- as they do -- for independent appraisal of fiscal policy forecasts is sensible. But for the good of the British people -- and for fiscal sustainability -- the first priority must be to restore robust economic growth. The wealth of the nation lies in what its citizens can produce.

George Osborne's claim that the economic consensus favours the Tories has been exposed as false.

The decision to send the letter to the FT (it was originally rumoured that it would appear in this week's Sunday Times) was a canny one. It lends the letter a far greater degree of authority; and it appears in a title that also argues against the deficit hawks. The paper's leader today concludes:

Friday's letters are an embarrassment for the Tories, above all, who sought to capitalise on the first letter. They must learn -- soon -- that their desire for simple political messages is no excuse for nuance-free policy positions.

The FT is often mistakenly assumed to be a cheerleader for the free market, but it has actually endorsed Labour at every election since 1992. And it would be foolish of the Tories to count on its support this time round.

What is surprising is that this letters war has started at a time when the differences between the parties on trimming public spending have ostensibly narrowed. David Cameron has promised that a Conservative government would avoid "swingeing" cuts and Alistair Darling has insisted (against the wishes of Ed Balls) that any windfall from lower than expected unemployment must be used to reduce the deficit, not for a pre-election giveaway.

But with the economy as fragile as it is, the Tories' plan to begin cutting spending from this year remains deeply irresponsible. Any hope George Osborne had of presenting himself as a credible chancellor-in-waiting has evaporated.

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George Eaton is political editor of the New Statesman.

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What Donald Trump could learn from Ronald Reagan

Reagan’s candidacy was built on more than his celebrity. Trump not only lacks experience as an elected official, he isn’t part of any organised political movement.

“No one remembers who came in second.” That wisdom, frequently dispensed by the US presidential candidate Donald Trump, came back to haunt him this week. Trump’s loss in the Iowa Republican caucuses to the Texas senator Ted Cruz, barely beating Senator Marco Rubio of Florida for second place, was the first crack in a campaign that has defied all expectations.

It has been a campaign built on Trump’s celebrity. Over the past eight months, his broad name recognition, larger-than-life personality and media savvy have produced a theatrical candidacy that has transfixed even those he repels. The question now is whether that celebrity will be enough – whether a man so obsessed with being “Number One” can bounce back from defeat.

Iowa isn’t everything, after all. It didn’t back the eventual Republican nominee in 2008 or 2012. Nor, for that matter, in 1980, when another “celebrity” candidate was in the mix. That was the year Iowa picked George H W Bush over Ronald Reagan – the former actor whom seasoned journalists dismissed as much for his right-wing views as for his “B-movie” repertoire. But Reagan regrouped, romped to victory in the New Hampshire primary and rode a wave of popular support all the way to the White House.

Trump might hope to replicate that success and has made a point of pushing the Reagan analogy more generally. Yet it is a comparison that exposes Trump’s weaknesses and his strengths.

Both men were once Democrats who came later in life to the Republican Party, projecting toughness, certainty and unabashed patriotism. Trump has even adopted Reagan’s 1980 campaign promise to “make America great again”. Like Reagan, he has shown he can appeal to evangelicals despite question marks over his religious conviction and divorces. In his ability to deflect criticism, too, Trump has shown himself as adept as Reagan – if by defiance rather than by charm – and redefined what it means to be “Teflon” in the age of Twitter.

That defiance, however, points to a huge difference in tone between Reagan’s candidacy and Trump’s. Reagan’s vision was a positive, optimistic one, even as he castigated “big government” and the perceived decline of US power. Reagan’s America was meant to be “a city upon a hill” offering a shining example of liberty to the world – in rhetoric at least. Trump’s vision is of an America closed off from the world. His rhetoric invokes fear as often as it does freedom.

On a personal level, Reagan avoided the vituperative attacks that have been the hallmark of Trump’s campaign, even as he took on the then“establishment” of the Republican Party – a moderate, urban, east coast elite. In his first run for the nomination, in 1976, Reagan even challenged an incumbent Republican president, Gerald Ford, and came close to defeating him. But he mounted the challenge on policy grounds, advocating the so-called “Eleventh Commandment”: “Thou shalt not speak ill of any fellow Republican.” Trump, as the TV debates between the Republican presidential candidates made clear, does not subscribe to the same precept.

More importantly, Reagan in 1976 and 1980 was the leader of a resurgent conservative movement, with deep wells of political experience. He had been president of the Screen Actors Guild in the late 1940s, waging a campaign to root out communist infiltrators. He had gone on to work for General Electric in the 1950s as a TV pitchman and after-dinner speaker, honing a business message that resonated beyond the “rubber chicken circuit”.

In 1964 he grabbed headlines with a televised speech on behalf of the Republican presidential candidate, Barry Goldwater – a bright spot in Goldwater’s otherwise ignominious campaign. Two years later he was elected governor of California – serving for eight years as chief executive of the nation’s most populous state. He built a conservative record on welfare reform, law and order, and business regulation that he pushed on to the federal agenda when he ran for president.

All this is to say that Reagan’s candidacy was built on more than his celebrity. By contrast, Trump not only lacks experience as an elected official, he isn’t part of any organised political movement – which enhanced his “outsider” status, perhaps, but not his ground game. So far, he has run on opportunism, tapping in to popular frustration, channelled through a media megaphone.

In Iowa, this wasn’t enough. To win the nomination he will have to do much more to build his organisation. He will be hoping that in the primaries to come, voters do remember who came in second. 

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war