Austerity has cost the UK £3,500 for every household

The maths of cuts.

Counterfactuals are tricky. How can we know for certain what the British economy would look like if austerity had never been implemented?

Well, we can't be certain. But with a few assumptions, we can ale an educated guess, and that's precisely what Alan Taylor has done at VoxEU. The assumptions he makes aren't uncontroversial, but they are easily defensible, and the results are stunning.

First, we have to assume that the government actually did have the ability to avoid austerity. That is, if Osborne hadn't rapidly started to slash the state, would the bond markets have refused to loan to us shortly after? It seems unlikely, especially given, as Taylor points out, gilt yields remain incredibly low despite our debt-to-GDP level rising and our real GDP worse than predicted. The bond market basically doesn't care about the national debt, at least while it's at the levels it is now; instead, as opportunities for investment have frozen worldwide, yields in the UK have collapsed, along with those in the US and Japan.

So the UK didn't have to implement austerity; it was a choice. The second assumption is that policymakers "care about timing fiscal adjustments so as to mitigate damage to the real GDP path of the economy", and won't just splurge the money wherever they can find political support for it. That is a fairly weighty assumption, to be sure, and one which a lot of people working at the intersection of politics and economics might question. At the same time, though, it's a pretty necessary assumption to do much thinking about macroeconomics, not least because if you assume politicians are idiots, it becomes pretty hard to justify any state spending at all.

If you buy those two basic assumptions, Taylor writes, then you can start to work backwards from the observed effects of austerity in other countries to build up the counter-factual. This part is just the same as we've seen again and again: austerity hurts growth. A lot.

Last year, for instance Paul Krugman did a rough-and-ready calculation and estimated that cutting budgets by 1 per cent of GDP since the recession reduced GDP by around 1.25 per cent. That's not supposed to be generalizable – but it does seem true for a specific time (2008-2012) and place (Europe).

Taylor's model is far more robust: it takes account of allocation bias (the fact that the state of a country's economy may have influenced whether or not it applied austerity measures), and also allows for the fact that austerity has different affects applied in a boom or slump. And it finds a massive effect in a slump, compounded by the fact that, as Taylor says, "a dead cat bounces": given we'd expect more future growth the deeper in a slump we are (as the economy catches up with where it should be), there's a tendency to underestimate the damage of austerity.

But this is all preamble. You're here for the money shot. How much has austerity cost Britain? Three per cent of GDP:

Simon Wren-Lewis amortises that across the UK: it comes to £3,500 for every UK household over those three years. Bear that in mind next time you hear the government talking about how much our welfare bill is. Once upon a time, we had that money.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The most terrifying thing about Donald Trump's speech? What he didn't say

No politician uses official speeches to put across their most controversial ideas. But Donald Trump's are not hard to find. 

As Donald Trump took the podium on a cold Washington day to deliver his inauguration speech, the world held its breath. Viewers hunched over televisions or internet streaming services watched Trump mouth “thank you” to the camera, no doubt wondering how he could possibly live up to his deranged late-night Twitter persona. In newsrooms across America, reporters unsure when they might next get access to a president who seems to delight in denying them the right to ask questions got ready to parse his words for any clue as to what was to come. Some, deciding they couldn’t bear to watch, studiously busied themselves with other things.

But when the moment came, Trump’s speech was uncharacteristically professional – at least compared to his previous performances. The fractured, repetitive grammar that marks many of his off-the-cuff statements was missing, and so, too, were most of his most controversial policy ideas.

Trump told the crowd that his presidency would “determine the course of America, and the world, for many, many years to come” before expressing his gratefulness to President Barack Obama and Michelle Obama for their “gracious aid” during the transition. “They have been magnificent," Trump said, before leading applause of thanks from the crowd.

If this opening was innocent enough, however, it all changed in the next breath. The new president moved quickly to the “historic movement”, “the likes of which the world has never seen before”, that elected him President. Following the small-state rhetoric of his campaign, Trump promised to take power from the “establishment” and restore it to the American people. “This moment," he told them, “Is your moment. It belongs to you.”

A good deal of the speech was given over to re-iterating his nationalist positions while also making repeated references to the key issues – “Islamic terrorism” and families – that remain points of commonality within the fractured Republican GOP.

The loss of business to overseas producers was blamed for “destroying our jobs”. “Protection," Trump said, “Will lead to great strength." He promised to end what he called the “American carnage” caused by drugs and crime.

“From this day forward," Trump said, “It’s going to be only America first."

There was plenty in the speech, then, that should worry viewers, particularly if you read Trump’s promises to make America “unstoppable” so it can “win” again in light of his recent tweets about China

But it was the things Trump didn't mention that should worry us most. Trump, we know, doesn’t use official channels to communicate his most troubling ideas. From bizarre television interviews to his upsetting and offensive rallies and, of course, the infamous tweets, the new President is inclined to fling his thoughts into the world as and when he sees fit, not on the occasions when he’s required to address the nation (see, also, his anodyne acceptance speech).

It’s important to remember that Trump’s administration wins when it makes itself seem as innocent as possible. During the speech, I was reminded of my colleague Helen Lewis’ recent thoughts on the “gaslighter-in-chief”, reflecting on Trump’s lying claim that he never mocked a disabled reporter. “Now we can see," she wrote, “A false narrative being built in real time, tweet by tweet."

Saying things that are untrue isn’t the only way of lying – it is also possible to lie by omission.

There has been much discussion as to whether Trump will soften after he becomes president. All the things this speech did not mention were designed to keep us guessing about many of the President’s most controversial promises.

Trump did not mention his proposed ban on Muslims entering the US, nor the wall he insists he will erect between America and Mexico (which he maintains the latter will pay for). He maintained a polite coolness towards the former President and avoiding any discussion of alleged cuts to anti-domestic violence programs and abortion regulations. Why? Trump wanted to leave viewers unsure as to whether he actually intends to carry through on his election rhetoric.

To understand what Trump is capable of, therefore, it is best not to look to his speeches on a global stage, but to the promises he makes to his allies. So when the President’s personal website still insists he will build a wall, end catch-and-release, suspend immigration from “terror-prone regions” “where adequate screening cannot occur”; when, despite saying he understands only 3 per cent of Planned Parenthood services relate to abortion and that “millions” of women are helped by their cancer screening, he plans to defund Planned Parenthood; when the president says he will remove gun-free zones around schools “on his first day” - believe him.  

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland