Missing the IFS Green Budget for economy nerds must be like living near Woodstock in the 1960s & missing out on Hendrix. Is Robert Chote Hendrix ?
R Chote: Current government plans are ALREADY front-loaded. No more cutting in 2010.
But parties should not use unavoidable uncertainty as an excuse for inaction.
First presentation is about Aggregate supply – how much has been permanently lost to potential GDP? Answer – amazingly pessimistic – 7% of output & slower growth by 0.5. If this is so, we will get inflation MUCH earlier, and need a massive hit to living standards which will be a political nightmare. The work comes from Barclays + is theoretically sound, based on solid IMF & OECD historical work. Am a bit depressed
Let me be clear. If this is right & we have had such a massive hit to Aggregate Supply, then three quarters of my normative suggestions have been wrong. We would need sustained austerity to reaquire balance – and trying to boost demand will only produce inflation. We are in Spectator World.
Carl Emerson has just pointed out that the sharpest fiscat tightening is between now & 2011. Yet the Conservatives want to go deeper & sooner!