It’s wrong, wrong, wrong!
And it’s not just the trade unions who are worried about the Government’s austerity programme. Many economists, including Joseph Stiglitz, the Nobel prizewinner who predicted the global crisis, predicts the Chancellor’s first Budget will take the UK deeper into recession and hit millions – particularly the poorest – badly. In a recent interview in The Independent, he said, “It’s not just pre-Keynesian, it’s Hooverite.” By which he means governments are not just refusing to stimulate, they are making cuts, as Herbert Hoover did in the US in 1929 – when he turned the Wall Street Crash into the Great Depression.
“Hoover had this idea that, whenever you go into recession, deficits grow, so he decided to go for cuts – which is what the foolish financial markets that got us into this trouble in the first place now want.
“If you have a household that can’t pay its debts, you tell it to cut back on spending to free up the cash to pay the debts. But in a national economy, if you cut back on your spending, then economic activity goes down, nobody invests, the amount of tax you take goes down, the amount you pay out in unemployment benefits goes up – and you don’t have enough money to pay your debts.”