Nailing left wing austerity lies

Keynesians have been in confident assertive mood recently, claiming that the facts are bearing out their long-standing calls for more fiscal stimulus to "end this recession now", as their cheerleader-in-chief Paul Krugman put it.

They claim that the divergence between US and UK growth rates proves their case.

Until Osborne choked off growth with his reckless spending cuts in 2010, they say, the UK was on the path to recovery thanks to Labour's loose fiscal policy, including a temporary VAT cut.  The chickens of austerity are now coming home to roost, including a stubbornly persistent deficit.

Contrast this with the US, where Obama resisted calls to start cutting the deficit, and a recovery is gathering strength.

This Observer article is typical of the breed:

Gordon Brown at the helm, steered the world economy back on course, with the aid of a $1 trillion collective stimulus. Brown wanted to maintain the stimulus: the US government did, but the 2010 coalition did not, in the name of budgetary consolidation. The US budget position improved dramatically with economic growth while the British deficit, in the absence of decent growth, continues to be an embarrassment.

The problem is that the figures don't support this version of events.  Look at the chart showing UK and US public sector deficits as a % of GDP:

The supposed difference between austerity-obsessed Brits and spendthrift Yanks is all rhetoric and perception.  If anything the US has adopted a tighter fiscal policy than the graph suggests: there have been big cuts at state level which are not reflected in the Federal deficits shown here.

The reality is that the two countries have followed a very similar path.  They entered the recession with their public finances in remarkably poor shape given the boom that preceded it and the crisis sent deficits soaring.

Both started out with some Keynesian stimulus but eased off as political concerns over the scale of borrowing took hold.  In the last couple of years both countries have adopted a middling course, neither attacking the deficit or adding to it as Krugmanites demand.

In fact the US has made the first serious move to cut deficits dramatically as their "sequestration" law kicked in this year to lop $85bn from Federal spending.  But the US is still growing more quickly than Britain.

So, the idea that British growth is slower than the US because we went for austerity and they didn't is a myth.  There are plenty of other possible explanations for the US currently outperforming Britain.

I would highlight one - US house prices were allowed to fall back to their pre-boom levels and the banks purged a lot of bad debt in the process.  The process is widely believed to be over and housing is now contributing to growth.  By contrast the UK has done everything in its power to prevent this house price boom unwinding and is consequently stuck in low growth mode - plateauing rather than recovering (see The stalled UK economy in one chart).

There are almost certainly multiple factors at work.  Another UK-US contrast relates to energy: they have fracking and gas prices 1/4 of UK levels, we have declining North Sea oil production shaving a % point off GDP.

One thing's for sure - the simplistic nonsense about "it was austerity what did it" needs to be laid to rest.


From our website:  UK and Spanish tax implications of a rental property in Spain

The 10 least sincere phrases in the English language

Yes everybody lies, and it's not just little white ones "to save their feelings".  It's just easier and more comfortable to say what will get the job done rather than what we think.  Here is my selection of the least sincere phrases around:

10.  “I am in a really weird place right now”

• The modern equivalent of letting someone down gently with the it’s-not-you-it’s-me routine.

9. “Your call is important to us”

• Why don’t you answer the freakin’ phone then.

8. “How was football?”

• Non-sporty partners are not remotely interested in the reply.  Try answering “awful actually, someone broke their leg and had to go to hospital” and see if you get anything more than the stock “very nice dear” reply.

7. “A major motion picture event”

• Saying this in a deep voice at the start of trailers for “Smurfs 2” and “Hangover 3” does not make them events.

6.  “Regrettable”

• Always a phrase used by somebody blissfully unaffected by the announcement and thus with no reason for regret it e.g. a Chief Exec announcing redundancies or a utility company raising prices.  Regrettable, yes, but not by them.

5. “Sorry”

• As said by a child to a sibling they have reduced to tears. Usually only spoken under threat of water-boarding and so quietly that  NASA listening devices wouldn’t pick it up.

4.  “Injured in an accident that wasn’t your fault?”

• The real question that these ambulance-chasing sharks are asking is “long-forgotten incident which we can extort a few quid out of?” but they and their truth-dodging clients have to keep up the charade.

3.  “I like you … the audience loved it – you’re a breath of fresh air"

• TV talent show judges are apt to gush like this when someone has somehow got the sympathy vote and has to be put through to the next round despite being rubbish. Think of an 80 year old widower who can play “My Heart Will Go On” using his dead wife’s rib-cage as a glockenspiel. 

2. “Aaah…he looks just like you"

• Someone claiming that a baby looks just like Mum or Dad is not being sincere.  It’s a classic diversionary tactic when faced by a truly ugly new-born: simply pick a parent at random, point out the supposed likeness and a lively discussion will ensue, neatly obscuring the fact that you have failed to comment on the nipper’s appearance.

And the winner by a country mile ...

1. “Ryanair apologises for the late departure of your flight this evening”

• Even the screaming baby in row 23 knows that they don't really care about anything they put their passengers through.  Their slogan should be: “We don’t give a flying fxxk”

See also: What two years of flying Ryanair will do to you       When did Ryanair get so expensive?

Since when did Ryanair get so expensive?

UPDATE: a reader who books with Ryanair messaged me with some tips on how to avoid the highest fares.  In his experience, the fares are cheapest 3-5 weeks before the date of travel.  They quite often start expensive unlike on Easyjet, where the first price is usually the cheapest quoted and it's downhill from there.
He has also found that it is cheaper to book in Euros which is done by putting the Spanish destination first.

No one much likes Ryanair (What 2 years of flying Ryanair will do to you) but millions of us put up with it because it’s “the low fares airline” .  Well it used to be.

I visit Spain regularly and generally end up flying Easyjet or Ryanair because they are cheaper than alternatives like Monarch and BA.  In the past Ryanair has usually had the edge on price but I recently noticed a huge shift when booking flights for next Winter.  

Flicking between the two websites for the weekends I needed, Easyjet was invariably coming out on top.  In some cases Ryanair was almost twice the price of its rival:

I had a quick look at Monarch and BA.  BA was the most expensive but, as they are at pains to point out, are not a no frills outfit.  Monarch, was more expensive than Easyjet but they also easily beat Ryanair.

I booked my flights for this Summer ages ago and got a mixture of Ryanair and Easyjet flights.  Looking on the websites now for a couple of dates in the high season, they look very similar.

So maybe it is just the winter fares on this particular route that Ryanair have decided to put through the roof.  I would be interested to hear what other regular flyers have to say.

One thing's for sure, you can no longer take Ryanair’s boast of having “the lowest fares” at face value.  They have clearly decided to cash in on their dominant position.  Flyers should not simply assume that Ryanair is cheapest and need to shop around.

One pleasant side effect of booking with Easyjet is that their website is easy to use e.g. you can quickly click through to pay for your booking without having to say NO to pages of add-ons like transfers and carry on cases.