Obama's stimulus looks nothing like Brown's - whatever our PM might say

Fred

Very insightful, Fraser, thanks. But I suspect Cameron and Co are too weak to stop Brown claiming that Obama is following the Brown path.

Short the UK

Obama's tax cut for families will mainly be used to pay down debt - it is a waste. His infrastructure investments will take some time to percolate into the economy.

The underlying under-employment rate is c.12%. The December figure could have been higher but the signing on centres couldn't cope with the demand. The January figure could be close to a million.

America is in a depression, Obama's is having to be blunt because he realises that if he gives his 'change & hope' spiel the public will think he is out of touch.

The UK is in a desperate place. National liabilites are c.£3.6 trillion. The magic circle of 'fake' wealth creation is imploding: Property Speculation, The City and Retailing. I think at some point within the next two years the IMF will be called in and State spending will be slashed. The UK is in a depression and we now have to cut our cloth. Our standard of living will now drop as we head into a steep decline. We have little wealth generating industries and massive levels of debt.

The best we can hope for is to go L shaped like Japan. The more probable outcome is that we go A shaped, a la Argentina. The A has more chance of happening because of the economic clowns who are pulling the levers of power.

It is a very bleak future for Blighty.

Obnoxio The Clown

"he gave it to the pubic straight", did he?

Carol

Obama can afford to draw up a four year plan. GB is scrabbling around for the short term to get him through the next election, whenever.

Fraser Nelson

Fred, I think Cameron and Osborne are quickly improving in the art of using figures as weapons - which is, of course, Brown's sole skill.

Short the UK, you think the IMF can afford to bail us out? I'm beginning to wonder.

Obnoxio, I'd say Obama was frank in terms of letting Americans know the severity of the situation,the flintiness and length of the path ahead then yes. He didnn't dole out false hope, as Brown did in November - for which he will pay the price, I suspect in Easter when its obvious his squirt has done nothing. But there are questions over what's a tax cut and what's welfare in Obama's package, unusually its a rich mixture of both. But a far better mixture than he looked set to serve up during the campaign - so he's learning, fast. And it's not even 20 Jan yet!

John Miller

And at last the real Brown plan unfolds. Keep the Bank of England's balance sheet secret(did they even pretend there was a good reason for this?)and print more money. I hope to god they do win the next election so we can have a Labour PM (Brown will have resigned by then on the grounds of ill health) presiding over old fashioned Labour hyper inflation.

They think by keeping it secret then the Arabs will still buy into a devaluing currency offering a 4% negative return. The usual Labour hypothesis being that, if we don't tell them or lie, they'll never work out the truth.

Ivan D

Are you the same Fraser Nelson - expert on German domestic politics - who used to very confidently assure us that there would be no German stimulus package a la Brown? Or was that another Fraser Nelson? We certainly don't hear much from him around here on that score these days. He is probably in America. Maybe in Fulton. I believe they're very keen there on the, ahem, eccentric point of view that when Chruchill became PM in 1940 he had no mistakes to defend. You know, like Norway.

Short the UK

Fraser,

Cynicus Economicus reckons the IMF won't have enough.

The very smart Mish Shedlock said this the other day:

"The UK is on a mad rush to oblivion."

I felt very pessimistic in October & November but lightened up in December, I am now back to full pessimism. It's not so easy to continuously hold such a dark vision.

Is there any hope?

TGF UKIP

Fraser, I not this piece is timelined at 3.55 pm.

So Cameron gives his longest, most detailed and, in many ways, his most relevant interview on Marr this morning and the Speccie's political editor has no comments to make on it. Or like me did you record it and are going to illuminate us with your thoughts later. I do hope so for what you have previously written resonated so much in that interview.

I'm sure other Coffee Housers are keenly awaiting your thoughts too, Fraser.

But meanwhile, back to Obama, and I note that that the FT was reporting yesterday that Congressional Democrats are rebelling against the proportion of the stimulus package devoted to tax cuts and that he is immediately resiling from his proposals.

Can I quote from Edward Luce in the FT? "The president-elect who has come under fire from the left in the past few days for proposing that up to 40% of the stimulus should be via tax cuts, said that he would be prepared to "hone and refine" the package to take account of "new ideas".

As Fred Barnes pointed out on the Beltway Boys last week, the Congressional Dems are particularly keen that the package (which they are also arguing should be much larger towards a trillion and not just $775bn) should be directed principally towards infrastructure spending so that they can insert a condition that federal dollars can only be spent on projects carried out with unionized labour.

Looks like Dave might not be the only one who instintively bottles it.

Olaf Rye

I only wish to add a few points to the incisive comments already posted. The hope of Brown is that banks will start lending again, and the last thing that we need is more private or public debt. He has no ideas at all and we are in a desperate position. I was hoping that, to attract investment, he might rescind the masses of regulation and costs passed on to businesses and consumers in this country, but he will never do this as Labour wants to control everything and has created an army of workers that exist only because they are to enforce the regulations. God help us all ... anyone have any suggestions of where to escape ?

Fraser Nelson

TGF, don't you give your staff a half day on Sundays? My 2009 resolution is to blog only once on the sabbath and I could do mp better than Pete, who has blogged on Cameron's excellent Marr performance.

Ivan, come on... I said the Germans have a debt-averse attitude and a fiscal surplus: they are in a position to do a splurge because they saved in the good times. I'd say Churchill's approach to Hitler pre-1940 was pretty consistent - is judgment had been proved right, unlike Chamberlain's.

Augustus

Two alternatives to boost the economy which are often cited in the context of government intervention: tax cuts and monetary policy, seem to have lost their efficacy. Tax cuts have already been tried out and do not seem to have worked. Reeling under mountains of debt, the tax break (or refund cheque) is invariably used by households not for making new purchases, but for reducing the outstanding debt. The second alternative, monetary policy action, is also rapidly reaching the point where it will become totally ineffective. For it is certain now that the US economy is already stuck in what Keynes long ago called a liquidity trap, a situation where the central bank can no longer boost aggregate demand by reducing interest rates. reducing the federal funds rate as far as it will go to 0% would not help. Even if confidence in the financial system were fully restored and interest rates at historic lows, this might not increase borrowing by firms because of the bleak forecast of falling demand for goods they produce. Monetary policy would have reached its limits. The only option left to ward off a severe recession and decrease the pain on the working classes would seem to be agressive fiscal intervention in term,s of direct expenditure on goods and services by the US government.

Here in England, Gordon Brown, who seems to believe that he saved the banking world, and who we were falsely led to believe was a cautious chap - he certainly lectured us all about prudence, now believes that through lowering VAT, slashing interest rates, tinkering with mortgages, ballooning the public sector deficit and embarking on a huge spending spree he can eliminate many of our problems by the issue of such long-term debt that will take at least a generation to pay off. If I was a German I would be shaking my head. They are a cautious race, would never release huge spending power, or urge the population into debt. They, as other European nations will also suffer a recession, but their high value exports are still what the developing world will want and need in the next upturn, and they will sit it out stoically. Their economies are certainly better placed than ours.

hadrian

I like what John Redwood has written in the Sunday Telegraph; at least he gives the impression of having some sort of coherent plan of easing us out of this mess or creating conditions to make recovery more likely. Now that sense of vision and purpose is what the voters need to see in the Opposition but I still think Dave and Georgie are failing properly to communicate it. Bring Redwood on board pronto, I say.
If our wealth has indeed been faux and delusory- property, speculation, City and retail then just how does one return to genuine wealth and away from these comforting delusions? To return to delusions is surely the ultimate in madness?

TGF UKIP

Fraser, we must have different Coffee Houses on our repective PC's. All I can find on mind is a post of Peter's with a passing reference to the interview and a link to Connservative Home's blow by blow summary of it.

However, I'm not really surprised you're none too keen for it to be de-constructed too closely. Might just be a tad uncomfortable.

I did enjoy it, though!

Verity

Hadrian. I have suggested Redwood for Shadow Chancellor before on this site. He is far cleverer than anyone in the government. And more articulate. Has anyone noticed that there is not one articulate person in the government?

Verity

I hate Gordon Gruesome's manufacured little quiff. Oh, the blow dryer blowing over the little brush holding curl! I could scream.

mitch

Gordon will apply failed 70s dogma and idealistic student politics to the problem and we will all suffer.
Why cant these blinkered fools use common sense?

Rhoda Klapp

Augustus does well to point out the disconnect between what governments wish to happen and what is happening on the ground. For me and I suspect most people with a job, the thing to do with the money is pay down debt and try to save for that rainy day or even for those buying opportunities which will come with recovery. If the nation is in the same kind of trouble, then the nation should be doing the same kind of thing. You can't get out of this by stimulus, and especially not by debt-funded stimulus, any more than I could solve any financial problems by borrowing to pay my debts.

What to do on a national scale? Bite the bullet and write off the bad debt. Reduce spending on waste and non-productive items, increase spending on things that will employ people NOW. Cut out regulations and practices which add friction to the economy (why do I have to certify that I obey employment law etc etc when I tender for public sector work, if it's the law of the land?).

Stimulate company spending by allowing tax writeoffs of 100% or more. Do something about late payers, nothing kills small businesses quicker than bad cash flow. How about our new banks factoring invoices for nothing? That would allow a business to take a risk without worrying if they'll ever get paid.

And finally, again, if I've bought several banks, can I have the shares in my name please?

Ian C

Transferring debt from the private to the public sector via tax cuts that are saved by the recipients are a good mechanism for forshortening the economy's downturn because they bring forward the day that consumers will spend.

The idiocy of the politician of any colour who does not want a tax cut saved is palpable.

Ivy Eileen

Isn't the UK's "debt-funded stimulus" (of this size and proportion) just like trying to pull yourself up by your own bootlaces?

Steve.W

Gordon Brown tried to suggest to the UK voter that the EU was following his recovery plans to the letter and failed. Brown has a sad comedic side to him so stand by for him bellowing away about working with Obama that won't work either but will be funny!

hadrian

Governments should not be involving themselves in so called 'job creation'- period.
It'll all end in even more tears.