Back in August, I wrote a piece called “Fiscal Cliff Madness” about the set of consequences produced by the law enacted by the government that will severely reduce spending and raise taxes. Today, new research has surfaced from the non-partisan Congressional Budget Office (CBO) that gives us a clearer idea of just what exactly the fiscal cliff might do to the United States’ economy if it comes to pass. The new information is even more dire than the information we had in August, and so the “madness” has now been upgraded to “insanity”.
It has become fashionable on the political right to attack the Federal Reserve and its policy of quantitative easing, the process by which the Federal Reserve increases the money supply by purchasing assets owned by the private sector with cash that it prints. The right argues that quantitative easing encourages inflation and makes it easier for the government to borrow money, that it discourages saving, and that these are bad things. In contrast, these are very good things, and I shall endeavour to argue as to why.
Today I find myself preparing to board plane to resume my final undergraduate year at the University of Warwick in Britain. But what sort of country am I coming back to? Has Britain’s government managed to turn around the country’s economic situation, buoyed by the Olympics, or does Britain remain stuck in the doldrums? That is today’s topic.
Today I’d like to take a mental trip back across the pond and examine the current double dip recession in the United Kingdom, investigating the role it plays as a case study in the policy debate between advocates of stimulus (state spending increases) and advocates of austerity (state spending decreases).
Sneaking up on the US government, slowly but surely, is the fiscal cliff–the agreement congress made to cut spending across the board in many sensitive areas if a bipartisan deficit reduction plan could not be agreed to. This was a bad idea from the outset, but you wouldn’t know it from listening to the Democratic Party, and that’s both a problem, and the topic of today’s post.