The budget and the multiplier muddle

The Chancellor of the Exchequer  needs  to know the size of the fiscal multiplier in order to predict the effect on the economy of his tax and public expenditure changes.  The multiplier is simply the factor by which you have to multiply the size of a budget adjustment  to get the size of the resulting change in  GDP.  Economics textbooks take it to be a constant, but in fact it is affected by things that change from time to time.  Its size cannot be deduced from first principles, but can only be inferred from what happened as a result of previous budgetary changes.  The problem is that the multiplier may have changed since then because other things have changed.  Economists do their best, using sophisticated statistics to allow for those changes, but the outcome is open to considerable uncertainty.

Estimates of the multiplier are being updated as more evidence becomes available, and it now appears that the figures that had been used were too low, and had led forecasters to underestimate, the fall in GDP that would result from a given cut in government spending. An Office of Budget Responsibility's forecast evaluation report of October 2012  acknowledged that the effect of previous austerity measures had been greater than they had forecast
"The multipliers would have needed to be more than twice as large to explain the growth shortfall we have seen. Estimates of multipliers vary widely, so it is clearly possible that the fiscal consolidation exerted more of a drag on growth than we assumed,"

It is not everyone that accepts the existence of a financial multiplier,  however.  Referring to the growth effects of the financial crisis David Cameron,  in a speech of 7 March, took the view that
 "the deficit reduction plan is not responsible, in fact quite the opposite" 
 (a  view that he attributed at the time to the Office of Budget Responsibility, but was followed by  a denial by the OBR)

Gordon Brown's fiscal legacy

It is a popular myth that Gordon Brown left  Britain's  public finances in a mess from which George Osborne is struggling to rescue us.
 The facts  (as reported in its 2010 election brief by the independent and generally respected Institute for Fiscal Studies)  are these:
"By 2007–08, the public finances were in a stronger position than they had been when Labour came to power in 1997. Though public spending increased from 39.9% in 1996–97 to 41.1% in 2007–08 (an increase of 1.2 percentage points), over the same period revenues grew by 2.3 percentage points, meaning that total borrowing fell by 1.0 percentage point over this period … .With more being spent on investment in 2007–08 than in 1996–97, the current budget (that is, the difference between current revenues and spending on non-investment items) strengthened even more – from a deficit of 2.7% of national income in 1996–97 to a deficit of just 0.3% of national income in 2007–08. Meanwhile, public sector net debt fell from 42.5% of national income to 36.5%, as the UK economy grew faster than the accumulation of new borrowing", and, "…, in 2007 we had the second lowest level of debt in the G7

The moraliity of immigration policy

Assume that being moral means accepting  obligations  toward others – as distinct from being amoral, and concerned exclusively with one’s own welfare.  Outside of family and such as  contractual obligations, there is no logical  reason to suppose that  those obligations differ toward different people.  There would be no reason to assign a lesser right to your consideration to an  African  peasant,   than to Devonshire farmworker.

The implications of that logic for the morality of  immigration and overseas aid  policy would seem to be: 

-          --  either  that immigration policy should not prevent the African peasant from coming to Britain;

-          -  or that overseas aid should compensate the African peasant for his loss of the advantages of doing so.

(UK overseas aid now amounts to about 0.6 percent of GDP,  or about £150 a year per  person)