Wednesday at the Financial Times Op-ed page

The best op-ed page in the world, Wednesday March 13 2013 edition:

1. Bruce Bartlett, “former senior economist at the White House, US Congress and Treasury,” a Republican-affiliated economist, tells everyone to “ignore pyrotechnics in US budget politics” because the end of the madness is near (link):

“Paul Ryan on Tuesday unveiled a new plan that claims to balance the federal budget in 10 years. It would do so by slashing spending, especially for health programmes, while simultaneously cutting tax rates for the wealthy….

Those unfamiliar with the peculiarities of the US budget process may be inclined to attach more importance to the Ryan budget than it deserves….

What tends to be lost in the pyrotechnics of budget politics is that huge progress has already been made in getting the US budget on a sustainable path. Large budget cuts and tax increases that have already been enacted have put sustainability within relatively easy reach. With both parties wishing to claim credit, we may have finally reached the budgetary endgame.”

2. Martin Wolf, the Michael Jordan of advanced economic analysis, argues “Britain’s austerity is indefensible” (link). In words to which US politics is finally, barely coming round:

“David Cameron’s “there is no alternative” speech last week on the UK economy has aroused much criticism. This is justified. The British prime minister’s arguments for sticking to the government’s programme of fiscal austerity were overwhelmingly wrong-headed….

Mr Cameron argues that those who think the government can borrow more “think there’s some magic money tree. Well, let me tell you a plain truth: there isn’t.” This is quite wrong. First, there is a money tree, called the Bank of England, which has created £375bn to finance its asset purchases. Second, like other solvent institutions, governments can borrow. Third, markets deem the government solvent, since they are willing to lend to it at the lowest rates in UK history. And, finally, markets are doing this because of the structural financial surpluses in the private and foreign sectors….

Mr Cameron argues that “this deficit didn’t suddenly appear purely as a result of the global financial crisis. It was driven by persistent, reckless and completely unaffordable government spending and borrowing over many years.” In a way, this is the most worrying error – not because the fiscal policy of the Labour party, then in power, was perfect. Far from it. Fiscal policy should have been tighter. But that is not the main reason the UK has a huge structural deficit.

It is the economy, stupid. In 2007, according to the IMF, UK net debt – at 38 per cent of GDP – was the second-lowest in the Group of Seven leading economies. These levels were also exceptionally low by UK historical standards. In the March 2008 Budget, the Treasury estimated the structural cyclically adjusted deficit on the current budget at minus 0.7 per cent in 2007-08 and minus 0.5 per cent in 2008-09. The collapse in output has caused the explosion in deficits and debt. Almost everybody underestimated the vulnerability, the Conservative leadership among them: pre-crisis, it committed itself to continuing the plans that Mr Cameron now calls “reckless and unaffordable”.

3. John Kay, a micro-economist, illustrates how political structure shapes the data surrounding economic knowledge, under the headline “Politicians will always succumb to the need to bend data” (link):

When I began my career in economic research in Britain, I had confidence that whatever rhetorical flourishes politicians might use, the statistical information that accompanied government pronouncements was reliable. I no longer think that: not because – as in Argentina – the data are fabricated, but because the presentation of figures is selective, because legitimate areas of judgment, where different views could be properly taken, are often resolved in a biased fashion, and because – as with the Royal Mail pension fund – technical loopholes are exploited to give inappropriately favourable impressions.

Transparent accounting devices, such as the recategorisation of interest receipts by the Asset Protection Scheme for bailed-out UK banks, may be less damaging than manipulations that involve actual changes in behaviour and therefore impose economic costs. Taxpayers have spent billions of pounds in interest costs through the private finance initiative to enable tens of billions of pounds to be taken off the government balance sheet – money that should have been spent on the schools and hospitals.

When in opposition, the present government acknowledged the issues and committed itself to clarity and openness in presentation. But it seems the exigencies of office have proved too demanding. Why lose weight when you can reset the scales?

4. Alexandr Dugin (link), presented as the “chairman of the department of the sociology of international relations at Moscow State University,” explains “what the world needs to understand about Putin”:

“During his third term as president, Vladimir Putin is starting to distinguish himself as a Russian conservative. Understanding this will have considerable benefit for those seeking clues to the country’s future….

[but]

It is not trying to guard an exhausted status quo. His ideas, by and large, do not transgress the limits of moderate western-type nation-building.

Mr Putin will move in the direction of being a conservative moderniser at home and a realist abroad. He will insist on state sovereignty, distrust globalisation, limit liberalisation and keep democracy strictly within a sovereign, national framework.

The term “balance of power” is the key to understanding Mr Putin’s version of conservatism, which will define politics in his third and presumably fourth terms. He will pursue the national interest, regional and global power, protectionism and mercantilism. Having lost the cold war, Russia will try to revise the status quo using all available opportunities.”

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