Thursday, January 29, 2009

Stimulus Creates Job Loss, Higher Taxes and Slows the Economy in the UK

The Spectator is a great British magazine. It is in the tradition of using a high standard of journalism to hold politicians to account. While conservative by design, the magazine can also lay into the conservative leadership (and does so) when it thinks there are grounds to do so.

The magazine has published an analysis of the impact of the stimulus package on the UK economy over the next five years, using the work of the very skilled and respected Oxford Economics company. The conclusion. The stimulus package will increase unemployment over time, be expensive for employers and have a slowing effect on the economy. Why? Because all this public spending has to be paid for.

Gordon Brown, embattled Prime Minister in the UK, claims that his stimulus package will create 100,000 new jobs. It wont. According to this analysis, it may create 35,000 against a background of 2.2 million unemployed in the UK in 2009 – no big deal.

If this is correct, then will giving Viagra to the economy cause side effects which are less desirable than leaving the market to take care of the issues? Probably. Why? Because higher taxes and less government spending – both required to bring borrowing, deficits and government spending back under control – will wipe out any gains.

Its worth reading. Find it at The Spectator.

No comments: