Policymakers will only be able to deal with this dysfunction when the failed logic of the doom loop Is confronted. Recession may only be inevitable in the absence of preventative action. As above there is little uncertainty: outcomes are clear on what will happen if the past is ignored.
The necessity is expansionary fiscal policy. The Treasury not making additional cuts on the immediate horizon at Autumn Statement 2022 was not enough. A correct judgement of potential means not only capital spending but also current spending will support the economy, above all higher pay for public sector workers. The TUC calls are outlined in a submission for the Budget on 15 March.28
There is here a difference with other left opinion that challenges austerity but concedes supply constraint. 29 In the view here economists should be very sure before potential previously reckoned to exist is written off. At the very least those who get multipliers wrong should not have a monopoly over judging what happens next; not least because the orthodox/monetarist theory cannot by definition confront this question.
Those on the left who accept supply constraint are led to advocate wealth taxes in the context of public finances. But wealth is more usefully approached in the wider context of economic failure and the doom loop. For – as hinted above (p. 9) – the flip side of the GDP failure is an immense gain to wealth or asset values. The fuller story emerges looking at outcomes on a longer view.
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