Britmouse recently linked to some comments by David Cameron:
Getting our debt under control is necessary for growth. But it’s not sufficient. Our responsible fiscal policy is being matched by active monetary policy. That’s the best way to support demand and help rebalance our economy away from debt-fuelled consumption and towards exports and investment. And the independent Bank of England is able to do more to support the economy if necessary or if inflation falls below their target.
Fiscal responsibility and monetary activism is the right macroeconomic mix for our over-indebted economy. But the additional ingredient that government will deliver and needs to do even more of is a radical programme of microeconomic reform to make our economy more competitive – including competitive tax rates, planning reform and deregulation.
Unfortunately he’s not getting much help from the BOE, as NGDP growth in anemic. They also need Swedish-style micro reforms, but it’s unlikely that the British public would stomach those sorts of laissez-faire policies. I think Cameron needs to bite the bullet and can call for 5% NGDP targeting for three years, and 4.5% thereafter, even though he’d get criticism from within his party.
And here’s something right off the wire:
Obama stressed that events in Europe held “extraordinary” importance for the United States, which unlike the eurozone is growing, albeit slowly.
He said that the G8 summit, which he will convene at his Camp David retreat later Friday, would discuss “a responsible approach to fiscal consolidation that is coupled with a strong growth agenda.”
Meanwhile, Hollande said growth must be the priority, maintaining his stance that austerity measures alone would be insufficient to reverse the crisis in Europe.
In an attempt to smooth over the split within the G8, other European leaders stressed that austerity and stimulus are not mutually exclusive.
“We need to take action for growth while staying the course in terms of putting our public finances in order. Stability and growth go together, they are two sides of the same coin,” European Commission President Jose Manuel Barroso said ahead of the summit.
So let’s see, how do we get austerity and stimulus at the same time? How about easy money and deficit spending? No, that won’t work. Tight money and budget surpluses? No. Tight money and big deficits? Hell no, that’s what we’ve been doing. That’s how we got into this mess. How about easy money and budget surpluses? Bingo. That’s a growing NGDP and budget surpluses—the Swedish way.
Glad to see Cameron/Obama/”European leaders”/Hollande/Barroso have finally seen the light. Now do it.
PS. And what tiny band of obscure bloggers has been pushing this policy for 3 1/2 years?