Nobel Winners Stiglitz, Solow Back Brown on U.K. Deficit Cuts
Nobel Prize-winning economists Joseph Stiglitz and Robert Solow are among 67 economists to support Prime Minister Gordon Brown’s argument that it’s too soon to start cutting the U.K.’s record deficit, a retort to 20 economists who attacked his position earlier this week.
The timing and pace of deficit reduction is at the center of the campaign for the general election that Brown must call within weeks. David Cameron’s Conservative Party seized on a Feb. 14 letter whose signatories included four former Bank of England policy makers supporting the position that cuts are needed this year to keep the confidence of the markets.
Two letters published in the Financial Times disagree. Signatories for the first include Solow, 85, famous for his work on growth theory, and two former Bank of England deputy governors. It warns that “a sharp shock” now “would be positively dangerous.”
The second letter, signed by Stiglitz, 67, and economics professors including Robert Skidelsky, says that those who seek to “reassure the markets” are following the advice of those “whose mistakes precipitated the crisis in the first place.”
The letters offer relief for Brown and his finance minister, Alistair Darling, coming after Britain posted its first budget deficit for January since monthly data began in 1993. The longest recession on record has shriveled the nation’s tax take, and at more than 12 percent of gross domestic product, the U.K. budget deficit is on a par with that of Greece.
The 67 economists also undermine Conservative Treasury spokesman George Osborne’s Feb. 15 argument that there was a “consensus of economic opinion aligned with” his party.
Brown today will say that the opposition party’s “hatred of government action would risk the recovery,” according to extracts of a speech released by his Labour Party.
The Conservatives have led Labour in public opinion polls for two years. Still, Britain’s electoral system means Brown can retain power without winning the popular vote. He must call the election by June.
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