We should long for fiscal policy, and budgets, to be boring

The UK financial press is full of pent up excitement about the budget.  Including talk of money ‘behind the sofa’ being replaced with the metaphorically transposed ‘black hole’, and how George Osborne will respond.

We should all long for fiscal policy to get as boring as Mervyn King, former Bank of England Governor, used to say monetary policy had become.

The ideal budget would confirm what we should already know.  Major welfare state reform would be finished with.  There would be no cosmetic tinkering with customs, excise and duties for the tabloid press.   And the macroeconomic aspect of fiscal policy would be a simple following through of a pre-announced plan of how to respond as economic news came in.  Since we would already have the economic news, and the forecast that went with it, we’d know just what they were going to do anyway.

Imagine if the same attention to headline grabbing and strategic change were visited on monetary and financial stability policy?!  More credit easing;  less.  Interest rates up;  down.  QE asset purchases;  sales.  Capital requirements up;  down.  We’d rightly think the Bank of England had gone crazy.

For this reason, although I have my own views about what constitutes good macroeconomic fiscal policy, half of me is praying for a tedious, damp squib budget.


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