You may recall that I have, in the past, anticipated that the Chancellor of the Exchequer’s projections would not be correct. The latest figures are, again, over-optimistic:
Chancellor Alistair Darling is expected next week to downgrade the government’s forecast for the growth of the UK economy in 2008…. The chancellor is expected to reduce the growth forecast from 3.0% to 2.5%.
– October 2007
Delivering his budget plan to the House of Commons, Chancellor of the Exchequer Alistair Darling on Wednesday cut his forecast for 2008 U.K. economic growth, predicting gross domestic product will increase by 1.75% to 2.25%. Darling had previously forecast growth of 2% to 2.5% in 2008…. For 2009, Darling sees GDP at 2.25-2.75 pct, lower than the 2.5-3.0 pct range previously. For 2010, however, he maintained the GDP growth estimate at 2.50-3.00 pct.
– March 2008
Mr Darling forecast that although the economy will contract by 3.5 per cent this year – far worse than expected – it will start growing again towards the end of the year, expand by 1.25 per cent next year, and rise to 3.5 per cent in 2011.
– April 2009
In light of this reliable record of failure, I see absolutely no need to modify what I have been saying since last October. “Considering that Darling’s brilliant plan has literally been textbook macroeconomics for the past five decades, what are the chances that this is somehow going to fail? Infinity to one against or Infinity squared to one?”
One thing that few are taking into consideration is the way that a large government sector makes the Keynesian approach to spending one’s way out of recession even less viable than it was back in the 1930s.. Government is not productive and cannot be a real source of growth; if it could, then few economies would be experiencing problems now. Since government accounts for between one-third and one-half of most economies now, this means that achieving the goal of 3.5 percent growth in 2011 would require the private sector to grow between 5.25 and 7 percent while being handicapped by higher taxes, increased regulation, and upside-down mortgages.