Fiscal fumbling in the UK

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AFTER SIX MONTHS or more of fiscal confusion in the United Kingdom leading up to the Autumn Statement we can breathe again, if only for a short time. But why is the fiscal debate in the UK such a mess? On reflection, there seems to be three levels of fumbling.The first confusion is conceptual: how should we think about public debt? The second is procedural: how should we, as a community, decide the fiscal stance and what part should the Office for Budget Responsibility (OBR) play? The third is analytical: can we really trust the output from the OBR?ConceptualThere is a widespread belief that public debt is “bad” and that it needs to be “brought down.” This is supported by many “professional” economists. Professor Mankiw of Harvard University in the United States made a splash this summer warning about the fiscal challenge facing the United States in talks to Princeton alumni as well as the NBER. He insisted that we would not leave a negative bequest to our children, yet public “debt is a negative bequest between generations.” (A written version of the NBER lecture is here, bequest remarks on page 2.)The same attitude is common in the United Kingdom.Consider a recent seminar at the National Institute for Economic and Social Research (NIESR) in the run up to the Autumn Statement. NIESR has long been seen as a sensible, independent voice on fiscal policy in the UK. Hence the seminar was called to consider the sustainability of the current debt trajectory. And in it, Professor Sir Charles Bean of LSE insisted that:the quid pro quo for [using debt during times of crisis] has to …