When the media is biased against the facts

When I write about what I call mediamacro, which includes bad reporting of macroeconomic issues by the media, I often receive comments suggesting that the importance of the media’s bias against Labour is exaggerated, and anyway there is nothing that can be done about it. Now of course the print media is biased against Labour, and what evidence we have also suggested a BBC bias against Labour under Miliband. But most of the time when I complain about BBC and other non-partisan media reporting on macroeconomic issues, it is not a bias against Labour that concerns me, but a bias against the facts.

Take the proposition that austerity was required because Labour borrowed too much. That proposition is simply false. The increase in the government’s deficit occurred in 2008/9 and 2009/10 as a result of the recession caused by the global financial crisis. As I noted most recently here, the Labour government before the recession was clearly not profligate in the normal meaning of that term. So when Conservatives constantly talk about having to clear up the mess Labour left, and this goes unchallenged in the media, that has the effect of legitimising a false statement.

What we have in this case is a variation on what they call in the US a ‘shape of the earth: views differ’ style of reporting. In that case one side claims the earth is flat and the other side says it is round, and the media in an effort not to appear politically biased report it as a disputed fact. If you think that example is too wild, think about climate change, or maybe wait until the US election where Trump is one of the two candidates. Was Obama a US citizen: views differ.

What we get as a result is a bias against the facts. In the case of Labour and the deficit, because Labour chose fatefully not to challenge the Conservatives on this, the media takes this as confirmation that it must be true rather than checking the facts themselves, or shy away from presenting the facts because that would be seen as ‘too political’. Myth then becomes a fact that even some Labour MPs start believing, and when someone actually stands up for the facts they are assumed to be dishonest or a slightly mad professor. So the BBC fails in its mission, which is to inform and educate as well as entertain.

I was going to advertise my talk in Bristol at this point, which will also explain how this failure played a major role in the 2015 election, but I see that it is now sold out. If there is sufficient demand I will write up what I say and publish it here. 

Why high house prices are partly down to austerity

Diane Coyle, in reviewing Rowan Moore’s book Slow Burn City: London in the 21st Century, focuses on the idea that forever rising house prices could gradually kill off what is now a vibrant city. As housing gets steadily more expensive, getting people to work there will get more and more difficult. In the meantime, young people who can afford to buy get more and more into debt. I wonder whether soon mortgage providers will become more interested in the wealth of borrowers parents than in the borrower’s own earning capacity. (This is not just a London problem: see here about New York for example.)

The reason for this that everyone focuses on, understandably, is stagnant housing supply. However, housing can also be seen as an asset. Just as low real interest rates boost the stock market because a given stream of expected future dividends looks more attractive, much the same is true of housing (where dividends become rents). Stock prices can rise because expected future profitability increases, but they can also rise because expected real interest rates fall. With housing increasingly used as an asset for the wealthy, or even as a way of saving for retirement, house prices will behave in a similar way. A shortage of housing supply relative to demand raises rents, but even if rents stayed the same falling expected real interest rates raise house prices because those rents become more valuable compared to the falling returns from alternative forms of wealth.

That is why a good part of the house price problem comes from the macroeconomy: not just current low real interest rates, but also low expected rates (secular stagnation). The idea that house prices are tied down by the ability of first time buyers to borrow (and therefore to real wages or productivity, modified by changes in the risks lenders were willing to take) seems appropriate to a world where the importance of the very wealthy was declining, and most people could imagine owning their own home. We now seem to be moving to a more traditional world (remember Piketty) where wealth is more dominant, and with low interest rates that may also be a world where renting rather than home ownership becomes the norm for those who are not wealthy and whose parents are not wealthy.

There may be factors behind secular stagnation (low long term real interest rates) that we can do little about, but there are things we can do right now that will raise interest rates, and thereby tend to lower house prices. The most important of those is to stop taking demand out of the economy through continuing fiscal consolidation (aka austerity). This boost to demand that comes from ending fiscal consolidation will allow central banks to raise interest rates more quickly. While central banks may only be able to influence real interest rates in the short term, because so much uncertainty exists about what this long term involves the short term may have a powerful influence on more distant expectations.

We can also have some positive influence on the longer term by increasing public investment, including forms of public spending (that may not be classified as investment) that encourage private investment. It should also include building houses where (or of a kind) the private sector will not build. That will have beneficial effects in terms of raising real interest rates in both the short and longer term.

Ever rising house prices lead to unprecedented high levels of private debt, and also destroy the dream of many young people to own their own home. One answer is to build more houses, but another is to run better macroeconomic policies. That house prices continue to rise during a period of fiscal austerity is not an anachronism. It is not a bug but a feature of an age of austerity.

Austerity and the mainstream: for the record

When I say that textbook macro, and the macro used by most mainstream macroeconomists, says austerity of the kind implemented in 2010 was a big mistake, I am sometimes told ‘but that was not what economists said at the time’. The names of one or two well known economists are often mentioned, or the letter from 20 economists in the Sunday Times in February 2010.

What is often forgotten is that this letter sparked an immediate response. Over 60 economists wrote in one or other of two letters published in the Financial Times that now was not the time for strong fiscal consolidation. The recovery had to be properly established first. Given that these responses were put together in haste (which probably explains why I did not get the chance to sign either), but still managed to attract over three times as many signatures as the original, I would suggest that shows pretty clearly that a clear majority of UK macroeconomists at the time followed current and textbook analysis on austerity.

Even some of the original 20 later admitted they had made a misjudgement. So why is this letter remembered, but the responses to it are not - particularly as the responders were clearly proved right by subsequent events? Using OBR figures I calculated that Osborne’s austerity has cost each UK household at least £4,000, and probably more. This number has never been seriously challenged, but I also think it is not widely known. When it comes to austerity, the problem is not and never has been mainstream macro theory or mainstream macroeconomists.

Fiscal rule redux

Although this discussion is about the UK, the macroeconomic issues involved apply equally elsewhere.

Most of the media discussion of Labour’s new fiscal rule presented before the budget focused on the commitment to balance the current budget. The media did this because ‘the hook’’ was the similarity between this aspect of the rule and the rules proposed by Brown or Balls. As I noted at the time, no one in the media seemed to want to compare this goal to the Chancellor’s overall surplus objective, which remains rather extraordinary.

In some ways this element is the least interesting part of the rule. Two other key parts are that current balance is a rolling five year target, and the knockout if interest rates hit their zero lower bound (ZLB). Both are more difficult to explain quickly in a mediamacro world where the deficit is considered all important, although at least with the rolling 5 year target a quick response is that the coalition government adopted exactly that form of target. If they had adopted the less flexible target of current balance by 2015, the economy would have been even more screwed by austerity than it actually was.

The really new feature of the rule is the knock out. (This was described as a ‘loophole’ by one political reporter: mediamacro again.) The rule is deliberately suspended to allow for fiscal stimulus when interest rates hit their ZLB. How much stimulus? Whatever it takes to get interest rates to rise above the ZLB. In Portes and Wren-Lewis we suggest the Bank of England are the obvious people to advise on this (the size of stimulus, not its form in terms of spending increases or tax cuts). The focus of fiscal policy switches from deficit control to stabilising demand, but only because monetary policy can no longer do that job effectively.

If such a rule had been in operation during the Great Recession, we would have seen a continuation of the fiscal stimulus we saw in 2009 into later years. That would have meant, for sure, that government debt would have risen by more than it did, but it would also have meant, for sure, that output would have recovered more quickly. What would have happened to the debt to GDP ratio we cannot know for sure, but the important point is that this does not matter.

It is this last point which is the most difficult to convince people about in the mediamacro world. In this (imaginary) world, we have to worry about the deficit because if we do not there might be a financial panic, with interest rates on government debt rising and perhaps even an inability to sell that debt. The best response to this concern is it would not matter even if it happened, because the Bank of England would buy the debt and keep interest rates on that debt down. Of course the market panic scenario will not happen anyway, because there is zero chance that the government will default, but trying to convince people that the financial markets will behave rationally after the global crisis is hard.

Many non-economists think creating money to cover the deficit sounds outlandish, until you point out it is already happening with QE. The potential size of the QE programme is unlimited. The whole point of QE is to keep long term interest rates, like the interest rate on government debt, low. QE happens when short interest rates are at their ZLB. That it why, when rates are at the ZLB, fiscal policy can focus on stimulating the economy. [1]

There are some who think that any kind of fiscal rule represents appeasement of the austerity position. As I discussed in my post on MMT, I do not think that is very good economics, particularly for a party (like Labour) that is committed to maintaining an independent central bank that uses monetary policy to stabilise demand. In that regime, when you are not at the ZLB, deficit bias is a potential problem. I think intergenerational fairness is important, and we shouldn’t ignore it just because the argument is misused to support austerity. I am reminded of this every time I look at Norway, and recall how Mrs. Thatcher effectively used oil revenues to cut taxes rather than build up a sovereign wealth fund. There is a certain irony that George Osborne’s current policy of going for surplus, while totally wrong for today, would have been the right policy in the late 80s and 1990s.

Ellie Mae O'Hagan recalls how many on the left (in my recollection all shades of the left) argued that when austerity started to bite there would be a popular revolt against the policy. That did not happen, in part because of mediamacro, but also because there was not a clear alternative to unite behind. Labour tried to have it both ways, expressing worries about what austerity was doing but also agreeing that the deficit was a current concern. In Labour’s new fiscal rule we have a policy that sets out clearly how we should deal with any new crisis, and also how we should have dealt with the last one. It is a policy the left should unite behind, because overcoming mediamacro’s obsession with deficits will not be easy.

[1] You can only do this if the government controls the currency its debt is issued in. When that does not happen, as many developing countries have found to their cost, you do have to worry about the bond markets. That was exactly the problem that led to the Eurozone crisis, until the ECB came up with OMT.

A more elaborate argument for countries that do borrow in their own currencies is that a market panic over government debt would be accompanied by a run on the currency. Paul Krugman tackles this, but following discussions with the FTs Martin Sandbu I do plan to discuss this issue further at some point.  

Is evidence based policy left wing?

The answer in principle is of course not. In practice, not so clear. This is something I talked about back in October 2013, and there are no signs that things are getting better. Alex Marsh makes the same point in the context of the latest budget. This antagonism to ‘unhelpful’ evidence is out there in plain sight for all to see in the UK government’s current attempt to deny academics in receipt of public funding the ability to talk about the policy implications of their work. I talked about this in terms of the misuse of the term ‘public money’ a few weeks ago, but it is also a pretty direct attempt to suppress unhelpful advice. (Note that ministers have the power under this proposed legislation to revoke this ban in individual cases, presumably when evidence is ‘helpful’ - to them.)

Of course we are not talking about a hostility to evidence based policy by everyone on the right on all occasions. In a THE article by Ben Goldacre, where he also highlights the dangers of the government’s proposed legislation, he details the extent to which he is talking to ministers about evidence based policy. But that interest does not seem to extend to big macro decisions. I was reminded in reading this about what I regard as a triumph of evidence based policy making in my own area: the UK Treasury analysis of Euro entry in 2003. (Disclaimer: my little contribution is the fourth one down in the picture of the reports.) Why didn’t this government do something similar for both the Scottish referendum and the EU referendum?

Everytime I mention the 2003 exercise someone responds that it was just a smokescreen for a power play between Brown and Blair. I think this is an overly cynical view, a view that evidence never changes anyone’s mind. Ramsden’s own view is that the civil service, using the evidence, “ultimately persuaded both the Chancellor and in particular the Prime Minister that it wasn't right to join." It was also the right decision. With both recent referendums we have seen proponents of change putting out documents suggesting that change will not be economically damaging, when most evidence shows pretty clearly that it will be. With the EU referendum in particular, would it not have been better if the government had asked the Treasury to do a similar exercise to 2003, using outside experts where appropriate to provide or validate the technical analysis?

Ben Goldacre’s piece reminded me of my own recent place on John McDonnell’s Economic Advisory Council (EAC). From Ben’s tweets I knew that he was not the greatest fan of this government, and in particular their current treatment of junior doctors, so I asked him whether he had received any negative comments from doctors or others about him giving advice to the government. I was not surprised to hear he had not. Who could object to him taking the opportunity to argue for better use of data and trials in medicine and elsewhere with people who just might do something about it?

It is a shame that some people did not take the same view when I agreed to be on the EAC. I would lose credibility as a macroeconomist, I was told. When McDonnell did his U-turn about supporting the fiscal charter, some suggested this reflected badly on me, even though he had turned in the direction I thought was correct! One charge in particular was levelled at the time. We were being used to make the leadership look respectable, but our advice would in practice be ignored. A couple of weeks ago Labour adopted a fiscal rule which is based on my own work with Jonathan Portes, and in particular by a presentation I made to the group. Mariana Mazzucato’s own work has also featured strongly in Labour party speeches, with good reason.

At the end of the day, policy makers need to look at evidence. If they do not we need strong mechanisms that allow them to be confronted by this evidence. Policy makers that make space for evidence and take decisions based on it need to be congratulated for this, rather than being told their efforts were just a smokescreen. They should be congratulated because letting evidence in often involves a risk: not just to the policy maker’s priors or preferences but also for scrutiny of past actions. Equally we should regard policymakers who knowingly ignore evidence with great suspicion, and those that try to deliberately keep evidence out of the public domain should be condemned.

Time to rewrite a bit of oral history

I have written at great length about the myth that the Labour government created the need for austerity, or as George Osborne likes to put it, how he has had to clear up the mess that Labour created. Here he is again, in an exchange with Yvette Cooper yesterday. And I long for the day that after he, or any other Conservative, repeats this line, someone has the courage to reply: “that is total bollocks”. This bit of oral [1] history has survived for too long.

I will not go again through all the details (for that see these two posts), because a simple picture tells you all you need to know. Here is the UK government deficit, as a percentage of GDP, since 1970.

The deficit in the five years before the global financial crisis was around the average over this whole period. It shoots up in 2008/9 and 2009/10 for one simple reason: the UK, like most other countries, experienced the largest recession since WWII. Osborne has been clearing up the mess left by a major recession, which left UK GDP around 15% below its pre-recession trend. And the real irony is that he has done nothing to fix that very real problem, but instead obsesses about one of its symptoms.

Yet as long as this myth continues to go unchallenged, Osborne can portray Labour as unfit to run the national finances. As long as it goes unchallenged, a large section of voters will continue to believe that austerity was Labour’s fault. I think most people now agree that Labour made a huge tactical mistake when they failed to combat this narrative five years ago. But as this little exchange from yesterday shows, the damage to Labour the myth has done is not going to go away because the Conservatives will not stop repeating the myth.

I therefore have a suggestion. John McDonnell should send a copy of this chart to every Labour MP and tell them to always keep a copy with them. The next time the ‘clearing up the mess they left’ line is repeated, they should respond not by changing the subject or looking sheepish. They should produce the chart and say that it is just not true. The deficit went up because of the recession following a global financial crisis, and this chart proves it. [2]

[1] I know I'm abusing the meaning of 'oral history' here, but I do so because the written history is very different. The few scholarly papers on fiscal policy under the Labour government are consistent with the data and facts.

[2] I am also happy to suggest simple knock downs to possible responses. For example:

C: The recession was caused by inadequate financial regulation during Labour’s watch.

L: But you were constantly arguing for less regulation at the time.

C: IMF/OECD data show huge cyclically adjusted deficits in the pre-recession years

L: Extremely dubious (the OBR who use real data to cyclically adjust do not have this, and few signs of a huge boom at the time), and pure hindsight (both groups suggested otherwise at the time).

C: Everyone knows Gordon Brown bent the rules and missed his targets

L:  George Osborne has missed 3 of his own targets. Of course policy was not perfect under Labour, but that does not change the fact that the deficit more than tripled in size between 2007 and 2009, and that was all down to the recession.

C: Labour did nothing to tackle the deficit in their last two years in office, when George Osborne was saying they should.
L: You are right, and we make no apology for it. In 2009 the UK, along with the US, Germany and China, undertook a fiscal stimulus, which George Osborne argued against. Every serious economist agrees that helped prevent the recession being even worse than it was. Which means if Osborne had been Chancellor in 2009, UK unemployment would have risen by more and real wages would have fallen even more.

MMT and mainstream macro

There were a lot of interesting and useful comments on my last post on MMT, plus helpful (for me) follow-up conversations. Many thanks to everyone concerned for taking the time. Before I say anything more let me make it clear where I am coming from. I’m on the same page as far as policy’s current obsession with debt is concerned. Where I seem to differ from some who comment on my blog, people who say they are following MMT, is whether you need to be concerned about debt when monetary policy is not constrained by the Zero Lower Bound. I say yes, they say no, but for reasons I could not easily understand.

This was the point of the ‘nothing new’ comment. It was not meant to be a put down. It was meant to suggest that a mainstream economist like myself could come to some of the same conclusions as MMT writers, and more to the point, just because I was a mainstream economist does not mean I misunderstood how government financing works. It was because I was getting comments from MMT followers that seemed nonsensical to me, but which should not have been nonsensical because the basics of MMT are understandable using mainstream theory.

One comment on that earlier post provided a link to a very useful Nick Rowe post, who as ever has been there before me. This suggested that MMT assumed a vertical IS curve (there is no impact of interest rates on aggregate demand). If the IS curve is vertical, then it explains the puzzle I have. In the thought experiment I outlined in my previous post, if the government started swapping debt for money the decline in interest rates that would follow [1] would have no impact on demand, so there would be no rise in inflation. Indeed what else could it be besides an assumption of a vertical IS curve, as MMT does not deny that excess demand would lead to inflation at full employment.

I now think that is putting it too strongly. The view that many MMT writers have is that interest rates have an unreliable impact on demand relative to fiscal instruments. In that case of course you would have to use fiscal policy to control demand and inflation. That would be the focus of the fiscal rule. It is a similar regime to one I suggest would be appropriate for individual Eurozone countries. Inflation would be a discipline on deficit bias. [2]

What about a world where monetary policy did successfully control demand and inflation, which is the world I’m writing about? Evidence suggests you then need a fiscal rule stopping deficit bias (a gradual rise in the debt to GDP ratio over successive cycles). In a country with its own central bank (so no concern about forced default) and where all debt is owned domestically, the standard reasons why you would be concerned about deficit bias are intergenerational equity, crowding out of capital, and having to raise distortionary taxes to pay the higher debt interest bill.

There is a lot you can say on all three, but the point I want to make is simple. Being in that world means you do not need to worry about other sector balances because of their impact on demand. By being in that world at no point am I misunderstanding how government financing works, or ignoring the role of money. It does not mean I read the government budget constraint from left to right or vice versa! Yet I still get comments like this one left on a more recent post.

“Your political yourself Simon. One thing more than anything really annoys me. Why do you never announce or go public and say that taxes do not fund government spending?”

Comments like the one above, taken without context from some MMT paper, just appear stupid. By all means criticise my view that monetary policy is effective, or that rising debt has costs, but in future comments like that will just be ignored.

Let me make the same point using another example. Alex Douglas in a post argues that MMT does make an original contribution to political economy. He looks at a Warren Mosler claim that the state creates unemployment, and this is the only reason unemployment exists. It seems to me (with some additional help from Alex) that this involves two elements. The first sounds like a combination of points that mainstream economists might make: deficient demand exists because we are in a monetary economy, and some combination of monetary and fiscal policy can always get rid of deficient demand. The second is that money exists because the state requires taxes to be paid with it. Now I’m less sure about that second argument, but the point is that I can unpick what I agree with and what I do not using perfectly standard economic ideas. Yet if he had simply sent me a comment which said “the state currency is fundamentally a device for coercing labour” I wouldn’t have had a clue what he was talking about.

Now you might ask at this point why is it so important to be able to put MMT arguments in the language of standard macro. MMT is a coherent school of thought, using a language that those who have read the important texts understand. [3] Someone like me should just take the time out to read those texts. Well I have read some MMT papers, but I can assure you I have read many more than pretty well every mainstream macroeconomist I know. So what you may say. But it is a fact, and you may think it is an unfortunate fact, that mainstream macroeconomics is pretty dominant in both academic and policy circles. And it will stay that way: heterodox economists have been predicting the downfall of mainstream economics for longer than I have been an economist. [4] So if MMT is to have any influence, it will be through changing how mainstream macroeconomists think.

You gain that influence by properly understanding the mainstream. Bill Mitchell, writing in 2013, lambasts economists like me who try to suggest that the fixation with debt since 2010 does not come from mainstream macro. He does not believe it, and writes

“Why is there mass unemployment if government officials understood all our claims? It would be the ultimate example of venal dysfunctional politics to hold that that everybody knows all this stuff but are deliberately disregarding it – for what?”

But that is the tragedy of what has happened since 2010. Politicians, either out of panic or with ulterior motives, decided in countries with their own currencies that we should start worrying about the market no longer buying government debt, and austerity was the result. In this they were supported by a media that thought the government was like a household, and economists from the financial sector who had their own reasons for promulgating this myth. True, they did find support from some mainstream academic macroeconomists, but that support was never based on mainstream theory.

What mainstream theory says is that some combination of monetary and fiscal policy can always end a recession caused by demand deficiency. Full stop: no ifs or buts. That is why we had fiscal expansion in 2009 in the US, UK, Germany, China and elsewhere. The contribution of some influential mainstream economists to this switch from fiscal stimulus to austerity in 2010 was minor at most, and to imagine otherwise does nobody any favours. The fact that policymakers went against basic macro theory tells us important things about the transmission mechanism of economic knowledge, which all economists have to address.

[1] Bill Mitchell appears to suggest that in this case the central bank could maintain its interest rate by selling its stock of government debt. However pretty soon it would run out of assets to sell. This is exactly why some central bankers are reluctant to undertake helicopter money. One solution with helicopter money is to get the government to recapitalise the central bank, but of course to do that would involve creating more government debt. The central bank could start creating its own debt, but if governments stopped creating their own debt and asked the central bank to do it for them, nothing has really changed. 

[2] It is not clear to me that in such a world debt would always be tied down. A government that used an effective (in multiplier terms) fiscal instrument in booms (e.g. government spending) but an ineffective one in depressions (tax breaks for the wealthy) might experience an upward drift in debt. But what is clear is that in such a regime, concern about the debt stock should never justify significant departures from demand and inflation stabilisation.

[3] Although, as the range of comments to my earlier posts showed, what people understand MMT to mean varies quite a lot.

[4] I personally would not welcome the disintegration of macro back into separate schools of thought. Economists should be like doctors, and I do not want to have to ask my doctor what medical school of thought they belong to. I have relied on doctors using the same language and being able to understand each other. However I also realise that the unwise fixation of the current mainstream with microfoundations methodology can act as an exclusion mechanism, which encourages the formation of alternative schools of thought. This is yet another reason to be very critical of this methodological hegemony.  

Budget accounting tricks

One of the problems with fixed date deficit (or in this case surplus) targets is that they encourage playing around with the public finances to hit the target. Generally, but not always, this involves making a saving today by shifting costs into the future. Privatisation is an obvious example. It may be justified if the net present value of the sale is positive, or if privatisation really improves efficiency, but all to often it is a device to meet a short term target.

As Jolyon Maugham shows clearly, Osborne has done his fair share of such tricks, and not just in the latest budget. I have nothing to add, except a thought on where this should take us. There are two roads not to take. The first, which is taken by many on the right, is to say that the Chancellor should have imposed more ‘real’ cuts to meet those targets. The second is to suggest that really the Chancellor is doing sensible macro after all, but is just trying to disguise the fact.

What accounting tricks show is that the target itself is nonsense, and not that the Chancellor should try harder to hit them. While these tricks should clearly be exposed, there is a danger that by focusing too much on them, we inadvertently legitimise the target they are designed to achieve. What they show is how difficult the Chancellor now finds it to cut public spending any further. I do wonder sometimes at the mindset of those who write that Osborne has failed because he did not cut enough to meet his targets. Have they internalised the anti-Keynesian propaganda so much that they actually believe it?

For the same reason, these accounting tricks do not show that Osborne is relaxing austerity in the way I and others have argued should happen. The planned decline in public investment is real enough. There were plenty of cuts in the budget, and while disability cuts as proposed have now gone (is this a record for the speed of reversal of a budget measure), they may simply return repackaged. The savage cuts to ‘unprotected’ department spending remain, as does the myth of protection itself. The Chancellor used tricks not because he had a change of heart, but because he ran out of options. Nor do cuts in capital gains tax or higher rate tax bands make for much of a fiscal stimulus, as they fall on groups who will tend to save much of it.

The Chancellor is culpable for sure. But his mistake was not to use accounting tricks, but in putting at the centre of his budget strategy a politically inspired target which makes no economic sense whatsoever.     

Lack of accountability

In 2007 the Pitt review told us that climate change was going to greatly increase the incidence of record breaking bursts of rainfall in the UK. The Labour government responded by substantially increasing their spending on flood defences in the spending review which ended in 2010/11.

The coalition government reversed those increases, leading to sharp falls in spending on flood prevention. Five years and many costly floods later, George Osborne has finally admitted he was wrong by announcing a substantial increase in money for flood defences. After being told by the government, one flood disaster after another, that they were doing everything that was possible, they have now decided that maybe it would be a good idea to spend more.

A bigger mea culpa you could not find. Yet if you google “austerity flooding”, it is still my blog post that comes top. When the floods hit around Christmas in 2013, no one seemed to want to connect the two. The government seemed immune to criticism, and successfully directed any culpability to the Environment Agency (who could not answer back). Even with the latest floods, outside the pages of the Guardian or Independent there was little criticism of earlier spending decisions. Yes Labour were slow out of the blocks in attacking the government, but are we really in a media world where if a senior politician does not talk about something it becomes a non-subject?

Chris Dillow asks why Osborne is not given the scorn and derision he deserves. As ever he gives many possible answers, but to many people one factor above all explains what is going on. It can be summarised by the following chart from the IFS, looking at who wins and who loses from this latest budget.

As I noted in my last post, Osborne felt he had to produce a budget like this for reasons that have only to do with who will be the next leader of the Conservative Party. Yet many will conclude that he (almost) gets away with it because it is in the interests of those who control the media to let him get away with it.

While there is undoubtedly some truth in this, I do not think this is quite the killer explanation that some suppose. Another important factor is that we have been living through a period in which the need to cut spending to reduce the deficit has entered the national consciousness as not only an undeniable truth, but an imperative that dominated all other concerns. So strong was that conviction that it helped win the Conservatives an election, despite the fact that they pledged to make the deficit worse by cutting taxes. Osborne had successfully characterised himself as the politician brave enough to ‘make the hard choices’ required to fulfil that imperative.

But as I have argued before, this belief that what George did and continues to do on cuts is an undeniable necessity is a product of the events of the recent past, rather than some immutable idea that the nation will forever hold. The most significant part of Iain Duncan Smith’s resignation letter is the following:

“I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self-imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest.”

So a plea to political journalists and commentators. Forget the spin that this resignation is all about the EU referendum (which, like all good spin, has an element of truth) and focus on this sentence. The idea that with his cuts George was and is only doing what had and has to be done is crumbling, and you do not want to be the last to notice. Start holding our government to account, not just for benefits cuts but also for the damage caused by flooding, and above all for the dire performance of the UK economy relative to the past.