Tag Archives: Anthony Sanders

More On UK “Austerity”

There have been a lot of good things written about UK austerity since my post last week. Here is a quick round-up:


Yesterday, Veronique noted that the meanings of words often get jumbled when politicians and pundits talk about austerity. Tax increases, spending cuts, and structural reforms all fall under the label “austerity.” But only some of these measures actually work. And only some of them are actually being tried. Maybe it is time for some new words?

On Sunday, Anthony Sanders posted a number of informative charts showing recent trends in the UK economy, including: repeated dips into negative GDP growth over the past couple of years, massive sovereign debt, rising unemployment rates, and an over-built financial sector. On the plus side, the UK is still paying comparatively low interest rates on its debt and its housing market has not fallen as far the US’s.

Lastly, Anthony Evans sends me this Allister Heath piece which sheds some light on what has actually happened in the UK:

Current spending rose in cash terms from £604.8bn to £617bn in 2011-12. The OECD says UK public spending was 49.8 per cent of GDP in 2011. Public sector net borrowing remains at a catastrophic 8.3 per cent of GDP. All of this remains utterly unsustainable – yet the public have wrongly been told that the UK “is tackling its debt”. Osborne has been a disappointing chancellor – but not for the reasons cited by the left.

Photo by DoctorWho/flickr

Is the Pension Benefit Guaranty Corporation the Next Bailout?

Created in 1974 by Congress, the Pension Benefit Guaranty Corportion (PBGC) is a government agency that protects private sector pensions for workers in financially failing companies. According to The Center for Public Integrity,the PBGC is itself in need of rescue. In addition to having insufficient money to bail out private pensions, the Office of Inspector General gives the PBGC an “F” in an audit of its internal financial controls.

The agency cannot confirm investment revenue figures reported by the independent contractors hired to lend securities on its behalf. The result is the PBGC often gives erroneous information to Congress. Though the agency is self-financing through insurance premiums paid by the companies that operate defined benefit plans, the PBGC is in deficit for $21.9 billion. At the same time the PBGC’s potential obligations to cover pensions in faltering companies tripled last year to $168 billion. It’s an ongoing problem. In 2006 the agency had a deficit of $23 billion. As GMU finance professor Anthony Sanders notes, the PBGC is a model that cannot be sustained. Another reminder that the ultimate guarantor of government guarantees is the taxpayer.