The letters from Professor Lord Layard, Lord Skidelsky and others including David Blanchflower, argue against the earlier conflicting open letter to the Sunday Times on February 14, calling for a rapid reduction of the budget deficit.
Professor Layard and co-signatories’ letter warns that “while unemployment is still high, it would be dangerous to reduce the Government’s contribution to aggregate demand beyond the cuts already planned for 2010-11”, amounting to 1 per cent of gross domestic product.
The letter says: “With people’s livelihoods at stake, the Government should avoid reckless actions.”
It adds that history is littered with examples of governments withdrawing stimuli too early, such as in the US in 1937 and Japan in 1997.
In a separate letter, Lord Skidelsky and others write that the economists behind the February 14 letter “fail to point out that the current deficit reflects the deepest and longest global recession since the war”.
The letter says that “extraordinary public sector fiscal and financial support is needed to prevent the UK economy from falling off a cliff”.
It says that by seeking to reassure the financial markets by calling for a rapid reduction in the deficit, the February 14 economists are pandering to the views of the very financial markets whose mistakes precipitated the crisis in the first place.