The triple A versus the triple dip
George Osborne had a surprisingly good week. The UK economy did not.
Today's PMI survey in manufacturing shows a further decline in manufacturing activity in February. March could yet help turn things around, but if next week's survey of the larger services part of the economy is also weak, there is a distinct possibility that national output will shrink again, in the first three months of this year.
In other words, it is quite possible we will see that much talked-about "triple dip".
Just as worrying, perhaps, is the depressing news on exports in this survey, and the revised GDP figures earlier in the week.
As I mentioned on the 10 o'clock news on Wednesday, those new estimates suggest that the economy did see some growth last year, especially if you exclude our shrinking offshore oil sector.
But, far from supporting the recovery, our export sector actually pulled it down in 2012, with net exports subtracting about 0.8 percentage points from the annual rate of growth. Today's manufacturing survey shows new export orders declining in February, for the 14th month in a row.
On this evidence, we are not exporting our way out of depression. At all.
What can the chancellor do about any of this? That is the question we will all be asking, in these last weeks before the Budget. It is certainly a more important issue, for most people than the loss of Britain's AAA credit rating. (Indeed, for exporters that downgrade might even be helpful, at the margin, to the extent that it adds further downward pressure to the exchange rate.)
The chancellor came out fighting, on Monday, in the wake of that downgrade by Moody's. Where many around him - even in his own party - saw the loss of the triple A as a humiliating failure, Mr Osborne decided to see it as further confirmation that he had been right all along.
You might think that's stretching things a little. But the way Mr Osborne sees it, the coalition's strategy in 2010 was based on the idea that the hole in Britain's public finances would not fix itself, and could fatally damage the country's standing in world markets, if left to fester.
On this line, the Moody's decision shows just how right he was. The implication is that we would have lost the top credit rating even sooner, had Labour been in charge, with a somewhat looser approach to borrowing.
This argument is correct, on its own terms. Moody's certainly did not downgrade the UK because it felt that the deficit reduction programme had proceeded too quickly. It's the rise in the stock of debt that has them worried, not the pace of austerity.
However, critics of the government's approach, such as Martin Wolf of the FT, would say there's a hidden assumption in this whole line of argument. That is that there was no alternative approach that would have delivered faster growth - and maybe lower borrowing as well.
On this view, the argument over whether or not "austerity" killed the recovery misses the point.
The Bank of England and the Office for Budget Responsibility think the slow pace of growth since 2010 owes more to the eurozone and imported inflation than it does to Mr Osborne's tax rises and cuts in public investment.
Maybe they are right. But Mr Osborne's critics would say he might still have done more to offset these negative factors, and so produce a stronger a recovery.
If you believe the IMF's new, higher estimates for the so-called "fiscal multiplier" (and some do not), a stimulus programme, or a more growth-friendly combination of spending cuts and tax rises - with fewer cuts in public investment - might well have delivered faster growth after 2010, without making the fiscal situation any worse than it already was. Borrowing, on this scenario, might even have ended up being lower, thanks to faster growth in tax revenues.
This is, apparently, what Ed Balls believes. But he did not do a very good job of making the case in Parliament this week - which may partly explain why Mr Osborne came out of this week surprisingly well.
For economists, as opposed to politicians, there is not a lot of point debating what might have happened after 2010, and whether a different approach to the deficit might have brought more growth. We can't rewind the tape and do the last two years again. But there is all the reason in the world to think about what the authorities can do to support growth right now.
Clearly, the Bank of England is thinking about that quite hard. Three members of the Monetary Policy Committee voted for more quantitative easing last month - including the Governor himself. It might not take much more bad news for a majority to vote that way next week. And we know from testimony this week from Paul Tucker that other more radical steps are also being considered - at least by some.
Many in the city and in all of the main parties would like Mr Osborne to be thinking the unthinkable as well. He has shrugged off the loss of Britain's top credit rating, but the questions about what, if anything, he can do to kick-start growth are going to be harder to shake.