Tuesday's budget- do our reactions matter?

It seems pretty clear that Osborne’s budget on Tuesday is not going to be full of good news. The prospects for what is going to happen are pretty depressing, regardless of whether you think it is the correct course of action. The big debate is about whether public spending cuts are good for the economy or not- will they lead to a double dip recession?

Now I’m no economist, so personally I’m not going to try and predict what will happen. And in truth, no economist can actually predict what will happen, however good they are. But perhaps the key question is not whether cutting public spending is the right course of action now, but rather what our reaction to those cuts will be.

The economy is not an external force that acts on its own. It is an accumulation of many small actions by many different people- a trader who sells her shares, a shopper who stops buying luxury products, a banker who decides to loan money, an entrepreneur who decides to set up a business. How the economy reacts to any budget announcement depends to a large extent on how many people think the policy is right. If lots of people think it’s going to be bad for the economy and react accordingly, then it probably will be bad. If people are hopeful for the future, then their actions are more likely to help the economy grow.

So perhaps we all have some responsibility on Tuesday- our reactions to the budget will be important. Whilst spending cuts and tax increases to tackle the country’s debt will be damaging for many people’s personal circumstances, this is also going to be a time to look for opportunities, not for burying our heads in the sand. And perhaps we can all be a part of the solution.