Simon Wren-Lewis has written a good defence of Labour's Fiscal Credibility Rule and shown why it won't stop Labour from being the transformational government this country needs. However I still have strong objections to it and think it should be dropped.
He gets to the heart of the matter right away and I think this is mostly correct. However, even if we accept the conventional assignment that monetary policy can manage demand reliably, that doesn't mean it should. 
That's because what monetary policy is essentially aiming to do is force other sectors to accommodate the government's budget stance. So if the UK has a CAD and is looking to balance the budget, monetary policy needs to incentivise the private sector to deficit spend
Or else there's increasing unemployment. Advocates for fiscal rules and monetary policy dominance have to justify this.
Which is essentially what Simon does with his next point. Now numerous economists have shown that functional finance is sustainable at whatever deficit in terms of its long run budget constraint.
SWL says that higher taxes are needed to pay greater interest payments. This is a sleight of hand because it implies that the govt needs to raise tax rates to do this. Actually no budgetary adjustment needs to take place. All that needs to happen is for i<g.
Which is the case that has nearly always prevailed, so that doesn't even necessarily have to constrain monetary policy.
A government following a functional finance strategy will always meet its long run budget constraint without even trying. No tax hikes or cuts necessary. That doesn't mean there aren't short run constraints, there is still the issue of real capacity.
The next point refutes some of Richard Murphy's accusations. Actually the fiscal rule is based on microfoundations (which is meant to be a mark of rigour in mainstream econ, I thought). The IGBC is based on the idea of an infinitely lived representative agent.
And in various posts and articles SWL has argued against fiscal policy under the assumption that the market decides the appropriate mix of private and public goods. So while I didn't like the time of Murphy's post, it wasn't altogether unfair.
*tone of Murphy's post, that should say.
