Public spending cuts: will anyone ask the big question? | ToUChstone blog: A public policy blog from the TUC

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Public spending cuts: will anyone ask the big question? | ToUChstone blog: A public policy blog from the TUC.

Adam Lent asks:

There is a very widely held assumption in policy and media circles now that cuts are necessary and inevitable. The only disagreement is over how much and when. Apparently, those hard-headed bond traders and credit raters will only be satisfied when they see unemployed nurses weeping outside Jobcentres. It seems to me though, there is one question no-one wants to ask: will cutting spending actually reduce public debt?

It's an excellent question.

I'll put it like this: when a company is suffering tight cash flow bank managers invariably ask for spending cuts. The first thing to go is the marketing budget.

Shortly after sales collapse.

And the bank manager is bemsued about why they then have a bad debt on their books.

The same logic is used by those who demand public spending cuts in a recession. And the outcome is much the same.

The fact is sometimes you have to spend to put yourself in a position to get out of a mess. And it pays for itself by creating future earnings potential.

That's the beauty of the Keynesian multiplier for you.