From the Guardian:
People tend to think that the government debt is like a household debt and needs to be managed very tightly. But as Leslie Budd at the Open University Business School says: "This‚Ä¶ belongs to the less well known branch of economics called Ignorance Economics." It is sensible to cut waste, but slashing spending indiscriminately to deal with fiscal crises can do more harm than good. Public spending is an injection into the economy that boosts national income and employment.
Or as William Keegan put it:
There was a popular weekly in my youth called Comic Cuts. The coalition now running our country ought to consider launching a new publication entitled "Tragi-comic Cuts": the editor would be David Cameron; the deputy editor George Osborne; the circulation manager Nick Clegg; and the office-boy Vince Cable.
The motto of the Con-Lib house journal would undoubtedly be the slogan that our new prime minister has already coined: "Purpose behind the Pain" – the rationalisation of sadistic masters throughout the ages.
Pain for a Purpose replaces Gordon Brown's "Prudence with a Purpose".
Cameron and Osborne give the impression of wanting to create a crisis of confidence to foment the atmosphere of fiscal masochism. Is Pain for a Purpose what the right wing of the Tory party is traditionally suspected by the left of wanting? Is a crisis brought about by deregulated bankers just what the rightwing doctor ordered to put "welfare recipients" in their place?
As Keegan says:
I am not a conspiracy theorist, so I should like to think not. But you do begin to wonder. It is not just Tories and rightwing Liberals: the Treasury itself, having allowed Brown too much leeway during his chancellorship, is seizing the opportunity to revive the Treasury view of the 1930s.
Now, I got to know the great economist Lord (Lionel) Robbins when he was chairman of the Financial Times and I was economics correspondent. He had espoused the Treasury view in the 1930s – that, in his words, "internal deflation was the only way to cope with a fall in demand" – but later regarded this as a "fundamental misconception".
I am not saying the position of the coalition and the Treasury is quite like this, but it worries me. It also worries the Obama administration, which has suddenly seen most of Europe conduct a U-turn from fiscal stimulus to fiscal retrenchment, thereby imperilling the recovery – and perhaps threatening social cohesion.
I’m not a conspiracy theorist either – far from it. But like Keegan think the facts speak for themselves. The ConDems are either pursuing the Economics of Ignorance – or they really are pursuing tragi-comic cuts for the sole purpose of inflicting pain.
Those are the only credible choices on offer.
And it does not matter which you choose – the result is wholly unpalatable.