Come back, Keynes
Senator McCain and the Republicans over the water, and the Tories over here, bear-led (the appropriate term in present circumstances) by Cameron, a rather battered Osborne, and Hague, are demanding cuts in government spending — for example, the Tories' advocacy of a freeze on local council spending, and the GOP calling for a freeze in all federal government spending — as a proper response to the recession. The Tories denounce Gordon Brown for having failed, when Chancellor of the Exchequer under, or alongside, Blair, to "put money aside for a rainy day" when the going was good, implying a condemnation of the extent of government spending on public services in the past decade which made a start in making up for the scandalous lack of investment in them during the Tory years that preceded it. They talk about the UK's budget deficit and borrowing as if these were evidence of profligacy — in a recession! John McCain calls Barack Obama a 'socialist' (shock, horror! swoon!) for advocating tax cuts for 95 per cent of Americans and increased taxes on the remaining 5 per cent of rich individuals and corporations; he seems to think that only the rich, provided that they don't have to pay much tax, "create jobs".
It's as if Keynes had never existed. Are the Republicans and the Tories genuinely unaware that the way out of recession is increased, not deferred or frozen, public spending on projects which will generate jobs, put money in the hands of ordinary working people which they will spend and thus generate further demand which in turn stimulates investment, borrowing and spending? That to finance increased public spending by increasing overall taxation can only deepen and prolong the recession by damping down ordinary spending, so that it's essential to finance the additional expenditure out of more borrowing instead? That because the less well-off have a higher propensity to spend than the rich (who save a higher proportion of their incomes and thus contribute less to re-inflating the economy in a recession), re-distributing money from the rich to the less rich, including the poor, is an excellent anti-recession policy? That public borrowing to finance a budget deficit in a recession is absolutely essential, the very antithesis of profligacy?
If William Hague is aware of any of these elementary truths, he showed no sign of it in his BBC television interview this morning with Andrew Marr, ably backed up by the appalling Amanda Platell, even more than usually serpentine and partisan in her review of the press (to the evident annoyance of the equally partisan Alastair Campbell, also on the programme).
So there are two possible interpretations of the line being taken by these siren voices on the far right in the US and here in the UK: either they understand the elementary economics of dealing with recession, but pretend not to for the sake of damning the political opposition — in which case they are hypocritical frauds; or they don't, in which case they are economically illiterate. Either way, they should not be entrusted with the responsibilities of government in the hard times that lie ahead — "moving forward", as everyone now seems to say when they mean "in the future". Fortunately Senator Obama and Gordon Brown seem to understand these not-very-obscure realities and to be ready to apply them to the present discontents — if their respective electorates allow them to do so.
PS: Of course a policy of increased government spending on projects likely to create jobs quickly need not rule out cuts in non-productive public expenditure, such as on ID cards and the giant national data-base, aircraft carriers, the renewal of the Trident missile programme, and the insane profligacy accompanying much of the programme for the 2012 London Olympics, all cuts that could release funds for much more useful projects with much more short-term benefits for employment. These could usefully include spending on green projects designed to support the battle against global warming. But such cuts should clearly not be used to reduce government borrowing or the budget deficit.