A new book is a much-needed piece of heretical questioning for politicians who argue that something needs to be done about the size of the public debt
The record government deficits are keeping the economy on life support during the Covid-19 crisis, and removing them would be like pulling the plug. Without the state stepping in, there would be mass unemployment and bankruptcies. The government is spending so much because people and companies cannot do so. It ought to be obvious that fiscal deficits, in and of themselves, are neither good nor bad. They should be used to save jobs and keep inflation low.
Yet the message from the chancellor, the government’s economic watchdog and thinktanks is that the current level of spending is unsustainable and needs to be brought down by raising tax revenues or reducing spending, or doing both. This is not an economic argument but a political one. The public is being made anxious about the “debt” so that this fear can be weaponised. By persuading voters that something must be done about the national finances, and sustaining that outrage, politicians can push for spending cuts. This is a repeat of the familiar austerity con that voters fell for a decade ago.