I am persuaded that the government should run a deficit throughout the recession to stimulate consumption, deliver social welfare at our time of greatest need and take advantage of low interest rates to invest in infrastructure.
On the other hand I am also persuaded that ignoring an ever increasing deficit is to court disaster and that government should tighten its belt in the same that private businesses are being forced to. So that the markets will regain confidence in us and start lending at slightly less than usurious rates.
In short I believe that if we spend too much there will be a generation long global depression. But I also think that if we don’t spend enough there will be a generation long global depression.
I’m nothing if not flexible.
Or if I’m honest, it is just so much easier to sit on the fence on these kind of debates. I don’t have a background in economics. As is the case for most of us I suspect, for me the last four years has been a crash course. I am regularly seduced by the arguments of the Keynesian stimulators only to be wooed the following day by the slash and burn Austerians.
So rather than make my mind up one way or another I find it much easier to slip back into the leather elbow patched herringbone tweed jacket that was the uniform of History undergrads in the eighties. From where you can smugly observe the attack and retreat of John Maynyard Keynes disciples. Mirrored by the periodic rise and fall of the deficit hawks.
On Thursday I compiled a report for Drivetime tracing the last few years of this ongoing ideological battle. It has been a very quick cycle. In the Autumn of 2008 as the G20 leaders responded to Lehman Brothers etc they were all agreed on the need for stimulus. By the Autumn of 2010 when they met again in Toronto they were slashing their way through their national budgets with garden shears. And as we push on into 2012 there’s quite a few people with considerable influence over policy that are talking about the need for spending to stimulate job creation because otherwise a generation of unemployed people will never work again.
Of the myriad different stats either side throw up to support their position let me share just one which I find more persuasive than all others. While Europe is marching to a beat banged out on a drum in the ECB in the US two million jobs that would have been lost were either saved or created by the Obama Stimulus package. They’ve got problems on that side of the Atlantic but their recovery seems to be a good deal further down the right road than ours.