All three British political parties have now set out their economic policies for the election next May. A BBC commentator summarised them as follows:
Conservatives: continue with drastic cuts and austerity in order to achieve a budget surplus by the end of the next parliament.
Labour: continue with cuts, but not quite so drastic, so as to eliminate the so-called structural deficit by the end of the next parliament, but also spend on investment in the infrastructure.
Liberal Democrat: more like the Tories in the short run, but more like Labour in the long run.
That is, of course, a crude and unfriendly description if the Liberal Democrat position - I hate our being defined by what the other two are doing - but that's what he said and this is above all an honest blog.
Unfortunately no one has the guts offer the alternative, a Keynesian stimulation of the economy, the effectiveness of which is authenticated by both economic theory and practical history, and supported by a pantheon of economists and informed commentators.
First, we need to challenge the assumption that "the deficit" is the most important issue in British politics and that to eliminate it is an urgent requirement The government's spending deficit is largely an internal matter: it is borrowing money from one group of Britons wearing one set of hats ( in pension funds, insurance companies, other financial institutions, unit trusts, holders of National Savings, those rich or bold enough not to bother with National Savings but who buy government securities directly.), and paid back by much the same people as taxpayers. So we pay as taxpayers and receive as pensioners etc. The only part of government debt is that could be a problem is that fraction of it that is held overseas.
In my view, a far greater potential economic problem is the Balance of Payments deficit. That is all owed overseas and a supposed deficit (revised figures showed that it wasn't) brought down the Wilson Government in the 1970 election. Today a very real deficit is far larger and therefore more serious, but hardly gets a mention.
And there are other suggestions for "top of the bill." In an article in this weekend's Observer Bill Keegan takes the view that our most serious economic problem that of low productivity.
However, economics, though important (not least because I've earned my living teaching it) is not the be-all and end-all. My own view is that the most serious problem facing our society today is growing inequality. We are in grave danger of becoming not one society but two: perhaps we already are. This situation really does need urgent attention before it becomes dangerous, but it seems will hardly feature in the election campaign, other than to further blame and victimise the chief sufferers from the recession, that bottom 20%, while those who caused the recession continue to flourish.
Be that as it may, there is growing recognition that the main reason for the now returning deterioration of the government's finances is not profligate spending but the fall in tax revenues through continued business stagnation, unemployment , zero-hours contracts, part-time and low paid work, and that the way to restore balance is by a classic Keynesian stimulus which, along with growing prosperity, would increase the tax-take.
Not only is this increasingly understood but it would actual be popular. In his blog Mainly Macro Oxford professor Simon Wren-Lewis quotes a You-Gov poll which shows that in response to the question :
Thinking about how the next government handles the issue of Britain's deficit, which of the following best reflects your view?
A. The next government should prioritise reducing the deficit, mainly through making cuts to spending on public services
B. The next government should prioritise reducing the deficit, mainly through increasing the level of taxation
C. The next government should not prioritise reducing the deficit, and should spend more on public services or cutting taxes to try and promote growth instead.
only 27% supported Option A (broadly the Tory policy), 25% Option B, (broadly Labour) but a whopping 48% Option C, which ought to be the Liberal Democrat policy.