Cuts and opportunism

Ed Milliband was again emoting if not explaining his alternative economic strategy on radio 4 this morning. If only we were to borrow and spend more money, that would be good for growth, and therefore good for debt in the long run. It has enough plausibility for people who want to believe it to give Labour cover to proclaim themselves anti cuts, to go on ukuncut demos where by rights they ought to be lynched.

The reality is that Labour's plans are to cut the deficit more slowly: in 8 years rather than 5. That is reaching the midpoint in 4 years rather than 3. (The coalition reaches the midpoint of deficit reduction in 3 years, rather than 2.5 because the first year (this last one) saw only token cuts.)

What this means is that whenever Labour score political points by "opposing" a cut, they have a policy that would demand that same cut is made, on average, only 1 year later. Not "save our libraries" but "keep our libraries open for one more year then close them" would be an honest slogan. Ditto every other cut.

More could be done by raising taxes of course, but when Evan Davies put the question about not capping council tax, Milliband rejected the idea, saying, rightly that an increase in council tax would squeeze many at a difficult time. (An apology for Labour's record on council tax might have been in order, particularly to pensioners, who didn't even have an earnings link as they do now.)

And that story is repeated. Despite having the policy of somewhat higher taxes and therefore fewer cuts, no tax increase is supported or proposed, save the "jobs tax" that would have raised only about 2% of the deficit.

We are told that Labour's plan would be better for growth. Growth is the answer to everyone, even the Greens it seems, confusingly enough. Of course I would hope they do think their plan better for growth, rather than adopted just for the cheap point-scoring value of pretending to have an alternative to cuts. But believing your plan to be better is one thing. Spending the difference is quite another.

Borrowing to spend is right during a recession to blunt the hard edge of the downturn. It will temporarily boost growth, but at the cost of a long term deadweight of debt dragging the economy down. So as Keynes said, such debts should be paid back when times are good. Now the recession ended in 2009, and we are still borrowing. We will still be borrowing 5 years after the recession, hitting balance in the 6th. Labour's plan is to still be borrowing 8 years after the recession. This is not Keynsianism, just borrowism. Borrowing not just during recession, but all the time, hoping some other party will be in government when it has to be sorted out.

So on the one hand we have lower corporation tax, enterprise zones, apprenticeships, university technical colleges, cutting red tape, part of a comprehensive strategy for growth in the private sector. On the other hand the strategy to borrow and spend in the public sector for 8 years, creating a massive long term dead weight of debt, and neglecting the private sector that could actually bring us the tax revenues we need.

All this for an average 1 year delay to cuts, and the chance to play the good guys.

Greens and Keynes: total muddle

You'd think it would be a simple question. Do the Greens support the fiscal stimulus to get the economy growing again, or do they, like the Tories, consider it more important to balance the budget sooner?

Logically, as the Greens are not supposed to be that keen on economic growth anyway, you would expect the latter answer. But that has to be weighed against visceral knee-jerk opposition to the Tories.

So I've been intrepidly commenting on Green blogs trying to get to the bottom of this. Natalie Bennett at Philobiblon was cheering the return of Keynes but wouldn't explain whether she wanted the growth that Keynesianism is thought to deliver.

When Jim Jay attacked Cleggy over the "savage cuts" remark, I asked whether opposing growth won't mean even savager cuts in the long run. And I get some vague guff about a "paradigm shift away from a capitalist economy", which is a rather vague answer to quite a specific question.

And now Rupert Read adds mud to the water with a pithy condemnation of growth. So is he against the fiscal stimulus? He wouldn't say.

This muddle is all the more surprising when we consider that it would actually be quite easy for no-growth Greens to come up with a clear and consistent position. If you think that the Tories are correct that balancing the budget now is better for prosperity in the long run, then go with Keynsianism. And if you think the Keynsians are right that a fiscal stimulus now is better for prosperity in the long run then go with balancing the budget. You'd have to half agree with the Tories either way, and I guess this is the problem.

Now it turns out that growth figures are about how much the goods and services we supply each other are worth to us, and not about how much environment is destroyed, and so the greens really ought to be a bit more specific and focus their attentions on the actual destruction of the environment rather than on an aggregate statistic like GDP that includes a great many good and unobjectionable things.

But no. Far from being more specific, their solutions just get vaguer. Paradigm shifts. Alternatives to capitalism, as yet unspecified. Read's suggestion of a stimulus to stabilise the economy is at least specific, but suggests that his green new deal should stop dead as soon as growth figures go positive.

Often on specific policies the Greens sound like what is simply a high tax-and-spend party. And this too, would make sense particularly if you want to strangle the economy. But ask them about economics or political philosophy, and they will never say this. Why choose this vague waffle over a simple policy that meets your objectives? Is some deeply held contradiction at work here?

This is a breathtaking shortcoming for what claims to be a serious political party. What have they been thinking about for the last 20 years?