Right Wingers Everywhere Just Don't Get It

Here is an example from Great Britain where David Cameron, leader of the Conservative party, is advocating the same inane shrink government, cut taxes, balance budgets nonsense as their confreres around the world (as well as Herbert Hoover clones in the 1930s). This is a snippet from piece by Martin Wolf in the Financial Times ...

The UK has proved horrifyingly vulnerable to a financial crisis that has cut off funding from abroad. But why is it so vulnerable? The answer from David Cameron, the leader of the opposition, is simple: “We’re in this mess because of too much debt – too much government debt; too much corporate debt; too much personal debt; and it becomes clearer all the time that the scale of Britain’s debts puts us in a much weaker position than other countries.”

The right answer, Mr Cameron suggests, is “an economy where government and its citizens live within their means, save for a rainy day, waste not and want not. It’s an economy where everyone has the chance to own their own home with space to live and breathe – and where we work to live, not live to work.” So, in response to the biggest economic crisis since the 1930s, he has decided to take a pre-Keynesian view of the management of public finances.

Mr Cameron argues that the government should save for a rainy day. But he fails to note both that it did – public sector net debt was 36 per cent of gross domestic product at the end of 2007-08, down from 43 per cent in 1996-97 – and that no day could be much rainier than today.

Mr Cameron argues, again, that everyone should own their own home. Yet it was this silly idea – coupled with controls on house building supported by his party and the liberalisation of finance it promoted – that formed the housing bubble and explosion of household debt.

Mr Cameron argues for improving the tax treatment of savings. But an excessive private desire to save is now a huge danger. He also fails to note the already favourable treatment of home owners, savers for pensions and investors in “individual savings accounts”. He is pandering to current complaints about low returns. But low returns are an alternative to debt deflation and mass bankruptcy, which would wipe out many financial assets.