Nobody has been more enthusiastic about rubbishing new Labour Party Leader Ed Miliband than the Murdoch media, so it's a bit of a surprise to find him gracing the op ed pages of today's Times with a column attacking the government's deficit reduction plans. I guess it's a welcome change from his day job of underwhelming the members of of his own party.
The story is behind The Times paywall, but here are a few choice extracts, with the usual carefully calibrated comments.
No surprise that Ed thinks the Government is cutting the deficit too quickly, but he's at pains to assure us that this is not just about politics:
"....no other developed country is taking such an extreme approach. That is why we say Mr Osborne is going too far and too fast on the deficit. This is not a political slogan, it is our economic judgment".
Well, let's look at it in those terms, then. Just what is this economic judgment based on? There's no mention of Keynes in Miliband's article, but he and many others have been keen enough to put on the great man's mantle in the recent past, so we can fairly assume that's his starting point.
Problem is, Labour's record in office doesn't really entitle Miliband to claim to offer a Keynesian alternative: at least, not one that would be recognizable to Keynes. Much of Labour's fiscal policy was founded on Gordon Brown's claim to have abolished boom and bust, which isn't Keynesianism or any other kind of -ism: it's just idiocy. Based on that belief, Brown and Alastair Darling enthusiastically ramped up spending throughout the first decade of the new millenium, which is a very non-Keynesian thing to do: fiscal policy should be counter-cyclical in good times as well as bad. In fact, the growth in spending was so robust that the Treasury had to keep moving the goalposts in order to maintain the illusion that Brown's self-imposed "golden rules" were being met.
Let's go back to Ed Miliband:
"...the fact that Britain’s debt at the outset of this crisis was the second-lowest in the G7; lower than it was under the Tories in 1997".
This is only sort of true. The Treasury expended enormous energies during the Labour years in finding ways to keep public sector debt off the books. Accounting fictions at Network Rail, hugely expensive private finance initiative (PFI) schemes and underaccounting of the true cost of public sector pensions all played a role. It's close to impossible to come up with an accurate measure of public sector debt (for other countries as well as the UK), but ask yourself this: if the size and growth of the debt really wasn't a problem, why was the Treasury working so hard to cloud the truth?
One more quote from Ed:
"....the evidence from around the world that a global credit crunch caused deficits to rise on every continent. The US and Japan face deficits of the same scale and for the same reason".
Wow, Ed, is that really a club you want to be a part of? Japan has had the ongoing fiscal deficits and ultra-easy monetary policy that you seem to favour for more than a decade, and all it's done is to rack up massive public debts without getting the economy out of its near-depression. As for the US, it's close to bankrupt at both the national and state level, and only manages to keep going because the dollar is still accepted internationally as a store of value. That's not an option for the UK, and it may not be one for the US for much longer: in the words of the great economic soothsayer Leonard Cohen, "there's a mighty judgment coming, but I may be wrong".
All of this leaves us in a bit of a quandary. The Con-Dem coalition may well be right for the long term: we should have the size and scope of public sector that we're willing to pay for. Yet Miliband is surely at least half right when he cautions in the Times article that "The big question is whether the Tory approach will leave us with low growth and squeezed living standards in the short term, as well as deeper economic problems in the long term". The problem with paying attention to Miliband is that there's little sign that he and his party have even acknowledged. much less learned from what went wrong when they were in office. We'll know soon enough whether Miliband is right about the short-term outlook, but for the long term, he seems to be just as delusional as his predecessors.
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