We can’t go on like this. Cut the deficit obsession, not the deficit.
There have been a number of mash ups of the David Cameron “We can’t go on like this” poster. Possibly the most entertaining is this:
There has been, however, a concerted campaign by the political right to exploit the current recession for their longer term aims. The Conservative party, backed by the Taxpayers’ Alliance and other right-wing think tanks has been very quick to focus debate on the budget deficit. Their solution is to radically cut public spending.
The inevitable outcome of cutting public spending will be a reduction in jobs. Of course this doesn’t matter to the Conservatives or their paymasters in big business. The more unemployment there is the more pressure to keep the minimum wage low, the more unequal society becomes, and the greater the advantage enjoyed by the rich.
The need to cut the deficit seems to be based on concern about the credit rating enjoyed by Sterling. The logic is that losing a ‘triple-A’ rating will make borrowing more expensive in future. We have to question though, the wisdom of slavishly following what credit rating agencies dictate. Paul Mason, BBC Newsnight’s economics editor, suggests that, in fact, many in the markets believe that UK debt is undervalued, and that even the loss of a ‘triple-A rating’ would make little difference to the government’s ability to borrow.
There’s a particular irony in economic collapse caused by the financial services industry being exacerbated by the financial services industry at the cost of everyone outside the financial services industry.
The government is hampered here by its policy of pampering the ultra-rich. Running an economy that benefits a tiny number of very wealthy people (bankers in short) makes it difficult to share the benefits of growth through taxation. People so wealthy they can easily relocate cannot easily be taxed. Had the economy been focused on high value jobs paying medium to high salaries the solution to these problems would be easy: raise taxes.
Furthermore, what’s lost in this debate is the very substantial damage that cuts in public spending will do to the country. Public spending allows us to invest in education, which in turn increases employability. In order to cut public spending Peter Mandelson is proposing swinging cuts to bring Universities to their knees.
Public spending allows investment in preventative health. This would cut health service costs in future. It will, no doubt, face cuts.
Investment in crime prevention, debt advice, mental health services and pre school care all have long lasting beneficial effects on individuals. These beneficial effects are also economic. Not having to pay for prison, bankruptcy and anti-depressants, and enabling women to work, reduces the burden on state expenditure.
This is a much more real threat than that posed by the credit agencies. The cuts in short term public spending will definitely lead to increases in long terms spending. Much of the money spent by the current government went on repairing the damage caused by the Thatcher government’s policy of mass, structural unemployment.
So, what is to be done?
The debate needs to be reframed. We must resist the idea that cuts are necessary. The way out of this situation is to invest in both physical and social infrastructure. Rather than finding new and innovative ways to cut public services, we need to fight for public services. As Patrick Harvie rightly points out, we must oppose right wing attacks on public spending.
This investment will pay dividends over the coming 20 or 30 years. The Green New Deal proposes a growth in mid to high income skilled jobs creating low carbon, sustainable infrastructure. This will be effective both in tackling inequality and in dealing with climate change. For those who are worried about deficits, it will also create the tax base that will, in the long term, repay the national debt. This will leave the country with a legacy of greater equality delivered in a sustainable way.
The alternative is a legacy of more imprisonment, lower social satisfaction, greater inequality and a structurally unfair society. We really couldn’t go on like that.