Friday, 21 November 2008

Winning the economic argument may not be enough

There is probably no current writer on economics who writes with greater clarity and economy than Samuel Brittan.

He has a reputation as a stout defender of classical liberalism. Indeed, he defended Margaret Thatcher and Geoffrey Howe from the famous challenge from 364 economists in 1981. But Brittan can not be easily pigeon-holed. In one of the best recent glut of columns on the return of Keynes, he staked his allegiance to both Keynes and Milton Friedman. He is against equality but advocates redistribution, including land taxes and a basic income, as a 'redistributive market liberal'. And he writes with most passion in denouncing arms sales.

Brittan's must-read column today offers a lucid overview of the arguments for and against a fiscal stimulus of lower taxes and extra spending - and argues that critics of the Brown policy are wrong.

The government is clearly winning the economic argument among informed opinion. The Conservative position is, day by day, being forensically unpicked by voices who might often be sympathetic.

But Cameron and Osborne are now gambling on that not mattering very much at all in the public debate. Their talk about "maxing out the national credit card", seeking to update Margaret Thatcher's homilies about household and national economics, demonstrates that they are focused on "common sense" appeals to gut instincts and the battle of the soundbites.

And, as Brittan notes:

The next objection is that an already high budget deficit will be pushed into the stratosphere by the extra borrowing. This is psychologically the most difficult hurdle. Too few people understand that a government’s budget is not like a family’s or a company’s. It is precisely when the private sector is cutting down and saving that the government needs to spend more as an offset to maintain a reasonable level of total expenditure in the economy.

Brown is winning the battle of economic ideas, internationally and domestically.

But the political argument has not yet begun. Next week, it will.

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