By slashing government spending, by making half a million people in the public sector and as many again in the private sector redundant, he might be claiming to cut government cost but what he is actually doing is something much more sinister and dangerous. What he is doing is deliberately sucking demand out of our economy.
That is 1.6 million people won’t be paying tax any more. But they will be claiming benefits. Even if they are the new, reduced ones. So far from saving money, George Osborne’s so-called cuts will actually increase spending whilst massively reducing his tax income. The consequence is obvious. The deficit will go up, not down.
Which, according to that Keynes bloke, magically puts demand back into the economy.
So, if Osborne has cocked up, the seeds of the solution are in that very cock up that Osborne has made.
Most odd for a self-proclaimed Keynesian to be arguing that an increased deficit is a bad thing to have in a recession really, isn\’t it?