Start with the real basics here. We’ve monetary policy, we’ve fiscal policy. These are the two levers that can be used at the top level to influence the economy.
Tax, said Barber, pre-empting Kwarteng by 50 years, “too often stultifies enterprise”. He boasted how he planned to produce economic growth of 10 per cent over two years, which was twice the long-run average at the time for the UK.
He cut income tax and purchase tax (the forerunner to VAT), while also drastically relaxing monetary policy
Loosening both at the same time might not be all that wise – depends upon the background situation perhaps.
But we’re not doing that at all. We have a loosening of fiscal policy, sure. But also, at the same time, a considerable tightening of monetary policy. Interest rates are going up, money printing is declining, QE becoming QT and so on.
This simply is not the same policy mix.
To illustrate. Back in the 1930s the world had that great depression and all that. Britain recovered in about 18 months. The US took a decade and more (depends on how you treat WWII and the fake GDP figures there). Britain tightened fiscal policy, increased taxes and cut spending. At the same time as it dramatically loosened monetary policy by coming off the gold standard, allowing sterling to drop by 25% and so on. Boom times – no, really, boom – arrived.
In one sense we could say this is anti-Keynesian policy. In another, say it’s entirely consistent – original, proper, Keynes says that only when monetary policy is exhausted is fiscal the only thing left.
That Barber loosened monetary policy is the very proof we need that we’re not doing the same thing right now.
Sure, we can still argue about whether this is the correct policy mix etc etc. But anyone trying to tell you that this is the same policy mix is lying. Or ignorant.