At the end of the war the spending was shifted from running cost expenditure (paying millions of men in the armed forces, buying loads of shells, bullets tanks and so on) to building stuff (houses, a health service etc). On top of that, as noted above, all those demobbed squaddies went and started making stuff Britain could sell and therefore increase national revenue.

Compare that to the situation today. Gordon is spending like a madman but to what end? There are no great national investment schemes, no massive New Deal construction projects (the Olympic infrastructure hardly counts) – things which might just justify the huge expense in terms of Keynesian economics. Instead he’s borrowing to keep his turkey army mobilised and hence out of revenue earning jobs.

I also fail to see why it is better for government to borrow and spend than it is to leave people alone. For the most part, people are itching to spend and invest in new stuff, like new houses, power stations, airport expansions, but the NIMBYs and Greenies won’t let them.

Plus of course demobbing brought millions of workers back into productive employment. If you’ve cut your outgoings and started earning again you’re going to do well aren’t you.

I also seem to have missed the bit where she justifies wartime levels of debt when we are not at war.

Tim adds: I’ve not missed it, simply ignored it, for it’s irrelevant to her argument. For her argument is that at the moment we should be borrowing more money to be spent by hte government. When people say “Hey! but we’ll go bust!” she says “But look at post WWII”. And, if they had been borrowing post WWII she might have a point. But they weren’t: they were fiscally contractionary, they were paying back debt.

That’s why her argument falls. It’s nothing to do with “what” government spent the money on: it’s to do with the balance between tax collections and spending and thus the influence that gap has on hte public debt.