Despite the Coalition’s five-year programme of spending cuts and tax increases, the national debt is to rise from 72 per cent of gross domestic product this year to 76 per cent in 2014-15. Debt will peak at £1.5 trillion in 2016-17.
As a sensible precaution against future crises, the OECD said the developed countries should have a long-term goal of bringing debt down to 50 per cent of GDP.
He should have been spending a lot less than he was precisely so as to leave room for Keynsian fiscal manouvering as, if and when, the bust came.
That’s the real crime, he wasn’t Keynesian enough. At the end of the longest boom in modern history he should have been running budget surpluses of several percentage poiints of GDP. Not splashing the cash around as he was.
But then of course that’s why such crude Keynesianism doesn’t actually work. There’s just no way, given political reality, that a government can run such budget surpluses of the necessary size, year after year. The pressure to spend it all is just too strong (really, try reading Polly’s columns from 2002-2008. She can always find something to spend the oceans of cash upon).