A counterblast to deficit fetishism

In the face of the massive public expenditure cuts proposed by the Con-Dem coalition, The New Left Project has launched a debate on the cuts and how to respond to them.

The first contribution, The Axeman’s Jazz, is a characteristically incisive essay by Richard Seymour, who blogs at Lenin’s Tomb and has recently published The Meaning of David Cameron

It’s a decisive rebuttal of the line peddled by Cameron, Clegg and Osborne that the deficit is the most important issue facing Britain today, and that it is the result of profligate spending under Labour.  This passage goes to the heart of the deficit myth:

In New Labour’s first term, a priority was to establish credibility with financial markets by reducing the public debt. The debt was reduced by a total of £34bn in the last year of the first time – a larger total reduction than all the cumulative debt reduction of previous governments for fifty years. Capital expenditure in most departments of government fell precipitously for the first years of the New Labour administration, and overall public spending fell from over 40% of GDP in 1997 to 38.1% in 2001. Even with successive fiscal problems in the ensuing years and a subsequent need to borrow to plug black holes, by 2004 Gordon Brown had reduced the debt from 44% of national income to 34%. By 2005, the combined spending on debt interest and unemployment benefits had fallen by a half. In the latter half of the 2000s, public spending rose to above 40% again, reaching 41.1% in 2007-08. Only with the credit crunch and following recession did it return to levels last seen in Thatcher’s first two terms, rising to 47.5% of GDP for 2009-10. This has been the result of a combination of two factors: stimulus spending, and the sudden contraction in the private sector. The deficit that arose resulted from the reduction in the tax base as unemployment soared and the economy shrank, and the massive bail-outs for the financial sector.

So, we can dispense with the fairy-tale that the deficit has been caused by profligate expenditure. New Labour adhered closely to neoliberal doctrines and policy nostrums.

Cameron’s declaration that the cuts will not be reversed once the immediate crisis is over, and that smaller government is here to stay, is the clinching evidence that the agenda is ideological; it’s important that the coalition is not allowed to get away with hiding behind the deficit.

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