Wrong-headed

Two Radio 4 Today discussions caught my ears this morning. Here's the first.

In a discussion on public spending, the IoD and the TPA put forward the view that £50billion of government spending could be cut without hurting services. This was resisted by Tony Dolphin, of the Institute for Public Policy Research, on the grounds that now was not the time - it would amount to a cut in spending of 3% of GDP, or 6-7% of overall public spending. This, he said, would be disastrous at the present moment, taking a huge amount of money out of the economy and thereby deepening the recession.

It strikes me that this is utter, utter rubbish. It assumes that if Government does not spend the money, all the cash somehow disappears, never to be spent again. It entirely misses the fact that if the Government does not take the money from us as tax - forcibly if necessary - then it remains in our pockets for us to spend.

It is, of course, a truism that when money spent privately, it achieves a lot more than when spent publicly. So, in fact, it could even be better (as a way out of the recession) for Government to not spend this money. Especilly, I have to say, where it has already been concluded that the money is being wasted.

Now, supporters of big government will no doubt say that because the Government can borrow at good rates, it can raise money during difficult periods that we do not have, and would not be able to spend. This may be true, although we may be reaching the limits of this. But to argue this is to conflate the manner in which Government raises money with the manner in which it spends it. If Government can raise money in this way safely at time like this, then it should. But that does not mean it should waste it, nor does it mean that it must necessarily increase spending. It could, for example, use the "new" money for essential spending and reduce (or not increase) taxes thereby also leaving money in our pockets.

This offhand comment reveals, to my mind, the inherent mindset of the socialist; first, that taxes can be raised at the stroke of a pen and that the money thereby raised appears magically in the Government's coffers with no harm to the private sector, and second that only public spending can ever help an economy.

It is difficult to be more wrong, and more dangerously wrong.