Sunday, October 19, 2008

Alistair Darling Goes Keynesian

The economy is weakening, should we cut back on public services? For some the answer to that is obvious, the logic is summed up nicely by the phrase 'live within your means'. For others, the picture is more complex. As the state guarantees at least a basic income for everyone it obviously docent pay for government spending to be slashed if it is only going to lead to job cuts and therefore more expenditure in terms of benefits. Job loss also causes a decline in tax revenues leading to more public sector job cuts, etc., etc.,

The alternative to this situation is increased govornment spending in weak times. This expenditure increases public debt but also strengthens the economy, fewer people loes there jobs and homes in the short term and in the long term the debt can be repaid from the tax revenues of a stronger economy.

A recent telegraph article suggests that Alistair Darling believes in this deficit expenditure, taking his academic lead from John Maynard Keynes. I suspect that this is a clear economic differentiator between the two main UK political parties.

The only question is where will this money be spent. Some of us believe that repowering our carbon fuel based energy sector, and carrying out massive energy efficiency retrofits should be high on that agenda. Housing efficiency spending makes particular sense in terms of jobs creation, cutting energy bills and fighting climate change.

UPDATE: The Governments Failure with Renewables May be Leading to the Same Conclusion

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