Call Me Keynesian If You Must

For years now I have been chided for the use of economic expletives, like deficit and Keynesianism. Now those sort of words are coming back into semi-respectable usage I’m left confused rather than overjoyed. My two preferred economics tutors, economics editor Ross Gittins and fellow blogger Lindsay have no real concept of how thick I really am, but they keep trying.

Gittins is now revealing himself as a born again Keynesian, more or less using the argument that it was just as well to save his breath to cool his porridge. I can accept that from a professional commentator, but a recent article he penned (Listen carefully…) Take this statement for example:

“It's appropriate (and desirable) for budgets to fall into deficit when the economy is entering or leaving recession (or a serious downturn), whereas it's appropriate and desirable for the budget to move into surplus when the economy recovers from recession in the expansion phase of the business cycle.”

It has been common across western economies over the past couple of decades to shrink spending on key areas like health and education. That has never made any sense to me, just taking those two areas. Surely it is economically healthier to provide easily accessible frontline health services to reduce later pressure on more expensive specialist and hospital treatments.

Though conservatives tend to fear education it really has the effect of maintaining stock on the shelves for the future. The stop start in valuing education and training has severe consequences on the economy, particularly when we hit times of skills shortage, as is currently the case.

I’m inclined to believe that regardless of the economic cycle, if deficits are needed to ensure these things are maintained at appropriate levels it is worth the cost. I will stand corrected, but it seems that as the corporate sector must compete with government for available borrowings, the recent regime all too happily shed community responsibility for corporate gain.

For some insane reason the New South Wales state Labor government is sticking with the nasty ways of the past, increasing taxes and reducing spending to avoid deficit. In fact they are putting the national economy at risk to maintain a dubious AAA credit rating.

This at a time when the health, education and broader infrastructure across the state is in serious need of attention. The benefits of creating much needed jobs from construction and other projects feed back to the state in a number of ways, including maintaining currently dwindling GST revenues and other taxes.

I seriously fail to comprehend why government should not be entitled to a portion of loan funds, regardless of stages in the economic cycle. If investment is the base is not consistent they need to be caught up sooner or later, and it is generally later – after the horse has bolted. Call me Keynesian if you must, at least it is no longer a swear word among most economists.