All the main parties are talking about slashing public sector spending Cameron promises that such cuts will be "painful", Nick Clegg prefer "savage" and Gordon Brown is no different.
Despite all the hyperbole public sector debt has been much higher than the 76% today. As right wing FT and Spectator Columnist Samuel Brittain puts it:
Debt ratios of this size are historically far from unprecedented. In the early Victorian period the ratio was nearly 200 per cent and almost reached that level again in the early 1920s. In 1956 it was just under 150 per cent. Harold Macmillan, who was chancellor at the time, quoted the historian Lord Macaulay: “At every stage in the growth of that debt it has been seriously asserted by wise men that bankruptcy and ruin were at hand; yet still the debt kept on growing, and still bankruptcy and ruin were as remote as ever.” In fact the debt was gradually reduced from the peaks mentioned above without any heroic gestures.
And as he goes on to say:
The danger of premature tightening was illustrated in the US in 1936-37, when the ending of a war veterans’ bonus and the introduction of social security taxes helped push the US back into recession when recovery from the Great Depression was far from complete.
He explains in this article the common assumption that is the flaw of people's thinking on the subject:
The basic fallacy is known as the fallacy of composition: the belief that what is true on the small scale must be true on the large. Shakespeare's Polonius said "Never a borrower nor a lender be." Margaret Thatcher advised young people not to get into debt (except of course to buy a house!) Even accepting these homilies at their face value, they do not necessarily apply to the Government of the whole country.
The big error of the present economic discussion is to treat national budgets as on a par with the budgets of individuals or firms, which need to balance except for narrowly defined investment projects. Even if you also favour a balanced budget at the national level, it is at most a second order rule to give way if it impedes the achievement of broader economic objectives.
In fact the public sector balance has an entirely different function: that of offsetting gross disequilibria in the national and international economy. If attempted savings exceed investment opportunities, public sector deficits are needed for as long as necessary to fill the gap - a job which will otherwise be done by stagnation and unemployment. When economic recovery has reached a certain stage, the time may come to roll back public sector borrowing. But we have certainly not reached that stage yet and it is far too early to rule out a second or even third leg of the recession.
So why are all the main parties queuing up to reject the wisdom learnt from past recessions to attack the public sector?
Why do we appear to have a choice of vindictive donkeys competing to cut public services when the evidence of the past shows this will be bad for the economy?
We need some more intelligent thinking from the people that would be our leaders if they are to really help the country. It may require challenging the financial myth of composition that what is good on a small scale is also good on a large scale, but if they stick with populist sounding policies that don't engage with the financial realities we will all be poorer for it.