Keynesians still rule
Automatic stabilizers are the pride of leftwing politicians and that strange group of economists known as Neo-Keynesians.
They kick in when the country goes into recession, automatically increasing spending as the economy splutters. They comprise various benefits paid to the unemployed as they are laid off in growing numbers.
Surely this must be a good thing? To listen to Labour ministers, you’d think so. The problem is, they have no ceiling once they start, and our system pays them out of borrowing, not investments. Borrowing has to be paid back out of taxes, which further depresses the economy.
An economy can easily spiral out of control under limitless “automatic stabilizers” and loss of tax revenue. The United Kingdom is a classic example of that right now.
Never has there been more need for a “social fund” to mop up the automatic stabilizing leakage in the national finances. Surely, there’s now an unstoppable impetus for putting the whole welfare budget on a sounder footing for the future?
