Stuck in the household budget model of the economy
Pretending the nation’s economy is just like a household budget has always been a strong theme in the way that Conservatives talk about economic policy. People naturally generalise from their own experiences to try and make sense of frighteningly complex issues.
It’s a very useful concept for the small state right as it can always be deployed to argue for spending cuts and ‘living within your means’. It makes for the homely metaphor that was Mrs Thatcher’s stock in trade. But if any thing sums up Keynes in a single simple concept it is that the nation’s finances should not be treated like a household purse.
I’ve always thought that whatever they say, most senior Conservative politicians understood this, whatever their tactical use of household purse narratives. But now I’m not so sure. It looks very much as if George Osborne has simply looked at a Treasury forecast of future increased tax income and assumed that the only way that tax could increase is from an increased tax rate rather than economic growth.