“If this plan is working, what would a failing one look like?” So asks Martin Wolf in response to David Cameron’s speech insisting that his austerity policy was right, is right, and is succeeding. Simon Wren-Lewis goes through Cameron’s assertions in some detail, among other things catching him more or less lying about what the Office of Budget Responsibility — roughly speaking the counterpart of the CBO here — ha actually said about the impact of austerity on growth.
I was particularly struck by the way Cameron is still claiming that Britain’s low interest rates show that his policy is successful and necessary. This is a bit like the high priest sacrificing a virgin once a month to ensure that the sun keeps rising, then claiming that the fact that the sun has risen proves that the sacrifice was indeed necessary. The obvious test is to compare Britain with other countries; if Britain’s 2.07 percent bond yield validates his policies, does America’s 2.05 percent yield validate Obama’s? Or better yet, does France’s 2.10 percent yield validate Hollande’s? Or is the point, perhaps, that every country that borrows in its own currency (or, in the case of France, finally has a central bank willing to do its job by providing liquidity) can now borrow cheaply?
The trouble, of course, is that Cameron’s political career and his very identity are now totally bound up with his austerity crusade. He’s a prisoner of his past, who can’t and won’t change course. Instead, his incentives are all about gambling for redemption — sticking with the policy in the hope that something turns up that will somehow make him a hero.