We’re reasonably sure this isn’t what they meant to do but there we are.

One of the joys about economics is that it has to add up. If this is happening here in the economy then that over there must also be. One can then check and see whether the first is indeed going on by looking for that second that is, or is not. Equally, if we declare that this one thing is true when moving this way then it will also be true when running the other.

The IPPR wants to tell us that government borrowing to “invest” (the ““ is because it’s extraordinarily rare that govt does invest, rather than spend to pleasure voting blocs) doesn’t have much effect upon things.

Don’t take my word for it. The International Monetary Fund’s chief economist last year wrote: “The magnitudes of the effects [of fiscal tightening on inflation] appear to be small.” Economists from the Bank of England and the Bank of International Settlements also find very limited impact of extra government borrowing on inflation, if any at all. Recent experience also illustrates this: the US government had a significantly higher deficit than the UK last year, and yet it saw inflation fall to a lower level than we did.

That is, borrowing to spend is not very stimulatory.

Hmm. But then that means that borrowing to spend is not very stimulatory. Or at very least there has to be some ‘splainin’ done as to why it is when it isn’t.

But if borrowing to spend isn’t stimulatory then we’ve just disproven one of the major planks of Keynesian economic management. That fiscal policy, the widening out of the deficit, solves recessions. For if we say that fiscal policy isn’t stimulatory then that is what we’re saying, fiscal policy isn’t stimulatory.

Which is interesting, no? And will IPPR recall this next recession and not tell us that government should borrow more to spend? No, we don’t think so either.