The perennial political football - Credit, public domain

Even for The Guardian managing two logical fallacies in the one editorial is pretty good going. But that’s what they achieve in this one on funding the NHS. They manage both to get the Keynesian – and by extension, modern monetary theory – idea of deficit financing wrong and also the implications of the National Health Service being the efficient manner of organising health care. Actually, this is such a misunderstanding that I suspect it’s been written by Aditya Chakrabortty:

Before spending more money on the NHS, British politicians should take the advice of the US economist Stephanie Kelton: in a UK lecture this week, she explained that it was wrong for politicians and the media to argue that the government must balance its books, just like a household. If a household were to continually spend more than its income, it would eventually face insolvency; it is thus claimed that the government is in a similar situation. This is false.

Yet politicians are obsessed with avoiding an increase in the deficit, an impulse so ingrained that Professor Kelton described as it “almost Pavlovian”. An analysis of the UK’s economic position tells us how to fund the NHS: growth is flatlining, real wages are stagnant and there’s little inflation. The UK’s indebted households are sinking deeper into debt. Hardly the time to raise taxes. The public sector deficit ought to be seen as an instrument to support the economy, not a way to break it. To pay for the NHS, which is critical for long-term prosperity, the government should engage in Keynesian deficit spending: this would help to keep not only the public healthy but the economy too.

The thing about deficit spending is that you should only be doing it when you need to be doing it. No, this isn’t a rejection of that Keynesian idea or ideal, it’s the point of it.
When wages are flatlining, when the economy needs that bolus of extra demand then, OK, go borrow and spend. Or, in the MMT world, print money and spend. But once you’ve delivered that bolus and the economy has recovered then you must be able to stop that spending – whether delivered by borrowing or printing. That is, a permanent increase in spending is not Keynesian demand management, only a temporary one is.

Increasing the NHS budget is not going to be a temporary matter, is it? Therefore it’s not Keynesian demand management, is it? Again, this is true whether we’re talking about proper Keynes or MMT. An increase in the long term budget, the permanent budget, isn’t that economic management being claimed, that management dependent upon the state of the economy.

Which brings us to the second logical error:

Mrs May does not want to be remembered as the prime minister who squandered the dramatic improvements that had been achieved by the NHS. Despite the longest budget squeeze in its history, the NHS was last year judged the best and safest healthcare system of 11 developed nations. Unsurprisingly, given austerity, the NHS was reckoned to be cheaper to run than other healthcare services found in comparable economies. What the health service needs is the kind of vision that Tony Blair and Gordon Brown offered almost two decades ago when they decided to raise health spending to the EU average.

The claim about the NHS is that by having a national, planned, centralised, system, free at the point of use and funded through general taxation, we gain a more efficient health care system. You know, none of that competition, the profits made by insurers, the costs of insurers even, and so on. The argument is totally scrotal of course but that is the one being made.

So, if we’ve a more efficient structure to our health care service then we don’t need to be spending the same amount as other people, do we? Because we’re more efficient. Sure, if we’re less efficient then we’ll need to spend more, but if more so then we can and should spend less. The two claims are thus in opposition to each other. That we are more efficient and also that we must spend the same as others.

But then this is a Guardian editorial, isn’t it? Presumably by Chakrabortty. So who expects it to make sense?

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