More on the Tories and the myth of government “waste”

John Maynard Keynes pooh-poohs Sir Stuart Rose et al.

My NS colleague and good friend, the economist and former MPC member David "Danny" Blanchflower, has asked me to highlight this letter, published in yesterday's Financial Times, which he co-authored with Robert Skidelsky.

Sir, How many of those business leaders who complain that raising National Insurance contributions is a "tax on jobs" realise that the "efficiency savings" that they demand would destroy jobs just as certainly?

Raising National Insurance contributions attacks jobs by reducing profits per unit of output: an "efficiency saving" by government cuts costs by putting someone out of work. Both measures aim to reduce the government deficit at the expense of jobs. That is why the government has wisely postponed raising NI contributions and cutting "waste" until economic recovery is under way.

The general point is that expenditure that would be "wasteful" in normal times can be useful in depressed times. When an economy is growing strongly we need to cut out waste; when it is depressed, what is called "wasteful" spending can keep up aggregate demand, employment and sales. Keynes might have been thinking of our eminent business leaders when he wrote that "common sense" is apt to prefer wholly wasteful forms of public spending such as unemployment benefits to partly wasteful forms such as over-manning in government agencies.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Donald Trump's healthcare failure could be to his advantage

The appearance of weakness is less electorally damaging than actually removing healthcare from millions of people.

Good morning. Is it all over for Donald Trump? His approval ratings have cratered to below 40%. Now his attempt to dismantle Barack Obama's healthcare reforms have hit serious resistance from within the Republican Party, adding to the failures and retreats of his early days in office.

The problem for the GOP is that their opposition to Obamacare had more to do with the word "Obama" than the word "care". The previous President opted for a right-wing solution to the problem of the uninsured in a doomed attempt to secure bipartisan support for his healthcare reform. The politician with the biggest impact on the structures of the Affordable Care Act is Mitt Romney.

But now that the Republicans control all three branches of government they are left in a situation where they have no alternative to Obamacare that wouldn't either a) shred conservative orthodoxies on healthcare or b) create numerous and angry losers in their constituencies. The difficulties for Trump's proposal is that it does a bit of both.

Now the man who ran on his ability to cut a deal has been forced to make a take it or leave plea to Republicans in the House of Representatives: vote for this plan or say goodbye to any chance of repealing Obamacare.

But that's probably good news for Trump. The appearance of weakness and failure is less electorally damaging than actually succeeding in removing healthcare from millions of people, including people who voted for Trump.

Trump won his first term because his own negatives as a candidate weren't quite enough to drag him down on a night when he underperformed Republican candidates across the country. The historical trends all make it hard for a first-term incumbent to lose. So far, Trump's administration is largely being frustrated by the Republican establishment though he is succeeding in leveraging the Presidency for the benefit of his business empire.

But it may be that in the failure to get anything done he succeeds in once again riding Republican coattails to victory in 2020.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.