Sunday, January 16, 2011

Fiscal responsibility and why nobody wants it

So Labour comfortably won the Old and Sad by-election, affording Ed Miliband a bit of breathing space. Given the circumstances of the election - the Labour MP being turfed out of Parliament by judges on the grounds of lying during his campaign - this is quite a result. It reflects Labour's steady, though narrow, lead in the opinion polls over the past few weeks, as left-leaning Lib Dem voters drift into opposition to the coalition, almost certainly because of discomfort about the various unpopular measures of fiscal adjustment being implemented.

This result suggests a problem for the coalition: although voters may claim that they want to see the deficit cut and the books balanced - in June, 59% approved of the coalitions spending plans - there is less clarity over what kind of pain voters are really prepared to take. The abstract notion of fiscal responsibility is more attractive than the prosaic reality of job loss and service decline.

The US, as ever, blazes a trail in this. The new House Speaker, Republican John Boehner, made an idiot of himself a couple of weeks ago by failing to identify a single government programme that he would cut, despite protestations that his party would take an axe to government spending. This is not surprising - Republican voters benefit just as much from government spending as Democrats (Red States are mostly net beneficiaries of government largesse, Blue States net contributors).

This is yet another example of perhaps the most important political science intuition: that people like public goods, but try to avoid contributing to them if they can. Balanced budgets are very definitely public goods, but individual tax burdens and benefits are largely stubbornly private. In the same way we all want clean air but burn fossil fuels all the same, budget deficits are someone else's problem.