Why David Cameron is economically illiterate

David Cameron has managed to find folksy metaphors that have resonated. His one about the last Labour government "maxing out the nation's credit card" may be economically illiterate - implying that the state is like an individual consumer (a point demolished in this Guardian editorial) - but it certainly conveyed the claim that Labour had spent too much and that was why we're in a crisis.

"They didn't fix the roof when the sun was shining" resonated equally, even though it implies a classic Keynesian demand management strategy (that Labour should have raised taxes during the boom*) which Cameron would presumably reject ... but it did communicate a point that Labour was reckless.

However, his latest claim - from his speech on the economy last Thursday and repeated at Prime Minister's questions today - is that:

“They think that by borrowing more they would miraculously end up borrowing less ... Yes, it really is as incredible as that.”

But it's not incredible, in fact it's a common occurence for most people - and lends itself to a Cameron-style metaphor. Balls or Miliband could simply retort:

"It's like when you borrow money today to buy a house with a mortgage, so that tomorrow you spend less because you don't have any housing costs in later life"

The metaphor can actually be stretched even further:

"And why do we borrow more today? Just like the mortgage holder: to get an asset at the end of it. That's exactly like the infrastructure Labour is advocating on a million new council homes. As well as creating jobs, reducing unemployment, tackling homelessness and overcrowding, we'd also get extra income from council rents and save on the housing benefit bill. So yes, Mr Cameron we'll borrow more today so that we borrow less tomorrow."

In the FT today, Martin Wolf also assesses Cameron's economic credibility - and pulls no punches.


*instead Labour cut corporation tax from 33% to 28% during its period of office and only introduced the 50% tax rate from 1 April 2010, well after the boom had bust.