Paul Krugman swats aside my naive plea for a New Keynesian consensus on fiscal policy, suggesting that conservatives have always been opposed to Keynes. But I stand by it. I think our Conservatives [UK, big C] were tethered by those views. Else why be so gentle, 2010-2015 and now? Not all of them, for sure. There’s audible commentary complaining that the job was only half-done. The job being deficit reduction.
And if we go back further in history, say to the post-war period, there was essentially a consensus about Keynesian demand-management. In my view this was never really ditched, either, in the 1970s and 1980s. It’s just that we came to understand the inflation process better, how to do monetary policy and fiscal policy together. There are some notable contradictions to this view, of course, like the March 1981 Geoffrey Howe budget that prompted the 364 economists letter. But, later on in that period of Tory hegemony, there were Keynesian flavours. Nigel Lawson, despite believing that low-taxes/small state was good for long-run growth, also knew that cutting taxes was stimulative in the short run, and would help them get elected.
Actually, I think I’ll stop there. After all – applying one of the lessons of the initial exchange here to myself – I’m not a historian and should stick to economics.