Over the weekend we got news of the government's New Year job creation programme:
"Gordon Brown today unveils ambitious plans for a 1930s American-style programme of public works to ease the pain of recession by creating up to 100,000 jobs.
School repairs, new rail links, hospital projects and plans to usher in a new digital age by investing in superfast broadband will be used to keep unemployment down. The plans will also be used to tackle climate change, by means of investments in eco-friendly projects such as electric cars and wind and wave power that would also create jobs.
His promise to use public money not only to create short-term jobs, but also to build a low-carbon economy for the future, will be seen as a modern reworking of Roosevelt's New Deal - a massive programme of public works, such as dams and roads, to help America recover from the Great Depression."
A new New Deal? 100,000 new jobs?
To start with, where's the money coming from? It's presumably not the cash already announced in the Pre-Budget Statement just before Christmas, because that only amounted to £3bn capital spending temporarily brought forward from 2010-11. Besides, it would be extraordinarily mendacious to re-announce something we already knew about - only the most cynical con man would pull a stunt like that.
So what money is it?
Yet more borrowing? But Brown's reckless government is already borrowing more than that of any other major economy, and is well on track to borrow more than any peacetime government in our entire history.
And how much spending would it actually take to create 100,000 new jobs?
Brown gave no hint that he'd even thought about that, but we can make some estimates. If the jobs were all directly in the public sector, they would cost us £3-4bn pa (equals 100,000 times £30-40,000 pa, being the average employment cost of a full-time public sector worker).
But these people are apparently to be employed in grandiose public works projects, including tech-intensive high speed rail, superfast broadband, and low-carbon energy. That would cost a lot more, not least because we'd have to import virtually all the kit and technology from abroad. We could easily be looking at another £5-10bn.
What's that? It's "investment", and there'd be a pay-off?
Don't be daft - there never has been before (see this blog).
And do we want a new New Deal anyway? Roosevelt's famous New Deal projects may have made for great newsreel footage, but they could never absorb all America's millions of unemployed. Moreover, far from being "pump priming", many economists now believe their huge cost burden may have actually delayed a self-sustaining recovery.
The fact is that despite all the money Roosevelt spent, and all the regulation he enacted, the US economy still didn't get back to 1929's level until WW2 came along. Indeed, in 1939 his own Treasury Secretary, Henry Morgenthau - a man who had been in the very cockpit of the New Deal throughout- wrote this damning assessment:
"We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot."
Brown's New Year package is deeply unconvincing. And to the extent that it's more than yet another reannouncement of spending already planned, taxpayers should be concerned. Our public finances simply cannot support a further splurge on half-baked programmes like this.
PS As we've blogged many times, our current predicament is all horribly reminiscent of the 1970s. Back then, even though the economy was propped up on four piles of bricks, Callaghan used to bang on about leap-frogging us forward into a technomarvellous future by "investing" taxpayers' cash in chips (eg see this blog). Not to mention this little job-creating lunacy (cost us £100m, around £1bn today):