Wednesday, October 05, 2011

Prime Minister: Pay off debts (while you still can)

The British Prime Minister, David Cameron, is calling on the public to pay off their debts - in particular credit card debts. (No, really. Details here.) The idea is that we are all borrowing too much and living beyond our means. It's necessary for our longterm financial health to cut back and get things in order now.

Why such a happy message to voters? Perhaps it is to keep up the public relations offensive against Labour. The Conservatives have been arguing that Labour - when in government - had spent too much and increased the country's debts. Now that Cameron's government has been proposing new funding for various new schemes it may sound hollow (and so "we've heard this all before from you") if he were to continue the "Labour spent our savings so the Tories are here to tighten our belts" line. Instead, he is selling a similar message in a different way: you, the voter (like the country), has borrowed too much and so you must cut back. Just as you should cut back, so should the country cut back. See the logic?

The genius in this is the traditional Conservative idea that households are like the state's treasury on a smaller scale: just as each household must live within its means, so must the state. This message is very effective because voters can easily grasp the idea and it has an intuitive plausibility.  (Of course, the problem is that the state is entirely different. For example, only states can print money and help control interest rates.)

There is a flaw in this plan that opponents can easily exploit. Let's accept the idea that we should pay off debts to secure a more stable financial future. (I'm feeling charitable.) If this is true, then why is his government knowing, foreseeably, and avoidably implementing a higher education policy that will double, if not treble, the debts of virtually all new university students from next academic year (in a scheme where 20-30% will never pay back their full loans and these debts will have to be picked up by the state)? If dumping debt on future generations is such a bad thing, then why is this at the heart of government policy from next year?

Hypocrisy in a party leader's speech may not be the stuff of headlines and perhaps not too surprising. It is no less disappointing however. So pay off your debts, or at least while you still can . . . .

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