There is a consensus among the political establishment - in Britain, at any rate - that government deficits make cuts in public services and jobs, together with increases in general taxation, inevitable. The only question is how much, for whom, and when.
This is nonsense. Here's why.
By far the largest chunk of the deficits derives from bail-outs of financial markets with public funds and guarantees. This is very risky, so it comes expensive. What's more, governments can borrow more cheaply than anyone else. So, one way or another, they should be making a handsome profit. If so, why tax and cut now? If not, why not?
Financial markets must repay what they owe governments, with interest, and thereby reduce the public debt by a vast amount, making tax hikes and public expenditure cuts now senseless. If not, why not?
Anyone who can't answer these questions first is in no position to tax and cut - least of all if they speak for financial markets. After all, financial markets, not governments, were bankrupt in the first place.