I found this article on the BBC website.
Criticising the UK government’s decision to cut VAT from 17.5% to 15%, Mr Steinbruck questioned how effective this will be.
“Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?” he said.
“All this will do is raise Britain’s debt to a level that will take a whole generation to work off.”
Saying the UK government was now “tossing around billions”, Mr Steinbruck questioned why Britain was now closely following the high public spending model put forward by 20th Century economist John Maynard Keynes.
“The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking,” he said.
“When I ask about the origins of the [financial] crisis, economists I respect tell me it is the credit-financed growth of recent years and decades.
“Isn’t this the same mistake everyone is suddenly making again, under all the public pressure?”
I think Mr. Steinbrück is making some very good points here. First of all the Brits departure from their lassez faire, deregulating approach (that I generally approve of) to a heavy state intervention (that I heavily disapprove of) is ridiculous. Secondly this kind of deficit spending is quite comparable to what happened in Britain over the last few years: You got one credit card in order to pay off the momentary debt, whereas you don’t realize that by doing so you accumulate an even bigger amount of debt that you have to pay off later. This principle works of course until there is no more credit card company willing to hand out new debt to you.
Britain didn’t really use its period of solid growth to re balance their budget – admittedly it is quite hard to get in balance if all your growth stems from encumberance in the first place.
My two cents : I am just a small timer in the big economist game, but I know exactly what is going to happen because I’ve been there, done that: You are partying and drinking like a sailor on shore leave and feel the effects of your excessive alcohol consumption the next morning. Because that nasty hangover stings like a bitch you have another drink, since more alcohol will ease the pain. However you are in for a surprise the same night, when you realize that the hangover has come back and this time it brought friends! We’re in for some happy-go-lucky times.
You see what I am getting at? Tossing around big bucks right now will just strain the coming generation (in other words: us!) later.