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25 Jan 2009 10:00 am

The Brutal Truth

Over to Matthew Parris, whose Tory pessimism often eclipses even mine:

This recession is not a failure of market economics. It is a reassertion of market economics after a decade in which we paid ourselves more than we were producing, and funded it precariously and temporarily by complicated credit instruments that it took a while for the market to rumble. Now a prosperity that always baffled ordinary citizens has collapsed. The collapse of confidence is not irrational; it's the correction to a long run of irrational confidence. All that stuff about the emerging Asian giants wasn't just phrasemaking for party conference speeches. It was true. We're falling behind. We face a mountain of debt: the difference between the life we are able to sustain and the life we were enjoying.

I don't understand why, after two decades of bubbling our way to phony prosperity through the dotcom chimera and the housing boom, it is somehow a "crisis" that our standard of living is falling. It is surely a good thing that the standard of living is falling. It means that reality is beginning to return. A hangover may be painful but its cure is not a bout of more binging. My fundamental concern with the stimulus is that its spending be focused directly on real investment and immediate demand and that it be swiftly followed by a brutal assault on long-term entitlement and defense spending.

We need to take a machete to social security and Medicare and a very sharp scalpel to all domestic discretionary spending. And we need to think very hard about big withdrawals of troops in Europe, Asia and the Middle East, and about the foreign aid we give Egypt and Israel. Between the boomers at home and the expanding, unending empire abroad, the next generation will have no sane fiscal future unless something is done very very soon.

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