Douglas Alexander says that Labour has been losing the economic argument. And the opinion polls (pdf), as described by Martin Kettle, bear him out. This is puzzling in two senses.
First, although Labour has (so far) lost the argument in terms of public opinion, it has not lost the argument intellectually. There was a powerful case for it to run deficits even in the mid-00s, and there is, of course, a strong argument against fiscal austerity now.
Secondly, support for austerity is not obviously founded in self-interest. The same polls that show support for the Tory position also show that 71% of voters worry that they will suffer directly from the cuts. And public service users aren’t the only losers. Savers are also losing; the counterpart of tight fiscal policy is a prolonged loose monetary policy which is keeping interest rates negative in real terms. When Danny Alexander boasts that the coalition has kept interest rates low, he is confessing to imposing losses upon millions of older, wealthier voters.
So, why isn’t Labour doing better on this issue? I suspect there are five reasons.
1. Labour hasn’t tried very hard to defend its case - partly because it doesn’t know how to position itself with regard to its time in office.
2. The Coalition has a vivid metaphor - that we have “maxed out our credit card.” Although this is economically illiterate, it is a clearer, simpler message than the alternative.
3. The Coalition has been able to exploit the illusion of “necessity”. They‘ve succeeded in presenting cuts as inevitable.
4. Bayesian conservatism. Very many losers from tight fiscal policy - the older, richer people who’d see their interest income rise if fiscal policy were looser and monetary policy tighter - are disposed to support the Tories anyway. (They re not alone in supporting policies against their self-interest; Hampstead lefties who favour higher taxes on the rich do the same.)
5. The guilt-by-association fallacy. Labour’s economic case suffers from negative halo effects. It is closely associated with Gordon Brown, who is a deeply unpopular figure. And it is associated with wasteful public spending. These negative associations detract support from what is a respectable intellectual case.
Whatever the cause, there’s a message here. It’s the same message we get from two apparently very different subjects - the inefficiency of tax systems and popular opposition to fixes for the euro area’s debt problem. What we see in all cases is that, in politics, rational self-interest does not always win.