Should politicians make false apologies? I ask because of Janan Ganesh's claim that Labour has been "monstrously incompetent" in failing to apologize for its fiscal policy before the crisis:

Had the Labour party owned up to its profligacy in office during the previous decade, it would now have the moral licence to mock [Osborne's] failed deficit target...
Instead, Labour will not even concede that it was wrong to run a structural deficit in the years leading up to the crash, by which time Britain was a decade and a half into an economic expansion. A party that is still borrowing in those circumstances will never see a reason not to borrow.

The economist in me disagrees with this. I sympathize with Simon's retort that allegations of profligacy are "nonsense." I say so for four inter-related reasons.

First, there was no boom before the crisis of 2008. Quite the opposite. The IFS said:

The last decade as a whole was characterised by a very poor performance for average incomes. Between 2002-03 and 2009-10, no single year saw an increase in median income of more than 1.0%.

It estimates that in the five years to 2007-08 median real incomes rose just 0.5% per year. This is the sort of stagnation which might justify counter-cyclical fiscal policy.

Secondly, in the mid-00s the corporate sector was running a large financial surplus: because of what Ben Bernanke called a dearth of investment opportunities, its savings far exceeded capital spending. As Frances says, sectoral balances must sum to zero. A corporate surplus thus requires someone to run a deficit. With foreigners also loath to borrow, that someone was the UK government. To put this another way, had the government tried to tighten fiscal policy against a background of the investment dearth, we'd simply have had even weaker economic activity*.

Third, given the inflation target, tighter fiscal policy means looser monetary policy. That might have led to even worse speculation and malinvestments by banks.

Fourthly, bond yields were falling during the 00s; from 2001 to early 2007, ten year real yields fell from over 2.5% to under 2%. That tells us that financial markets were not worried about "profligacy" but were concerned about weak real growth.

And even George Osborne at the time agreed. In 2007, he promised that a Tory government would match Labour's planned spending increases.

I'm pretty clear, then, that it would be bad economics for Labour to apologize for its fiscal policy**.

But would it be bad politics? Here, I'm not so sure. On the one hand, doing so would play into the silly Tory narrative that they are cleaning up Labour's mess. But on the other hand, a false apology might serve the same function as apologies for other historical misdeeds such as the slave trade. As Theodore Dalrymple said, insincere guilt can be a form of moral self-aggrandizement. And because people tend to take others' self-assessments seriously, this might give Labour a better basis for criticizing Osborne's failure to to cut the deficit by much. Politically, therefore, Janan might be right.

The issue here, though, extends beyond fiscal policy. Labour says it "got things wrong on immigration in the past." If I vote Labour in May, it'll be because I believe that apology to be insincere. In a polity in which the media is biased and the public irrational and ill-informed, there might - just might - be place for lies in politics.

* As I've said, it wasn't the case that fiscal policy in the 00s crowded out capital spending: the investment dearth was exogenous to fiscal policy.

** I don't say this to exonerate Labour. You could argue that looser fiscal policy should have taken the form of tax cuts rather than spending increases. And you can certainly argue that its spending was unproductive.