A lesson from history - you can't spend your way out of recession

Those who fail to understand the mistakes of the past are doomed to repeat them. In the worst financial crisis since the Second World War, there is a clamour in some quarters - particularly from some sections of the Labour Party, which bequeathed us this mess - that 'stimulus' is the way to blast our way out of recession. Spend the money and you stimulate demand. It sounds seductive. But who said this:

"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step."

It was actually James Callaghan, speaking at the Labour Party Conference on 28th September 1976.

3 years later the top rate of income tax reached 98%. Did it work? Did it hell.