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‘This will be cold comfort to public sector workers in the NHS or local government, trying to keep the wheels from falling off.’ Photograph: St John Ambulance/PA

Eliminate the deficit? Eliminate economic hope, more like

All George Osborne’s great project has done is destroy growth, and escalate poverty. Is that what austerity was for?

Congratulations, everyone! We did it! The deficit has been eliminated! George Osborne, the architect of austerity, emerged from one of his non-jobs as the editor of the London Evening Standard to tell us all it was a “remarkable national effort” on Twitter, as if he’d ever broken a sweat over it. David Cameron, who will go down as arguably the worst prime minister in history thanks to the gigantic power move of doing a Brexit and running away, simply added: “It was the right thing to do” – safe in the knowledge that he was now out of the line of fire from tough questions.

That will all be cold comfort to the thousands of homeless people struggling to cope with sub-zero temperatures, or those having to choose between keeping the heating on, or risk going into rent arrears and losing their home entirely; to public sector workers in the NHS or local government, trying to keep the wheels from falling off as they deliver vital services in the face of budget cuts; and to disabled and unemployed people, bearing the brunt of the government’s spending cuts and facing harassment from the authorities.

Forget all that. We’ve eliminated the deficit, and all we had to do was attack the poor and vulnerable with a relentless fury, create a new generation of young people for whom the concept of pensions or even steady wages is a fantasy, and undermine public services to such a grotesque extent that it will take years to rebuild what we’ve lost. Hooray!

It’s worth pointing out, not that this hasn’t been said before, that the rationale for this strategy was always a confection of fear-mongering and economic illiteracy that misrepresented the causes of the 2008 crash as being something to do with “Labour overspending” rather than a global banking crisis. This was an ideologically driven attack on the concept of redistribution through public spending. The upper-class bumblers in charge latched on to any excuse, no matter how quickly it was debunked, to pursue their project of returning the country to the Victorian slum state of their romantic imaginations, where finally, at long last, poor but cheerful urchins would give them the respect they deserved for being born wealthy.

And what ridiculous excuses they were. We must cut our children’s wages today to save them from paying interest on bonds tomorrow – even if that means they will accumulate private debt at a much higher rate of interest. We must fear the “bond vigilantes”, even though the experience of Japan shows that they’re only as much of a threat as the government lets them be. We must prevent the public sector from “crowding out” private investment, even as the depressed demand caused by austerity also turned out to deter productive investment, and low interest rates kept money going into asset price inflation, raising rents and locking in housing inequality. These excuses never had to actually hold up under any real scrutiny; they just had to provide enough plausible cover so that the government could get on with the job of finding new ways for parasitic companies to profit from the poverty it was creating.

The counter-argument is simple but runs against much of the received wisdom of the political establishment. As Richard Murphy of Tax Research UK points out: “A growing economy requires general price increases, or inflation. Except under unusual circumstances, a general increase in prices requires an increasing money supply. A fiscal deficit is the only way in which money can be injected into an economy continuously. It follows that governments must run a near perpetual deficit or face the risk of creating a liquidity crisis due to a shortage in the money supply, which would then create a risk of deflation.”

In other words, deficits aren’t only not bad, they’re necessary. Without them we get deflation, an over-indebted household sector, and an explosion in inequality.

The government is not like your household. It does not “run out of money,” because its job is to match the quantity of money to the desired economic activity. Its “debts” are not like your debts – they’re your savings and your pension funds. Osborne’s “remarkable national effort” was always and only to ensure that the government sector took more money out of the economy than it put into it. His great legacy is that we’re now at the stage where for every pound the government spends in day-to-day services, it taxes, and therefore destroys, more than a pound somewhere else. And we put people on the streets to freeze to achieve it. Go us.

Perhaps the one upside of finally achieving the ludicrous goal is that we will now see there was no reason for it. Maybe at long last, when this meaningless balance-sheet position turns out not to be the gateway to the sunlit uplands of growth and prosperity, the media will stop simply accepting deficit hysteria as a given, and start asking the questions it should have been asking from the beginning: what is all this suffering and poverty for, exactly?

• Phil McDuff writes on economics and social policy

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