The record government deficits are keeping the economy on life support during the Covid-19 crisis, and removing them would be like pulling the plug. Without the state stepping in, there would be mass unemployment and bankruptcies. The government is spending so much because people and companies cannot do so. It ought to be obvious that fiscal deficits, in and of themselves, are neither good nor bad. They should be used to save jobs and keep inflation low.

Yet the message from the chancellor, the government’s economic watchdog and thinktanks is that the current level of spending is unsustainable and needs to be brought down by raising tax revenues or reducing spending, or doing both. This is not an economic argument but a political one. The public is being made anxious about the “debt” so that this fear can be weaponised. By persuading voters that something must be done about the national finances, and sustaining that outrage, politicians can push for spending cuts. This is a repeat of the familiar austerity con that voters fell for a decade ago.

The prospect of the state going bankrupt may help popularise tax rises. Taxes can reduce spending power and have a useful role to play in curbing excessive accumulations of wealth. But taxes should not be increased just to appear fiscally responsible. The “austerian” argument has been comprehensively debunked in a new book, The Deficit Myth, by the economist Stephanie Kelton. She correctly says governments like the US and UK should not be compared to households that can run out of money. This has been borne out by the Covid-19 crisis, where the state has spent astronomical sums without breaking a sweat.

Prof Kelton is a modern monetary theorist and posits that there is no financial constraint on the government’s ability to spend. This is because the Bank of England, acting on behalf of the government, is a monopoly supplier of currency. The central bank also controls the rate at which the country borrows. When the government runs up a debt, it is promising to pay back its creditors with money it can print at a rate it determines. In the coronavirus pandemic, the state has not been issuing bonds to borrow from the private sector, but has been digitally printing the money.

If politicians understand that there is no budget constraint, say Prof Kelton’s critics, it will make it impossible to manage an economy sensibly. People will start demanding all sorts of things, such as a properly funded NHS or cash to tackle climate change. But shouldn’t we move from obsessing about budget outcomes and focus on human ones? This is no free lunch. There are real limits to what the government can (and should) do. If it tries to spend too much in an economy that’s already running at full tilt, inflation will accelerate. The boundary for spending by a state is determined by the level of technological advance and resources available.

What is depressing is that rather than educate the public, politicians instead continue to serve up deficit hysteria. Economics too often resembles religion rather than science. Much of what counts as economic theory is doctrine, supported by a belief, not evidence. Prof Kelton’s book is not a bible. It does not peer deeply at how an economy expands capacity. Some question whether she has simply repackaged an older Keynesian economic story. But she has succeeded in instigating a round of heretical questioning, essential for a post-Covid-19 world, where the pantheon of economic gods will have to be reconfigured.