In truth, though, the issue is not so much fiscal policy as the mix of fiscal and monetary policy.
I say this for a simple reason. A looser fiscal policy implies stronger aggregate demand and hence higher incipient inflation. But for a given inflation target, this should mean higher interest rates. A 'reset' of fiscal policy thus means a reset of monetary policy, too. To give a rough idea of the magnitudes here, the Bank of England has estimated that a one percentage point rise in Bank rate reduces output by around 0.6 per cent. This implies that if we assume a fiscal multiplier of around 1.2 then a fiscal easing of 1 per cent of GDP should lead to Bank rate being two percentage points higher than it otherwise would be.
George Osborne favoured "fiscal conservatism and monetary activism". But Theresa May's claim that there "have been some bad side effects" from low rates implies that his successor will retreat from this a little.
There are two good arguments for it to do so.
One is that near-zero interest rates mean that monetary policy cannot easily respond if the economy falters. Yes, in the event of a nasty surprise the Bank of England could resume quantitative easing or even introduce helicopter money. But the former has imprecise and variable effects. And administrative problems, if nothing else, mean it would take time to introduce the latter. It would be better if interest rates were higher, as this would give the Bank better ammunition with which to fight the next downturn.
The second case for resetting the fiscal-monetary mix is that low interest rates aren't giving a great boost to business investment; the Bank of England expects that to fall by 1.7 per cent in volume terms next year. Instead, they might merely be pushing up house and share prices. The problem here isn't merely that this runs the risk of stoking up a bubble and subsequent crash. It's also that high house prices depress productivity and growth by diverting resources away from sectors with potentially faster real growth: if you're spending half your income on rent, you've much less to spend on the goods and services of dynamic sectors.
There might also be a longer-term cultural problem. Low interest rates and high house prices reinforce the message that you can get rich by borrowing to buy property rather than by working, saving or starting new businesses. That would reinforce stagnation by diverting energetic people away from doing better things.
There is, therefore, much to be said for shifting to a mix of looser fiscal and tighter monetary policy. Yes, this would lead to higher gilt yields, but that's a feature not a bug.
But perhaps there's a cost here. Higher infrastructure spending at a time when private sector capital spending is falling is a step towards what Keynes called the socialisation of investment. Some of you might fear that this represents a shift towards a more collectivist economy, which both betokens and might accelerate attitudes that are hostile to a free market. I sympathise - but the ideological climate has shifted against the free market anyway.
