In the current issue of the New York Review of Books, Paul Krugman tries to explain the psychology that produces the impulse toward austerity as the cure for economic recessions:
Everyone loves a morality play. “For the wages of sin is death” is a much more satisfying message than “Shit happens.” We all want events to have meaning.
When applied to macroeconomics, this urge to find moral meaning creates in all of us a predisposition toward believing stories that attribute the pain of a slump to the excesses of the boom that precedes it—and, perhaps, also makes it natural to see the pain as necessary, part of an inevitable cleansing process....By contrast, Keynesian economics rests fundamentally on the proposition that macroeconomics isn’t a morality play—that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that “we have magneto trouble”—i.e., the economy’s troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem.
....I’d argue that Keynes was overwhelmingly right in his approach, but there’s no question that it’s an approach many people find deeply unsatisfying as an emotional matter. And so we shouldn’t find it surprising that many popular interpretations of our current troubles return, whether the authors know it or not, to the instinctive, pre-Keynesian style of dwelling on the excesses of the boom rather than on the failures of the slump.
I think Krugman is subtly wrong here. Or maybe not all that subtly. In the United States, at least, I'd argue that plenty of ordinary people view the economy the way he describes it here. They think of the macroeconomy as merely a jumbo version of a household economy, and they know that when a household overspends and goes into debt, it really does have to pay a price. It has to cut back on consumption and start paying down its debt. The moral conclusions from this are both obvious and justifiable, and they figure the same thing is true of the national economy.
But is this what elites believe? Some do, probably. But I think for most of them, austerity is just a convenient facade. Their real motivation is simpler: they want to cut spending on the poor. Unfortunately, they've learned that this appeals only to voters who are already hardcore conservatives. To win over a broader audience, they need to appeal to the conventional view that a high debt level betrays a lack of national discipline and needs to be corrected at a national level. Like a household that spent too much redecorating its kitchen with a home equity loan, the country has spent too much and now needs to cut back. For most people, this argument is far more palatable than a simple appeal to cut spending.
So yes: a lot of people view the economy as a morality play. But among conservative elites, I suspect there's less of this than you might think. Rather, it's used primarily as a cynical way of getting the spending cuts they want without overtly bashing the poor.
POSTSCRIPT: And what about liberal elites? Beats me, but if I had to guess I'd say that too many of them were burned by the 70s and have remained in a fetal crouch ever since. For them, every recession is a rerun of the 70s and needs the same kind of medicine if we want to recover. It's kind of sad, really.