Debt and deficit problem, a myth?

[chuckskull]

Very interesting article on HuffPo; http://www.huffingtonpost.co.uk/rame...?utm_hp_ref=tw

...in 1997 inherited a debt of 42% of GDP. By the start of the global banking crises 2008 the debt had fallen to 35% - a near 22% reduction page 6 ONS Surprisingly, a debt of 42% was not seen as a major problem and yet at 35% the sky was falling down?

Secondly, in 1997 Labour inherited a deficit of 3.9% of GDP (not a balanced budget ) and by 2008 it had fallen to 2.1% - a reduction of a near 50% - Impressive! Hence, it's implausible and ludicrous to claim there was overspending. The deficit was then exacerbated by the global banking crises after 2008. See HM Treasury. Note, the 1994 deficit of near 8%

I'll admit this article plays to opinions I already held(apart from giving Labour to much credit), namely that the biggest problems with our Economy are Dave and George, and that we should be investing not cutting.

Thoughts? Particularly like to hear them if you can undercut his facts or logic.

[HalloweenJack]

we are all equal but some are more equal than others.

notice tax loop holes arnt being shut - those who can afford to use them (eg tory backers) made the noises to david baboon and thus its all gone quiet on that front.


typical tory government - rob from the poor and give to the rich.

[TeePee]

Debt has certainly been a much bigger percentage of GDP in the past. But this is very simplistic.

The UK has too much government. Making it smaller is a good thing.

[TheAnimus]

I'll admit this article plays to opinions I already held(apart from giving Labour to much credit), namely that the biggest problems with our Economy are Dave and George, and that we should be investing not cutting.

Thoughts? Particularly like to hear them if you can undercut his facts or logic.

When you take numbers to pick a point, rather than pick a point from numbers, you are on rather iffy ground imsho.

For instance defecit, what does that actually mean? How would you calculate it, what would you include, what wouldn't you? He mentions acronyms with no definition of what they mean, or why they are useful, for instance he throws asside PSNB. Now that is very odd to me, because when ever anyone attacks labour its normally over public spending, surely the debt of that, which is lets not forget often underwritten with increidbly complex and confusing differen't principles, do it with public spending.

If the fact he describes his political beliefs at the top of the article (why should that matter, economists notorously transcend political beliefs) worries me. A very quick google of his name and:
http://brackenworld.blogspot.co.uk/2...-for-this.html

That guy does appear to have an axe to grind, and for me misses out the most irriating part.

In the 90s, we were coming out of a recession, as a result debt as GDP was reducing, the trend was in the right direction. Kensian stimulas is most effective when the economy is struggling, everyone agrees on that, even the biggest detractors of the idea. The previous labour government allowed spending to continue and the debt to rise when the return on the investment on such Kensyian stimulas is less.

The other issue with all this spending is the effectiveness, the US been the textbook example at present, one problem which is had by the proponents of Kensyian stimulas, is that it often doesn't work, because its done badly. The issue is anyone can attribute the banner of their spending to it at the time, and drag up the whole argument of Kensyian stimulas. For example I could argue that giving me £1bn GBP would stimulate the local pharmacutical and whoring business, which in tern would lead to a boom in North London. Obviously such spending wouldn't really help the country but none the less often people chear for any spending.

So in short I think the author was not just wrong, but incredibly selective. In much the same way that someone who is a creationist will pick and choose the evidence, people do the same with certain indicators.

Personally I'd love nothing more than the government been able to say they've made £30bn available for tube upgrades and new routes in London, I think it would be a great legacy, even in 50 years time, compared to say the £15bn we rubbishrubbishrubbishrubbishrubbished on the olympics which will be compeltely forgotten within the next 5.

This is why its not just a case of looking at spending, but looking at how the money was spent, how the economy was trending, what it was yesterday, what it is likely to be tomorrow. Picking select indicators on select years is disengenuous at best. As you said in your post, it resounded with you because its exactly what you wanted to hear.

[Saracen]

What Animus said, more or less.

One of the things that Gordon Brown did that irritated the hell out of me was that he was always "investing" in this, that or the other, when sometimes it was blindingly obvious it was just "spending". He didn't seem to understand the difference, which to my mind is either stupid or duplicitous, and he wasn't stupid. Ed Balls seems to have the same perspective. Mind you, he isn't the only one.

[Top_gun]

Debt has certainly been a much bigger percentage of GDP in the past. But this is very simplistic.

The UK has too much government. Making it smaller is a good thing.

We've seen the consequences of making government smaller already:

• with the Horse meat scandal

• with the banking crisis

This chart shows how much government has shrunk since the second world war.

[Noxvayl]

Considering Animus has taken care of the article in question I thought I'd just post a video on how much effect the British government has and why it is wrong to simply blame the people in government for the failure we witness.



Considering the topic revolves around the economic situation we are in these are some video's explaining how the banking system works and why it has failed.

Salman Khan on the negatives of Fractional Reserve Lending.

Positive Money have created a very good series of video's explaining the monetary system: http://www.youtube.com/watch?v=bE8i-...MvXxcq7UUeJskV They also have a lot of talks about how they propose to fix our broken system which is worth watching.

[TheAnimus]

We've seen the consequences of making government smaller already:

• with the Horse meat scandal

• with the banking crisis

Your kidding right?

[wasabi]

Labour did nothing to fix the underlying structural deficit. See IFS reporthttp://www.ifs.org.uk/bns/bn79.pdf

What worries me is that the Tories are under pressure to do the same stupid stuff that Labour did in order to keep voters happy. i.e. the Tories ringfence NHS spending, which Labour increased massively on the dubious funding of a housing bubble and PFI agreements which bite after their office term. What they should have done was been honest that their 'investment' was spending and increase EVERYONE's income tax by 3 percent to cover it.

[TheAnimus]

What worries me is that the Tories are under pressure to do the same stupid stuff that Labour did in order to keep voters happy. i.e. the Tories ringfence NHS spending, which Labour increased massively on the dubious funding of a housing bubble and PFI agreements which bite after their office term. What they should have done was been honest that their 'investment' was spending and increase EVERYONE's income tax by 3 percent to cover it.

Correlation and causaility, heck even basic cause and effect humans are very poor at understanding.

We've simply never evovled a need to be able to do so. I've not got time atm to sift through the references but I'd imagine they'd be something interesting hanging off the back of this: http://en.wikipedia.org/wiki/Correla...mply_causation

We simply like to make incorrect patterns. It's part of our human nature.

So you apply the phsycology that people don't want to be told they are going to suffer an adjustment in lifestyle; money will not go as far, services will cost more. They don't want to hear that idea.

As such many people will ironically, blame the hard times now, on the present government, and vote back in the same idelogy that led to us having such in-efficencies which are doubtlessly hurting us more now.

Just like a smoker, the patient will hate the medicine.

[Top_gun]

Your kidding right?

Sorry if I don't respond to you. I find your grammar makes your post difficult to read and some of your comments are akin to the Daily Mail.

[Top_gun]

Considering Animus has taken care of the article in question I thought I'd just post a video on how much effect the British government has and why it is wrong to simply blame the people in government for the failure we witness.



Considering the topic revolves around the economic situation we are in these are some video's explaining how the banking system works and why it has failed.

Salman Khan on the negatives of Fractional Reserve Lending.

Positive Money have created a very good series of video's explaining the monetary system: http://www.youtube.com/watch?v=bE8i-...MvXxcq7UUeJskV They also have a lot of talks about how they propose to fix our broken system which is worth watching.

Excellent post, Noxvayl. I quite liked the six part series on the banking system which was based on the New Economics Foundation book on banks. I'm a big fan of the New Economics Foundation.

I heartily agree with Salman Khan's assessment on the constitution and where everything was centralised from Number 10. The big problem with Blair & Brown is that they wanted to go down in history as the greatest PMs in history and their behaviour reflected that. Not sure I agree on his views on child poverty though as I think Neo-liberalism is responsible for increasing inequality.

[TheAnimus]

Sorry if I don't respond to you. I find your grammar makes your post difficult to read and some of your comments are akin to the Daily Mail.

No problem, anyone that believes the horse meat problems the vast majority of which came from outside the UK, from areas which have passported rules under the EU, is someway connected to a downsizing of government is clearly such a complete and utter moron.

[peterb]

Sorry if I don't respond to you. I find your grammar makes your post difficult to read and some of your comments are akin to the Daily Mail.

No problem, anyone that believes the horse meat problems the vast majority of which came from outside the UK, from areas which have passported rules under the EU, is someway connected to a downsizing of government is clearly such a complete and utter moron.

And I think we'll stop that tone of discussion right there, thank you.

[Willzzz]

I find it weird how the video says Labour were competent, they just made bad decisions.

Isn't that an oxymoron?

[BobF64]

Can't help but think that after a change of governing party, the new government should be allowed to spend the entire first term stating that "everything was the previous governments fault", and reminding voters of that at every possible moment, whilst the previous governing party must state at all times, "this stuff thats currently broken is our fault".

Would be one heck of a lot easier than the current bull$hit that goes on.