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How do you feel towards Gov't cuts?

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  • View Poll Results: Government cuts
    Cut harder than the Gov't currently is
    30.14%
    Maintain the current rate
    19.18%
    Cut, but at a slower rate
    23.29%
    The Gov't needs to stop cuts
    4.11%
    The Gov't should do the opposite - spend
    20.55%
    Indifferent/don't care/what are cuts/should I still be alive?
    2.74%

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    (Original post by prog2djent)
    So you genuinly think the centre right accross europe are ideologically against growth and employment? They are idelogically against spending and borrowing, but they think their methods will encourage confidence and improve future conditions by something something deficit.

    I think the cuts, mixed with what is happening in eueope, as well as the media, have slown growth and reduced confidence, but I think some cuts they are making are OK, I suppose.

    Take for example my local library, used to be run by the government, cuts, didn't close, private company has taken over .... its still open, the same people are working their, and it is still in use, there is a one off charge (so its not free at the point of use, for just anyone, but, like before, vertain privilages require a cash membership) which is pretty low because of the competition from the library in town 2 miles away, and another library 1 mile over.

    The market works!

    Go figure.
    The Right in Europe, and the UK, came into power and told us that they had a plan, that would restore confidence within the economy, and that such cuts were necessary to get economies growing, and that if we didn't make cuts, our cost of government would soar.

    What has actually happened in the UK, is that unemployment has soared, with the unemployment rate figures not representing the fact that many people have dropped out of the labour force, and part time employment has risen. The growth, and confidence we were supposed to see as a result of such cuts haven't materialised, and we remain in a deep depression. Now, when something isn't working, and when it's clear that it won't work, I expect to see changes, yet George Osborne, and the right in Europe continue to advocate cuts, despite the mountain of evidence against this. How can they claim to be for growth, for employment, when they can see the consequences of their actions, yet maintain that it is working? It is either ignorance of the very highest order, or they are making decisions in bad faith, knowing that what they are doing won't work, but doing it anyway, and the costs, social and economic, are rising as a consequence. Meanwhile, the markets have signaled that there is a big risk of depression and deflation in the UK, with the costs of borrowing still falling, infact, falling too much.

    They claim that they are undertaking such cuts to ensure that future generations don't have to pay off today's debts, and yet, there have been massive cuts in investment, which I've talked about in a previous post.

    This isn't about being 'pro-market' or 'anti-market', most advocates of stimulus are pro-market types, including myself, who see that at the moment, the market is failing, with there being a huge gap in spending because of firms holding back, and consumers holding back, as a result, the government needs to have temporary burst of spending to fill that gap. The market isn't fully efficient, and the government's job is to make sure that it works as best as it can, as it is, our government has failed to do that, as there remains a large output gap.
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    (Original post by Nick100)
    But running a deficit can only reduce investment. The government runs a deficit by borrowing money from people who would otherwise invest it in private industry. Even if the deficit is 100% investment in infrastructure it is unlikely to increase economic productivity by as much as a private investment purely because of the nature of the incentives in the public sector.

    Incidently, why didn't the Great Depression follow the recession of 1921? There were reductions in US government spending on that occasion. Conversely, why did it last a over a decade following the massive spending increases of Hoover and FDR?
    About your point regarding running a deficit, yes, you are right, under normal, non recession/economic slump conditions. However, what we can see from UK bond yields, as well as a variety of other 'safe' yields, is that investors are terrified of current economic conditions, and are putting their money where they deem it will be safe, which is UK bonds, and a select group of other national bonds, rather than in private bonds. As it happens, a lot of private firms aren't borrowing much as they too don't want to expand when the economy is depressed. So, this results in us being able to borrow cheaply, so doesn't it make sense to have a temporary burst of spending, ideally on things the private sector doesn't provide such as infrastructure, education and healthcare, which in turn boosts the economy, and encourages private firms to get spending, and investors to see that the economy is recovering again, and therefore stop running scared, and become a bit more bullish?

    As for 1921, there are two types of recessions - short ones where a central bank tries to rein in inflation, and then others types. The former types of recession tend to be short, and are effectively 'engineered' by the central bank to bring inflation down, then let loose, and things quickly recover. That's what happened in 1921, the Fed wanted to bring inflation down, and could use monetary policy effectively to do so, as it could stimulate the economy when it was satisfied by lowering rates again.

    As for other types of recession, these are harder to deal with, especially when we are at something called the 'zero bound', which means that central banks can't cut rates further to improve things, and there needs to government expenditure. Under F.D.R, the economy improved significantly as a result of projects such as the New Deal, with unemployment falling, and infrastructure being built that are in use in the US to this very day, however, whilst many label F.D.R a keynesian, he wasn't, as Keynesianism didn't even exist at the time, he really was driving without a roadmap. His new deal plan whilst considerably succesful, was proven to be not enough - he initiated a stimulus plan worth much less than the 40% or so output gap, and as such, recovery was much slower - hindered by what happened in 1938, and he decided to cut back under pressure from opposition. The New deal, despite being inadequate in size, still had a positive effect, both on unemployment and growth (I believe it improved unemployment by around 10%) and the economy really picked up when world war 2 started, and there was a lot more expenditure.
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    (Original post by Martyn*)
    I wonder if those who voted for the first option have mum and dad to provide for all their material needs?
    No I work long days and I'm self sufficient. You still living on benefits at the expense of people like me?
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    (Original post by CandyFlipper)
    No I work long days and I'm self sufficient. You still living on benefits at the expense of people like me?
    No-one is self-sufficient except perhaps for the odd tribe in Outer Mongolia. So what is it that you do?
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    (Original post by prog2djent)
    Yes I am "OK" with that. I'm OK with stopping funding something which hardly any people use, I would be OK with stopping subsidies to a Library just to keep it open, which sends out the message that it isn't productive and is a drain on the economy.
    Were clearly not "all in it together" and we never have been and never will be, get used to it, the richer you are, usually by making yourself that way, the less risk worry their is with stuff that's going on now. No political system can change it and no ****** ideology can change that.
    Im Sorry but your absolutely wrong, there are political systems and ideologies that can change it. Ever heard of socialism? I think you should read and educate yourself to avoid making such statement.
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    (Original post by FDR)
    About your point regarding running a deficit, yes, you are right, under normal, non recession/economic slump conditions. However, what we can see from UK bond yields, as well as a variety of other 'safe' yields, is that investors are terrified of current economic conditions, and are putting their money where they deem it will be safe, which is UK bonds, and a select group of other national bonds, rather than in private bonds. As it happens, a lot of private firms aren't borrowing much as they too don't want to expand when the economy is depressed. So, this results in us being able to borrow cheaply, so doesn't it make sense to have a temporary burst of spending, ideally on things the private sector doesn't provide such as infrastructure, education and healthcare, which in turn boosts the economy, and encourages private firms to get spending, and investors to see that the economy is recovering again, and therefore stop running scared, and become a bit more bullish?
    But investment isn't low because people don't want to borrow money (a recession inevitably means an increase in prices and hence an incentive to expand to compete better or simply to have more stuff to trade); it's low because people don't want to make risky loans with such a pitiful interest rate. Government bonds carry very little risk (hence why the government can always find a lender even with low interest) but private loans all have a risk which cannot be covered by an interest rate of 0.5%. At this point the government must raise interest rates to increase the incentive to lend.

    As for other types of recession, these are harder to deal with, especially when we are at something called the 'zero bound', which means that central banks can't cut rates further to improve things, and there needs to government expenditure.
    But if rates are cut too far then they prevent lending. This is the problem in the USA at the moment - consumption is up and exports are up from their pre-recession levels but investment still hasn't recovered.

    Under F.D.R, the economy improved significantly as a result of projects such as the New Deal, with unemployment falling, and infrastructure being built that are in use in the US to this very day, however, whilst many label F.D.R a keynesian, he wasn't, as Keynesianism didn't even exist at the time, he really was driving without a roadmap.
    But this started under Hoover, and FDR's spending was consistently high throughout the 1930s yet this did not stop the country from having a double dip recession. How can you say that his New Deal was not enough even though spending was higher than ever before? Have you not considered that the New Deal did not help the economy?

    His new deal plan whilst considerably succesful, was proven to be not enough - he initiated a stimulus plan worth much less than the 40% or so output gap, and as such, recovery was much slower - hindered by what happened in 1938, and he decided to cut back under pressure from opposition.
    Given that there was a massive recession of nearly 20% in 1937 which continued into 1938 it is probably a good thing that they stopped him. The economy went into free fall for over a year.

    The New deal, despite being inadequate in size, still had a positive effect, both on unemployment and growth (I believe it improved unemployment by around 10%) and the economy really picked up when world war 2 started, and there was a lot more expenditure.
    Unemployment was higher than ever before for the duration of the 1930s; it did not reach its 1929 levels until America entered the war. The lowest it ever got to during the '30s was 14%; that is a disaster. And the economy didn't pick up until World War II ended; during the war there was rationing of goods, increases in prices, conscription of huge numbers of people, and the quality of life of the average American at home was reduced.
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    (Original post by Nick100)
    But investment isn't low because people don't want to borrow money (a recession inevitably means an increase in prices and hence an incentive to expand to compete better or simply to have more stuff to trade); it's low because people don't want to make risky loans with such a pitiful interest rate. Government bonds carry very little risk (hence why the government can always find a lender even with low interest) but private loans all have a risk which cannot be covered by an interest rate of 0.5%. At this point the government must raise interest rates to increase the incentive to lend.
    I don't think you understand interest rates - if interest rates are high, then people don't borrow because the cost of borrowing is high, therefore low interest rates encourage lending. Secondly, the government has no control over interest rates at all, the Bank of England does, and estimates show that if the BoE hadn't reacted how it did, by cutting rates from 5.5% in 2008 to 0.5% in March 2009, the contraction in UK GDP would have been greater than 10%. Why do you think the interest rate was lowered? It was because people were reluctant to borrow at high rates - The rate doesn't have anything to do with 'incentives for borrowers', because the Bank rate is what banks have to pay the central bank to borrow from, then set their lending rates accordingly, for lenders, it's all about relative interest rates - e.g if the Bank rate is 0.5%, Barclays or whatever will borrow from the BoE at this amount, then lend to you at 1%, but if the Bank rate is 5%, it may lend at 6%, and at the former rate, it will have more borrowers as the cost of borrowing is lower, so the Banks are making more money.

    But if rates are cut too far then they prevent lending. This is the problem in the USA at the moment - consumption is up and exports are up from their pre-recession levels but investment still hasn't recovered.
    Again, please, read up on interest rates - low rates encourages borrowing, and high rates restricts it. Just read up on interest rates first -- http://en.wikipedia.org/wiki/Monetary_policy

    But this started under Hoover, and FDR's spending was consistently high throughout the 1930s yet this did not stop the country from having a double dip recession. How can you say that his New Deal was not enough even though spending was higher than ever before? Have you not considered that the New Deal did not help the economy?
    I don't believe Hoover was a big spender at all, however, F.D.R did spend a lot, but it still wasn't enough - the Output gap was at it's worse, 40% of GDP (the difference between what the economy could be producing and what it was producing at the time), and F.D.R introduced a stimulus plan that didn't cover nearly enough - it was around 3-5%, so clearly not enough. That's why when WW2, and the US undertook massive spending, that the economy started picking up.

    Given that there was a massive recession of nearly 20% in 1937 which continued into 1938 it is probably a good thing that they stopped him. The economy went into free fall for over a year.
    1937 was the year that F.D.R was pressured to 'do the responsible thing' and stop all the government expenditure, and as a consequence we say the recession.

    Unemployment was higher than ever before for the duration of the 1930s; it did not reach its 1929 levels until America entered the war. The lowest it ever got to during the '30s was 14%; that is a disaster. And the economy didn't pick up until World War II ended; during the war there was rationing of goods, increases in prices, conscription of huge numbers of people, and the quality of life of the average American at home was reduced.
    Unemployment fell to around 10% lower than it's 1933 levels, around from when F.D.R was elected. As I said before, if there had been a much larger stimulus, the recovery may have been even better, however most people agree that F.D.R's New deal helped the recovery.
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    (Original post by PeterOkenla11)
    Im Sorry but your absolutely wrong, there are political systems and ideologies that can change it. Ever heard of socialism? I think you should read and educate yourself to avoid making such statement.
    Moi? Ever heard of socialism?

    Prog2djent?

    You are new here right?
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    (Original post by That Bearded Man)
    It's going to be a typical right v left debate here.
    Is it? Whilst Labour and the Conservatives have fairly entrenched views on this - although I would argue that their actual plans wouldn't be much different at all - I don't think it's ideological as such.

    Yes, UK has a large debt, however cut, cut, cut doesn't help growth at all, I think it requires an economic stimulus and the banks to start lending.
    Banks don't lend when they see investments as being unreliable. I think that's perfectly reasonable - particularly given the situation with toxic debts and so forth.

    As for economic stimulus, I remain unconvinced that the government doling out cash right, left and centre is how one prompts activity and innovation in the private sector. How about cutting tax?

    Also the public sector is being criticised, one for it's pensions, which is unfair, why are you cutting the public sector pension to level with the private sector when the private sector should be growing to match the public sector.
    That's a completely different issue. The pensions situation arises not because of deficit reduction, but because of an ageing and changing population demographic. It's simply unsustainable for people to expect to spend quarter of a century or more after retirement being completely economically unproductive whilst increasingly expecting a greater standard of living.
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    (Original post by L i b)

    As for economic stimulus, I remain unconvinced that the government doling out cash right, left and centre is how one prompts activity and innovation in the private sector. How about cutting tax?
    Cutting tax won't promote world economic growth it will merely give companies a few extra £ but not enough to make a difference. Our tax rates would still not be appetising enough to convince businesses to uproot themselves and settle in the UK. The best bet is to leave the economy alone and let it sort itself out.
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    (Original post by internetguru)
    Cutting tax won't promote world economic growth it will merely give companies a few extra £ but not enough to make a difference. Our tax rates would still not be appetising enough to convince businesses to uproot themselves and settle in the UK.
    Depends on the level of the cut. And we're not just trying to attract overseas investment, but rather to stimulate our current businesses.
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    (Original post by Martyn*)

    No-one is self-sufficient except perhaps for the odd tribe in Outer Mongolia. So what is it that you do?
    It's your turn to answer me - do my taxes pay for your life on benefits?
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    (Original post by L i b)
    Is it? Whilst Labour and the Conservatives have fairly entrenched views on this - although I would argue that their actual plans wouldn't be much different at all - I don't think it's ideological as such.



    Banks don't lend when they see investments as being unreliable. I think that's perfectly reasonable - particularly given the situation with toxic debts and so forth.

    As for economic stimulus, I remain unconvinced that the government doling out cash right, left and centre is how one prompts activity and innovation in the private sector. How about cutting tax?



    That's a completely different issue. The pensions situation arises not because of deficit reduction, but because of an ageing and changing population demographic. It's simply unsustainable for people to expect to spend quarter of a century or more after retirement being completely economically unproductive whilst increasingly expecting a greater standard of living.
    Okay, since this is an argument about the economy, you would expect to see Lefties saying spend, spend, spend whilst the Righties are saying cut, cut, cut

    How to encourage the banks I have no idea, I liked Len McCluskey's idea about the setup of an investment bank.

    Cutting tax will surely put public spending on NHS etc. in jeopardy, also some tax breaks have already been introduced.

    I don't agree with the demonising of the public sector by the government, including doctors. I'm not sure that this is simply that, I think the Tories are looking to promote privatisation by destroying the public sector via pensions.
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    (Original post by prog2djent)
    Moi? Ever heard of socialism?

    Prog2djent?

    You are new here right?
    :rofl: you are probably my favourite TSR poster
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    (Original post by Mendeleev's Table)
    :rofl: you are probably my favourite TSR poster
    Firstly, you have bad taste, you will get ravenous, oh so ravenous rectum cancer if that is your true opinion haha.

    And I can't quite understand why, since starting on TSR nearly a year ago, my opinion on anything that I posted about back then has either flipped sides to being MUCH more extreme to much less extreme.
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    (Original post by Martyn*)
    Sounds exactly what the elite of the establishment do.
    Care to elaborate? Who?
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    (Original post by Iron Lady)
    As you all are aware the Gov't faces a large deficit. Do you take the view that we should cut heavily now? Or do you take a more moderate approach - cut, but at a slower rate? Or are you at the other end - see no need for cuts?

    Also, can you specify if you have been badly affected by the Gov't cuts?

    Thanks.
    I noticed you haven't commented much on this thread. Is it fair to assume, that as a Thatcherite, you are against the cuts, and that your opinion is that there should be rises in expenditure? Afterall, Thatcher was in Government for over 10 years, and spending rose in absolute terms every year, and only fell in real terms once more than it did under Mr.Blair (Infact, before Iraq, Blair was a lot more fiscally responsible than Mrs Thatcher, but that's another story).

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