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'Deficit Denial' And The 'Credit Card' watch

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    Since the coalition came to power I've become, what they term, a 'deficit denier'. That's not to say I ignore the existence of the budget deficit, I simply don't see having one as terrible per se, particularly during sticky financial times. And by the coalition's logic, not eliminating the deficit in the blink an eye makes you a 'denier'. This is fundamentally false - acknowledging the deficit and dealing with it are two completely separate things.

    It is a simple fact that by having a deficit, the debt of the country will go up; by definition you are spending more than you are getting in revenue. But the credit rating scare tactics that have created this new paradigm whereby cuts should be taken instantly is bewildering; Britain has a far stronger economic capability than nations like Ireland, Greece and Portugal - who we're constantly being compared with - and the idea that we risk losing our triple A rating without immediate action is a gross exaggeration. This 'there is no alternative' thesis which dominates the government's rhetoric has served to justify sizable cutbacks at a time when the private sector is struggling to establish growth.

    And oddly enough, this is where the logic of the coalition takes a nosedive. George Osborne compared the nation's debt to that of Labour max-ing out on the credit card (which without the banking crisis is a complete misnomer) just like a family does or you or I do. So how does a family that is cash-strapped deal with a credit card debt (possibly in the wake of a financial crisis - replacing a car so they can go to work etc?) Do they pay it off straight away to avoid interest charges and an overall bigger sum, resulting in them having to them struggling to buy food, clothes and shelter for their children? Or do they space out their repayments, paying back more but over a longer period, in such a way that it lessens the impact of the things they are forced to cut back on - takeaways, trips out, birthday presents etc. I would suggest that many would take the second option. The net result being that they are making cuts, cuts that will over time remove their debt, but do so in a smooth curve rather than a drastic jag.

    Fundamentally, most sane people accept the fact that operating at a deficit is not a good thing. But during, and in the aftermath of a recession, is the most appropriate time to be running at one. If we were running at a huge deficit in the boom years, then yes that would be irresponsible. But what those who advocate swingeing cuts, including the coalition government, are that these are not just numbers on a spreadsheet. Cuts affect real people from across the country and treating them as mere percentages glosses over the hardship being felt. The state is clearly bloated and over-exposed but, beyond efficiency savings, this should be dealt with when the private sector has secured an established growth pattern and can pick up the slack in the public sector. The government should be nurturing productivity and growth as its number one priority - they are correct to say it is the private sector that will get us moving again but they are not creating the conditions for it to take on that role fully as yet.

    So, those who have questioned 'what alternative?' to the Labour parliamentary stance and the position of the TUC and marchers etc are right to an extent: the opposition have thus far failed to articulate the above argument eloquently. But that does not mean that the politics of fear currently employed by the coalition is any more correct. The 'necessity' of deficit reduction is becoming something of a truism when history tells us it is anything but. It is a testament to the coaliton's hegemonic project that it has got the country believing that:

    Deficit = Recession rather than Recession = Deficit

    Undoubtedly to some, this will still make me a 'deficit denier'. But this is the wrong application of the term. I know there's a deficit and a considerable debt. But wait until Britain's growing and there's jobs in the private sector, and then balance the books.
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    That was rather long and I might've accidentally not read it.

    Also, you're wrong.
    The later we start to balance the books, the more we have to pay and WOW, we do pay a lot. The conservatives think that this is quite important.
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    (Original post by fibrebiz)
    That was rather long and I might've accidentally not read it.

    Also, you're wrong.
    The later we start to balance the books, the more we have to pay and WOW, we do pay a lot. The conservatives think that this is quite important.
    I'm not denying that we'd have to pay more; I'm suggesting that it is preferential to do so by keeping the economy moving and people in work rather than short-term drastic action which, while effective, results in considerable unemployment and does not cure our growth problem.

    Also, by 'accidentally' not reading it, you miss the main point of the argument.
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    (Original post by dannymccs)
    I'm not denying that we'd have to pay more; I'm suggesting that it is preferential to do so by keeping the economy moving and people in work rather than short-term drastic action which, while effective, results in considerable unemployment and does not cure our growth problem.

    Also, by 'accidentally' not reading it, you miss the main point of the argument.
    Drastic action is painful, but let's not joke around. Labour would only make symbolic gestures to reduce spending in the good times, so while we live in an awful economic situation, the conservatives are not going to wait until next term to start making changes, for fear that the government after them will do nothing.

    Also, drastic action is a good thing. We are STILL running a deficit, forget the national debt, so every year we are still borrowing. When we take drastic action, it shows credit agencies that we're prepared to pay off our debts and that we won't default. They increase our credit rating, we borrow at a lower rate, we save money.

    Easy, right?

    Problem is, a lot of people (most of whom are labour supporters) don't see that argument to completion, so we'll continually hear about the shocking, harsh cuts because that's all the British public are ready to hear about, for the time being.


    Also, I did read your argument. I just like irony a bit too much.
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    No, I don't think Labour deny the deficit - that's just a Tory soundbite. I just think Labour are incorrect on how they want to deal with this country's finances. The cuts now will be painful and people will lose their jobs and I truly feel for them, but I do believe the alternative is worse. If we want to enjoy boom years again within the next 15 years then I truly believe cutting deep now is the way to go about it. Labours plan would be less painful in the short term, but we would be plagued by slow growth for well over a decade. The Torys will create a sustainable base to start growth again and this will come around at a much quicker pace with their cuts happening now. Under Labours spending plan (and I use the word "plan" generously, it's actually more like a general idea), our debt would be forecast to go to over 80% of GDP, that's simply unsustainable.
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    In many ways this is analogous to the debate around environmental sustainability.

    Fossil fuels are running out. Energy prices are rising and we face increasing amounts of political instability because of the concern over energy security. The effects of pollution are also starting to interfere with the global food supply.

    Our current levels of energy consumption are unsustainable. We either have to radically consume less or radically change our energy production methods so that we can overcome the problems of scarcity and pollution. This means we need to take hard actions which will impact badly on households and firms but it is the problem of previous governments who have left us in this mess. Either we take action now or we burden future generations with the consequences.

    However you tend to find an inverse correlation on the fiscal sustainability/environmental sustainability debate. The type of people who are most pious about fiscal responsibility, balanced budgets and prophecies of doom due to sovereign debt, are generally the type of people who stick their head in the sand about the energy and pollution issue, argue that climate change is a myth and we've actually got a lot of fossil fuels ahead, and warn of economic ruin if we start introducing carbon taxes and the likes.

    Meanwhile the types of people who tell us we face irrevocable natural disasters due to climate change, have already passed peak oil and will be soon forced to turn the lights out due to scarcity, are more likely to be the type who tell us governments faced much bigger debt:GDP ratios in the aftermath of the war when they went on massive spending programmes developing infrastructure, and that we face economic ruin if we start down the road of austerity measures.
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    http://www.debt-clock.org/

    Keep talking.. while the numbers keep rolling.. :rolleyes:

    (Original post by dannymccs)
    "not eliminating the deficit in the blink an eye"
    Labour racked up more and more public debt during the boomtime! This is an adjustment that has been a long time in coming. The following doesn't take into account the sizable 'off the books' debt situation the New Labour cretins left us with either:





    .. and if we chose to ignore it/delay dealing with it now we'd be effectively selling the city, and FDI linked industry in general, down the swanny, and the city lies at the heart of our hollow economy - if you know owt about the world of Economics/business you'll know that that's the reality and that sticking our fingers in our ears and going "la la la la" to our creditors is perhaps ill advised
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    (Original post by Foo.mp3)
    The following doesn't take into account the sizable 'off the books' debt situation the New Labour cretins left us with either:

    Nor does it take into account inflation.

    You could have paid for WW2 with the amount Major borrowed in a year if you just compare cash terms.
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    (Original post by Quady)
    Nor does it take into account inflation
    I hope to **** you're not seriously advocating inertia based on the idea that inflation will mardkedly erode the real stock of debt
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    (Original post by Foo.mp3)
    I hope to **** you're not seriously advocating inertia based on the idea that inflation will mardkedly erode the real stock of debt
    No I'm advocating sensible presentation of info.
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    (Original post by Quady)
    No I'm advocating sensible presentation of info
    Sensible? I'm sorry are nominal debt stocks no longer deemed a legitimate indicator for levels of indebtedness? This ent an MPC presentation, it's TSR

    Inflation was just a couple of percent for neigh on a decade until relatively recently so one wouldn't expect price level adjustment to flatten such a graph too much anyway (assuming the figures used weren't in-fact already adjusted e.g. 2010 base)

    Feel free to add your own figs if ye really see fit or else pipe down aye lad, little pedantic/off the ball
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    Why dont you just print more money?
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    (Original post by samconly)
    Why dont you just print more money?
    Monetary tinkering's moved on a bit since the good old days.. QE is the new helicopter money

    Plus we're in a period of stagflation, expanding the monetary base would probably be ill advised, unless you can find a way to sneak it into the bank accounts of mortgage holders without anyone noticing..
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    (Original post by Foo.mp3)
    Sensible? I'm sorry are nominal debt stocks no longer deemed a legitimate indicator for levels of indebtedness? This ent an MPC presentation, it's TSR

    Inflation was just a couple of percent for neigh on a decade until relatively recently so one wouldn't expect price level adjustment to flatten such a graph too much anyway (assuming the figures used weren't in-fact already adjusted e.g. 2010 base)

    Feel free to add your own figs if ye really see fit or else pipe down aye lad, little pedantic/off the ball
    You don't seem to understand basic things about national debt. The most important thing is it's comparison to GDP. For an extreme example, if you increased the debt with a deficit of a billion pounds, but doing so doubled your GDP, it is unbelievably the right thing to do. All you would see from your graph is 'Oh, they increased the debt by a billion pounds, that was wrong'.

    Inflation at 'just' a couple percent for a decade amounts to ~22% over a decade. Admittedly the graph would probably look largely the same but it's important to get these things right. There's a proper argument for deficit reduction but this isn't it.

    To OP, I'd largely agree to what you said. I'd point out though that 'deficit denier' is entirely just phrase. It's only purpose is to get the public to believe that their plan is right. Reading into it is largely a waste of time.

    Incidentally, my favorite thing about the talking points the coalition is using is how they'll call Labour 'deficit deniers', then immediately afterwards point out that Labour had planned £14 billion of cuts themselves :rolleyes:
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    (Original post by Friar Tuck)
    You don't seem to understand basic things about national debt. The most important thing is it's comparison to GDP
    Heh, I'm sorry do you know me? I could have sworn I was a student of economics.. pretty sure I've a fairly firm grasp on macroeconomics thanks mate

    Debt to income ratio indeed provides a scalar perspective that absolute figures do not, didn't have the time/inclination to put owt other than the first most elemental graphs that google came up with, sorry love, as I said to the other lad this is TSR not an MPC briefing so chill ye boots.. plus many have an idea that UK GDP has been in the region of just over a trillion over the past few so gaining a sense of perspective shouldn't be toooo difficult

    (Original post by Friar Tuck)
    Admittedly the graph would probably look largely the same but it's important to get these things right
    It'd just look a little flatter, wouldn't detract from the trend and patent growth rate increase which is the important message to take from a nice simple illustrative graph such as this :rolleyes:

    (Original post by Friar Tuck)
    There's a proper argument for deficit reduction but this isn't it
    We're all ears Dr. Bernanke

    (Original post by Friar Tuck)
    They'll call Labour 'deficit deniers', then immediately afterwards point out that Labour had planned £14 billion of cuts themselves :rolleyes:
    Milliband @ march not ring any bells? Labour want to have their cake and eat it, the Coalition may be far from the perfect civil partnership but at least they're biting the bullet on this'n and anything's preferable to Brown et cronies surely!?
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    (Original post by Foo.mp3)
    Heh, I'm sorry do you know me? I could have sworn I was a student of economics.. pretty sure I've a fairly firm grasp on macroeconomics thanks mate

    (...)didn't have the time/inclination to put owt other than the first most elemental graphs that google came up with, sorry love, as I said to the other lad this is TSR not an MPC briefing so chill ye boots(...)
    From your post, because you chose a graph showing absolute figures, made me think you were part of the majority of people who have a very bad knowledge of economics. Sorry if I seemed condescending, and sure it's just TSR, but we may as well try and have a proper discussion. If something requires too much detail/effort to go into properly, just say that and summarise, and we can go into further discussion/explanation if we need to

    (Original post by Foo.mp3)
    It'd just look a little flatter, wouldn't detract from the trend and patent growth rate increase which is the important message to take from a nice simple illustrative graph such as this :rolleyes:
    True, it'd be flatter. So is your point about the trend and growth rate until the financial crisis, because then the numbers get warped by the bailing out of the banks etc.

    It seems though you chose your graph to represent the point you wanted to make, as opposed to choosing the graph for it's accuracy and relevance and then drawing a conclusion from that.

    (Original post by Foo.mp3)
    We're all ears Dr. Bernanke
    I was going to do this bit last, but my mate just said he has a spare pendulum ticket for me. So I'm off and i'll do that tomorrow

    (Original post by Foo.mp3)
    Milliband @ march not ring any bells? Labour want to have their cake and eat it, the Coalition may be far from the perfect civil partnership but at least they're biting the bullet on this'n and anything's preferable to Brown et cronies surely!?
    Ed and those marches were ridiculous tbh. That whole thing about Labour not criticizing everything because they could was clearly rubbish. That doesn't excuse the coalition though, I just let labour slide more atm because little they say will change anything at the moment, so their comments matter less.
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    (Original post by MagicNMedicine)
    However you tend to find an inverse correlation on the fiscal sustainability/environmental sustainability debate. The type of people who are most pious about fiscal responsibility, balanced budgets and prophecies of doom due to sovereign debt, are generally the type of people who stick their head in the sand about the energy and pollution issue, argue that climate change is a myth and we've actually got a lot of fossil fuels ahead, and warn of economic ruin if we start introducing carbon taxes and the likes.
    Two comments.

    1. No one, not even sceptics, deny climate change exists. You will often find that those sceptical of anthropogenic climate change will use natural climate change for the basis of their arguments so to call them climate change deniers or whatever is simply inaccurate
    2. I would be definied a fiscal conservative, yet I support the environment and believe we should do more to protect it - again another false generalisation on your part.
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    (Original post by Teaddict)
    2. I would be definied a fiscal conservative, yet I support the environment and believe we should do more to protect it - again another false generalisation on your part.
    It's one thing making a general statement "I support the environment and believe we should do more to protect it". Its another thing actually supporting tough decisions which would be necessary to actually sort it out, ie decisions which would hit people and businesses hard in the pocket.

    There are plenty of people on the Labour side who would say "I support the idea of reducing the deficit" but they aren't so keen on tough decisions to get there.
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    (Original post by Friar Tuck)
    So is your point about the trend and growth rate until the financial crisis, because then the numbers get warped by the bailing out of the banks etc
    Granted interventions have impacted on the figures over the past few years but the trend/growth rate to '08 speaks for itself, as noted, at a time of economic prosperity when one would expect automatic stabilisers to kick in, correcting long-term fiscal imbalance - we all know our public finances issues have come about in part due to Brown et pals banking on 'the end of Boom and Bust cycles'!

    Also those figures do not include all financial interventions or they'd be considerably higher (£2tr+) and, as mentioned, also do not include all the off the books crap.. they just give a flavour - as I may have said already, y'all free to dig out more accurate/apt figures if ye can really be arsed

    (Original post by Friar Tuck)
    I just let labour slide more atm because little they say will change anything at the moment, so their comments matter less
    When exactly was the last time labour comments (excepting the Milliband you can take farily seriously) carried any currency?

    They're ****ing lucky the Lib Dems have stolen the limelight so soon in the national lampoon stakes..

    (Original post by MagicNMedicine)
    It's one thing making a general statement "I support the environment and believe we should do more to protect it". Its another thing actually supporting tough decisions which would be necessary to actually sort it out
    Think it may have been Stiglitz who reckoned 1% of GDP should mitigate climate change, China seem to feel the same way and have asked that we all raid our piggy banks to the tune of 1p to the pound - the West does still seem a little reluctant to lay down.. hence Copenhagen flop

    (Original post by MagicNMedicine)
    There are plenty of people on the Labour side who would say "I support the idea of reducing the deficit" but they aren't so keen on tough decisions to get there
    Don't even get me started on this, they've consistently avoided putting down real, specific/actionable plans for cuts and have just blurted out figures that fulfil whatever the shallow brief is at the time - currently:

    1) Can't be seen as defecit deniers (though maintain denial of culpability re: leaving the country bent over with its pants around its ankles)

    2) Can't be seen to be willing to cut as much as the Coalition (or we won't be able to capitalise on public sector/wider societal tension caused by cuts come the next election) so just take the Coalition's figures, shave 20% or so off it and give a ballpark figure

    Painfully transparent, only serves as a reminder to those of us who aren't Communists or living with our head in the sand (arguably amounts to the same thing) as to why we (as a nation) must never again be 'seduced by the devil' :rolleyes:
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    (Original post by dannymccs)
    It is a simple fact that by having a deficit, the debt of the country will go up; by definition you are spending more than you are getting in revenue.
    Just to throw it in:

    a deficit includes within it the repayments for national debt. If the size of the deficit is below the amount of debt that has been paid back during that period then the national debt will go down despite the presence of a deficit.
 
 
 
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