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'Deficit Denial' And The 'Credit Card' watch

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    The thing that annoys me about the coalition particularly the Conservatives is that they continously blame everything on Labour. '"the mess they inherited from Labour" - that has become their slogan. I think its very misleading because all countries are in a mess, they make it seem like the financial crisis is just happening in UK when its a global issue. I do think Labour carried on spending a little too long but its a difficult decision to make, knowing whether the recession is small or big and when its time to stop 'stimulating' the economy and start cutting. But I vaguely remember that George Osbourne when Tory wasnt elected explained what decisions he would have took and in reality if they had been made then the 'mess' would have gotten messier.
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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.
    I may agree however before the election it was looking that our credit rating was going to be downgraded this only changed when the coalition came to power and put into action a cuts program
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    (Original post by dannymccs)

    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.
    The problem with this analogy is that with the credit card you're talking about paying off debt, whereas with the budget we're talking about reducing a deficit. So in terms of the credit card analogy what we are doing is adjusting our spending so that, in five year's time, we're stopping borrowing extra money on our card. How we then repay our existing debt on the card is another issue. So I'd say it would be more sensible for someone with a credit card to reduce their spending so that they are not borrowing additional money as soon as possible. Especially since they are likely to receive punitive interest rates or have credit withdrawn altogether.

    Cutting back on spending so as to have extra money to pay of debt and cutting back so as not be borrowing additional money are very different things. The first is temporary - it's an exercise in raising cash. The second is more permanent, its cutting back to what you can afford in the long term. Of course you might be able to avoid doing that if you increase your income instead.

    But of course government debt is very different to credit card debt so Osborne's analogy is meaningless.
 
 
 
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