Why Did Labour Run A Budget Deficit During The 'boom' Years?

[SHERWICK]

"More generally, the public sector recorded deficits between 1991/92 and 1997/98 before moving into surplus in 1998/99."

Ah, just in time for Labour to claim credit!

http://www.statistics.gov.uk/cci/nugget.asp?id=206

Also: "Deficits have been recorded since 2002/03."

Just why did Labour/Brown need to run a budget deficit during the boom years? (And each year since 2002/3?).

[Nationalist]

They were funding something called the "New Labour Project" which basically involved hiring enough people into the public sector, in non-jobs, as tame voters, to keep Labour in power forever. And it nearly worked!

[SHERWICK]

They were funding something called the "New Labour Project" which basically involved hiring enough people into the public sector, in non-jobs, as tame voters, to keep Labour in power forever. And it nearly worked!

I'd like a Labour supporter to answer. Reading this forum, you'd think that budget deficits only started after Brown bailed out the banks (i.e. they were the fault of the bankers).

[tahoma]

I'd like a Labour supporter to answer. Reading this forum, you'd think that budget deficits only started after Brown bailed out the banks (i.e. they were the fault of the bankers).

Dream on. The nulab drones on here will never 'answer' the question in the sense that you apply the word.

[non frog]

I'd like a Labour supporter to answer. Reading this forum, you'd think that budget deficits only started after Brown bailed out the banks (i.e. they were the fault of the bankers).

As a non supporter I'll take a stab at it. The previous government over spent to replace much needed infrastructure but was on track in the first part of the parliament. Brown's great mistake was to believe the city would carry on providing huge tax revenues for him to spend. It was the opposite of "prudence" and in hindsight a massive error.

The banker bail out saw the deficit rise from 3% of GDP (ie too much but within a level that could be dealt with) to 11% (ie we're screwed).

Basically Brown was not the guy you wanted driving the bus when the tyre blew out. He didn't cause the tyre to fail though.

[Toto deVeer]

I'm not a labour, tory, lib or any other supporter.

But your question has a Keynesian flavour to it.

I would have thought that Keynes' theoretical premise was that the private sector economy was the fundamental basis of long term growth, and that government spending was to be used as a stabilizer.

If you look at US GDP statistics from 2001 to present, and remove government spending, you find that year by year the private sector GDP has been declining. When you add in the government spending contribution, the year on year GDP increases.

My guess is that the deficit spending led to growth in GDP, and that is what happened. In other words, the real economy, the private sector, has been in recession during this same period.

This is what happens when one forgets about the physical economy and all the wealth flows to the financial sector, that includes housing speculation.

I'm not a Keynesian by the way. Just an observation.

[Ruffneck]

I'd like a Labour supporter to answer. Reading this forum, you'd think that budget deficits only started after Brown bailed out the banks (i.e. they were the fault of the bankers).

there isn't really any labour supporters around here

[Confounded]

"More generally, the public sector recorded deficits between 1991/92 and 1997/98 before moving into surplus in 1998/99."

Ah, just in time for Labour to claim credit!

http://www.statistics.gov.uk/cci/nugget.asp?id=206

Also: "Deficits have been recorded since 2002/03."

Just why did Labour/Brown need to run a budget deficit during the boom years? (And each year since 2002/3?).

America was scared of slipping into a recession/depression after the burst of the dotcom bubble and the 9/11 attacks.

You may remember after the 9/11 attacks people both sides of the Atlantic being encourage to spend for victory. It has been an economic battle that has been thought since 2000.

The policy reminds me of the Black Knight in the Holy Grail.

[Michael]

Labour ran deficits during the boom years because of their natural tendency to like spending other people's money......

By 2005 or 2006 because of the crdit boom we'd gone a lot longer than usual without a slump so Gordon brown who had been Chancellor for 7 or 8 years convinced himself he'd ended boom-bust and that tax revenues would rise in perpetuity.........................and planned his spending accordingly

[Mrs Bear]

They were funding something called the "New Labour Project" which basically involved hiring enough people into the public sector, in non-jobs, as tame voters, to keep Labour in power forever. And it nearly worked!

To quote Libby Purves in today's Times:

'More than five million people now work directly for the taxpayer; of new jobs created under new Labour, more than half are publicly funded. In the West Midlands, public sector employment grew by 25% while private jobs fells 2 %; in the North East, nearly half of all women's jobs are public. And let's not even start on Wales.

This has not involved a flood of useful new frontline workers. Some of the bubble famously consists of weird semi-invisible roles such as 'diversity cohesion officers' and 'five-a-day coordinators', not to mention platoons of officials charged with 'encouraging recreational walking' or going round lecturing people about their eating habits, computer sitting position or carbon footprint, without providing a shred more information or urgency than we get every day off the telly or the newspapers. Worse, and more statistically significant, tens of thousands of ergonomically approved new chairs have been filled with people whose sole function is filling out monitoring forms about the work of their more directly active fellows, so that yet more new employees in Whitehall can put the numbers into computer models and shape them into pretty patterns.

Yet it is impossible to rejoice at the shakeout of this nonsense, because some useful people will lose their livings, too. And even those who weren't that useful did, as individuals, deserve better.'

Edited October 25, 2010 by Mrs Bear

[Democorruptcy]

Because New Labour abolished financial regualtion when they created the FSA.

Then as house prices rose due to liar loans, self certs, 125% mortgages etc New Labour had to try keep their core voters the Public Sector happy by giving them enough wages to still be able to afford to buy houses. The deficit is because wages have ballooned.

[Georgia O'Keeffe]

Because New Labour abolished financial regualtion when they created the FSA.

No they mastered/eradicated boom & bust, as such given we are now in a permanently high plateau rather than having to bother about nuisances such as business and economic cycles i dont see a problem with running a deficit of any size, i say to the govt "fill yer boots"

[DungBeetle]

I'm not a labour, tory, lib or any other supporter.

But your question has a Keynesian flavour to it.

I would have thought that Keynes' theoretical premise was that the private sector economy was the fundamental basis of long term growth, and that government spending was to be used as a stabilizer.

If you look at US GDP statistics from 2001 to present, and remove government spending, you find that year by year the private sector GDP has been declining. When you add in the government spending contribution, the year on year GDP increases.

My guess is that the deficit spending led to growth in GDP, and that is what happened. In other words, the real economy, the private sector, has been in recession during this same period.

This is what happens when one forgets about the physical economy and all the wealth flows to the financial sector, that includes housing speculation.

I'm not a Keynesian by the way. Just an observation.

+1 +1 and +1

George Bush Jnr fell into the trap following 9/11 and dragged most of the world with him. Modern politics is about image, and no ruling party wants to be seen to be letting the country slip into recession.

[longtomsilver]

I'm not a Thatcherite but maggie once famously said that socialism fails when you run out of other peoples money. Enough said!

[porca misèria]

Our beloved Gordon insisted we must balance the budget.

Then it became balance the budget over the economic cycle. That gave him a moving target, and it moved each year, as every year became a down year and we were on course to grow our way to prosperity and surplus. They weren't calling it Keynesian until after the bust, but it had much the same shape!

[porca misèria]

+1 +1 and +1

George Bush Jnr fell into the trap following 9/11 and dragged most of the world with him. Modern politics is about image, and no ruling party wants to be seen to be letting the country slip into recession.

Sure, "9/11" was a boost. It dragged the US out of a bad place, as it turned suddenly from villain (remember Dubya tearing up all his international treaties and obligations?) to victim. But the rot goes back further. Not sure when 'subprime' actually started, but it was certainly happening under Clinton, in the guise of enabling Black Americans to buy houses without anything so overtly socialist as 'social housing'.

[Toto deVeer]

Sure, "9/11" was a boost. It dragged the US out of a bad place, as it turned suddenly from villain (remember Dubya tearing up all his international treaties and obligations?) to victim. But the rot goes back further. Not sure when 'subprime' actually started, but it was certainly happening under Clinton, in the guise of enabling Black Americans to buy houses without anything so overtly socialist as 'social housing'.

I think the seeds were planted when MERS was created, around the mid 1990's. I believe.

MERS is simply a shell corporation with no employees set up to hide a paper trail of fraud and to protect the beneficial parties with a corporate veil. It is clear that the financial sector was planning to defraud the nation when this vehicle was set up, and intended to turn the most valuable asset of the middle classes into poker chips to be wagered in the world's biggest casino.

[PopGun]

Oh ffs

I'll make this very very simple.

There was no BOOM, nada, zich, nothing. Labour just made out to everyone who was gullible enough that there was, in order to excuse their conceited method of massive public spending.

Blair also fooled many an idiot that we we're all middleclass, and deserved high house prices in a low wealth economy.

Many on this site love to spit venom at the socialists (fair enough), however what is more disturbing is their blind willingness to accept and follow their propaganda.

At least we have Cameron to wave us all back into the burning building now, instead of Blair or Brown.

[tim123]

They were funding something called the "New Labour Project" which basically involved hiring enough people into the public sector, in non-jobs, as tame voters, to keep Labour in power forever. And it nearly worked!

I don't buy this arguement that all PS workers vote Labour, not on the basis that they do so to "reward" the person who gave them their jopb, nor on the basis that the type of person who takes a government job is predisposed to voting Labour. It seems to me to be complete and utter nonsense.

All of the people that I know who work for the government vote Tory (or at worse abstain, because they'd rather cut their right arm off than vote labour).

tim

[tim123]

As a non supporter I'll take a stab at it. The previous government over spent to replace much needed infrastructure but was on track in the first part of the parliament. Brown's great mistake was to believe the city would carry on providing huge tax revenues for him to spend.

If all NL did with their windfall income was to spend it on infrastructure projects then we wouldn't have a problem because when the windfall stops you can stop the infrastructure spending.

The problem is that he used the money to directly increase the nuber of people that the government employs by 25% and when the money tap is turned off you've can't stop paying these people.

tim

[Riedquat]

Our beloved Gordon insisted we must balance the budget.

Then it became balance the budget over the economic cycle. That gave him a moving target, and it moved each year, as every year became a down year and we were on course to grow our way to prosperity and surplus. They weren't calling it Keynesian until after the bust, but it had much the same shape!

That seems to sum it up. I think it started as a classic case of self-delusion and self-justification, and ended up carrying on because they didn't know or were too scared to stop it.

[General Congreve]

So I could make a killing in gold when the pound finally kicks the bucket?

[SHERWICK]

Sure, "9/11" was a boost. It dragged the US out of a bad place, as it turned suddenly from villain (remember Dubya tearing up all his international treaties and obligations?) to victim. But the rot goes back further. Not sure when 'subprime' actually started, but it was certainly happening under Clinton, in the guise of enabling Black Americans to buy houses without anything so overtly socialist as 'social housing'.

So, basically, you're saying that Labour ran a deficit during the 'boom' years to help black Americans buy houses.

[Van]

Labour ran deficits during the boom years because of their natural tendency to like spending other people's money......

By 2005 or 2006 because of the crdit boom we'd gone a lot longer than usual without a slump so Gordon brown who had been Chancellor for 7 or 8 years convinced himself he'd ended boom-bust and that tax revenues would rise in perpetuity.........................and planned his spending accordingly

+1.

Labour = interventionism. Always has, always will.

However, in Brown they managed to promote a champagne socialist who not only believed that he had mastery of the economic cycle, but then who's policies exacerbated the boom.

Remember that Labour adopted TORY spending rules for their first two years - that is why there was a budget surplus.

Labour will always mean a bigger state, the destruction of wealth, the death of enterprise, and ruin of the public finances. They must never be allowed back in power again.

[tallguy]

"More generally, the public sector recorded deficits between 1991/92 and 1997/98 before moving into surplus in 1998/99."

Ah, just in time for Labour to claim credit!

http://www.statistics.gov.uk/cci/nugget.asp?id=206

Also: "Deficits have been recorded since 2002/03."

Just why did Labour/Brown need to run a budget deficit during the boom years? (And each year since 2002/3?).

Because they didn't have any family silver left to privatise and they didn't have any of the black stuff left to sell.

The Tories ran a huge deficit during their years in power (defined as living beyond your capacity to pay for what you are consuming out of wealth you are generating)). It just didn't feel like a defcit because they didn't have to generate it from borrowings. Instead they generated it from the one-time sale of the ultilities and the one-time bonanza of north sea oil.

Real economic growth in this country stopped around the mid-seventies. Since then we have been living off borrowed time of one sort or another.

Time's up.

Now we get to find out how poor we really are.

Edited October 25, 2010 by tallguy