Deficit Myth?

[Saver]

I just read this:

http://www.huffingtonpost.co.uk/ramesh-patel/growth-cameron-austerity_b_2007552.html

Not being an expert on economics data I have no way to know if the author is just selectively quoting things or if they are right - anyone care to comment?

[Steppenpig]

The quality of writing in the blog is abysmal. The tone is sensationalist and juvenile. Criticising someone for lying when you yourself are using straw men and untruths undermines any confidence. (e.g. "Finally Exposed" when it is merely public information). It is obviously a party political piece.

Edited April 8, 2015 by Steppenpig

[R K]

I just read this:

http://www.huffingtonpost.co.uk/ramesh-patel/growth-cameron-austerity_b_2007552.html

Not being an expert on economics data I have no way to know if the author is just selectively quoting things or if they are right - anyone care to comment?

general points are correct, yep.

Cameron/Osborne have lied consistently about labour over-spending and have increased the debt in 1 term substantially more than Labour did in 3.

One can only guess what Tories would have done had they been in power in the lead up to the financial crisis. It's difficult to conclude it would have been any less damaging under them. They were against an independent BoE MPC so would probably have been manipulating the base rate for their own political purposes in any event and we know they were consulted during labour's nationalisation of the banking system so theyd have done the same.

Cutting govt spending depends upon their big lie that labour wreck the economy. In fact history shows it is the Tories who are the worst when it comes to economic competence. So really their slogan should be "More chaos with the Tories or competence with Labour" but it wouldn't play so well to their supporters. It is a little mystifying why Labour aren't calling them out on this but it appears they don't think it is either worth the effort or it plays into the Tory framing of the economy somehow so they're just ignoring it. Which is a shame because the Tory lie is a whopper and they keep on repeating it so presumably lots of people think it is true.

Edited April 8, 2015 by R K

[Errol]

slogan should be "More chaos with the Tories or competence with Labour"

I think both are totally inept, but are we saying now that Gordon Brown was competent?

[byron78]

I think both are totally inept, but are we saying now that Gordon Brown was competent?

Compared to Osborne?

Yes.

Compared to anyone else?

Not so much.

[frederico]

The OBR have a lot to answer for here, either incompetent, political stooges or conmen.

Osbourne obviously used the OBR to justify everything he did.

The worrying thing is that genuine economists seem to have less idea about what is going on and how to fix it than I do.

[zugzwang]

I don't think it helps to frame things as Labour vs Tory any more. They've made the same mistakes because both parties have been broadly following the same free market agenda, the Tories since 1979 and Labour since 1994. It's the idea of rational expectations, financial self-regulation and offshoring that's at fault - each of these constructs has been imported into the political economy via the City of London and the Bank of England. Traditionally, both parties would have treated them with suspicion if not outright hostility.

Edited April 8, 2015 by zugzwang

[billybong]

The article doesn't mention off balance sheet debt and liabilities so it lacks in that respect.

It's correct to say that the Conservative/Libdem government have been even more extravagant than NuLabour who were far too extravagant as well.

NuLabour would have done little different if they'd been in power - they might have been even more extravagant again.

That video is dated October 2010 so imagine what the situation is like now 5 years later.

Edited April 8, 2015 by billybong

[interestrateripoff]

The OBR have a lot to answer for here, either incompetent, political stooges or conmen.

Osbourne obviously used the OBR to justify everything he did.

The worrying thing is that genuine economists seem to have less idea about what is going on and how to fix it than I do.

Not surprising as most economists don't even understand the history of money as there is no anthropological evidence to support the barter claims in economic text books. But why let little things like facts get in the way of a good story.

[canbuywontbuy]

Osborne's cocaine hit view of the economy: The yearly deficit is under control, the economy is enjoying a robust and sustained recovery, and young people are enjoying the opportunity to own their own home, thanks to H2B.

[Hail the Tripod]

I don't think it helps to frame things as Labour vs Tory any more. They've made the same mistakes because both parties have been broadly following the same free market agenda, the Tories since 1979 and Labour since 1994. It's the idea of rational expectations, financial self-regulation and offshoring that's at fault - each of these constructs has been imported into the political economy via the City of London and the Bank of England. Traditionally, both parties would have treated them with suspicion if not outright hostility.

Ever increasing regulation coupled with ever increasing government directed spending. It's a single agenda for both parties, but hardly "free market" agenda.

[Milkshock]

Ever increasing regulation coupled with ever increasing government directed spending. It's a single agenda for both parties, but hardly "free market" agenda.

+1. There is no 'free market' at work here, more socialised direct government intervention. In that sense Labour are at least honest in robbing you blind. The Tories, however, you would expect more responsibility from than extending the nanny state.

[byron78]

Ever increasing regulation coupled with ever increasing government directed spending. It's a single agenda for both parties, but hardly "free market" agenda.

Well, no.

But the free market isn't actually free is it?

It spends billions lobbying government to work for it - you'll find quite a lot of that regulation solely benefits big "free market" companies and an absurd amount of that government spending goes to "free market" companies as well. The US defence budget alone is mind-boggling.

[wonderpup]

Not surprising as most economists don't even understand the history of money as there is no anthropological evidence to support the barter claims in economic text books. But why let little things like facts get in the way of a good story.

The joke is that when people like Krugman propagate the idea that debt and money are irrelevant in economics on the basis that they are just a 'veil over barter' they are using one unfounded myth to prop up another- because if those alleged barter based systems that did not use money were in fact credit based systems it means that credit predates money and cannot therefore be a derivative product of either money or barter- it must be a fundamental element of economics.

[cock-eyed octopus]

general points are correct, yep.

Cameron/Osborne have lied consistently about labour over-spending and have increased the debt in 1 term substantially more than Labour did in 3.

One can only guess what Tories would have done had they been in power in the lead up to the financial crisis. It's difficult to conclude it would have been any less damaging under them. They were against an independent BoE MPC so would probably have been manipulating the base rate for their own political purposes in any event and we know they were consulted during labour's nationalisation of the banking system so theyd have done the same.

Cutting govt spending depends upon their big lie that labour wreck the economy. In fact history shows it is the Tories who are the worst when it comes to economic competence. So really their slogan should be "More chaos with the Tories or competence with Labour" but it wouldn't play so well to their supporters. It is a little mystifying why Labour aren't calling them out on this but it appears they don't think it is either worth the effort or it plays into the Tory framing of the economy somehow so they're just ignoring it. Which is a shame because the Tory lie is a whopper and they keep on repeating it so presumably lots of people think it is true.

So.

How would Labour have dealt with the economy, had they won the last election? What state would the economy be in now?

[zugzwang]

Ever increasing regulation coupled with ever increasing government directed spending. It's a single agenda for both parties, but hardly "free market" agenda.

UK financial markets were (and are still, largely) a completely lawless free-for-all which is why the GFC's biggest frauds - Lehman Bros International, AIG, RBS, Madoff etc - either originated in or were run through the City of London. The City continues to oppose and frustrate Treasury efforts to impose parliamentary authority over the octopus of tax havens and shadow banking conduits it sustains, as it has done for half a century or more. The neoclassical insistence that markets are naturally risk minimising and utility maximising when left free of regulatory supervision is absolutely sovereign, despite said belief having no theoretical or empirical foundation.

[billybong]

So.

How would Labour have dealt with the economy, had they won the last election? What state would the economy be in now?

It would be more or less the same as it is now (massive borrowing etc) except that the Conservatives would have continually criticised them using their key words for opposition like waste, tax and spend and massive borrowing. Labour's economy wouldn't have got the "austerity" tag because it's Labour.

[cock-eyed octopus]

It would be more or less the same as it is now (massive borrowing etc) except that the Conservatives would have continually criticised them using their key words for opposition like waste, tax and spend and massive borrowing. Labour's economy wouldn't have got the "austerity" tag because it's Labour.

You really think so? I'm afraid I don't agree. We will, of course, never know.

[billybong]

You really think so? I'm afraid I don't agree. We will, of course, never know.

To know all that's needed is to look at the Conservative/Libdem policies which have been similar to NuLabour's policies - taking into account response to differing circumstances and a different position in the overall cycle. Massive borrowing escalating further, reliance on house prices, tuition fees, the continuance of no referendum on the eu, emptying the pensions not unlike emptying the gold not unlike privatisations, effectively continuing to relinquish sovereignty to the eu etc etc not to mention the all party habitual reneged on promises etc.

Look at the lack of real opposition to policies since at least 1997 under all Parliaments.

They likely won't be exactly identical but sufficiently so to make little or no difference. The name tags "austere" and "tax and spend" are pretty accurate even when pursuing similar policies as that's demonstrated in almost every Prime Minister's Question Time and in media debate over time.

There's no harm in disagreement of course. People have to make their own choice when voting (or not voting).

Edited April 10, 2015 by billybong

[Ash4781]

Well from my understanding department expenditure limits were cut and some cut year on year post Brown and the public sector net debt is broadly where it was If not more. I can't remember Darling's plan but even he seemed to acknowledge Brown really f'd up (Milliband too). Osb' also f'd it up too. Now a choice between Balls and Osb'.

[davidg]

Well from my understanding department expenditure limits were cut and some cut year on year post Brown and the public sector net debt is broadly where it was If not more. I can't remember Darling's plan but even he seemed to acknowledge Brown really f'd up (Milliband too). Osb' also f'd it up too. Now a choice between Balls and Osb'.

Darling's plan is Osbourne's plan B

[cica]

I'm not sure Claim 1 makes sense.

"By the start of the global banking crises 2008 the debt had fallen to 35%"...

...but it went up to about 60% soon after, didn't it? Before the 2010 general election.

Edited April 10, 2015 by cica

[billybong]

From HPC's "The 2015 Good News Election Propaganda" thread and the sovereignman link.

“Since the government is spending more than it earns, it is hardly surprising that it is borrowing more, and that the debt-to-GDP has risen from 68.95% in 2009 to 93.30% in 2013, again according to OECD figures.

Edited April 10, 2015 by billybong

[crashmonitor]

general points are correct, yep.

Cameron/Osborne have lied consistently about labour over-spending and have increased the debt in 1 term substantially more than Labour did in 3.

One can only guess what Tories would have done had they been in power in the lead up to the financial crisis. It's difficult to conclude it would have been any less damaging under them. They were against an independent BoE MPC so would probably have been manipulating the base rate for their own political purposes in any event and we know they were consulted during labour's nationalisation of the banking system so theyd have done the same.

Cutting govt spending depends upon their big lie that labour wreck the economy. In fact history shows it is the Tories who are the worst when it comes to economic competence. So really their slogan should be "More chaos with the Tories or competence with Labour" but it wouldn't play so well to their supporters. It is a little mystifying why Labour aren't calling them out on this but it appears they don't think it is either worth the effort or it plays into the Tory framing of the economy somehow so they're just ignoring it. Which is a shame because the Tory lie is a whopper and they keep on repeating it so presumably lots of people think it is true.

The course of debt was set before the Tories came to power. The fact the debt has doubled in the last five years was pretty much unstoppable, you can only reap what was previously sown. You can't turn around a super tanker overnight.

It's all about legacy, Clark handed over the dream scenario in 1997 to Blair, Brown handed over a disaster. Had Labour continued the debt would be even higher today.

Edited April 10, 2015 by crashmonitor

[R K]

So.

How would Labour have dealt with the economy, had they won the last election? What state would the economy be in now?

From memory they planned a slower fiscal consolidation with a more balanced taxes v spending cuts, kept up investment Darling's plan would have resulted in a similar end point to Osborne's today but with higher cumulative output. Somewhere around 5-10% higher over the parliament.

Osborne moved much closer to Darling's original plan when he abandoned plan A if you remember and then tried to regain some of the lost output from 2010-13 with his desperate housing market props.

There are similar choices now - Osborne with another aggressive agenda for spending cuts or a more balanced plan from Balls. Personally I have no idea why Balls is also planning a surplus by the end of the next parliament - there's no rational reason for it unless he feels he must do it for political d1ck swinging reasons, dunno. But it looks like labour will invest more and tax unproductive wealth more which can only be a good thing.

The basic point is that the private sector need to deleverage their b/sheets and the best way to do that with rates at the ZLB is to keep public debt higher i.e. supporting growth during that process. Something they have been more successful at in the US (after a few scares with nonsense over debt ceilings and fiscal cliffs and so on). But since Tories are wedded to this idea that all govt spending is necessarily bad and the state must be shrunk (purely ideological) they've ended up failing on the public debt measure but also failing on the growth measure too. Worst of both worlds. Whatever you may think about Brown et al prior to 2008, Darlings planned budget had they won in 2010 was a far better one overall and Balls looks better than Osborne's today (as far as it is known).

Purely on that basis I would favour Labour's plans (but I'm not a labour supporter).

Edited April 10, 2015 by R K