Tag Archives: national debt

The ‘Deficit’? Which deficit are they talking about?

Let’s get something straight: there is no such thing as “The Deficit” there are deficits, and the politicians of the three main parties are all guilty of presenting an image of a single monolithic deficit that must be “brought down” at all costs. This is to support their cock-eyed view that cuts, particularly to social security benefits are necessary, while tax cuts for the rich will somehow stimulate the sluggish (some would say moribund) economy because the “wealth” will miraculously “trickle down” to those below. Not even the very right-wing George H W Bush believed that and derisively referred to trickle down (or supply side) economics as “voodoo economics”.

Our imperial masters will confuse, sometimes deliberately, “The Deficit” with “The Debt”. Again, there is a debt and it’s called The National Debt, which is accumulated through government spending on wars, for example.  The current national debt has been around since the end of the First World War. Politicians, many of whom are not economists, will often claim that “The Debt” also needs to “paid off” and will again cite government spending on social security as the main culprit of increased borrowing. This is economically illiterate bunkum. Yet, we are now in a situation where, once again, the level of the nationals debt is set to be increased by a new war in the Middle East. Yet, the government can’t find money for the NHS? Please, pull the other one.

When politicians talk about The Deficit, most of the public haven’t a clue what it means and this suits our imperial masters well, for they can use this magic phrase to rebut any criticism of austerity, privatizations and cuts to public services. I have lost count of the numbers of vox pop interviews where some member of the public has quite literally repeated verbatim the spiel of some government minister or other. “The country is broke and we need to pay our debts” some ignoramus will opine, while another will claim “There’s no money, we need to cut something”. The United Kingdom is the seventh richest country in the world and there’s no money? Come off it.

There are five kinds of deficits. Let’s deal with each one in turn.

First, there is the structural or budget deficit. This is when the government is spending more money than it receives. Usually, governments receive money through taxation. If a government is cutting taxes for billionaires and faceless corporations, then it isn’t making any money. It’s simple logic. The other way a government can raise money is to print the stuff but quantitative easing, as it’s referred to, has only benefited the same people who got us into this mess: the bankers. The government could remedy this by taxing the rich more. Whenever this idea is proposed, our imperial masters respond by telling us this will hurt the “wealth creators”. These people only create wealth for themselves. They don’t even work for it. They get other people to do the work.

Work is over-rated. Hard work more so.

The cyclical deficit refers to, as its name suggests, the economic cycle and is caused by downturns in output. Low levels of business activity and high levels of unemployment are the manifestations of this kind of deficit. Some economists disagree over the terms ‘cyclical’ and ‘structural’ and claim that there’s no difference between the two.

A balance of trade deficit occurs when imports outstrip exports. If you’re not making and selling enough stuff to other countries but are buying in loads of stuff from overseas, then this is what happens. Every outgoing Tory government since 1964 has racked up a massive balance of trade deficit for the incoming Labour administration to deal with.

Finally, there’s the balance of payments deficit. This is related to the balance of trade. A balance of payments deficit is created when the imports of goods, services and investment income exceeds the exports of the same things. In 1974, this led to the Sterling Crisis of 1976.

So what is the national debt? Well, this is when governments borrow money from the central bank (In the case of England, this is The Bank of England), which is a private concern and not owned, in spite of its name, by the state. Governments borrow by issuing bonds, securities and bills.  In the United States the level of debt to GDP is 73.60%. In the UK, it’s 88.7%. Does this make a difference to you or I? Well, not really, since the government can borrow money at preferential rates of interest. The Tory-led government claims that it’s “reducing borrowing” but it hasn’t. It’s actually borrowed more money  than the previous government. Furthermore, all governments borrow money. It’s a fact of life.  The Tories’ continual claim that they’re borrowing less (sic) is a lie. In fact, most people don’t even know how much the national debt is, yet Westminster politicians will usually pretend to know when they’re busy conflating the national debt with ‘The Deficit’.

I realize that I have simplified these terms without going into heavy economic theory, but this is how deficits need to be explained to the public.

Do I expect our imperial masters to come clean on government finances any time soon? I doubt it. These people can’t even lie in bed straight.

Here are more blogs about the government’s deficit lies.

Finally! Exposed! The Deficit Myth! So, David Cameron When Are You Going To Apologise?

The Great Debt Lie and the Myth of the Structural Deficit

Another Cameron myth: the coalition hasn’t reduced the deficit by “a quarter”

 

 

 

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My Coalition verdict: What a shower

The title of this blog is borrowed from a series of similar blog titles in yesterday’s  Torygraph.  As you’d expect, all of them heap praise on their Tory brethren and pour scorn on their Lib Dem coalition partners. None of them claim that the coalition is a “shower”, though clearly many of them wish the Tories had an unassailable majority. But we don’t always get what we want in life, do we? The coalition has been in place for one year and in that year, it has waged war on the poor, the unemployed, the low-waged, the disabled, students and anyone who does not fit into their vision of the perfect society. In fact the word “society” has been absent from their minds as they pursue an ideologically-driven agenda of cuts.

The way in which the coalition parties have used the excuse of the structural deficit to push through cuts has been dishonest. In fact, this coalition government finds it difficult to be consistent. First, it talks about the national debt, then it talks about budget and structural deficits and tries to erroneously compare these things – as Thatcher did – with household finances. They tell us that “Britain’s credit card is maxed out” . Rubbish. The country doesn’t have a “credit card” and it can still raise money on the international bond markets. In spite of what the Con-Dem government and their allies tell us, Britain is far from being broke. There is money in this country but it’s all concentrated in the hands of a small number of people.

The sad truth is that the vast majority of the public haven’t got a clue when it comes to deficits and debts and the government use this ignorance to their advantage. This dishonesty is reproduced by the Telegraph’s bloggers, who are all keen to impress upon us the need to accept reductions in public spending, which the government tries to present as either ‘localism’ or ’empowerment’.

If they want to talk about household finances, perhaps they could start dealing with stagnating wages and the ever-rising cost of living. Britain’s household debt is higher than it’s ever been, yet the government seems quite happy for this situation to continue. At the beginning of this year, the rate of VAT was increased from 17.5% to 20%, which has meant that many things have increased in price – including food which, although free of VAT, is subject to VAT through production and distribution costs.

Education has been area where the Tories have sought to make their mark.  While paying lip service to the idea of education for all, they’ve been pushing forward their divisive idea for free schools. Free schools, in spite of what their supporters and this government tells us, sucks funding away from existing schools.  In Further and Higher Education, they’ve caused the biggest stink by scrapping the Educational Maintenance Allowance and imposing swingeing cuts on universities, which has prompted many universities to raise their tuition fees to the higher level of £9,000 per annum. The curriculum is also about to be colonized by ideology.  The subject of history is going to be rewritten to serve the narrow interests of the state. The revisionist historian, Niall Ferguson has been asked to devise a new history syllabus that will focus on such things as the greatness of empire. In many of the post-1992 universities, arts, humanities and social science courses are being cut because they are seen to be ‘soft’. However the real reason for cutting social sciences and humanities courses is because they teach critical thinking. Say hello to “by-rote” learning.

The Tories have also been keen to misrepresent social housing in their efforts to claim that

  1. All social tenants are  ‘scroungers’
  2. Council housing is a drain on the nation’s finances
  3.  Social housing is “state” housing and
  4. It’s a form of welfare.

Their flagship councils, who have been emboldened by having their party in government, have each made attacks on council tenants.  Westminster City Council wants to raise tenants’ rents if their incomes increase. Hammersmith and Fulham Council have threatened West Kensington and the Gibbs Green estates with bulldozers as part of their ‘redevelopment’ plans for the area around the Earl’s Court complex. The Queen Caroline Estate in the Broadway ward has also been targeted. The word that is often used in conjunction with these plans is “vulnerable”. These two councils claim, as the government does, that social housing should be for the “most vulnerable”. So who qualifies as “vulnerable” and what happens to those people once they have ceased to be “vulnerable”? Will they be evicted after a couple of years?

Let’s look at another of the more common misrepresentations.  Early in their administration, the Tories claimed that there were millions lost through “widespread benefit overpayments”. It turned out that the numbers had been vastly inflated and the amount of money was only dwarfed by the amount lost to the exchequer through tax evasion and avoidance. While those of us on lower incomes have no choice but to pay tax, those people who earn the most find ways to wriggle out of paying it.

It’s time for a look at some of those Telegraph blogs. Here’s one from the Great Lord of Darkness that’s titled  “My Coalition verdict: Iain Duncan Smith scores high, Vince Cable scores low”

The once respected Vince Cable, now an object of derision, scores zero, while Ed Miliband gets 2 out of 10 and must work harder.

There’s only one problem: Miliband isn’t in the coalition, so why mention him?

Ed West also has a pop at Cable.

Biggest loser: Either of the two leading rattle-throwers, Vince Cable and Chris Huhne, who are going to destroy their party because they overestimate the size of their political constituency. “Progressives” comprise a fairly small portion of the British public, and even within the Left are outnumbered by Blue Labour social conservatives and Jack Straw-style authoritarians. They could probably all fit inside Chris Huhne’s living rooms.

Super-Catholic, Cristina Odone can’t resist the sitting duck either.

Biggest Loser: Vince Cable. Energy Minister Chris Huhne may resign from government, but no one really liked him much in the first place. Vince, instead, was the nation’s darling for his purported knowledge of the economy (his book The Storm was a best seller), charmingly romantic Desert Island disc performance, and his fancy footwork on Strictly Come Dancing. Then he  blew it, boasting about his importance to the Coalition. He now looks like a foolish, self-important old man who seems as out of touch with his colleagues as with the public that once cherished him. Sad.

I won’t bother quoting the rest because they all plough the same dull furrow.

The coalition started badly. In the space of 15 days it suffered its first ministerial scandal and resignation when crypto-Tory, David Laws was forced to hand his portfolio to the equally worthless, Danny Alexander.  Today, Laws has been suspended from the Commons for breaching parliamentary rules. He won’t be returning to government any time soon.

The Telegraph says,

He is expected to be ordered to apologise to Parliament and pay back tens of thousands of pounds after an investigation that resulted from a Daily Telegraph report last year.

It is the most serious punishment imposed on any parliamentarian by fellow MPs following the expenses scandal and is likely to block any return to government for Mr Laws.

The Prime Minister had hoped that Mr Laws, who was popular among Conservatives as well as Liberal Democrats, would return to the cabinet soon, but this has now been ruled out.

Ironically it was the Telegraph that broke the Laws expenses story. For someone with a great deal of personal wealth, why did he feel the need to cheat the taxpayer out of over £40,000? One word: arrogance.

It’s hard to see how this coalition can last another 4 years when the Conservatives are trying to find ways to divorce their partners. The Tories’ allies,  the bloggers and commentators at the Torygraph,  spend a great deal of time sticking pins into their Lib Dem voodoo dolls. With these kinds of tensions, it is only a matter of time before the coalition collapses and in the aftermath of the Lib Dems drubbing in the English local elections and their obliteration in Scotland, this can’t come soon enough.

Paddy Power is offering the following odds on the year of the next general election:

2011                  7/2

2012                  5/2

2013                   10/3

2014                   5/1

2015 or later  6/4

Those look like pretty good odds.  I’m almost tempted to have a punt.

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A one-eyed take on debt reduction.

Daniel Hannan claims to have a solution for reducing the national debt.

http://blogs.telegraph.co.uk/news/danielhannan/100040348/how-to-abolish-the-national-debt-overnight/

The problem here is that he hasn’t been straight about what the national debt actually is. Is he confusing/conflating it with the budget deficit?

The current national debt has been with us since the end of the First World War and this should give us a clue as to how the debt is accumulated (I talked about this in an earlier blog). Hannan assumes the public’s total ignorance with regards to the nature of the national debt and continues to peddle the lie – as do most politicians of all parties – that it is caused solely by social spending (he infamously expressed a wish to see an end to the NHS).  The national debt could be reduced by withdrawing from Iraq and Afghanistan and by ending our taste for military adventures overseas. I agree that Council Tax should be scrapped but inheritance tax?  That’s a tax that principally affects the rich…in other words, the friends of Daniel Hannan.

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Filed under Conservative Party, Economics, Government & politics, laissez faire capitalism, neoliberalism, Spiv capitalism

National debt or budget deficit?

It seems that both newsreaders and politicians can’t get this one right. The national debt is accumulated when governments borrow money on domestic and foreign markets; it does this by issuing bonds. The budget deficit is when governments spend more money than they earn. The debt is mainly brought about by fighting foreign wars and deficits occur when the national economy doesn’t make enough money from the products that are sold by producers. Recently the word ‘product’ has been stretched to cover non-tangibles like loans, mortgages (which are a form of loan) and other financial services like insurance. These ‘products’ are included in the national GDP (Gross Domestic Product) figures for a given period (usually monthly or annually) along with other commodities (oil, gas, grains and so on). The black economy and the unemployed are not considered when GDP figures are tabulated. Ever the mischief-maker, Jean Baudrillard suggested that waste (which is a product) be included in a nation’s GDP figures (1998).

It’s time for politicians of all the main parties and some of the smaller ones, like UKIP, to come clean about what these terms mean rather than mumble about how we need to reduce our “debt” when what they’re actually referring to is the budget deficit. The national debt is the hidden discourse that the politicians don’t want to have with the electorate because that would mean confessing to the true nature of how our national economies are structured.

You can’t fool me.

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