Austerity doesn't work
I’m staggered by the number of people who still don’t seem to understand the difference between the national debt and the deficit. Those who say that austerity isn’t working because yet national debt is still increasing clearly don’t grasp the very basics of it. The reality is austerity is working for us. We’ve reduced he deficit by two thirds. But until we completely clear the deficit and start generating a surplus then we will never start to pay back the national debt and it will continue to grow.
I agree to an extent that nations budgets are different to household budgets, but the difference here is what we’re spending our borrowed money on. We not spending it on investment, we’re spending most of it on paying the interest on the debt we already have. We now pay more on the interest on the national debt than we do on the NHS. Nobody can convince me that that is in any way a good state of affairs.
Anyway those who say austerity is not working or not the answer have yet to explain what the answer is. How big does our national debt have to get before we have to start taking action to address it? Surely nobody is proposing we simply ignore it and allow it to grow indefinitely unchecked?At the moment we’re getting away with it because interest rates are so low, but what happens when interest rates start to rise?
In the absence of a credible alternative that doesn’t mean our national debt spiralling towards infinity then austerity is the best option. We all have to share the burden even those at the lower end. We’re just not as rich a nation as we think we are. All this 5th richest economy in the world is BS. We can’t afford our NHS. We can’t afford our bloated benefits system. We can’t afford our national pensions liabilities. Every day we run a budget deficit we have to borrow more and more and more. One day we will get to the point where people/governments will cease to lend to us, just like Greece.Posted 6 months agomolgripsSubscriber
In the absence of a credible alternative that doesn’t mean our national debt spiralling towards infinity then austerity is the best option.
Well the alternative is spend to grow. If you do it right, then even though you borrow more the growth pays you back. That’s what happened in Portugal, although of course every country is different. But there they tried austerity first and it didn’t work.
But spending to grow requires government actually doing something, and doing it well. Two things which we apparently can’t manage in this country.Posted 6 months agokimbersSubscriber
wobbliscott – Member
I’m staggered by the number of people who still don’t seem to understand the difference between the national debt and the deficit
But we were promised the deficit would be cleared by now, several times, that’s what made austerity worth it.
The young & the poor have paid the most for this is a legacy that will cost us even more in the futurePosted 6 months agomrmonkfingerMember
Those who say that austerity isn’t working because yet national debt is still increasing clearly don’t grasp the very basics of it.
Deficit is reduced, but not cleared. Debt still increasing. “Austerity” was the thing that was meant to fix the deficit and turn around a surplus in order to pay off the debt, such that all that cash you mention that is currently being hosed on interest payments, could be put to a more useful use. Hence why I said we didn’t really experience austerity. We got some public spending cuts. It’s only a terminology difference. But we didn’t get the thing that was promised.
OTOH I don’t believe we could get spending to grow right. We had a whole bundle of Labour terms where we spent an absolute ton, which seems to have lead to a rather whopping debt and pretty cheeky deficit to match.
I don’t know what the answer is, but sleep-QE-ing our way along, all the while hosing the value of the pound, just all seems a bit like the Greece problem to me.
Anyway, I’m out of my financial depth in this argument.Posted 6 months agoroneMember
Obundle of Labour terms where we spent an absolute ton, which seems to have lead to a rather whopping debt and pretty cheeky deficit to match.TOH I don’t believe we could get spending to grow right. We had a whole
I would politely contest that and say Labour did okay with growth and having a few surpluses during their middle stint, until the hammer dropped which history should agree wasn’t their fault.
I also don’t think the analogies to Greece, although often cited are valid at all.Posted 6 months agoroneMember
I know off the top of my head that Labour had more surpluses that the previous Tory government. (3/4 iirc)
The Tories have hardly ever produced surpluses, certainly in the last 30 years.
Your charts fails to show in comparisons to the Conservative party.
Conservative 1991/92 to 1996/97 (6 years): £348 billion (average £58 billion per year)
Conservative 2010/11 to 2016/17 (7 years): £ 720.1 billion (average £102.9 billion per year)
Total Conservative overall deficits for the 13 years: £ 1068.1 billion (average £82.2 billion per year) – yes, over one trillion pounds in 13 years!
Total Labour 1997/98 to 2009/10 overall deficits for the 13 years: £496.4 billion (average £38.2 billion per year).
Tories are borrow monsters.
Can’t escape the fact.
Nice piece here:
It’s all balls anyway. A country that controls its own money supply controls the debt.Posted 6 months agoteamhurtmoreMember
In isolation, whether the government is in surplus or defitict doesnt matter. It needs to be considered in the context of whether the other three major players are in surplus or deficit in, households, corporates and the the rest of the world. It is the balance between each of these players that matters, indeed ALL that matters.
Hence the idea that you can’t solve a debt crisis with debt was myopic at best, ignorant at worst – but maintsrateam economics is still dominated by the flawed models that makes otherwise sensible people believe this.
If, as in the aftermath of the crisis, the corporate and household sectors are running surpluses (paying down THEIR debt) the government’s need to balance this by running deficits as does the ROW (note what happens to £ in this context)
Whether deliberately or not (if believe the latter) the Tories abandoned austerity at birth and correctly (if unintentionally) ran among the highest fiscal deficits in the developed world. Hence the UK (and US) recovered faster and stronger than the EU in complete contrast to the widely abused narrative of “austerity”. It was and is a myth but a boon for sloppy journos and politicians, who can’t be bothered to understand what happened and is happening.Posted 6 months ago
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