UK 'must cut spending or raise taxes,' say experts

Sir_Humphrey

Generali wrote: »

What is "normal deficit spending" for a US state as you understand it, please?

AIUI, a US State has three sources of funding:

- taxes
- Federal grants (most often to pay for Federally mandated programmes)
- borrowing

How does "normal deficit spending" fit around this? A state can't print money so where else could the finance come from?

I think you're comparing your elbow with your bottom!!!

I am not an expert on US State budgeting. As I understand it, their capacity to borrow is more constrained than the Federal Government, hence their ability to sustain deficit spending is less than that of the Federal Government. This is because the borrowing required to fill the budget deficit is more difficult to obtain.

Certain US States have a constitutional bar to long term borrowing (which means longer than two years in some cases).

Wookster

sdooley wrote: »

The UK's less-extreme problems are also predominantly caused by private borrowing, which has increased by a factor of four compared to state sector borrowing. Private debt so dwarfs state debt that even a government that had run balanced budgets since 1997 would not have the reserves to bail out the banks without huge national borrowing. If RBS alone have to be nationalised, it will double the national debt.

You cannot ignore the impact of any of private, public or corporate debt. The impact of the recent bailouts has been to transfer debt (personal and corporate) into government hands.

All developed countries will be borrowing heavily over the next few years, during the recession, competing for limited funds resources. If you were a lender, who would you lend to? Someone who is already heavily in debt or someone who has shown prudence in the past and is less indebted?

Generali

Sir_Humphrey wrote: »

I am not an expert on US State budgeting. As I understand it, their capacity to borrow is more constrained than the Federal Government, hence their ability to sustain deficit spending is less than that of the Federal Government. This is because the borrowing required to fill the budget deficit is more difficult to obtain.

Certain US States have a constitutional bar to long term borrowing (which means longer than two years in some cases).

So you don't know what "normal deficit spending" is for a state.

Why bring it up?

Sir_Humphrey

Generali wrote: »

So you don't know what "normal deficit spending" is for a state.

Why bring it up?

I think my English is maybe ambiguous. It is normal to fund deficit spending through long term borrowing. That is what I mean by 'normal deficit spending'. I was referring to the method, not the quantity.

Generali

Sir_Humphrey wrote: »

I think my English is maybe ambiguous. It is normal to fund deficit spending through long term borrowing. That is what I mean by 'normal deficit spending'. I was referring to the method, not the quantity.

Perhaps the heat is messing with my brain as it really is very, very hot over here. Not in a rubbing it in kind of way, more in an 'old people keep falling over' kind of way. I know it's cold in the UK. Well if cold=hot it's 2xhot here!!!

AIUI, US States can tax, borrow or use Federal cash. If they lose the ability to borrow because the market won't lend to them then that's just the normal way things work.

State Govts can borrow more if they're prepared to contract their taxpayers to pay more interest in future and thus either pay higher taxes in future. New York went close to bankruptcy in the 1970s in similar circs.

Rochdale_Pioneers

Wookster wrote: »

Stop muddying the waters.

Labour has increased debt very significantly.

(my 1999/2000 was simply an example to show how ludicrous Rochdale's suggestion was)

I am now convinced that you are a moron. please demonstrate how public debt prior to the recession was higher than when Labour took office. You compare 2007 with 1997. The ONS says it went down. The EU say it went down. The OECD say it went down. The CIA World factbook says it went down. The IMF says it went down.

Clearly on planet Wookster it went up. On Planet Wookster 44% public debt is higher than 49% public debt. You can prove that can you? The accusation is Labour got public finances in a "terrible state" prior to the recession. The fact that debt was lower than when they took office shows this to be rubbish. Yet you keep spouting the same nonsense. You know its nonsense and yet you keep saying it

tomstickland

It doesn't matter how many organisations say it went down, because you and them are refering to debt as a percentage of GDP and Wookster is referring to total debt.

Furthermore, as I've said several times, it went down from 1997-2001 but then it started going back up again, during a boom.

Rochdale_Pioneers

tomstickland wrote: »

It doesn't matter how many organisations say it went down, because you and them are refering to debt as a percentage of GDP and Wookster is referring to total debt.

Furthermore, as I've said several times, it went down from 1997-2001 but then it started going back up again, during a boom.

So what you're saying is that when Wookster talks about "public debt" he doesn't mean public debt at all. Thanks for the clarification.

And yes, we know it went up post 2001, we've discussed that a lot. Did it go down overall between 1997 and 2007? If the answer is yes then to claim that public debt increased between those two dates is a lie isn't it? Or at least a complete obsfucation of the facts.

Nor do you answer the other major point under discussion, which is that even with the Brown spending spree post 2001, even with the bailouts now, public debt will still be lower than public debt in most of our neighbours. So the suggestion that we cannot sustain that level of debt is also either a lie or obsfucation.

As for private and corporate debt answer me this. If I have £10k on credit cards to pay off does that mean I won't pay my taxes? If the banks are paying £10bn in long term debts to other banks does that mean they won't pay tax? Does banks being up to their eyeballs in debt mean that the state can't borrow cash to fund the bailouts?

High levels of private debt or not, the UK government is entirely capable of securing and servicing debt levels of a forecasted 57% gross. Any and all attempts to suggest that we cannot simply do not equate to either the facts or to logic and reason.

Sorry boys but the Tories are wrong on this one. And its fine for them to lie about it, thats what oppositions do. Doesn't suddenly change the facts though.

tomstickland

Rochdale_Pioneers wrote: »

So what you're saying is that when Wookster talks about "public debt" he doesn't mean public debt at all. Thanks for the clarification.

He means total debt rather than debt divided by GDP.

And yes, we know it went up post 2001, we've discussed that a lot. Did it go down overall between 1997 and 2007? If the answer is yes then to claim that public debt increased between those two dates is a lie isn't it? Or at least a complete obsfucation of the facts.

It's exactly what it is - a statement that it went down from 1997 to 2001 and then it started rising again. And this is debt/GDP.

Nor do you answer the other major point under discussion, which is that even with the Brown spending spree post 2001, even with the bailouts now, public debt will still be lower than public debt in most of our neighbours. So the suggestion that we cannot sustain that level of debt is also either a lie or obsfucation.

But you've never answered the point about why debt rose 1991-1995 apart from claiming that because it went up then that mean financial mismanagement. Nor that debt in 1991 was lower than it is now.
As for private and corporate debt answer me this. If I have £10k on credit cards to pay off does that mean I won't pay my taxes? If the banks are paying £10bn in long term debts to other banks does that mean they won't pay tax? Does banks being up to their eyeballs in debt mean that the state can't borrow cash to fund the bailouts?

High levels of private debt or not, the UK government is entirely capable of securing and servicing debt levels of a forecasted 57% gross. Any and all attempts to suggest that we cannot simply do not equate to either the facts or to logic and reason.

Sorry boys but the Tories are wrong on this one. And its fine for them to lie about it, thats what oppositions do. Doesn't suddenly change the facts though.[/quote]

Rochdale_Pioneers

tomstickland wrote: »

But you've never answered the point about why debt rose 1991-1995 apart from claiming that because it went up then that mean financial mismanagement. Nor that debt in 1991 was lower than it is now.

I have answered it - I don't have the slightest idea why debt rose so massively in that period. Here we know exactly why debt is shooting up - we're bailing out banks and burning cash on fiscal stimuli. What did we burn a hundred billion quid on during 1991 - 1995? I know we burned £15bn on Black Wednesday alone and I know we had been buying sterling in the few weeks leading up to the ERM exit. That doesn't explain the massive ramping up of debt though, and I can't recall us bailing things out or buying assets. In fact we sold assets through privatisation. The financial mismanagement claim isn't mine - its what the Tories are saying about Labour. Well if that is true then logically the same must be true about a 5 year period where our debt went up by 80% under their stewardship.

And I have already agreed with you that debt was lower in 1991 than it is now - nor have I ever disputed that. But the figure to be used as the benchmark for Labour is not 1991 its 1997 - they cannot be blamed for the level of debt they inherited. And I am absolutely fine with debates about the merits of Brown's invest in the cycle plan which saw debt increase post 2001.

But even allowing for this failed scheme of Browns, even with not being able to repay that debt within the cycle as he had planned, the fact very clearly remains that government debt dropped between 1997 and 2007. never mind the movements in between, 44% debt in 2007 is less than 49.8% debt in 1997. So Labour DID pay off debt in the 10 year period in between taking office and the start of the credit crunch. the accusation from Tory benches is that the opposite is true - that government debt went up in that period. And it didn't.

Now I'm not going to keep going on about this because its becoming futile. I am not the one setting the parameters for the figures, I am taking what Cameron and Osborne are saying and comparing it with the facts. That apparently makes me a Labour stooge - I shall take such claims under advisement. I find it bizarre that some people want to critique Labour claims and make sure they stand up to scrutiny, but attack anyone applying the same yardstick to the Tories.

What I would like is for the economy - the actual real world economy - to recover. That requires an understanding of the facts as a basis for reasoned argument, planning and then action. If we can't even get the facts right then we are knackered. And frankly that goes for whoever wins the next election - this catastrophe we as the developed west have suffered goes beyond national boundaries and party politics. I couldn't give a toss about opinion polls or who will win the election at the moment, thats a year and a half away. I'm worried about next week. So I get annoyed when lies which are damaging to our standing as an economy are thrown around for cheap political points scoring. Some people on the right clearly want to damage the economy because they have calculated that the worse it gets the easier it becomes for the Tories to blame Brown. Any pain that then results under their forthcoming government they can then also pin on Brown.

I would rather avoid making this worse so that blame isn't needed. I don't play politics with people's jobs and homes. Many posters here are clearly well-to-do enough not to worry. Good for you. The rest of us are in the smelly stuff....