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

Wookster

Am I being silly? What's a MEW?

WTF?_2

kennyboy66 wrote: »

That the Laffer curve is a parabola with a theoretical optimum ?

That both right and left politicians only look at one side of the curve of their choosing ?

Art Laffer who came up with the Laffer curve, doesn't have a whole lot of credibility after this little incident:

http://uk.youtube.com/watch?v=LfascZSTU4o


This was late 2006, when the US Market still appeared to be doing fine. He's not laughing now......

kennyboy66_2

Wookster wrote: »

Am I being silly? What's a MEW?

Mortgage Equity Withdrawal.

Obviously some of this spending can add to a nations GDP by increasing consumption.

If the money was used to put down as a deposit for a buy to let house, then there is no impact on GDP

If the money is used to buy a nice imported BMW, then again there is no impact on GDP.

If the money is used to go out on the lash, holiday in the UK and improve your home, then it increases GDP, as it forms part of "consumption"

GDP = Consumption plus Government spending + investment + exports - imports.

If it was to consolidate credit card debts & personal loans, then there at this point would be no impact on GDP, but obviously the original spending would be part of GDP.

In 2006 & 2007 Mortages, credit card & unsecured lending increased by about £125bn each year, about 9% of GDP.

The increase in debt was only 1/2 as much in 2008, and I reckon there will be no increase in 2009

It depends on how much of this increased debt found its way in to GDP, rather than just being incurred to buy a bigger house.

There is certainly an effect but I don't think its anywhere near 6%. I reckon about 2-3%.

Howver you can add to this that people should save move (decreasing consumption) and that government can't increase spending at the rate they have.

Wookster

kennyboy66 wrote: »

There is certianly an affect but I don't think its anywhere near 6%. I reckon about 2-3%.

Ahhh gotcha

Well if its only 2-3% of GDP then there wouldn't be too much of a problem and one might even postulate that bank lending wasn't so reckless after all.

I'm not sure that's the case.

I'd seen estimates that 30% of GDP is based off "reckless lending" and while I don't think its that high its certainly in the double digits.

geoffky

Have a look at the graphs on this page it shows GDP with and without MEW in America..the figures are amazing..

http://www.irvinehousingblog.com/

ManAtHome

kennyboy66 wrote: »

If the money was used to put down as a deposit for a buy to let house, then there is no impact on GDP

If the money is used to buy a nice imported BMW, then again there is no impact on GDP.

Confuzzled....

Surely if any dosh is spent on housing, somewhere down the line a builder will be flogging new ones (adds to GDP), and unless the Beemer was a direct import, will be some value 'added' through the retail chain..?

tomstickland

Sir_Humphrey wrote: »

This would be sensible, as Keynesianism requires the reining in of the fiscal position in the good times.

It's a bit late to go all Keynes now - Brown decided not to bother with saving during the boom.

tomstickland

Regarding the "you're having a laffe" curve, I would expect tax revenue versus taxation levels to be a flat topped curve. Very high tax levels encourage people to move out of the country or find creative ways of evading. Clearly 0% tax raises no tax revenue.

The current administration seem to believe that they can ladle as many taxes as possible onto the population and thereby increase revenue.

Rochdale_Pioneers

tomstickland wrote: »

It's a bit late to go all Keynes now - Brown decided not to bother with saving during the boom.

The UK debt figures suggest that the Tories are lying through their teeth on this one. As apparently are you.

leveller2911

Rochdale_Pioneers wrote: »

1997-2001. Brown stuck to restrained Tory spending limits which even Ken Clarke admitted he would have broken. In that period Brown paid off debt instead, dropping UK national debt from 49.8% in 1997 to 37.7% in 2001. Its only in Labour's second term that the spending spree began - before that there was mass complaints from the back benches that Labour was doing nothing. Remember Brown's infamous sub-£1 pension increase?

Even with the big increase in spending, debt had only risen to 44.2% by 2007.

I find it very worrying that after 10.5 yrs in government some people still refuse to believe they f*ucked up big time............. this government has had more than enough time to put right the wrongs and they didnt...

"NEW LABOUR" !!!!!!!!! strange how we no longer hear that term..:rolleyes: