Where will the cuts fall

cells

antrobus wrote: »

The point would be that it isn't. The deficit is 5.5% of GDP and growth is 2.5%. If debt is growing faster than income then sooner or later you're going to run out of income. So, funnily enough, there is a need to further reduce the deficit by 3% to make things sustainable. As they say.



And you have to look at things in terms of where you are in the economic cycle.



Given that we are (a) on the upswing of the economic cycle and (b) we have a big pile of debt, the plan really should be move into a surplus sometime in the forseeable future.

What if the amount of credit in the system determine the interest rate rather than the other way around?

Thrugelmir

cells wrote: »

I've heard from both sides and there are good points to be made yet I've sill yet to find a definitive answer one way or another

What good points are there in running an ever growing deficit?

Keynes never intended inflation to be used in the way it has in his name in more recent years.

cells

Generali wrote: »

The size of unfunded liabilities are pretty clear if you look for them. For example, from a highly biased source admittedly:

http://www.if.org.uk/archives/2031/ons-reveals-full-uk-pension-liabilities



Even if the source is biased, the numbers are correct or at least within the right area of correctness.

The reason that the Government doesn't include these liabilities in the National Debt? They can renege on them so they don't have to include them. That's what will end up happening barring some miracle of economic growth. The Government at some time will have no choice but to fail to pay out what was promised.

Immigration will serve to put off that fateful day but quite simply you can't expect to work from the age of 23 or 25 until 60 or 65 and then expect the state to keep you for another 20 or 30 years.

A man in Harrow aged 65 can currently expect to see his 85th birthday. Given constant improvements in medicines and despite people trying really quite hard to eat and drink themselves to death, we can reasonably expect to see life expectancy continue to rise over time.

Why is it unsustainable its been going on for the best part of 200 years

assuming the old folk do 'drain the system' that cash isn't disappearing its circulating. At some stage we would get to a point where demand is constant but labour shrinks (old folk retire but they still eat food and drive and buy crap etc)

A few things could happen at that point. One is that the price of labor goes up. Eg the government gives the old folk their promissed zillions but the price of bread and milk and whatever else it is they like goes up through wage --> goods inflation

another is that we return to imo a better system of work where boys and girls start employment at age 15 instead of age 22. Thats a huge pool of largely wasted labor.

Also productivity should go up if the labor force shrinks


overall I don't think pensions goig to be a huge burdon (unless we do something totally stupid like fun the NHS to the point wach elderly person has a full time nurse wiping their bum)

cells

Thrugelmir wrote: »

What good points are there in running an ever grow
Keynes never intended inflation to be used in the has in his name in more recent years.

Well one good point is that money distributed to the poor just ups utilisation of marginal cost capital and is in fact a near zero cost gift to society.

An example would be say giving the poor £5 (or a cinema voucher) a month more by taxing cinemas. They then go and spend that £5 watching a film at the cinema. The business was taxed more but got more revenue which offset that tax. Effectively it was like the gov saying to cinemas be charitable and give out some free cinema tickets to the poor.

the reverse is also true. Lets say benifits were cut by £5 and the saving used to cut corporation tax. Maybe companies are initially happy but a few days later they notice sales are down collectively by £50m a week (£5pw x 10million recipients). Any tax saving they collectively made was mostly lost to lower sales

Cyberman60

cells wrote: »

as far as I can see. There is no limit to how much the government can spend.

You are Gordon Brown. :rotfl:

cells

Cyberman60 wrote: »

You are Gordondefinitionrotfl:

What was the peak deficit £180B in one year?
That seems close enough to me to meet my definition

CLAPTON

cells wrote: »

Well one good point is that money distributed to the poor just ups utilisation of marginal cost capital and is in fact a near zero cost gift to society.

An example would be say giving the poor £5 (or a cinema voucher) a month more by taxing cinemas. They then go and spend that £5 watching a film at the cinema. The business was taxed more but got more revenue which offset that tax. Effectively it was like the gov saying to cinemas be charitable and give out some free cinema tickets to the poor.

the reverse is also true. Lets say benifits were cut by £5 and the saving used to cut corporation tax. Maybe companies are initially happy but a few days later they notice sales are down collectively by £50m a week (£5pw x 10million recipients). Any tax saving they collectively made was mostly lost to lower sales

indeed it is so that if there is
- spare resources available then using them is essentially free
as long sufficient service are paid for to cover costs and profits.

which is essentially Keynesian arguments for paying people to dig holes and then filling them in

however it is also a waste of resources and leads inevitably to poor resource allocation, inflation, high taxation, bankrupt firms and poverty.

cells

CLAPTON wrote: »

indeed it is so that if there is
- spare resources available then using them is essentially free
as long sufficient service are paid for to cover costs and profits.

which is essentially Keynesian arguments for paying people to dig holes and then filling them in

however it is also a waste of resources and leads inevitably to poor resource allocation, inflation, high taxation, bankrupt firms and poverty.

its nowhere near the argument of digging holes to fill them in again


if you cut £100M this week from handouts to the poor/old, you find that next week business sales have fallen by £100M

apart from the obvious things like less VAT less corporation taxes less employment etc from the lost sales you would also find that businesses would have to rise prices

so although the government gave you a £100M tax cut (now not going to said poor/old people) that £100M will mostly be eaten up by higher prices

cells

Thrugelmir wrote: »

What good points are there in running a deficit?

I don't know, its a bit like a continuous loop on a programming error

cut the deficit and you cut that much flowing into the economy countering some/most/all of that saving so that is not good

but the reverse of just spend more and more and live happily ever after just intuitively doesn't seem like it could be right

so i am stuck in the middle of I just don't know



I lean ever so slightly to the "spend spend spend" camp as I think maybe taken to its simplest form deficit spending like like promising yourself a vacation later for doing work now. it brings forth production to now and a bird in the hand is worth 1.02 birds next year........

antrobus

cells wrote: »

...so i am stuck in the middle of I just don't know.......

That's about the only statement you've made on this thread that even vaguely makes sense.