Tory Economic Competence Myth?

mgdavid

chewmylegoff wrote: »

No, but i don't think we need a bunch of economists to tell us that higher government spending results in higher GDP and higher employment. Clearly if the govt borrows an extra £100,000 and uses it to employ you at a salary of £100,000 which you then spend on Starbucks coffees and such like then both employment and GDP will be higher. If the next government comes along and decides that is a waste of money and makes you redundant then GDP and employment go down.

Saying that reducing spending has a negative impact on GDP and employment (when compared to not reducing spending) is not the same as saying that we shouldn't reduce spending. The answer that the economists have given to the question is irrelevant to your argument as they haven't been asked whether they think it is the right economic policy to pursue, they have been asked to answer an irrelevant question. Perhaps elsewhere in the survey they express a view that the govt should not have taken a different economic approach, but I assume the blog would have reference it if so...

suggest you read up on the economic difference between state public spending (wastage) and private sector spending (investment).
You really think employing someone in a non-job on £100k pa is productive? God help us.

Generali

chewmylegoff wrote: »

No, but i don't think we need a bunch of economists to tell us that higher government spending results in higher GDP and higher employment. Clearly if the govt borrows an extra £100,000 and uses it to employ you at a salary of £100,000 which you then spend on Starbucks coffees and such like then both employment and GDP will be higher. If the next government comes along and decides that is a waste of money and makes you redundant then GDP and employment go down.

Not really.

If the Government borrows £100,000 then that's £100,000 that someone else can't borrow.

Maybe it's that Dave and Chlamydia can't borrow a bunch of cash to fund an unsustainable lifestyle. Maybe it's that Steve McJobs can't borrow the money to start his mCPhone company.

The Government doesn't just pull money out of the air (yup, QE I know). Each pound the Government spends is a pound someone else doesn't spend.

The technical term for it is crowding out and it is generally assumed that when the economy is growing that crowding out happens at a 1:1 ratio, i.e. each pound the Government borrows is a pound that business cannot borrow.

chewmylegoff wrote: »

Saying that reducing spending has a negative impact on GDP and employment (when compared to not reducing spending) is not the same as saying that we shouldn't reduce spending. The answer that the economists have given to the question is irrelevant to your argument as they haven't been asked whether they think it is the right economic policy to pursue, they have been asked to answer an irrelevant question. Perhaps elsewhere in the survey they express a view that the govt should not have taken a different economic approach, but I assume the blog would have reference it if so...

Government spending almost always (QE excepted) comes from taxation. Government borrowing is just spending tomorrow's tax today.

All taxation causes a loss to the economy and to people living in the economy due to what's called the deadweight loss. Clearly there is a gain to be set against the deadweight loss in that the Government will spend that money. Generally speaking if the Government spends the money on something the market can't provide (e.g. street lighting) then there may be a net gain from the Government spending.

If the Government spends the money on something the market can provide perfectly well whilst guided by the price system then the deadweight loss is a real loss to the economy. Indeed there may well be a second loss to the economy as the subsidised firm puts a more efficient one out of business.

antrobus

Generali wrote: »

Every politician should have the following phrase tattooed on their foreheads:

"Don't just do something, stand there".

Government economic policy should largely consist of trying very hard not to get in the way of people who only want to make a few bob.

Spidernick

mgdavid wrote: »

I'm an average sort of Joe, non-university educated but later went to evening college to get a qualification. Mostly worked as a small cog within large corporates.
In the 50 years since I started earning money there has been a remarkable correlation between my prosperity and Conservative Governments. Good enough for me.

Well that's just anecdotal. Personally I try and think beyond myself when deciding where my vote will go!

CLAPTON

Spidernick wrote: »

Well that's just anecdotal. Personally I try and think beyond myself when deciding where my vote will go!

what information do you use to a make a judgement about the area beyond yourself?

Spidernick

CLAPTON wrote: »

what information do you use to a make a judgement about the area beyond yourself?

As much as possible and from as many sources as possible, as well as my own experiences. Don't most people?

CLAPTON

Spidernick wrote: »

As much as possible and from as many sources as possible, as well as my own experiences. Don't most people?

that may or may not be just as limited depending upon your sources

Cyberman60

woodbine wrote: »

Thrugelmir wrote: »

Brown inherited a perfectly good economy and trashed it over a period of 13 years.

he stuck to ken clarkes spending plans for 2 years
but to maintain that we had a perfectly good economy pre 97 is plainly wrong

We had an improving economy with at least 12 consecutive months of growth after coming through a recession. We also had thriving pensions, lots of gold in our coffers etc... until Brown came along..:mad:

Spidernick

Is Osborne a 'lucky' Chancellor? Michael Meacher (who can also be Orwellian in his criticism of the Left, as well of the Right) certainly seems to think so. See this from 26 February 2015:

http://www.michaelmeacher.info/weblog/2015/02/osborne-thinks-economy-trump-card-joker-not-ace/#more-8193

'After the financial crash there was a serious shortage of demand, but Osborne’s austerity policies, instead of easing it, severely aggravated it. Despite the fact that his policies were the opposite of what was needed, he has had the luck of the devil through measures being applied from 4 other sources which have compensated for his own folly. First, £375bn was inserted into the economy through successive waves of quantitative easing. Then interest rates were ratcheted down to virtually zero – 0.5% for the last 6 years, the lowest by far for the whole 320 years of the Bank of England’s existence. Then because of the gross mis-selling of pensions and other financial products the banks were forced to disgorge £23bn in compensation to their consumers for their misdeeds. And finally, just in the nick of electoral time, the world price of crude has halved over the last 10 months, bringing inflation down to 0.3% and giving people for the first time in 6 years a marginal rise in incomes over prices.'

Cyberman60

Generali wrote: »

That would imply that the UK has undergone austerity (spending falling or taxes rising). It hasn't.

What has happened is the rate of increase in spending has fallen dramatically.

The rate of BORROWING has fallen dramatically, by 70 Billion a year since 2010, from 160 Billion a year to 90 Billion a year.

That is a major achievement. :T