What did Ed Balls really mean on the deficit?


11:44 am - January 15th 2012

by Richard Murphy    


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I am disappointed as the next Keynesian if Ed Balls said yesterday morning that he supports the Tories’ cuts.

He hasn’t, at least as far as I can tell. He has said:

My starting point is, I am afraid, we are going to have keep all these cuts. There is a big squeeze happening on budgets across the piece. The squeeze on defence spending, for instance, is £15bn by 2015. We are going to have to start from that being the baseline. At this stage, we can make no commitments to reverse any of that, on spending or on tax. So I am being absolutely clear about that.


This is not endorsement. This is about saying he has no choice on this matter: in opposition he can’t stop the Tories cutting and as a result the start point for a Labour government will be that these cuts have happened and there’s no point pretending now that won’t have happened: it will.

And what’s he’s also saying is that right now there is no way of predicting what Labour will make priorities for change come the time of the next election, so he won’t.

I’d be saying that too if I had his job. Not that it would make it a lot of fun.

And I also have to say, his focus on jobs is right, although forcing real pay cuts on the state sector is not sustainable forever – and he must know it. But jobs have to come first. That’s essential to the recovery – and for the people of this country.

Now, when is he going to talk the tax gap? Because that’s not a spending commitment, that’s a revenue commitment and that’s something quite different?

PS And if Ed Balls doesn’t mean what I think he means then my opinion changes. So I’m hoping I’m right.

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Richard is an occasional contributor. He is a chartered accountant and founder of the Tax Justice Network. He blogs at Tax Research UK
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Reader comments


“This is about saying he has no choice on this matter: in opposition he can’t stop the Tories cutting”

Half correct. He has no choice on this matter. But neither have the Tories. The squeeze is there not because of whatever a current British government is doing, they are there because of what previous governments have done.

And it’s the same story everywhere in Europe, of course: the current government, be it conservatives, social democrats, greens, whatever – they just can’t keep on borrowing money their predecessors have.

As someone said, you eventually run out of other people’s money.

“My starting point is, I am afraid, we are going to have keep all these cuts. There is a big squeeze happening on budgets across the piece. The squeeze on defence spending, for instance, is £15bn by 2015. We are going to have to start from that being the baseline. At this stage, we can make no commitments to reverse any of that, on spending or on tax. So I am being absolutely clear about that.

This is not endorsement. This is about saying he has no choice on this matter: in opposition he can’t stop the Tories cutting and as a result the start point for a Labour government will be that these cuts have happened and there’s no point pretending now that won’t have happened: it will.”

Ha ha. And I suppose you’re at war with Eastasia and always have, eh, Richard? You glide over the fact that Balls explicitly rules out reversing the cuts, doesn’t say “All these horrid Tory cuts will have happened by 2015, when we come in we will start from this baseline but start building public services up again (and hope no-one notices the borrowing)”. He says “we are going to have keep all these cuts”. If there is a Labour Government in 2015 – no, stop laughing at the back – then he would have a choice in the matter, he could choose to reverse these cuts, but he elects to rule it out.

Even the Labour Shadow Chancellor, this great economic brain that the left have painted him as, rules out tax/borrow and spend. Hard luck.

“PS And if Ed Balls doesn’t mean what I think he means then my opinion changes. So I’m hoping I’m right.”

Why so modest, Richard? You don’t strike me as the sort of bloke who spends too long worrying that he might be wrong about anything.

“You glide over the fact that Balls explicitly rules out reversing the cuts”

@test And you conveniently glide over the fact that what Balls actually said was he cannot *promise* to reverse the cuts. Spot the difference? Understand the nuance? How could he make promises when he doesn’t know what state public finances will be in? That would be downright irresponsible. Best to leave the hubristic claims to Osborne since he has been proved wrong on each one of them so far.

At last! Someone saying what my immediate reaction to Balls’ speech was. It’s a statement of the bleedin’ obvious: “We don’t know how much of a mess they’ll have made of the country, so we can’t promise we can re-instate any of these cuts.”

In any case, if the economy gets better under a Labour Government, we might want to spend the extra money in a different way, mightn’t we?

All I’ve heard Labour do this past year is;
1) Saying the cuts were “too much too fast”.
2) accusing the Lib Dems of deceiving their supporters in exchange for power.
3) Saying that ConDems were hitting the poorest the hardest.
4) Telling the middle class that Labour understood and were working to help the squeezed middle.
5) Saying that the ConDems were not for women.
6) Saying the ConDems were forcing students into dire educational debt.
7) Saying there was no coherent foreign policy.
8) Accusing Cameron of isolating the UK from Europe.
9) Saying a pay freeze and high VAT was not the best move.

Ed Miliband & his team kept saying that Labour would present a credible alternative but also shied away from publishing an interim manifesto & confirming what it would assume to cut and not cut if it became the next governmet. However, by doing a speech were the key line is “My starting point is, I am afraid, we are going to have keep all these cuts” is wholly irresponsible, pandering to the right wing press, demonstrates a year long intentional deception & hypocricy from people who should know better. Instead of his wishy washy speech on Tuesday, Ed Miliband should have been giving Ed Balls’s speech.

Yes I know I’m in the minority of saying this or daring to write this, but the 2 Ed’s conduct leaves little to be desired & just coz I am a party member doesn’t mean I have to praise & accept everything.

6. Anon E Mouse

Why is it that Labour supporters seem to think they can argue black is white and we’re going to believe it?

The cuts were always necessary. Labour’s planned “client state” with the public reliant on handouts from the government and benefit after benefit being invented to entice people to vote for them is over.

Next to go should be the hated European Union replaced by a trading arrangement between free democratic countries.

All that has happened here is that Ed Balls, realising that the public know the truth, has faced reality which is a good thing.

This is a step forward towards credibility for the official opposition in this country and is a good thing.

The sooner Labour activists stop thinking the public are idiots the better…

Frankly, I think some of those on the Left who are painting Ed Balls’ comments as a U-turn or an acceptance of the Tory view on austerity are trying to have it both ways.

We’ve been arguing since 2010 that if the Tories went full steam ahead with deep spending cuts and sharp tax rises, while the recovery was still fragile and the global picture uncertain, the likely result would be economic stagnation or recession at a time when growth was essential. The deficit would stay higher for longer and we’d end up poorer rather than richer as a country in the medium to long term, having missed the window of opportunity to make up lost ground following the recession of 08-09.

And we were right. We can now be fairly sure that the UK is going to be a poorer, more indebted nation in 2015 than we ever expected.

Yet now some people seem to want to say none of this really matters, because however bad things are in 2015, the next Labour government can just borrow as much money as it needs to reverse any cuts and tax rises it likes. Whether the economy’s growing at 3% or still stagnant, whether the national debt is 70% of GDP or 80%, whether the deficit is £30 billion or £90 billion, it just doesn’t make any difference. Nothing that happens could possibly mean spending has to be any lower from 2015 onwards than it would have been if the economy had just grown steadily at 2.5% a year from 2008 to 2015.

Surely this lacks all credibility. It was one thing to be arguing, in 2011, that it wasn’t too late to get the recovery back on track, but surely there comes a point when we have to accept that some of the ground we’ve lost, we can’t count on ever making up.

8. Leon Wolfeson

@7 – What, surrendering the momentum, the terms and substance of the economic argument and refusing to consider ANY form of alternative is good?

It’s signing RIGHT ON to the economic collapse. It’s agreeing that the basic economic policy of the coalition is solid. That nothing can be done, there’s no point arguing and he’ll sit down and shut up on anything involving money.

There are ways to sidestep. For instance, rent caps. But no, they’ve now been dismissed and the Tory argument accepted wholesale. People WILL be socially cleansed under a Labour government, having to move as LHA values increasingly fall out of step with rents (as it’s now designed to do).

If the government of the day had introduced a sovereign fund for our oil reserves, as Denmark did, we wouldn’t be in this position.
It’s the total lack of sound management that has ruined this country, that is down to the two political parties, Labour and Conservative.

What is need is the removal of millionaires in cabinet.

Time to give the Green party my vote I think.

10. Biffy Dunderdale

The contortions that Ed Balls has just been through to spin his way out of admitting he has had to join the reality-based community are nothing to the contortions Richard Murphy is going through to save face. I think we’re going to have years of this entertainment.

@ 8

“What, surrendering the momentum, the terms and substance of the economic argument and refusing to consider ANY form of alternative is good?”

No. We should continue to press for an alternative, and to make the case that if we’d taken a different path through late 2010 and 2011, things wouldn’t now be looking as bad as they are. But as we get further into this parliamentary term and our focus shifts from what the Coalition should be doing *now*, to what Labour would do if elected in 2015, we’re going to have to move on. As I say, we can’t have it both ways: *either* the Tories’ economic policies are doing serious, lasting damage, *or* things aren’t that bad and a future Labour government can quickly undo any damage that’s been done and get spending back on track and on a sustainable footing. Not both.

“It’s signing RIGHT ON to the economic collapse.”

No. It’s simply acknowledging that if such a collapse happens, as now looks likely, the next government is not going to be able to count on being able to make up for all the growth lost between 2008 and 2015. We are just going to be poorer, as a country, than we expected to be.

“It’s agreeing that the basic economic policy of the coalition is solid.”

Quite the reverse; it’s pointing out that the economic policy of the coalition is doing real damage that’s too severe simply to reverse in a few years’ time.

I think G.O’s comment at #7 is spot on too.

The problem is that Balls is talking about an inability to reverse the cuts, when what he actually has, if we accept his argument, is an inability to reverse the size of the cuts. The Tories may leave him with insufficient money in the pot to reverse everything, that doesn’t mean he can’t redistribute that money in a more socially responsible way. Does Labour really believe that leaving disabled people who are unfit for work without any state support after 12 months if their partner earns more than £7.5k is vital to the economy?

Richard,

I am disappointed as the next Keynesian if Ed Balls said yesterday morning that he supports the Tories’ cuts.

He hasn’t, at least as far as I can tell.

The problem with painstakingly attempting to reconstruct a statement to something more politically acceptable is that all you end up doing is exposing the rather obvious fact that the person you are attempting to spin has made a gaffe. You say you ‘cannot tell whether or not’ Balls indented to accept Tory cuts. I put it to you that if he did not, you would have seen no ambiguity.

Balls has betrayed the working class of this country for short term political gain.

15. Leon Wolfeson

@12 – I’m certainly not. I want *solutions*.

That means changing how many things are done. There has been a stubborn refusal by Labour to do more than tinker around the edges. It’s accepting, even, a likely breakdown in the Union. I fear violence in NI, bluntly…

@13 – Exactly. But that’s not been mentioned. It’s not on the cards. You can’t say one without the other if you want it to be clear that the other is part of the equation.

There are no real spending cuts: http://andreasmoser.wordpress.com/2010/11/15/uk-budget-what-cuts/ – The UK government will still spend more than it takes in, even under the current coalition.

Enforcing pay-cuts on the state sector is not sustainable forever but the priority must be jobs.

Is George Osborne enforcing the pay freeze to create jobs, Richard. He obviously isn’t so why does Balls support it if not as an endorsement of the economics and politics of austerity.

Is it not also true that the fiscal effect of introducing a living wage – therefore annuling the pay freeze – is far from fiscally regressive, likely to be beneficial in terms of saving the state money in other areas.

In this area, the public sector pay freeze, Ed Balls has caved into the beggar-thy-neighbour politics and economics of austerity.

@ 7 G.O.

Ah the old “if only we’d spent more money growth would be magically higher” argument.

Let’s ignore, for the moment, that even in the high spending Labour days pre financial crisis growth never got close to averaging the 2.5% you talk about, and focus onh the other fallacys of the Keynesians’ arguments.

Quite clearly, as half of Europe is showing us, interest rates would likely be a lot higher if there wasn’t at least some attempt to control spending. Fiscal profligacy isn’t as forgivable as it once was. Of course, you can simply print some money to cover your massive budget deifict, as Brown did by pushing the BoE into QE, but again, doing that for too long tends to drive inflation and weaken the currency. It’s certianly not a long term solution.

Then, of course, we can talk about these supposed massive cuts. They simply aren’t very big, taking spending back to roughly where it was in 2006-7, and more tellingly, hadn’t started yet when growth started to falter. Cutting back a tiny bit of spending is a minor distraction in comparison to to trauma of what are half of the countries in Europe being effectively bankrupt.

Recently, on another similar thread, I showed, with a worked example, how it simply isn’t possible to grow your way out of a 10% budget deficit. It is simply too big, and the extra debt interest very quickly swamps the tax revenues delivered through extra GDP – and I used very optimistic scenarios to give the growth only side no chance to complain. Various other posters on the thread also worked their own versions of my calcuation, and got very similar answers.

The government, the BoE and treasury all have similar models which tells them exactly the same thing. The Labour party are also very aware of the reality of the situation. I know for a fact Balls, Brown and Darling all had access to those very same models. Darling accepted this harsh reality, as evidenced by his own spending plan – invovling cuts. That Brown and Balls suggested no cuts were necessary either makes them blind to reason, or more likely, political opportunists of the lowest order. Willfully bending or hiding the truth in order to win votes. Some would call it “lying”.

@ 12 Sunny

Isn’t your favoured way of dealing with the cuts simply to pretend they don’t exist and simply not to talk about them? Or is that just the advice you would give to the Labour party and left in general – it’s too hard to say something credible so the best thing to do is simply say nothing.

22. Mitchell Torok

Really? “At this stage, we can make no commitments to reverse any of that, on spending or on tax…” Of course he can: if he had a socialist policy on banks, bankers, bonuses, tax, tax evasion, trident etbloodycetera; if he had some of the passion of Bernie Sanders in the US; if he didn’t sound so uncannily like Ramsey Macdonald.

As someone on the left who opposed the cuts and intends to continue opposing the cuts, I don’t see that I’m ‘having it both ways’.

You either believe that these cuts that hit the poorest hardest are counter-productive and immoral or you don’t.

Surely it is those of the ‘there was an alternative but there isn’t anymore and certainly won’t be by 2015′ are those ‘having it both ways’.

@ Tyler

“Ah the old “if only we’d spent more money growth would be magically higher” argument.”

But no one disputes that spending more money can help to promote/maintain growth. If you could cut spending as much as you liked without having any negative impact on growth, Osborne would have set out to eliminate the deficit in five months rather than five years. He didn’t do that because he thought the rate of spending cuts required to achieve that would be inconsistent with maintaining growth. In just the same way, most lefties think the rate of spending cuts required to eliminate the deficit on Osborne’s timescale is inconsistent with maintaining growth.

And when it comes to old chestnuts:

“Then, of course, we can talk about these supposed massive cuts. They simply aren’t very big, taking spending back to roughly where it was in 2006-7″

As I’m sure you very well know, the fact that overall spending is ‘only’ falling to 2006 levels does not mean that spending cuts in specific areas are not very large indeed. Pensions and debt interest are taking up a larger share of the pie, leaving less money for everything else.

“Recently, on another similar thread, I showed, with a worked example, how it simply isn’t possible to grow your way out of a 10% budget deficit.”

Fine. But the division of labour between growth, spending cuts and tax rises could be more skewed towards growth than it is.

“disappointed as the next Keynesian”.

Oh no, there’s not more than one, is there? Give it up man. Keynes was a fraud and a charlatan. Instead of that rubbish, you should read some economics.

Oops, final paragraph of that post should read

Surely it is those peddling the ‘there was an alternative but there isn’t anymore and certainly won’t be by 2015? argument that are ‘having it both ways’.

I agree substantively with everything you said, the problem for me is that while there was a lot of nuance in the speech, what the public hear is quite another thing. I’m not sure we need to talk about baselines in 2015 in 2012. Right now, we need to oppose the cuts in the here and now, if we are sincere in our economics.

Political posturing can be a dangerous game, because conventional wisdom emerges from many sources– politics, the media, the facts, decades of ideology. Credibility later is reliant on consistency in both your alternative, and with the facts. If our position is too close to that of the Government, a thousand Autumn Statements like this one will fail to come to our aid.

@ 24 G.O.

“Fine. But the division of labour between growth, spending cuts and tax rises could be more skewed towards growth than it is.”

How?? The spending cuts aren’t particularly huge, and as you allude to, a lot more debt will be built up whilst the massive deficit is reduced, and taxes are already quite high – not least because of the number of tax rises under Brown. Growth is already being left to take as much of the burden as the coalition can get away with without being laughed out of the room already.

Which is exactly where Ball’s and assorted other Lefty deficit denier types find that their credibility gap gets exposed.

@ Tyler

“Growth is already being left to take as much of the burden as the coalition can get away with without being laughed out of the room already.”

More like: the coalition set out to raise taxes, and especially cut spending, as far and as fast as they could get away with without undermining the growth needed to eliminate the deficit on their favoured timescale.

As for the idea that the coalition would have been ‘laughed out of the room’ if they’d counted on growth being any higher: as I recall, it was us lefties who thought their growth forecasts looked a little optimistic in the context of their other plans. Right wingers seemed quite satisfied, in late 2010, that we were ‘out of the danger zone’ and could reasonably expect the recovery to continue apace, especially when all that lovely ‘expansionary fiscal contraction’ kicked in round about now.

30. Leon Wolfeson

@16 – So, slashed budgets are an illusion. Right. Well, thanks for that dose of unreality, but in reality pork-barrel spending doesn’t mean that there are not savage cuts occurring.

Hint: Budgets can change, and pork-barrel spending and spending due to ill-advised “cuts” causing things like unemployment benefits to soar doesn’t mean that there are NOT massive cuts elsewhere.

De nial, etc.

@20 – Coming out of a recession, you grow rapidly for a period. We’re not this time, and it’s VERY much an unusual case. Why? Austerity, It’s cost us at LEAST 5% by this point. And we’re looking at absolute shrinkage again now!

*claps*

And of course you’re lying. Because you’re saying that the current situation is the only situation and there is no alternative to killing off a few million through cold and starvation and neglect. In this third-world shit-hole called England.

@25 – Ah yes, so, Ayn Rand then? There’s a nice credible economist for your right wing sensibilities!

I disagree and I’ve responded here:

http://representingthemambo.wordpress.com/2012/01/15/so-what-did-ed-balls-actually-mean/

A couple of quick questions:

If this is merely a reiteration of existing policy and acceptance of reality then why are so many MPs up in arms about it:

http://www.dailymail.co.uk/news/article-2086817/Labour-MPs-revolt-Ed-Miliband-Ed-Balls-caving-Tory-agenda.html?ito=feeds-newsxml

Oh and if Andy Burnham can commit to reversing the Tories NHS policies then why can’t Balls promise to reverse Tory cuts?

This isn’t about accepting political reality. This is a failure of political will and an abject capitulation to the agenda of the Jim Murphy’s and Liam Byrne’s of this world. That is to say, the Blairite ultras. It’s very, very disappointing.

@ 29 G.O.

I’m pretty sure the coalition would rather not be raising taxes or being forced into cutting back spending. If nothing else, it is rarely a votewinner. As it is though, the cuts really are barely scratching the surface of the massive incresae in spending during the Labour years. As I say, back to 2006/7 levels, when from memory, the UK was still a perfectly decent place to live.

@ 30 Leon Wolfson

What pork barrel spending? The coalition have cut back on capital expenditure, the only new project announced being HS2 – and that won’t even start work till 2016 at the earliest.

Austerity has not cost us 5% growth. Clearly thats a number you’ve just picked out of thin air. Even in Labour’s debt fuelled boom years growth rarely beat 1% QoQ.

As I say though, all these spending cuts are only going to take spending back to 2006/7 levels. If memory serves, millions of people weren’t dying in the streets through cold and starvation and neglect in those days. So I think the technical term for what you are talking is “bullshit”.

You’d also be able to work out, were you capable of doing some simple maths, that you really can’t grow your way out of a budget deficit this big, even with interest rates near all time lows. The interest on the new debt simply piles up quicker than the increased tax revenues from larger GDP – and that’s if you believe the somewhat dubious claim made by all big state left wingers that government spending always has a positive multiplier effect. Ed Balls knows this jsut as Darling did, but prefers to tell a straight faced lie that cuts are somehow unnessecary and just by spendign a bit more we can magic up enough growth to disappear the deficit.

WHat he is really doing is creating a political tool in truly the crudest fashion. Spending cuts are always going to be unpopular to those it affects, and it’s easy to attack the coalition when they are forced to make the hard, possibly unpopular choices in cleaning up the mess Brown and Ball’s left behind.

@ 31 representing

Ball’s can promise people the moon on a stick, but his credibility is near enough zero if he does. There isn’t enough money to pay for all of Labour’s spending – that’s why we have a large budget deficit – and as I have said above, it takes too long for the economy to grow enough to pay down the deficit without that deficit overpowering other spending on debt interest payments alone.

It’s not a failure of political will, or capitulating to someone’s agenda, it’s just a healthy dose of realism.

@32 Tyler: “There isn’t enough money to pay for all of Labour’s spending – that’s why we have a large budget deficit.”

That’s unmitigated rubbish. As I’ve posted several times before, in 2007, before the financial crisis broke, according to OECD figures, general government expenditure in Britain as a percentage of national GDP was a little higher than in Germany but lower than in Denmark, Sweden, the Netherlands and France. The current budget deficit looms so large because Britain’s GDP fell by 7pc from its peak in 2008Q1 to the trough in 2009, a steeeper fall than in most or all other advanced economies, most likely because financial services feature so large in Britain’s economy. And the steep recession cut government tax revenues.

I’m not a fan of Ed Balls and have previously posted that the government’s options for boosting growth (a little) are to slow the pace of cutting public spending and more QE. The BoE’s monetary policy committee will consider the option of more QE in February when the next quarterly inflation report is due.

Those pressing for more public spending to boost the economy are really obliged to say how it should be funded – by hiking (which?) taxes or more borrowing or by QE.

@ 31

“If this is merely a reiteration of existing policy and acceptance of reality then why are so many MPs up in arms about it:”

Either because they sincerely believe that however much damage the Tories do to the economy, it can all quickly be undone if Labour return to power in 2015; or because they think it makes political sense to pretend that’s the case; or because they’re worried that stating facts so bluntly is a risky business, since people may not be able to appreciate the difference between “I don’t think you should be sawing that person’s leg off” and “Once you’ve sawn that person’s leg off, I can’t promise I’ll be able to sew it back on”.

“Oh and if Andy Burnham can commit to reversing the Tories NHS policies then why can’t Balls promise to reverse Tory cuts?”

Either because reversing those policies won’t cost anything, or because he’s prepared to pay for their reversal by cutting back in some areas. (Burnham opposed a commitment to protect the NHS from cuts, remember, because he thought it might have the perverse effect of necessitating more cuts to things like social care and so end up doing more harm than good. Maybe he’s taking a similar ‘big picture’ view here.

@ 31

Here’s where I think Owen Jones is wrong on this one:

“But rather than trying to push a coherent argument against this disastrous austerity programme, it is now being treated as a fait accompli.”

OK, you could make a case that Balls has jumped the gun. But as we get closer to 2015, this programme *will be a fait accompli*. We are going to have to start talking less about what the Coalition did wrong from 2010 onwards and more about what Labour would do right from 2015 onwards if elected.

“Labour can no longer talk about how these cuts are inherently destructive, because otherwise it would have to commit to reverse them.”

No, no, no. Sorry, but this is just rubbish – and exactly what the Tories want us to believe. It makes perfect sense to talk about these cuts being inherently destructive without committing to reverse them, in just the same way that it makes perfect sense to talk about (say) the Iraq war being inherently destructive without pledging to resurrect the dead.

Look: Owen Jones has repeatedly and rightly made the point that the deficit is not there as a result of Labour overspending. We were essentially living within our means prior to the crash: the national debt was modest (c. 60% of GDP), the deficit was modest (c. 3% of GDP), the tax burden was modest (c. 38% of GDP), spending was modest (c. 41% of GDP), and growth looked steady and sustainable at 2.5% or so.

But things are going to be very different in 2015. We could not have a debt way above 60% of GDP, a deficit way above 3%, a tax burden way above 38% and spending way above 41%, year after year, in a fragile economy, with no possibility of growth eliminating the need for all that extra tax and borrowing, and *still* claim to be living within our means.

36. Trooper Thompson

@30

“@25 – Ah yes, so, Ayn Rand then? There’s a nice credible economist for your right wing sensibilities!”

Do you mean Ayn Rand the novelist? You poor fellow. Must I explain the difference between fiction and economic science? I blame the Keynesian jihad against Reason.

20 Tyler

Ah the old “if only we’d spent more money growth would be magically higher” argument.

It has been in the US.

Tyler

Recently, on another similar thread, I showed, with a worked example, how it simply isn’t possible to grow your way out of a 10% budget deficit.

If you can’t “grow” your way out of it (and this is patently untrue – and I think your figures got totally shredded on that thread) you certainly can’t cut your way out of it.

As the numbers are showing.

39. Leon Wolfeson

@32 – Correct, they’ve cut back on the spending they could safely make. Instead, they’re pumping cash into projects like dismantling the NHS, which is already proving extraordinarily costly.

I count the “emergency” spending which is soaring and will continue to soar, because of the dismantling of cost-saving social infrastructure.

You’re also fantasising that Labour didn’t plan to cut. They did. But even the same (which they wouldn’t have done) MINUS the VAT rise would have seen us in a FAR better position.

@36 – Evidently you need to read up on those yourself, Randroid.

Actually, Adam Smith described the core belief of my economic system.

@ Ben M

The US has achieved marginally better growth, but has increased it’s debt hugely, to the point where it is starting to gain an economic and political life of it’s own. Interest payments on just the new debt, despite all time low rates, are exceeding revenues generated from new growth. The US also isn’t as affected by the European crisis – which is itself one of governments swimming in too much debt.

In fact cutting spending is the only way out of such large budget deficits. You can quite easily do the maths, which show that even with 2% growth and 2% 10y bond yields you simply cannot grow your way out of a 10% budget deficit.

(If you remember, my figures didn’t get shredded. 2 other people disagreed with my methodolgy, used their own and came up with very similar answers to me).

What you are really complaining about is that cuts will make some people poorer. With additional tax rises, it will probably make almost everyone poorer. I’m not disputing that. There will be less money to spend, because the economy isn’t as large as it was and the previous government overspent massively. Not a difficult concept.

The US has achieved marginally better growth, but has increased it’s debt hugely, to the point where it is starting to gain an economic and political life of it’s own. Interest payments on just the new debt, despite all time low rates, are exceeding revenues generated from new growth.

The US grew 1.6% in year to 3rd quarter 2011. The UK just 0.5%.

That’s not just marginally better, that’s much much better.

And of course we saw last week a reduction in unemployment in the US v a dismally sustained rise in unemployment in the UK.

Unemployment is still higher over there of course, but since Osborne got his mitts on power we’ve seen a net increase under this quite clearly failing slash and burn austerity programme.

@39

“@36 – Evidently you need to read up on those yourself, Randroid.

Actually, Adam Smith described the core belief of my economic system.”

I’ve never once mentioned the woman, nor have I read anything she’s written.

As for Adam Smith, that’s all very well, but he didn’t get it all right, did he? It might be worth reading a bit from the 19th and 20th centuries, to get a bit more of a rounded view, n’est-ce que pas? Start with Menger.


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    What did Ed Balls really mean on the deficit? http://t.co/UFFfOhFo

  4. Patron Press - #P2

    #UK : What did Ed Balls really mean on the deficit? http://t.co/AwF7B40A

  5. VirtualResistance

    What did Ed Balls really mean on the deficit? http://t.co/UFFfOhFo

  6. Tom Davies

    What did Ed Balls really mean on the deficit? http://t.co/UFFfOhFo

  7. leftlinks

    Liberal Conspiracy – What did Ed Balls really mean on the deficit? http://t.co/FID758ZB

  8. Darth Badass

    What did Ed Balls really mean on the deficit? http://t.co/UFFfOhFo

  9. Paul Trembath

    Liberal Conspiracy – What did Ed Balls really mean on the deficit? http://t.co/FID758ZB

  10. Alex Braithwaite

    What did Ed Balls really mean on the deficit? | Liberal Conspiracy http://t.co/p68J6Hn3 via @libcon#I feel confident that you are right RM.

  11. Lesley Bruce

    This comment re: Ed Balls' speech yesterday is thought-provoking and one I hadn't considered http://t.co/078OTcG5

  12. Scott eastwood

    Hadn't considered this as what ed balls maybe meant but this makes more sense to me. http://t.co/d3e7OVgd

  13. Simon (Bannerbright)

    This comment re: Ed Balls' speech yesterday is thought-provoking and one I hadn't considered http://t.co/078OTcG5

  14. neil sculley

    “@libcon:What did Ed Balls really mean on the deficit? http://t.co/XvnasFC5” RTwhy the vitriol from other areas of the "left"? #littlechoice

  15. Dominic Newbould

    This comment re: Ed Balls' speech yesterday is thought-provoking and one I hadn't considered http://t.co/078OTcG5

  16. Michael Roche

    What did Ed Balls really mean on the deficit? | Liberal Conspiracy http://t.co/LvEuJxAa via @libcon

  17. Rory Weal

    What did Ed Balls really mean on the deficit? | Liberal Conspiracy http://t.co/SzDXp9iK via @libcon

  18. Labour and ‘parking the deficit’ – counterproductive and a disaster | Liberal Conspiracy

    […] Ed Balls speech yesterday apparently threw everything up in the air. The content didn’t change but the spin did. That makes opposition to the Tories even harder. Let me start with my position: I have always […]

  19. eileen

    I admire Ed balls' honesty around the situation predicted for 2015 but not sure he needed to say it now!- http://t.co/EIy9728t via @libcon

  20. alex cox

    I admire Ed balls' honesty around the situation predicted for 2015 but not sure he needed to say it now!- http://t.co/EIy9728t via @libcon

  21. So what did Ed Balls actually mean? « Representing the Mambo

    […] New Statesman have run this excellent article by Owen Jones today and Liberal Conspiracy have run this today. I have pasted the Lib Conspiracy article below and added my comments in italics. Suffice it […]

  22. Michael Roche

    @TheGreenBenches I am in agreement with your analysis of EB speech and also this http://t.co/LvEuJxAa





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