13 August 2009

Tom Freeman Explains Public Debt.

I highly recommend everyone read this post on the Freemania blog by Tom Freeman. He explains very clearly how GDP/public debt figures can be misleading. This is a good follow on to my post on how unemployment figures are distorted by the media.

For example, Tom explains how the current low/negative inflation can both make borrowing figures seem worse than they actually are and public debt much less of a problem for governments as interest rates are low.

He also explains how public spending has actually remained fairly flat and that the rise in borrowing is actually due to a massive drop in tax revenues and the extra burden of banking defaults.

There is though some solace for right-wingers itching to cut taxes. Tom admits that Brown should have either increased taxes in the years 2002-06 or cut public spending. He also admits that either or both of these are necessary in the future, though not until the recession is well and truly over.

The danger of the 'indecent haste' Tories is that they will cut hard straight away (egged on by their core support with relish) and inadvertantly prolong and/or worsen the recession.

By cutting early in 2010-2012 the Tories can still blame Brown and Labour and give themselves time to win again in 2014. But by cutting spending and jobs just when the economy needs them, the recession might not be over by then. Whether the Tories can get away with still blaming Brown in 2014 for their mistakes is the big question?

2 comments:

  1. OK tell me how unemployment is misunderstood by the media, are you saying we have less unemployed or more. If you use the figures before Thatcher and Blair cheated these , we are now looking at an unemployment reaching close to 6 Million, people who cannot get JSA because a wife/ husband is working or they have compensation for losing the job, or they just do not bother signing on. 2.44 million unemployed in the biggest recession in my living history, and we have 2.44 unemployed pull the other one.

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  2. Rob, there are about 2m people on incapacity/disability related benefits etc. Which is slightly less than there were in 1997.

    The Tories undoubtedly encouraged people off JSA onto disability benefits to reduce figures, but the number on benefit is definitely still lower than in 1997, which is not the impression you would get from reading the media. If this is beyond living memory for you then you must be younger than 17 or have had a poor memory when younger.

    Blair did not massage the figures, in fact he did the reverse, which is how the media can now claim things are worse. The government changed their preferred method of counting unemployment from merely counting JSA claimants to the internationally comparable LFS which is much higher. The media are deliberately fusing the two to give a mislaeading impression.

    PS. A wife or husband can claim JSA for 6 months no matter what their spouse's earnings or their own savings as long as they have paid their NI contributions and not voluntarily left a job (which is why it is called contributions based JSA).

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