structural deficit is a myth

[telsa]

Anyone seen this article by John Ross: The Fallacy of Osbornomics
www.guardian.co.uk/commentisfree/2011/jan/10/george-osborne-tories-deficit-cuts

because if I hear another person talking about the 'need to make cuts because of overspending by Labour' I'll go crazy.

In sort, any deficit is a result of 'inadequate tax take' - which I guess explains this bizarre phrase I keep hearing - 'competitive tax regimes'.
Ross puts it succinctly:
"When he was justifying the VAT increase on the Today programme, Osborne neglected to mention that during this parliament a series of taxes will be cut ? benefiting high earners, corporations and banks. These are roughly equal to the estimated revenue from the VAT hike ? rubbishing the claim government policy is driven by a "structural" requirement to cut the deficit. Osborne's argument that the urgent task is deficit reduction is therefore false. Even worse, the logic of his "voodoo budgeting" is not deficit reduction but income transfer from poor to rich."

^
any commentary that starts by holding up the US as an example of fiscal success is deeply suspect.^

Agreed. The US are equally screwed. I was watching Fox News last month and it appears that some are waking to the nightmare awaiting them but right now, most are still in denial.

But punblic sector workers contribute to private wealth production.

If it wasn't for teachers the private sector would have an illiterate unskilled labour force.

If it wasn't for doctors and nurses the private sector would have lots more days lost to sickness.

Ditto roads, transport, refuse, policing, economic development, not to mention that tax credits help keep wages low=costs low= more profit.

'And even if it costs about the same to keep someone on benefits as it does to keep them in an averagely paid public sector job the Government will hope that an unemployed person will eventually find a private sector job and end up contributing towards the Government rather than taking from it.'

Oh yes, that is all they do - take take take - those public sector jobs - utterly worthless aren't they, all those teachers and social workers and firemen and nurses - unlike all that wonderful private sector stuff. What a load of piffle!

"Oh yes, that is all they do - take take take - those public sector jobs - utterly worthless aren't they, all those teachers and social workers and firemen and nurses - unlike all that wonderful private sector stuff."

I never once said that public sector workers were worthless, and in a way it's quite flattering that people have to make something up in order to try and argue against what I said.

What I said was in response to someone asking how the Government sacking a worker saves them money, and it most definitely does, at least as the bean counters see it.

Public sector workers cost the Government money, that's a fact.

And each of those public sector works are funded by private sector workers, and to me that is absolutely right and correct by the way.

It's not a matter of "take take take" anymore than being in hospital or getting an education is, it's but simply a case of needing to balance the books.

Agreed. Nobody said public sector workers are worthless. Of course we need them in any economy. But like most things in life, its all about balance and affordability.

Right now our public sector is about 50-50 with our private sector. That balance is simply unsustainable.

In other words, for every person employed privately, there's another employed by the public sector.

And to give you a comparison, the US have about 17% of its workforce in the public sector and even in communist China it's only about 30%.

So each private sector tax payer must pay enough tax to not only pay the public sector worker but all the other stuff the government want to do too. Like pay benefits or buy some books for schools, perhaps some bullets for the war we're embroiled in?

Quite simply the average private sector worker pays nowhere near that. And oh yes before someone cries "Well tax the rich then." Well there simply isn't enough rich people to go around.

I'd love to have a policeman on every street corner. I'd love to have hospitals filled with nurses. But we simply cannot afford so many.

"Right now our public sector is about 50-50 with our private sector. That balance is simply unsustainable. "

I don't think that is is 50:50.

The Office of National Statistics (www.statistics.gov.uk/cci/nugget.asp?id=407) gives a figure of just over 6 million public sector workers, that includes the big jump due to Lloyds and RBS becoming in effect publicly owned.

It then puts about 23 million works in the private sector.

So there are nearly four private sector workers for every public one.

But yes in the end Government spending is simply unsustainable and has been for years. It's like the pension problems, it's been looming for years but no one has wanted to tackle it. We've got to shift to either accept a Government that gives us less or to a society that pays more tax. And that is the debate that's worth having, trying to pretend that the deficit doesn't exist or that it's all the fault of the bankers just puts the day of the debate back and will make the adjustment even more severe and painful.

The problem is, by taking so much money out of the economy in terms of cutting public sector employment (and raising VAT) unemployment is predicted to rise substantially.

That will obviously affect job opportunities in the private sector, thus we're really not going to achieve a significantly improved ratio. And tax revenues will fall further.

Or at least it seems that way to me.

The present government keep going on about how the private sector will take up the slack in employment opportunities, but there is absolutely no evidence that this will happen.

We will no doubt see how things pan out in the months and years ahead.

The deficit was under control (at no more than 3% GDP) for the entire period of labour government, until the global banking crisis that pushed it out of control. But remind me, what size bonus are the bankers getting this year?

Actually Badger, I was getting confused. It's not workers but percentage of GDP I think. It was from the programme "Britain's Trillion Pound Horror Story"

Unfortunately it's too old now to watch on 4OD so I cant requote it at the moment. I'll try to find it by other means. It was extremely interesting viewing.

The deficit was under control (at no more than 3% GDP) for the entire period of labour government, until the global banking crisis that pushed it out of control. But remind me, what size bonus are the bankers getting this year?

Oh god, not that old chestnut again! To borrow OP's words "if I hear another person talking about how the greedy bankers have caused the spending cuts I'll go crazy."

I'd write a reply but its late and I'd rather go to bed.

"The deficit was under control (at no more than 3% GDP) for the entire period of labour government, until the global banking crisis that pushed it out of control."

From 1999 until 2001 they were actually making a small surplus that peaked in 2000 at about £12 billion.

Then in 2002 they plummeted to an overspend of £20 billion.

And then from 2003 until 2007 they consistently overspent by £30 to £40 billion a year, in 2002 they went over the limit by £20 billion.

Even you if claim that overspending for every year of your Government but 3 is having anything "under control" the deficit was far from stable during their time in office.

They started from a deficit of about £15 billion in 97, curved up to smaller surplus peaking in 2000 and then curved back down to end up with a £40 billion deficit.

And on a graph of debt relative to GDP you see it steadily rising from 2003 onwards.

So that's not even stable yet alone "under control". And all before the banking crisis.

Those were the "good years", the "savings" from three years of surplus were blown in that first year of a £20 billion deficit, from then on it was adding onto the debt mountain.

And this isn't just a shot at Labour, the previous Conservative administration weren't much better.

The fundamental point remains that we have become used to a level of Government spending that our current taxation regime cannot afford. Government's have spent years ignoring the problem hoping that future growth might just make it go away, we've tried that since about 1950, it hasn't worked.

Something has got to give, in the good years a Government should be able to afford it's spending, either we seriously cut Government spending or we seriously increase or level of taxation.

BUT we cannot cut frontline services to vulnerable people and make them suffer the sort of shocking existences you healthy, solvent, walkie-talkie people out there just would NOT believe possible. It's just a no-no. The cuts must be targetted so carefully. A society should be judged on how it treats it's vulnerable members. I think if you don't believe that, I have no more to say to you.