The budget deficit: close your eyes and it goes away

Working in a university social science environment I find myself surrounded by those who take a leftist view of the world. One interesting trend amongst my colleagues of late has been to start to play down the economic challenges the UK faces.

The argument tends to take two forms. First, that the public finances are not really in such a mess – we have been in bigger deficit before (albeit only due to war) and so there is no need for any precipitate action to cut government expenditure. Second, there is the argument that the public services are vital and too important to cut. The presumption here, of course, is that the deficit is worth bearing because of all the “good work” government does.

The reason that these views can be sustained is that many on the left view any particular set of political and economic arrangements as contingent. There is no necessary reason for any particular configuration, which can be changed merely by the sufficient political will that rids us of the dominant ideology that clouds the truth. According to the left, the attitude towards the public deficit is purely ideological rather than being of any real substance. What is needed, they would argue, is to see the world differently, and all our problems will magically disappear. To use the jargon, the prevailing view of the economy is merely a “social construction” that can be challenged by a more enlightened awareness of our predicament.

These views towards the deficit can be seen as something of a rehearsal for what will happen if the Conservatives win the next election. The cry from the left will go up against what will be termed savage and unnecessary cuts, and the impact on “vital” public services will be emphasised without any regard for why the government is being forced to act.

Love this idea about reality only being a social construct. When you jump off a building you can have all the social constructs you like, but when you hit the dirt only the real truth will show. The UK might have been in as much debt after WW2 as now, but you also had a nation who was not used to a high consumerism lifestyle and had the ability to live without pleasures until the economy improved. We don’t have that happening now.

Surely this attitude means the Tories should be ruthlessly honest NOW about the neccessity to cut spending and raise taxes? To say which budgets will be cut, by how much, what taxes will rise etc. This will of course affect their popularity, but assuming they get a majority (even a small one) they would then have the mandate to do as promised, and opposition could be faced down with the statistic of the number of people who voted for the manifesto.If on the other hand they downplay the cuts/tax rises now in the hope of winning big in 2010 and then implementing harder measures, they will run into massive opposition after the election, in the face of which I suspect they will falter.

When you borrow a lot of money, paying the interest can be quite a problem. If the credit of the UK government comes into serious question (that is, its ability and willingness to get the UK’s public finances sorted out) then the rate of interest that lenders will require is likely to rise. In particular if creditors, both current and potential, were to come to suspect that future rates of inflation might be high (as a typically ‘political’ way of easing the debt burden, which might well be ‘popular’ with heavily indebted Britons) then it might prove almost impossible to reduce the level of debt, given that the government will probably need to borrow large amounts for several more years

Love this idea about reality only being a social construct. When you jump off a building you can have all the social constructs you like, but when you hit the dirt only the real truth will show. The UK might have been in as much debt after WW2 as now, but you also had a nation who was not used to a high consumerism lifestyle and had the ability to live without pleasures until the economy improved. We don’t have that happening now.

Surely this attitude means the Tories should be ruthlessly honest NOW about the neccessity to cut spending and raise taxes? To say which budgets will be cut, by how much, what taxes will rise etc. This will of course affect their popularity, but assuming they get a majority (even a small one) they would then have the mandate to do as promised, and opposition could be faced down with the statistic of the number of people who voted for the manifesto.If on the other hand they downplay the cuts/tax rises now in the hope of winning big in 2010 and then implementing harder measures, they will run into massive opposition after the election, in the face of which I suspect they will falter.

When you borrow a lot of money, paying the interest can be quite a problem. If the credit of the UK government comes into serious question (that is, its ability and willingness to get the UK’s public finances sorted out) then the rate of interest that lenders will require is likely to rise. In particular if creditors, both current and potential, were to come to suspect that future rates of inflation might be high (as a typically ‘political’ way of easing the debt burden, which might well be ‘popular’ with heavily indebted Britons) then it might prove almost impossible to reduce the level of debt, given that the government will probably need to borrow large amounts for several more years

Post new comment

The content of this field is kept private and will not be shown publicly.
Type the characters you see in this picture. (verify using audio)
Type the characters you see in the picture above; if you can't read them, submit the form and a new image will be generated. Not case sensitive.

Invest in the IEA. We are the catalyst for changing consensus and influencing public debate.

Donate now

Thank you for
your support

Subscribe to
publications

Subscribe

eNEWSLETTER