Knifonomics: part 2. Deficit, debt, disaster..

It's where I keep my nappies...

The Knife’s “national budget =household budget” theory still holds, at least in term of trying to understand the financial woes of the country. Any punter with the dubious privilege of owning a credit card understands that running a slightly smaller debt each month while being all the time near your limit, will not bring  a thank you letter from Mastercard, and will not stop you going bust, what with mounting interest etc.

On the other hand, paying off your debt, and hopefully cutting your card in two, will.

What is it that Gordon doesn’t understand about this? Nothing, he gets it, but he purposely blurs the terminology to turn down the spotlight on his frankly astonishing financial mismanagement.

Over to James Forsyth to enlarge on this:

Alistair Darling will stand at the Dispatch box on Wednesday and say that there is a plan to halve the Budget deficit in the next four years. His quiet delivery and demeanour of an Edinburgh lawyer will make this sound like a reassuring return to fiscal sanity. It is anything but. In reality, it means that the government intends to borrow another £500 billion — more than what the government spent in the whole of 2005 — over the next four years. Halving the deficit doesn’t mean making government expenditure match government revenue. It just means that the government will borrow less each year than it does now.

Labour are capitalising on the confusion between the word ‘deficit’ (i.e., government overspend) and ‘debt’ (i.e., the national overdraft). The two are completely different but the media, and so the public, regularly get confused between them. For instance, just this Tuesday, the seven o’clock news on the Today programme announced that the government had a plan to halve the debt in the next four years.

Darling’s proposal is like an obese man saying he is going to deal with his weight problem by putting on weight less quickly than he did before. The Chancellor is betting, with understandable confidence, that the media will never put it in these terms and stick to those d-words that sound so alike.

If Gordon Brown has an economic genius, it is his ability to use figures, metrics and language to mislead. For example, he has used the phrase ‘pay down the deficit’. The language is deliberately deceptive. One cannot ‘pay down’ an overspend. But Mr Brown seeks to invoke the idea of paying down debt — something you can only do if you are running a Budget surplus, which Labour has no plans to do. The Brown-Darling proposal is to borrow so much that the cost of servicing the extra debt it intends to run up if re-elected will be £20 billion a year by the end of the next parliament, four times the amount earmarked for the scandalously underfunded campaign in Afghanistan this year.

Brown’s linguistic tricks, though, are less effective when it comes to dealing with the markets. The amount of interest Britain must pay on government debt — the so-called gilt yields — is greater even than Italy’s. This means that a country that has had 61 governments since 1945 is now considered more creditworthy than this country.”

Of course Gordon could make 12,987,538,301 applications for Visa cards, max them all out, then transfer the balances to American Express.

It makes marginally more sense than his current plans.

Vote Gordon...


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