tag:blogger.com,1999:blog-2546602206734889307.post1949428995824497243..comments2024-03-19T09:54:37.187+00:00Comments on mainly macro: Mediamacro myth 2: Labour profligacyMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-2546602206734889307.post-70207662326424289392015-05-01T15:16:41.856+00:002015-05-01T15:16:41.856+00:00Lilley is being about as dishonest as he used to b...Lilley is being about as dishonest as he used to be when he was a minister. The plain-language meaning of his remark from 1997 is that the process of setting up the FSA might distract regulators' attention while it was going on. It was not, I think, still going on in 2007.<br /><br />Further, his claim that he would have regulated the banks is very strange seeing as he thinks there was too much regulation. Surely, if he means this, it would be better if the FSA was distracted?<br /><br />Finally, the Bank of England certainly was "responsible for ensuring the liquidity of the banking system". That's why it lent the banks enough cash to clear payments so long as they were solvent and could post collateral. That's what it was doing. That's what it means to "ensure the liquidity of the banking system".<br /><br />Lilley might have had a point, had he said "solvency". But he didn't, because he didn't and doesn't believe in financial regulation, and still hasn't admitted that the deregulated finance wonderland he stood for as a Conservative was a disaster.Alexhttps://www.blogger.com/profile/17153530634675543954noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-30685070158325520302015-05-01T10:06:49.650+00:002015-05-01T10:06:49.650+00:00Am I right in thinking this only includes balance ...Am I right in thinking this only includes balance sheet debt? What does the analysis look like if total debt (ie including pension liabilities and off balance sheet debt) is included?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-12618527349148447952015-04-27T11:51:43.028+00:002015-04-27T11:51:43.028+00:00If it was your intention to expose the 'myth&#...If it was your intention to expose the 'myth' of Brown's profligacy, then you would have compared the rise in spending and the deficit leading up to 2008 with the rise and spending with the deficit leading up to the early 90s recession.<br /><br />The fact is that after 2001, Brown increased government spending at a record UK peacetime rate and faster than any other G8 country. Spending grew much faster than the economy as a whole.<br /><br />I am sure you know that unsustainable credit booms also provide booming and unsustainable tax revenues. When the boom ends, tax revenues fall substantially. Therefore, it is prudent to run very small deficits or even surpluses during the good times, thus reducing GDP as a percentage of GDP. Prior to the early 90s recession, the Tory government at least had the sense to use these booming revenues to run a surplus (or around 2% of GDP) and cut the debt as a result to around 25% of GDP. This, when boom turned to bust, the public finances started from a good position. The last Labour government, however, saw fit to start increasing debt again as a percentage of GDP and we entered the recession from a position of running a 3% deficit at the height of the boom.<br /><br />If that isn't profligacy, I don't know what is. We would not have a deficit at all now if we had entered the recession with the fiscal position being 5% of GDP better (i.e the difference between a 2% surplus and a 3% deficit).<br /><br />The other criticism of Brown's spending was that it wasn't counter-cyclical - it actually helped feed the boom.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-87611276166755654012015-04-27T09:24:43.192+00:002015-04-27T09:24:43.192+00:00BECAUSE the myth in question is that Brown was pro...BECAUSE the myth in question is that Brown was profligate before 2008!!!!Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-30007672936580983652015-04-27T07:59:07.969+00:002015-04-27T07:59:07.969+00:00Well, 'Mainly Macro' - you clearly have no...Well, 'Mainly Macro' - you clearly have no defence to the point I made, instead preferring to throw the childish 'Troll' accusation. Unfortunately, for you, some of us are intelligent and can see right through your attempt to deceive.<br /><br />The fact is that you chose to compare the period of the last Tory government with just part of (instead of the whole of) the period of the last Labour government, deliberately excluding the recession. Why would you do this unless you were attempting to paint a false picture?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55913001515986541772015-04-24T16:18:32.718+00:002015-04-24T16:18:32.718+00:00The acceleration in government spending in 2002 in...The acceleration in government spending in 2002 in absolute terms and as a % of GDP, in the "good times", is pretty evident in chart 2.1(a).<br />http://www.ifs.org.uk/bns/bn43.pdf<br /><br />A good illustration of Labour "profligacy", aka Gordon Brown's master plan to win an election he expected to call in late 07/early 08 or so. Bad luck for him it was subsequently postponed/derailed by other events. Illustrates, too, the danger of trying to put party before country. It's amazing what partisan politicising can do to your memory.<br />http://www.theguardian.com/politics/2008/jun/26/gordonbrown.labour<br /><br />James in Londonhttps://www.blogger.com/profile/08392235894752150063noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-36886912676906948582015-04-24T15:27:38.742+00:002015-04-24T15:27:38.742+00:00I often wonder why people write comments like this...I often wonder why people write comments like this. It convinces no one, as people who read this blog rather than troll it are intelligent (and remember that the myth in question is that Brown was profligate before 2008), so unintelligent comments just reflect badly on your point of view. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70753705110066303582015-04-24T15:26:49.422+00:002015-04-24T15:26:49.422+00:00Speaking of disingenuous: Anon just tried to prete...Speaking of disingenuous: Anon just tried to pretend that the persistent deficits following the 1991 recession are some how excused by the persistent deficits after the 2009 recession. As if there were no obvious reason at all why these situations were not comparable.SThttps://www.blogger.com/profile/12250414866767420576noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-16937987679529081362015-04-24T14:16:17.960+00:002015-04-24T14:16:17.960+00:00"The average deficit from 79 to 96 was 3.2%. ...<i>"The average deficit from 79 to 96 was 3.2%. The average deficit from 97 to 07 was 1.3%. Now maybe those numbers are distorted by the economic cycle, so if we choose the OBR's cyclically adjusted numbers we get 2.6% and 2.1% respectively. QED!"</i><br /><br />The only thing you have proven is that by choosing an artificial timescale for comparison which ends in 2007, thereby excluding the recession, that you somehow think you can deceive people. Better luck next time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-31134770627657789132015-04-24T14:07:38.442+00:002015-04-24T14:07:38.442+00:00"Deficits don't persist for 6 years after..."<i>Deficits don't persist for 6 years after a recession</i>"<br /><br />The last recession was in 2008. We still have a large deficit. Labour only planned to halve it by now which is what the Tories have actually done (approximately) - so you cant simply put it down to the current government and hence your assertion is disproven.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-23669244476762512872015-04-24T13:59:44.489+00:002015-04-24T13:59:44.489+00:00True, and in my view that is the only way in which...True, and in my view that is the only way in which Labour can be even remotely described as "profligate". It is hard to defend against the claim that PPP just manipulated the indicators.<br />Of course, it is again a case of Labour being at fault for using right-wing policies, so to use that as a way to claim that Tories would be better at managing the economy would be quite rich.Anonymoushttps://www.blogger.com/profile/16283924475371707942noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33459166477778499112015-04-24T06:31:49.072+00:002015-04-24T06:31:49.072+00:00Deregulation was course not the cause of the GFC, ...Deregulation was course not the cause of the GFC, although some like to promote that idea now usually to advance a particular political view.<br /><br />Gordon Brown however ignored warnings from the Conservatives that the regulatory regime he was creating would lead to problems. It is therefore an error, again usually promoted to advance a particular political view, to suppose the Conservatives would have done the same.<br /><br />Brown was told in clear terms of the likely (and actual, as it turned out) consequences of his folly, thanks to Peter Lilley who records (@ http://www.peterlilley.co.uk/questions/1806/oral-question-money-creation-and-society ): –<br /><br />Quote:<br />” …..I was shadow Chancellor when the Bill that became the Bank of England Act 1998 was introduced. He pointed out that I then warned the House that: –<br /><br />“With the removal of banking control to the Financial Services Authority…it is difficult to see how…the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.”<br /><br />And so it turned out. I added:<br /><br />]“setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”-[Official Report, 11 November 1997; Vol. 300, c. 731-32.]<br /><br />So that turned out, too. I could foresee that, because the problem was not deregulation, but the regulatory confusion and the proliferation of regulation introduced by the former Chancellor, which resulted from a failure to focus on the banking system’s inherent instability, and to provide for its stability.”formula57noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69016302213084153302015-04-23T17:48:05.688+00:002015-04-23T17:48:05.688+00:00In my study of fiscal policy under the Labour gove...In my study of fiscal policy under the Labour government, I did comment in hindsight that the fiscal rule involving a fixed 40% of GDP debt target was probably a mistake, and that a gradually declining ratio would have been more appropriate. However I do not recall much criticism along those lines at the time.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53446333259400562162015-04-23T16:30:04.054+00:002015-04-23T16:30:04.054+00:00Thanks. I agree on the question. But at first pass...Thanks. I agree on the question. But at first pass it seems plausible that debt/GDP "should" have declined much further from the mid-1990s-2008. <br /><br />Hopefully the OBR will start calculating the true liabilities of the government (implicit, as well as explicit) so such long term planning becomes more likely rather than focussing simply on debt/GDP today. (in my view: this would make the true cost of pensions (including the triple lock!), PFI schemes etc.. transparent, which hopefully would improve decision making)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-29054733039162471912015-04-23T15:51:17.931+00:002015-04-23T15:51:17.931+00:00That would take a proper intergenerational distrib...That would take a proper intergenerational distributional analysis. In essence the question is: do we pay for higher future spending by raising taxes when that spending arises, or raising taxes today.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-56228017306369360992015-04-23T14:45:24.773+00:002015-04-23T14:45:24.773+00:00Thanks for this Professor. One question: given dem...Thanks for this Professor. One question: given demographic changes (principally the retirement of the baby boomers) the resources required for the NHS and social care will increase substantially in the next few decades. Simon Stevens predicts that the NHS will need £30bn/year extra by 2020 to maintain current standards, for example (although >2/3 if that he thinks can come from internal efficiency savings).<br /><br />While debt/GDP didn't increase a lot prior to the crisis, surely it should have been falling to smooth out this (predictable) demographic burden?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49305431580310516802015-04-23T12:55:53.806+00:002015-04-23T12:55:53.806+00:00First, I think with this particular election putti...First, I think with this particular election putting too much faith in the polls is a mistake (and they have also failed in the past with simpler cases). Second, even a 40% chance of disaster is still way too big for me to feel comfortable.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6809158818621152342015-04-23T11:57:21.185+00:002015-04-23T11:57:21.185+00:00Can I ask why you are so pessimistic about Ed Mili...Can I ask why you are so pessimistic about Ed Miliband´s chances of being the next PM? I follow Mike Smithson on Twitter, as I know you do, and from there see that the Betfair exchange has him at an implied 60% probability of becoming PM, compared with 40% for Cameron. The polls, meanwhile, are still roughly neck and neck which implies a sharp swing to Labour versus 2010 and a reasonable chance of being the largest party, even allowing for Scottish losses. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-61171873130163437282015-04-23T09:29:29.865+00:002015-04-23T09:29:29.865+00:00Love your graph of UK debt/GDP. It might be inter...Love your graph of UK debt/GDP. It might be interesting to overlay it with the same graph for the US. Impressive drop in this ratio from 1945 to 1980 in both nations. Between 1981 and 2007, the UK kept it debt/GDP from rising. But the US saw increases in the 1980's and after 2000. ProGrowthLiberalhttps://www.blogger.com/profile/17138489390594441753noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-25916101810083751102015-04-23T08:29:46.580+00:002015-04-23T08:29:46.580+00:00As a disinterested observer, I note that "Ano...As a disinterested observer, I note that "Anonymous" is being needlessly insulting and rude:<br />- "Ridiculous analysis."<br />- "... disingenuous, to say the least."<br />- "...if he ants t make a fair comparison (which, of course, he does not)"<br /><br />Whereas Magnus Carlsen is replying with to-the-point facts and logic. <br /><br />Of course, "Anonymous" could still be right. But it looks as though he wants to make others angry to hide the emptiness of his own analysis. He would certainly improve the quality of the debate if he confined himself to making points rather than trolling. PinkPighttp://www.xxxyyy.comnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70151658746539113242015-04-22T16:41:45.552+00:002015-04-22T16:41:45.552+00:00Good point, although Labour also did a lot with pu...Good point, although Labour also did a lot with public private partnerships.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11315208044347954462015-04-22T16:32:37.514+00:002015-04-22T16:32:37.514+00:00And that despite massive sales of state assets whi...And that despite massive sales of state assets which reduced deficits when they happened, but increased them afterwards (as assets sales always do).Anonymoushttps://www.blogger.com/profile/16283924475371707942noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-76903302374934879782015-04-22T16:32:02.533+00:002015-04-22T16:32:02.533+00:00This comment has been removed by the author.Anonymoushttps://www.blogger.com/profile/16283924475371707942noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-38916914236036433082015-04-22T13:57:23.769+00:002015-04-22T13:57:23.769+00:00The average deficit from 79 to 96 was 3.2%. The av...The average deficit from 79 to 96 was 3.2%. The average deficit from 97 to 07 was 1.3%. Now maybe those numbers are distorted by the economic cycle, so if we choose the OBR's cyclically adjusted numbers we get 2.6% and 2.1% respectively. QED!Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-73980367377556309082015-04-22T13:42:51.916+00:002015-04-22T13:42:51.916+00:00Deficits don't persist for 6 years after a rec...Deficits don't persist for 6 years after a recession, especially after one as short as in the 1990s. The debt increase was conservative profligacy, and successive tax cuts in particular. Debt was still increasing in Major's last year.<br /><br />If North Sea oil revenue equal say 2% a year, then 10 years of this wipes 20% off Debt/GDP. This is meaningful.<br /><br />And where do you get your assertion that North Sea oil revenue peaked under Labour? Even in revenue terms this is not true, and as for % of GDP, this was considerably higher in the 1980s than in the 00s.<br /><br />The only thing you are right about is the fact that debt falls when deficits are low and surpluses are achieved. However these flows were achieved off the back of wholesale privatisation proceeds and substantial north sea oil revenue.Magnus Carlsennoreply@blogger.com