The aim of this three-part article is to demonstrate that every deficit narrative and soundbite question or statement that you have heard parroted thousands of times are simply tricks aimed to mislead people.
Clearly, there would be no reason for concern if one chooses to parrot and hence endorse the claims promoted by these soundbites; if they were based on economic truths but unfortunately they simply do not stand up to the economic facts. For example, let us look at one more well-known parroted deficit soundbite question:
So you want spend more to reduce deficit? or How do you reduce the deficit by spending more?
This is an appeal to ignoranceas you are suggesting something cannot be true because no one can understand it. Moreover, you know this line of argument will influence people because they lack the economic knowledge and do not have the facts. Hence, they can be influenced to assume what you want them to assume and in this case, it is the claim that expenditure increases the deficit.
This is an economic illiterate claim because increased government expenditure ceteris paribus adds more to revenue than it does to the debt because of the multipliereffect. Hence, the deficit falls because as income GDP rises; unemployment falls, which reduces expenditure and so, reduces the deficit.
Returning to the finale below, I expose the last two structural deficit claims No four and five
"It is true to say, is it not, that in the run-up to the financial crisis Britain was running the worst structural deficit - that's the extra beyond the cycle - of any of the G7 countries?" - Marr 30th January 2011.
Andrew Marr like many others is strongly suggesting it is given and proven fact, which would naturally lead people to assume that it must be - begging the question. Nevertheless, the Coalitions much parroted narrative and soundbite accusation was in fact untrue at the time in January 2011 and months before. If we look at the availableIMF published figures at the time (Oct 2010)we can see in 2006 the UK had the third highest structural deficit in the G7 at - 2.6% and in 2007 the second highest at - 3%. The OECD figures show the same as confirmed by the IFS who stated:
"On the OECD measure, the UK had a structural deficit of 3.5% of national income in 2007. This was the third highest among the G7 countries and the sixth highest among the 26 OECD countries" - IFS Page 10 paragraphthree.
Four months later the IMF April 2011 figures showed the UK still had the third highest in 2006 at - 2.8% but in 2007 the UK had the highest at -3.2% albeit by only 0.1% above France.
However, the Coalition only finally earned it's soundbite well over two years later when the IMF published its October 2012 figures, which reported in both 2006 and 2007 the UK had the highest structural deficit at - 4.6% and - 5.2% respectively. Now, you may wonder why did the IMF figures doubled. Well, the OECD and IMF publish data; make calculations and forecasts based on figures and information supplied to them by the ONS. Hence, as the ONS in 2012 revised its historical fiscal and national accounts figures; the 2006 and 2007 structural deficits increased from the third highest to the highest. As the IMF email confirms:
They also point out it has never been cyclically adjusted beyond the cycle (which always increases it's calculation) but it was cyclically adjusted; as per usual.
"Let's turn to the structural deficit because that's still at the heart of the argument between yourself and the Conservatives. It is true to say, is it not, that in the run-up to the financial crisis Britain was running the worst structural deficit ....of any of the G7 countries?" - Marr 30th January 2011.
By agreeing the UK had the worst structural deficit; you also confirm that you were overspending and that you created the mess we inherited - the original argument. However, if you disagree you are labelled a deficit denier. Either way Ed Ball cannot answer the question without looking guilty. This moment caused the media frenzy of:
Aaaaaaaaaaw! Ed Balls denied having a structural deficit and he refused to apologise. Look Mummy watch him deny it - play ground petty pointless politics.
This is a classic redherring because it sensualises the irrelevant none issue of watching Ed Balls deny the existence of a structural deficit and it is used to lead people to assume, that it conclusively proves the argument has been won. Moreover, it acts as a ploy to distract and avoid providing evidence of overspending and "the mess we inherited".
In answer to the question, the IMF actually said the UK had the third highest structural deficit at the time and the last time we Conservatives were in office between 1979 - 1997 we had 18 structural deficits in 18 years - claim one. More importantly, people have been had because structural deficits occur in most years and even in the run up to recessions - claim one. Hence, the only thing the denial proves is that Ed Balls denied having a structural deficit; just as there has been one in nearly all others years.
Finally, there was no overspending because the Treasury, ONS and OBR say from the time Labour entered office in 1996/7 and prior to the recession 2006/7 the structural deficit was cut by 82%, the budget deficit by 85%, PSNB borrowing by 32% and the debt by 16% - claim two.
So there you have it; the structural deficit is simply an alarmist ruse employed to prey on people's fears to justify austerity to achieve our main goal of lower taxes. Essentially George Osborne has taken a leaf out of Ronald Reagan playbook. Overall, the whole thing is a kin to Phoebe scaremongering Rachel by telling her to leave the plane because "she has a feeling there's something wrong with the left phalange" watch
Yes, I think it was Samuel Taylor Coleridge who once said: "In politics, what begins in fear usually ends in folly".
To conclude, as the truth is the greatest enemy of the lie share this on Facebook, Twitter, Google +,WhatsApp, email and Blog it so that the truth can be discovered by all. Finally, may I say: