Labour fudging the definition of debt in order to allow themselves to spend more is actually in some ways a smart move. The general public are of the belief that public debt is very bad when in fact a certain amount of it is very good, especially when the economy is struggling like it is.
Long term though, they are going to have to change the narrative. The Tories have been riding the back of "balancing the books" for too long and to keep lip service to that is playing into their hands.
the other thing is that while the wiser might tell you the government budget doesn't work like a household budget, actually our own household budget hasn't been that dissimilar in the past. when we were hard up, the bills went on the credit card. when we got jobs, it got paid off. that's the sensible way round. not getting your electricity cut off and starving half to death to pay off debts in the expectation of being able to live it up later.
we were just lucky we had such a good credit rating. you know, like the government.
the entire Tory austerity program wasn't just based on the logic of household finances. it was specifically based on the logic of household finances of someone with a rubbish credit rating who doesn't believe they will ever be better off in the future regardless of what they do.
so yeah i kinda get how they conned a lot of working class people into voting for them.
also it's absolutely right to consider student loans as an asset, not a liability. this is money that students owe the government, not the other way around. it was always on the wrong side of the balance sheet. it's not Labour who are now fudging the figures to allow more spending. it was the Tories who were fudging the figures to justify austerity all along.
what you want is for the debt to GDP ratio to be long term stable. that means that you can borrow at the same rate as the economy grows to keep it level. and if you don't do that, what you may find is that GDP goes down faster than the debt. So debt to GDP ratio goes UP. the converse is also true.
this is how the government budget differs from a household budget. because of the feedback mechanism. if i take out a loan it won't get me a payraise. but that's exactly what happens for a government.
@mrsbeanbag actually getting a loan can get you a pay raise, if you invest in the money in yourself. The same is true for government, gdp will only grow if the borrowing is invested.
@ekg yeah it can. career development loans for instance. there wasn't enough space in a toot for all that. pretty much anything the government usually spends money on counts as an investment, though. healthcare, education, transport infrastructure.. as long as they're not, oh i don't know, channelling funds into their mate's offshore accounts through spurious government contracts, to pick a random example
@mrsbeanbag classic exempel of non productive, as in not generating growth, government spending is military spending.
I didn't mean to say you got anything wrong, I just wanted to add too what you said.
@ekg i'm actually in two minds about whether military spending counts as an investment or not. although tbh i don't really approve of it either way.
@mrsbeanbag most studies have the return on investment of less then 1, meaning the economy grow less then what is spent.
Most military spends, not counting salaries, goes to import of equipment. Imports are by definition counted as a decrease in growth.
@ekg yeah i was going to say, as long as they primarily use a domestic arms supplier. which the US largely does i guess. other countries less so. which goes some way to explain something i'm sure.
@mrsbeanbag more importantly net exporters of equipment, count isreal, usa, and a few more, have a positive impact on growth.
Growth is calculated as: private spending + public spending + net foreign investment + net exports.
@ekg true although NATO members are only allowed to buy arms from suppliers in NATO countries. so it's a kind of military-industrial protectionism.
@mrsbeanbag I don't think that's true, but their certainly exists a lot of pressure on members to buy from the alliance.
Both Sweden and Israel, with others, made the call that an independent defence required an domestic arms industry, that is not without reason.
@mrsbeanbag to expand. When Sweden sold Gripen to Brazil, including Israeli missiles, and American engines. A part of the deal was 100% counter purchases, meaning Sweden would be paid in Brazilian made or funded equipment. This is how equipment contracts typically works, because most countries are aware that importing equipment is unsuitable. I have a hard time believing that NATO would make it harder to export equipment by effectively baning these kinds of deals.
@mrsbeanbag sure it is both military equipment, but their exist an differences between transport aircraft, and fighter jets. And yes it was a weird deal, but counter purchases is common in equipment deals often not fully honoured.
@ekg so what are we getting in exchange from the Saudis. i guess it's oil, isn't it
@mrsbeanbag Yes, and keeping them calm about the Israel. Every time the USA give something to Isreal, the Saudis typically demands, and get, something equivalent.
@ekg Sweden is only a recent NATO member, and Israel still isn't, so i dunno. sounds like a weird arrangement to me. the whole purpose of trade is to swap one thing for a different thing, not another of the same thing.