Cameron’s speech sends the alittleecon bullshit detector into overdrive

David Cameron gave a speech on the deficit today. Standing in front of this background, he said some shall we say, questionable things:

I’ve heard the tone of his speech described as ‘hyperbole’, but I would go further and say there were a lot of balls out lies in there. His tactics appeared to be what I would call Shappsian, where you just tell intellectually lazy lies in a matter-of-a-fact way in the belief that people are too stupid to see through it.

First, the background, and the strapline “A Britain Living Within Its Means”. By means he’s talking about money, rather than stuff. If he meant the latter it wouldn’t be so bad, just basic common sense. What he actually means is reducing the deficit so spending is equal to or less than taxation. In attempting to achieve this it will mean households – in aggregate – will need to take on more debt than it had when the economy crashed in 2008. The Conservatives have a bloody cheek talking about living within our means.

Cameron also talked about the ‘chaos’ that would result should Labour win the election. His definition of chaos is:

“It’s election year, and the choice is clear: staying on the road to recovery – or choosing the path to ruin. Competence or chaos.

With the other parties, all you get is confusion.

Uncosted plans. The spectre of more debt. The shadow of more taxes on your family, your home, your business.

With the Conservatives, you get the opposite. A strong and competent team, a proven record, and a long-term economic plan that is turning our country around …

We cannot overstate how important this is.

If we fail to meet this national challenge, the writing is on the wall.

More borrowing – and all the extra debt interest that brings, meaning there is less money to spend on schools and hospitals and all the things we value as a country.

More spending, and the higher taxes that will require – hardworking people thumped to pay for Government wastefulness.

And higher interest rates too – punishing homeowners, hurting businesses, losing jobs.

In short, economic chaos.”

Labour have given themselves a bit of wiggle room over their spending, committing only to balancing the ‘current budget’, meaning, they have left scope for higher spending on whatever they want to define as capital spending, but on current plans, there’s little between Labour and Tory over spending. The amount of spurious nonsense you would have to swallow to take Cameron’s assertions at face value are surely too much for most.

Talk of ‘unfunded’ spending is a silly argument in itself. Cameron is saying both that this will mean more borrowing and higher taxes, but if Cameron is right (he’s not), the extra spending would be ‘funded’ either by higher taxes (in which case, in the mainstream view, no extra borrowing), or by extra borrowing (in which case, no extra tax). He can’t have it both ways, and in fact can’t have it either way, because taxes and borrowing are not needed to ‘fund’ spending at all.

Cameron talks of more borrowing leading to more debt interest payments, but as Richard Murphy points out, interest rates on long-term debt have plummeted over the last 10 years, so even if spending did go up, and the deficit was matched by issuing debt, as the older, higher interest debt was refinanced with new low interest debt, debt interest payments may even fall, not rise. A public debt crisis is not on the way whoever wins the election.

The final bit of nonsense I wanted to pick up on was Cameron’s assertion that interest rates would rise if Labour won. This is rubbish because interest rates in the wider economy are strongly correlated with the base rate set by the Bank of England. This is 0.5% at the moment, and has been for several years because the economy has been weak, and most economists think low rates stimulate the economy. As the economy recovers, we should expect to see interest rates rise, so if the Conservatives are saying the economy will continue to improve with them but slip into chaos with Labour, we should expect rates to rise with the Tories, but stay the same or fall with Labour. A complete 180 from what Cameron is suggesting. It’s not necessarily bad if rates do start to rise (although it will be for some people). It’s just what’s likely to happen in a recovery.

Not a lot to like then. He is relying on voters being idiots. This is not to say Labour do not makes questionable assertions of their own, but it’s been the Tories who have been straight out of the blocks with the sort of negative, fear-mongering campaign many suspected would be the way things would go. How will Labour respond?

6 thoughts on “Cameron’s speech sends the alittleecon bullshit detector into overdrive

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