Debt and Deficit confused in the mainstream media yet again

May 19, 2011 6:43 PM

Zoe Williams writes in this morning’s Guardian about Canada’s fiscal consolidation of the 1990s. She believes that we should not learn lessons from their experience, as we are in a very different situation. In our book How to Cut Public Spending, we devoted a substantive section to why there are very important lessons to learn from Canada. But fair enough, debates to be had and all that.

Until Ms Williams says this:

“To edge back a step, our deficit was nothing like Canada’s either. Theirs had been rising steadily since 1974, and had got to 70% of GDP. Ours was 30% before the financial crash, a figure that is manageable, almost respectable.”

It’s very difficult to engage in genuine debate about how to tackle the deficit if one side of the argument constantly confuse it with debt. Influential journalist Johann Hari did the same a little while back on his blog and in an article for GQ. He quietly corrected the mistake, but even then Matthew Sinclair still comprehensively deconstructed his argument.

The headline of today’s Guardian piece includes the line “Let’s start denying this deficit properly”. Denying a deficit of the size we have now is frightening. By implication, the author wishes to deny a deficit of 70 per cent of GDP, which is... well, what’s a stronger word than frightening?

To be fair, this glaring error has been corrected on The Guardian’s website. It has, however, run in the print edition, meaning the piece misinforms a lot of readers. But let’s accept a mistake was made, and the correction stands. A quick look at the Budget 2011 document shows us that even if the author meant debt, ours will be 69.7 per cent of GDP next year. Around the size Ms. Williams says Canada’s was before their fiscal consolidation. Our problems cannot be blamed solely on bailing out the banks either, though we should be trying to get our money back. Spending was racked up to unsustainable levels and whoever won the last General Election would be taking action to cut back.

The TPA has a clear view on the course of action needed to cure our fiscal woes. We’ve produced countless research papers and notes on what the problems are and how we can solve them. We’re also willing to engage in robust debate on the issue. That’s difficult when arguments on the other side are littered with mistakes like these.Zoe Williams writes in this morning’s Guardian about Canada’s fiscal consolidation of the 1990s. She believes that we should not learn lessons from their experience, as we are in a very different situation. In our book How to Cut Public Spending, we devoted a substantive section to why there are very important lessons to learn from Canada. But fair enough, debates to be had and all that.

Until Ms Williams says this:

“To edge back a step, our deficit was nothing like Canada’s either. Theirs had been rising steadily since 1974, and had got to 70% of GDP. Ours was 30% before the financial crash, a figure that is manageable, almost respectable.”

It’s very difficult to engage in genuine debate about how to tackle the deficit if one side of the argument constantly confuse it with debt. Influential journalist Johann Hari did the same a little while back on his blog and in an article for GQ. He quietly corrected the mistake, but even then Matthew Sinclair still comprehensively deconstructed his argument.

The headline of today’s Guardian piece includes the line “Let’s start denying this deficit properly”. Denying a deficit of the size we have now is frightening. By implication, the author wishes to deny a deficit of 70 per cent of GDP, which is... well, what’s a stronger word than frightening?

To be fair, this glaring error has been corrected on The Guardian’s website. It has, however, run in the print edition, meaning the piece misinforms a lot of readers. But let’s accept a mistake was made, and the correction stands. A quick look at the Budget 2011 document shows us that even if the author meant debt, ours will be 69.7 per cent of GDP next year. Around the size Ms. Williams says Canada’s was before their fiscal consolidation. Our problems cannot be blamed solely on bailing out the banks either, though we should be trying to get our money back. Spending was racked up to unsustainable levels and whoever won the last General Election would be taking action to cut back.

The TPA has a clear view on the course of action needed to cure our fiscal woes. We’ve produced countless research papers and notes on what the problems are and how we can solve them. We’re also willing to engage in robust debate on the issue. That’s difficult when arguments on the other side are littered with mistakes like these.

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