A political choice with economic consequences
On the BBC News last night the budget was presented by the economics correspondent, who did such a very poor job of explaining the basics of debts, deficits and spending. The talk of "getting the deficit down" and "the nation's credit card" is just pure nonsense yet is used continually by people who should know better. All government spending is a political choice that has economic consequences. My worry is we are constantly given a misleading impression of what money is for, and this narrows our political options. A deficit is the difference between what a government spends and what it removes in taxation. So if a government spends 100 on schools, hospitals, roads, care etc but only takes in 90 in taxes then it is running a deficit of 10. But here is the bit they never tell you. That means the rest of the economy, which your household is part of, are running a surplus of 10. That 10 travels around the economy creating demand. The money you spend in th...