[user104658]

Originally Posted by Brillopad

Like most things the size of the national deficit is relevant. Very high Government debt can slow down the economy and increase taxation to pay for it. According to the latest Article IV report on the UK economy the IMF said that maintaining deficits and debts at high levels would also constrain the space to respond proactively to future large negative growth shocks.

Ok but do you understand the reason for the part in bold? Basically the reason for reducing debt when "times are good" is so that you can SPEND SPEND SPEND when things get bad, because investment is the only way to effectively pull out of an economic downturn. When they talk about having room to reapond; this is what they mean. Having room to BORROW and SPEND more when the economy is suffering.

Now... Both Labour and the Tories unfortunately got this arse-backwards in each of their terms. Labour were in power during major boom years when we were thriving, but failed to address debt issues when we were in the position to do so. On the flipside... The Tories CUT spending and tightened the belts at a time when the economy was in trouble... The absolute opposite of the right thing to do. Creative spending on jobs and keeping the country flowing, and keeping money IN the pockets of consumers rather than removing it through austerity, is the way to bring us back to a thriving economy and THEN tackle the debt.

And they're still doing it. Despite what some would have us believe, the economy is far from recovered, let alone thriving, and this Tory obsession with austerity and cuts is only going to slow the economy down further and make things worse. It needs a turbo boost... Not someone hitting the brakes.

Its not really comparable to personal debt but a comparison can be drawn;

Let's say someone is in £40,000 of debt and they earn £25,000 a year. An expensive, but promising, opportunity comes up and they now have two options:

1) They could stay in their 25k job and put every spare penny they have onto debts every month. If they do this, they reckon they can pay it all off in 15 years of frugal living.

2) They can borrow another 10k and go on a 3 year course that will bag them a job earning £50k a year. During the course they can only afford to repay the interest, so at the end of that, they will be in more debt, but earning more money, and have the now-50k debt paid off in another 9 years.

So in option 1 it takes 15 years to pay the debt and still be in the same dead end job at the end of it.

Option 2, initially the debt rises but in the end it only takes 12 years total to pay the debt, even through the debt was higher and started repaying later, and the person is also in a much better position at the end of it.


The theory is the same. Spend money to make the economy truly strong and then repaying the debt won't be the same mountain that it is with our struggling economy in a time of uncertainty.