We\’re doomed. @richardjmurphy is the UK\’s No 1 economics blogger

Unpacking this little piece from the UK\’s number 1 economics blogger:

The answer is that it matters for three reasons. The first is that we wouldn’t have a world economic crisis now if we hadn’t had tax evasion. The current crisis focuses on the Euro. Italy is at its epicentre. It has external debt of €1.9 trillion. If only it had suffered the UK’s rate of evasion in the last decade then its deficit would be less than half that sum now.

Lesse, Italy\’s external debt is around €1.9 trillion. Yes, yes it is, so says the Bank of Italy.

It is also true that Italy\’s government debt is around €1.9 trillion.

But external debt and government debt are not the same thing, are not the same thing at all. Look at the Bank of Italy report: about €825 billion of the government debt is external debt.

The majority of government debt is in fact owed to Italian households and financial institutions: something we already knew in fact for it\’s referred to often enough.

The rest of the external debt is borrowing by banks and companies etc: something which the rate of tax evasion or not has absolutely nothing at all to do with.

So, we\’ve the UK\’s number 1 economics blogger getting terribly confused over government debt, something at least potentially amenable to a change in the rate of tax evasion,  and external debt, which is something very different indeed.

Then of course there is the schoolboy howler there. The use of the word \”deficit\”. Which, as any fule kno, is the annual addition to the stock of government debt, not the stock of government debt itself.

If this is the level of knowledge of the UK\’s number 1 economics blogger then we\’re all entirely screwed, doomed, aren\’t we?

13 comments on “We\’re doomed. @richardjmurphy is the UK\’s No 1 economics blogger

  1. What’s surprising is that the TJN figures he links to all demonstrate that HMRC do a very good job at raising the taxes that are due. Doesn’t seem to chime with the constant criticism of Hartnett and the Osborne-approved tax avoidance/evasion regime in the UK.

  2. This makes two assumptions:

    (1)That, had that tax been raised government expenditure would have remained the same, and

    (2) That a financial crash (which arguably caused the sky rocketing of the deficit) only applies to what is really incorrectly labeled “govt. money”. As we know the government doesn’t have any money they act as a collecting pool for money obtained from citizens and their businesses. The tax revenue raised is directly dependant on the profitability of businesses and the ability of those businesses to pay employees taxable incomes.

    Where the profitability of a business falls due to economic crisis so do tax receipts. So it wouldn’t matter as far as the structural deficit is concerned whether or not avoidance had taken place as the rate at which receipts fell was faster than the govt. could cut expenditure.

    What amazes me is that and A-level’s economics student could explain this simple concept, and an A-level student who pay attention could explain Worstall’s point.

    The issue here really is the ability of a government to change expenditure is line with receipts. It becomes irrelevant how much tax is avoided as that money to not entering and exiting the country as taxable income rapidly therefore throwing off govt. figures and budgeting.

    Murphy if you do read this please do explain these issues. Truth is I dont think you can. You think that tax unpaid is somehow a replenishing tank floating out there in the ether that can be used to top up govt. over spend.

  3. our only hope is that there are only about 5000 half-witted left-wingers who read economics blogs.

    Which is depressing enough – why aren’t there tens of thousands of smart left-wingers interested in economics?

    But I’d prefer to believe RM’s status originates from a small sample of not terribly smart people, than the alternatives.

    Of course the world’s most influential economics columnist, Martin Wolf, probably counts as a left-winger, so we are not doing too badly.

  4. I’m not an economist but…

    The first is that we wouldn’t have a world economic crisis now if we hadn’t had tax evasion.

    Surely that is complete and utter cobblers.

  5. CIngram – I think what you have there is a conclusion without a premise unsupported by evidence.

    It is simply a political slogan dressed up as expert opinion.

  6. Hilarious little tweet from Ritchie here:

    “It is not inevitable that the EU or democracy will survive this mess | Simon Jenkins http://ht.ly/7EGBv He’s right – fascism is waiting”

    He should know, he wants it badly. A juicy, all-encompassing system so he can tell who dares get a little bit of cash-in-hand immediately.

  7. Murphy also seems ignorant – willfully I suspect – of the fact that if Italians did obey tax rules to the letter, then the economy would collapse, given the nightmare of red tape in that country.

  8. He misses the most critical point of all.

    The Market was willing to lend Italy €1.9 Trillion.

    Assuming that the Italian government had been able to raise €950 Billion more in tax revenues, would they have borrowed less? The market would still have been willing to lend them that much.

    Hey Richie, they are politicians, they would have spent €950 Billion on bright baubles, and election bribes, and still had the same level of debt.

  9. Which is depressing enough – why aren’t there tens of thousands of smart left-wingers interested in economics?

    Ohh, but there are. It’s just that, when they find Econ 101 so disagreeable, they flunk it and rewrite the subject to suit their prejudices. Some of them even go on to write books about it…

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