There\’s an implication to this argument you know Polly

It\’s an idea that seems to require bogus figures to shore it up – he repeated that \”grants to councils will only go back to 2007 levels. There was a good level of libraries then\”, suggesting councils are deliberately exaggerating the cuts. Here\’s the cheat: public spending is returning to the same proportion of GDP as 2006-7 – but he omits to say that GDP has fallen between 6% and 7% during that period, leaving a mighty hole.

I am deeply unconvinced that GDP has actually fallen that much over that time period.

It might be true if you took previous trend growth and then looked at where we are now instead of what would have been if the boom had continued but that\’s another matter.

But let\’s just take this as being so. Polly\’s right.

While we might be spending the same portion of GDP, the fact that GDP has fallen means that we should in fact be spending more of GDP to maintain spending levels.

Right, now, turn that around the other way. When GDP grows we should not be keeping spending as a portion of GDP constant. Because we don\’t need to: what we need to be doing is keeping the actual amount spent on such public services constant.

Which really rather sounds quite excellent to me. Public services will therefore shrink, over time, to near nothing, as a percentage of GDP if we keep spending on them constant in real (ie, inflation adjusted) terms. Tax levels can be slashed, again, over time.

Take, for example, a reasonable level of trend growth, say 2% per annum. In 35 years this means GDP will double (yes, this is after inflation). But we only need to spend the same amount, in real terms, upon public services.

Thus, taxation to pay for said services, the amount we spend on such services, should fall from the long term average of perhaps 40% of GDP to 20% of GDP. In 70 years, 10% of GDP.

Hey, I\’m with the program.

But is Polly?

2 thoughts on “There\’s an implication to this argument you know Polly”

  1. Tim, I don’t think you’ve quite understood the rules of Pollyworld.

    If GDP falls, public spending should go up in percentage and in real terms, to counterbalance the social problems caused by the fall in GDP.

    If GDP rises, public spending should also go up in percentage and in real terms, because with the extra GDP we can now afford to deal with social problems we hadn’t dealt with earlier.

    In short: ever-increasing public spending is good, because it deals with social problems. There are an infinite number of social problems, and therefore an infinite need for public spending. There is no way of dealing with social problems except by increasing public spending.

    Got it now?

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