And Ritchie falls for it

The data comes from the IMF. It shows the planned proportion of GDP to be spent by the governments of the UK, Germany and USA over the next five years, with some historic time data to give the plans some context. As Aditya pointed out, it is the plan of the UK that is quite so extraordinary.

Between now and 2017 the Coalition is planning to cut its spending from about 45% of GDP to under 40%, a figure slightly lower than that in the USA.

And in 2007 it was 39% of GDP.

Given that in 2007 all was right with Brown\’s spending of the money then 39% of GDP is where it should be then, eh?

Actually, Ritchie has said several times that Labour (and Brown and Blair) spent too much back then. So it should be lower than that according to the Sage of Downham Market then?

8 thoughts on “And Ritchie falls for it”

  1. The reason why spending/GDP was at 39% in 2007 was because GDP was higher, not because spending was less.

  2. I mean really though, it all comes down to whether or not you think State spending is a Good Thing or a Bad Thing, doesn’t it? Proggies like Ritchie just think it’s always good, because (to use this Lord Leverhulme quote what I used in a few threads further down)-

    “It would not do you much good if you send it down your throats in the form of bottles of whisky, bags of sweets, or fat geese at Christmas. On the other hand, if you leave the money with me, I shall use it to provide for you everything that makes life pleasant – nice houses, comfortable homes, and healthy recreation.”

    Ritchie’s “courageous state” is simply Port Sunlight and its ilk, on a national (and ultimately international) scale. So, the more the State is spending, the less people are wasting on whisky, sweets and christmas geese. Ergo, a reduction can never be good, because then we will all be drunk and fat.

  3. Frances,

    I assumed that was the point about 2017 as well. GDP is expected to grow, while spending remains constant.

  4. MrPortato

    Umm, no. OBR is saying that GDP will n0t return to previous trend level for the foreseeable future. So the plan must be to cut spending.

  5. Well, that’s going to be interesting, because GDP can only grow if the broad money supply can be puffed up again by some asset inflationary boom, and we know what happened last time we did that, i.e. just after Mr Gordon Brown was spending 39% of it.

  6. The rest of Ritchie’s post is amusing too. He has (of course) taken the maximum in the IMF’s multiplier range and applied it assuming a 1% reduction in Govt spending vs. GDP over the next 5 years, reaching the conclusion that the result will be an 8.5% reduction in real GDP. From this he deduces that there will be a 5% reduction in employment. What a remarkable coincidence – that JUST HAPPENS to produce the magic 4 million unemployed figure that he has been bandying about for the last couple of years.

    He’s right that spending cuts of that order can only be produced by trashing capital investment, though. In fact the OBR report shows that capital investment has been seriously cut already.

Leave a Reply

Your email address will not be published. Required fields are marked *