Ritchie’s latest little debt calculation

Labour not only repaid more often, it turns out: it also repaid much more in total and on average (not shown) during each year when repayment was made.

So what do we learn? Two essential things, I suggest.

First, Labour invariably borrows less than the Conservatives. The data always shows that.

And second, Labour has always repaid debt more often than the Conservatives, and has always repaid more debt, on average.

The trend does not vary however you do the data.

Or, to put it another way, the Conservatives are the party of high UK borrowing and low debt repayment contrary to all popular belief, including that of most radio presenters. Which means that the next time I am presented with that nonsense I will be very firmly rebutting it.

And then we go to his source material.

Debt repayments under Labour in late 40s, yes. Attlee and all, getting it down after WWII. Bit in 69, 70, not sure what that was about. Lawson’s public sector debt repayment of 89, 90.

And then Gordon Brown. No, really: 98 to 2000. That’s actually the bit that drives the whole conclusion. You know, when Brown and Blair had promised to follow the previous Tory government’s spending plans?

The lesson thus being that Labour should sign up for Osborne’s spending plans, obviously.

22 thoughts on “Ritchie’s latest little debt calculation”

  1. Since Ritchie says borrowing a shit load of cash is essential, and the national debt does not need to be repaid ever, I guess the result of his research is that he’s going to vote Tory now.

  2. The inconvenient truth

    I guess if you only look at part of the picture I.e. ignore all the debt hidden off balance sheet through PFI, then you can convince the loyal followers of whatever you choose!

  3. Bloke in North Dorset

    More likely that Labour always inherits a growing, strong, economy, fucks it up, and hands back a basket case that needs lots of debt to sort out.

  4. “The data is clear – it’s both singular and plural. We’re speaking English, not Latin.”

    I agree with you, more or less. But technically, it’s neither. It’s a “non-count” or “mass” noun. The “singular” and “plural” forms only apply to count nouns.

  5. As BiND notes, it’s rare that these idiot politician types ever grasp that there’s a ‘time constant’ associated with everything.

    That is, given a system in some state, changing that state substantially by applying some stimulus (in the general sense) will take time to have full effect. In the USA, it appears to be about 4 years, so Presidents have the lovely opportunity to claim that their own administration has recovered from the crash etc…

    For large complex systems like states, there obviously isn’t a single time constant. What one observes is the effect of many individual time constants for various industries/activities smoothed together.

  6. NIV: Good point.

    “An amplifier with delayed feedback is an oscillator.”

    Not necessarily. An amplifier with positive feedback is an oscillator. An amplifier with delayed feedback can be very useful. When I was a postgrad I built a transconductance amplifier with delayed feedback to detect scanning laser dwell time. It didn’t oscillate at all.

  7. This is why Ritchie is a moron. No one would do the analysis he did and draw any firm conclusions from it. Firstly, correlation is not causation. To claim that a particular party repays more or borrows less ignores why the borrowing is high or low. UK borrowing over the past six years is mainly the fault of the cretin Gordon Brown – just as the repayments in the first term of New Labour were the fruit of Kenneth Clarke.

  8. What’s also missed is the affect of Brown’s budget for the election he bottled (2007 I think).

    This planned for quite a jump in spending as a % of GDP. It was hidden by spending on the crash, but was very much still there.

    Still, another Great Discovery for the LHTD to add to his list.

  9. “That is, given a system in some state, changing that state substantially by applying some stimulus (in the general sense) will take time to have full effect. In the USA, it appears to be about 4 years”

    Comparing the USA to the UK in this regard isn’t very helpful. For most of my life different parties have held the House of Representatives and President. For foreign readers the House has the power of the purse while the President is supposed to simply apply what has been passed by the legislature. In reality the President has far more power through control of the IRS and agencies that actually spend the money. There really is no simple way to tell who is really responsible with so many hands in the pot.

    One situation that is actually useful is to look at the failure of the USA saving and loans industry. S&L’s business model was initially based on the British Building and Loan system. Policies, Vietnam and Medicare being the most recognized, under Johnston in the 60s laid the basis for the high inflation rates. Additionally in 1966 massive regulations were added to the industry. Moves, like leaving the gold standard, during Nixon’s years made the situation worse. I don’t recall ever seeing Ford mentioned in connection to the S&L industry. Carter’s move that affected the industry was the Depository Institutions Deregulation and Monetary Control Act signed on March, 31 1980 which basically made all S&Ls unregulated banks. More deregulation quickly followed in 1981 with Reagan’s election. By 1985 the various manipulations of industry regulations finally began to show the final results. Of the next decade approximately 50% of S&Ls failed. Many of the financial tools used during the S&L failure were also causes of the 2008 crash. Simply put the effects of policies put into place in the 60s are still present. In this case we can say that economic effects of an administration can be seen for over 40 years.

    As a counterpoint the early 80s recession has an obvious starting point. The Fed, under Volker, raised rates from the 1979 average of 11% to 20% in 1981. In this case the policy changes took months to show up.

    Going with the overly simplistic number of 4 years for determining policy change effects does not add much to the debate. A contrarian can easily throw out the obvious causes like the Volker rate hikes and “prove” that the best situation for American politics with regards to the economy is when the Democrats hold both the House and the Presidency. Under these assumptions the Carter(4 years), Clinton(first 2 years), and Obama(first 2 years) administrations are actually best for the economy.

    If anyone can suggest a shorter way to explain that political policies don’t all have similar time constraints please make it. I obviously did not add all of the nuance needed to fully cover childhood recessions and yet this is already a very long post.

  10. I’m hoping that, when he attempts a rebuttal, someone points out that he’s not actually an economist.

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