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We are running a budget deficit. And we can continue running a budget deficit as long as people are willing to buy Treasury bonds. And if the government wanted to spend more and incur more debt, we can do that as long as we have a long term plan to invest in and grow the economy, which will reduce the deficit over the long term.
The problem with that (as Truss found out), is that the market might disagree with you on what is likely to grow the economy.
Tories have minimal credibility right now and therefore minimal fiscal room to manoeuvre. Any government from the other side of the house will struggle with the fact that things that we might think are "good" in some sort of ethical sense might not grow aggregate GDP in the medium term (the market doesn't really care about the distribution).
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Isn't it just the start of the Tory reelection narrative?
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NickCJ
n3il
@Lebowski
This whole fiscal 'black hole' is complete rubbish. It reminds me of Osbourne's 'household budget' lie back in 2011.
We are running a budget deficit. And we can continue running a budget deficit as long as people are willing to buy Treasury bonds. And if the government wanted to spend more and incur more debt, we can do that as long as we have a long term plan to invest in and grow the economy, which will reduce the deficit over the long term.
Austerity is a political decision, not an economic one.