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0 pointscomputer12y ago0 comments

> "- Government debt is at 90 percent of GDP."

Describing debt as percentage of GDP is a subjective anti-debt framing of the issue. Here's why:

Units of debt: $ (here pounds). Units of GDP: $/year. So, units of debt/GDP: years, not percent.

Since "100%" sounds like a high number, this way of framing the numbers is useful for scaring people. Putting it mathematically correct "11 months" sounds much less scary.

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mseebach12y ago

GDP is a measure of the size of the economy to allow comparison between different years and different countries. Putting things in fractions of GDP allows the same comparison to be made meaningfully.

> Putting it mathematically correct "11 months" sounds much less scary.

Yes, and for exactly this reason it's dishonest: It implies that you could, if you wanted, repay the debt in 11 months - which is impossible.

Anyway, 90% debt is only scary if we decide that there is a threshold below 90% that is un-scary. If the threshold was 150%, then Greece is scary but UK isn't. If it's 10% then everywhere is scary.

Personally, I'm more scared and/or outraged by the way the money is wasted than by the exact size of the debt.

petercooper12y ago

100% agree with your last sentence.

Now, I'm not really replying to you as such, but I don't quite understand the alarmism over, say, a debt of 100% of GDP.

UK tax revenues are 39% of GDP (so, very naïvely, the government's "income") and with a debt of 90% of GDP, that's 2.3x income. Or a typical £25k earner having a long term debt, like a mortgage, of £57.5k.

I confess this is an extremely naïve analysis since personal and government budgets are chalk and cheese, but it doesn't strike me, as a taxpayer, as being a number to get alarmed over. Or am I totally missing something?

mseebach12y ago

What you're missing is the fact that having a mortgage implies having an asset (a house) worth something more than the mortgage principal. The government does spend on investment, but the vast majority of the budget in sunk into running costs. Then, the more appropriate comparison would be a £25k earner with £57k in credit card debts, which is obviously a lot more scary - but again not completely comparable as the guy would be paying 20-30% interest while the government pays close to 0%, mostly because they have the power to raise their income on demand if they need to in order to service their debts.

computerOP12y ago

> Yes, and for exactly this reason it's dishonest: It implies that you could, if you wanted, repay the debt in 11 months - which is impossible.

It does not imply that. It's simply the mathematical truth of the units. I'm arguing that using percent is factually _false_, with as aim scaring people. I prefer truthful facts with explanation. Feel free to use a different thing than debt/GDP, but don't use something that's equivalent to claiming that 1+1=3.

chii12y ago

while i understand the unit, what does 11 months _mean_?

When you put debt as a percentage of GDP, it is understood to mean the "size" of the debt, with the implied "size" of 100% being bad (whether this is true or not, i m not sure).

eru12y ago

Yes, though of course, the numbers should get their scare value from something more objective. I.e. some kind of study about how much debt is actually harmful (or not?).

mseebach12y ago

The problem with that is that it's very hard to get a substantial body of empirical evidence in which you can isolate the variable. There was incredibly high debt during and after WW2, and the UK survived that, but then there's the elephant in the room of the uniquely united nation having just fought off a very real and direct existential threat. We don't exactly have that level of common sense of purpose today.

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mseebach12y ago

GDP is a measure of the size of the economy to allow comparison between different years and different countries. Putting things in fractions of GDP allows the same comparison to be made meaningfully.

> Putting it mathematically correct "11 months" sounds much less scary.

Yes, and for exactly this reason it's dishonest: It implies that you could, if you wanted, repay the debt in 11 months - which is impossible.

Anyway, 90% debt is only scary if we decide that there is a threshold below 90% that is un-scary. If the threshold was 150%, then Greece is scary but UK isn't. If it's 10% then everywhere is scary.

Personally, I'm more scared and/or outraged by the way the money is wasted than by the exact size of the debt.

petercooper12y ago

100% agree with your last sentence.

Now, I'm not really replying to you as such, but I don't quite understand the alarmism over, say, a debt of 100% of GDP.

mseebach12y ago

computerOP12y ago

> Yes, and for exactly this reason it's dishonest: It implies that you could, if you wanted, repay the debt in 11 months - which is impossible.

chii12y ago

while i understand the unit, what does 11 months _mean_?

When you put debt as a percentage of GDP, it is understood to mean the "size" of the debt, with the implied "size" of 100% being bad (whether this is true or not, i m not sure).

eru12y ago

Yes, though of course, the numbers should get their scare value from something more objective. I.e. some kind of study about how much debt is actually harmful (or not?).

mseebach12y ago

j / k navigate · click thread line to collapse