Economics is social science which has wide range of definitions.  Quite simply describes certain factors which determine production, distribution and consumption of goods and services.  Subject is study of humans interacting with the above concepts.  Grounded in reality study of human behaviour with scientific method behind it. No surprise that many different sciences come together with economics with range of skills used.

Social science which most people never learn basic concepts leaving the subject to experts.

Financial crisis: Faith no more

Financial crisis of 2007-2011 faith no more politicians and experts lost trust.  Break down in trust along with faith resulted in wave of questioning.  Opposition parties came to power pushing forward policy set designed to solve the crisis.  Crisis was created by range of factors with opposition parties blaming fiscal spending in response.  Blaming excess spending, regulation and policy failure for the crash. Right leaning opposition parties became Government due to painting this narrative. Rightly upset at lower living standards, high unemployment most voters followed the narrative hoping it would create an more stable system. Simply the goal was to reduce the deficit caused in response of the crisis. Years later deficit is still high for many nations with recovery delayed, unemployment still high yet voters still accepting the narrative. Policy was meant solve problems caused by the crisis resulting return to normal levels with growth.

Living within our means

Statement living within our means one of the main reasons given for reducing spending of governments.  Based on the assumption that governments function much like a household subject to the same limits. Debt must be repaid, generations limited by any debt we create.  Government needs taxes in order to spend can’t always borrow should not borrow. Private/public sector do share some common traits both consume and invest.

Public sector spending is not like a household…

Households can’t issue their own currency. Households can’t borrow the same amounts or even time frame. Taxes are not required in order to spend due to being able to issue currency or borrow.  Governments can issue currency cover the cost at later date with any taxes which come in.  Debt must be repaid again not true due to dynamics of being able to issue currency.  Governments can issue debt taken out decades ago which has ended.

Government debt acts as insurance policy against demand supply shocks or economic downturns.  Invested creating jobs driving up tax receipts, creating growth minor cost payout towards the owners.

Instead of being a drain insurance based asset which is tax credit or stable income for the owners.  Policy pays out every couple of weeks over number of years with holding it value.

Assumptions are incorrect mainly due to the term used to describe it.

Real argument?

Policy being applied is not rooted in economic credibility based on some incorrect assumptions.  What the real argument behind the policy of cutting public spending. Certainly not paying down debt or deficit both are natural responses to certain conditions acting as tools. Real argument is wanting smaller state but instead of making that argument used another one. Opportunity to exploit frustration at the same time with economic downturn.  Easy to understand why political apathy is so high given twisting of so many concepts.

Argument for smaller state why not make it instead of hide it?

Guessing the reason is would make any party political unelectable given how recovery yet to be felt.  All that pain for nothing but goal which you lied about from the beginning.  Damage done would return any party acting out the policy to opposition bench likely hood of being unelectable.  Some good arguments for smaller state but one should not hide true reason behind the choice.  Driven by ideology choices about public sector role within the economy.

Sectoral balances

Deficit spending more compared to what you tax

Surplus taxing more compared to what you spend

Government being in deficit means transfers towards private sector net financial assets, surplus reduced financial assets. Mathematics state that equations must be solved same goes with sectoral balances must equal zero.  Surplus means money has be taken away from private sector. Lower taxes should be compensation resulting in higher growth from this reduction due to the surplus.  Forcing surplus means private sector needs to have deficit.  Surplus in the private sector results in profits with assets.  By saying you want government to have surplus you’re saying private sector should not make a profit.  Poor reasoning with assumptions all around which policy is based on.

Common ground

Arguments being used do have some common ground with but method of delivery no.  Talking but actions taken have opposite effect.  Spending billions on fossil fuel subsidies rejecting green subsidies as interference.

Do agree that we should be living within our means which is why should be dealing with inequality and environment issues.  Population is consuming to many resources per person unsustainable situation. Planet can support the population only if we scale back what we’re consuming.  Does mean acting less meat using less energy being less consumer driven.

Economics so important

Government spending policy has big impact on the economy.  Consuming resources investing into resources major outcomes for populations.  Impact may not be obvious but does happen with time. Duty for people to understand even the basic concepts. Ignorance is bliss leaving complex subject to the experts who have failed far to easy.  Meat of the subject is information about the world which is at the finger tips.  Concepts we use daily easy to learn just a case of being willing to do so.  Can’t be an expert in everything but you can get good basic idea don’t need to study the subject which only focuses on narrow part of the field.

Conclusion

Recovery from Financial crisis 07-11 has resulted in questioning status quo.  Failure from politicians to answer questions has resulted populist policy taking hold. Living within our means fiscal policy helped cancel out the recovery real risk of worse long term growth.  Politicians who have twisted the truth may have chickens come home to roost due to policy choices.  Always policy alternates for the longest period of time the alternate has been silenced.  Current policy is counterintuitive towards it own goals.