Friday, 15 October 2010

Paying for this generation’s mistakes

Nick Clegg, in a recent speech:
Tackling the deficit means wiping the slate clean for the next generation. It means ensuring that our children do not pay the price for this generation’s mistakes. And their future must be at the heart of every decision we take along the way.
I wonder if Clegg realises quite how disingenuous he is being?

Even if the Coalition were to grow some balls and eliminate the deficit, rather than simply reducing it, the next generation will still be stuck with our debt.

Officially, the gross national debt recently passed the £1 trillion mark. It's hard to conceive. Art Cashin gave it a good shot:
Numbers like billions and trillions tend to numb the mind. They are too large to grasp in any “real” sense. Thirty years ago an older member of the NYSE (there were some then) gave me a graphic and memorable (at least for me) example. “Young man,” he said, “would you like a million dollars?” “I sure would, sir!”, I replied anxiously. “Then just put aside $500 every week for the next 40 years.” I have never forgotten that a million dollars is enough to pay you $500 per week for 40 years (and that’s without benefit of interest). To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years. And a…..trillion that would require $500 million every week for 40 years. Even with these examples, the enormity is difficult to grasp.
The true national debt, however, is much worse.

Even Clegg seems to understand that thinks can't carry on like this:
The amount the country is losing in interest payments alone is a national scandal. We are going to spend £43bn on debt interest just this year. That’s £830m per week. Just under £119m a day.

For that money, we could build a new primary school every hour. We could buy a new Chinook helicopter every day. We could take 11 million people out of paying income tax. We could triple the number of doctors in our hospitals. We could spend twice as much on education every year.
And yet, the cuts currently being proposed by the Coalition won't come close to reducing the debt; all they'll do is reduce the rate at which it grows. We can and must cut much more aggressively. Government debt is deeply immoral — it is the only kind that passes from father to son.

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