The “structural deficit” – setting the record straight

The Gloucestershire Echo recently published an article by John Webster in which he argued that cuts were justified on grounds of the UK having a “structural deficit”.  It’s a silly argument, and we’re grateful to the Echo for publishing our response in today’s paper.  Since the letter won’t be available electronically for a few days, here it is in full:

Councillor Webster’s article on the state of the UK economy, published 6 April, is evidence of the increasing desperation of ConDem politicians, as they try, in vain, to justify savage cuts motivated not by necessity, but by ideology.

Strip away the colourful language, and Webster’s argument effectively reduces to the following: the UK’s deficit is “structural”; therefore stimulus spending won’t work.

Assuming just for a brief moment that Webster’s premise (that we have a “structural deficit”) is reasonable, does his conclusion (that stimulus spending won’t work) actually follow?  No, it doesn’t, since, irrespective of the nature of the deficit, history tells us that government spending to create jobs is the most effective way of closing a deficit and paying off national debt.  Furthermore, if applied in combination with the closing of tax loop-holes and raising of taxes on the wealthy (whose income tends to be saved, thus not contributing to demand), any “structural” component that may exist would likely be eliminated in the process.

But there’s a more damning criticism to be made of Webster’s argument, which is that he evidently doesn’t understand, or worse deliberately obscures, what is meant by the term “structural deficit”.  According to Webster, the term is applicable to the UK economy since, for a few years under Labour, tax revenues were slightly lower than spending receipts.   This is highly misleading.  In fact, a “structural deficit” refers to that part of the deficit that still exists when the economy is running at FULL EMPLOYMENT.  But as Webster must surely be aware, the commitment to full employment was abandoned back in the 70s, with control of inflation taking over as the priority economic objective (which just happens to involve maintaining unemployment at a high enough rate to curb inflation, known in the neoliberal trade as the Non Accelerating Inflation rate of Unemployment, or NAIRU).  This is devastating to Webster’s case since it follows that there is no way of determining whether our deficit has a “structural” component or not.

In this light, resort to the notion of a “structural deficit” can be seen for what it is: a rhetorical trick to bamboozle and frighten people into accepting unnecessary cuts.

**UPDATE (22 April):  Two days after this blog post appeared, John Webster responded in his own inimitable style.  The full exchange is below.

Joe;

Your arguments are nonesense. They key issue is where is the money to come from?  Now, if you are proposiong a revolution to strip assets from those who have them – come out and say it.

John Webster

——-

John,

The notion of a “structural deficit” only makes sense to you because you take tax and employment as a given.  This, I’m afraid, positions you firmly in the neoliberal/regressive camp, which isn’t a pleasant place to be.  And you can’t wriggle out of your folly by claiming that the “the key issue is where is the money to come from”.  If this had been the central point of your article, you wouldn’t have described spending to reduce a cyclical deficit as “eminently sensible”.  I’m attaching two articles which I hope you’ll read and digest [**I attached this and this**].  The second one deals with your new question of “where the money comes from”.

All the best,

Joe

——-

Joe;

You’re such an unpleasant individual that this affects your arguments – and you understand nothing about economics.

JW

——-

John,

I’m sorry that you find my holding you to account so “unpleasant”.  Now, if you’d like to substantiate your accusations/assertions, I’m all ears…

Joe

——-

Joe;

Don’t communicate with me anymore – you are not interested in arguments at all. You have no idea of what you’re talking about.

John Webster

——-

John,

This isn’t “communication” in any meaningful sense.  This is me advancing arguments with supporting evidence and you responding with petulant invective.  Once you’ve resolved your projection issues AND read the papers I attached, feel free to hit me back.

Joe

——–

No – do not e-mail me anymore.

———

John,

You need to do some serious growing up.  And don’t think you’re walking away from this exchange unscathed, as all our correspondence is available on-line.  There ARE costs to arrogance and ad hominem, I’m afraid…

Joe

——–

That was always your intention – please publish everything you wish. That’s why there is no possibility of any meaningful discussion with you. Do not – under any circumstances – contact me again.

John Webster

——–

John,

As an elected representative and cabinet member of CBC, you have no business making this demand.  What’s more, as the author of multiple ad hominem attacks on a member of the public, you should consider yourself fortunate that you haven’t, thus far, been reported to the Standards Committee for clear breaches of your code of conduct.  Your disgust at being challenged in a public forum is what has precluded “meaningful discussion”, not my “intention” to publish – an argument you have only latched upon retrospectively.  Despite all this, the way remains open for you to engage constructively, as and when you feel able to do so.

Joe

——–

I have every right to ignore your adolescent politics.

If you want to publish a serious reposte to what I say do so in the Echo.

Meanwhile, go away.

JW

——–

Hi John,

Crikey.  In your rush to be as obnoxious as possible, you seem to have forgotten the chronology of this exchange.  A little recap…

On April 6 the Echo published an article of yours in which you sought to discredit government spending as an alternative to cuts on gounds of the UK having what you describe as a “structural deficit”.  On April 17 the Echo published my (necessarily brief) rebuttal of your article.  Since then you have responded with a revealing array of ad hominem:

“Your arguments are nonesense” [sic]

“You’re such an unpleasant individual that this affects your arguments”

“you understand nothing about economics”

“you are not interested in arguments at all”

“You have no idea of what you’re talking about”

“I have every right to ignore your adolescent politics”

If you choose to respond again, can I request that you either supply argument/evidence to support these statements, or apologise for behaviour transparently unbecoming of an elected official.

Best wishes,

Joe

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3 comments

  1. This is pretty extraordinary; is this Webster guy having a breakdown or something? He sounds insane.

  2. Shaun Kesterton · · Reply

    I have’nt heard any mention of support for the so called “Robin Hood tax” so far. Sounds a pretty good idea to me. I would also like to see the Inland Revenue paying wages in line with those companies who pay top dollar for graduates in avoidang tax. Taxing those with assets over a £1million will also go a long way. I dont deny we need to take a good look at our public services but feel with manufacturing in such a dire state now is not the time to send thousands more than necessary to the job centre, i would send 2/3rds of the middle managers of the NHS tho! Regards, Shaun

  3. In order to save one has to cut out waste, something our councillors refuse to acknowledge; they set the policies but refuse to accept responsibility of them. There is nothing inhumane by resigning when they know they have made mistakes.
    If one was to write down all the mistakes and the costs incurred this would go a long way to getting the UK out of the mess it is in.

    I would say this to Councillors; “why not make pledges to the taxpayer”:

    To deal with all complaints and give an explanation of your findings.

    Treat every area in Cheltenham with the same consideration, to avoid civil unrest.

    Not to choose policies purely to prolong the employment of council officials – with the seagull problem in mind – farmers have dealt with crows and rooks for years quite successfully.

    Not to enter into deals that have any a element of uncertainity and risk of financial loss leading to eventual hardship to the taxpayer and young people.

    Put officials’ salary increases out to a public select commitee for scutiny, in the same way as councillors salaries are determined, but make this committee an ‘elected’ committee. As it is it seems at this time “you scratch my back and I’ll scratch yours”.

    Before paying officials any redundancy money prove that this is the case, and no advertising for this post within a reasonable time – by changing the name of that same job for recruitment is unacceptable.

    Not to encourage promotion when officials are in their final years of service purely to enhance their retirement package.

    Avoid policies that are purely set up to make a quick buck, then only to be revoked because of public outrage

    And to remember that it is the duty of all taxpayers’ representatives to introduce policies that cause as little hardship to the electorate as possible, especially at such times, and not seize the opportunity to capitalise at this time in case with future mistakes in mind.

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