Someone else who doesn't know the difference between deficit and debt - this time Johann Hari

Johann Hari describes himself at great length on his website, take a read of the 672 words and wonder what he has missed. Oh yes he's missed 'economically ignorant'. In this piece entitled 'The biggest lie in British politics' Johann Hari first claims that:

'British politics today is dominated by a lie. This lie is making it significantly more likely you will lose your job, your business, or your home. The lie gives a false explanation for how we came to be in this crisis, and prescribes a medicine that will worsen our disease. Yet it is hardly being challenged.

Here’s the lie. We are in a debt crisis. Our national debt is dangerously and historically high. We are being threatened by the international bond markets. The way out is to eradicate our deficit rapidly. Only that will restore “confidence”, and therefore economic growth. Every step of this program is false, and endangers you.

...

Our debt is not high by historical standards, and it is not high by international standards. For example, Japan’s national debt is three times bigger than ours, and they are still borrowing at good rates.'

I think this is a poor argument and may return as to why this is the case another time. However it is the next passage that needs to be repeated:

'David Cameron claims that, despite these facts, they need to cut our debt by slashing our spending because the bond markets demand it. If they do not obey, then our national credit rating will be downgraded, and we will have to pay much higher interest on our debt. But here’s the flaw in that plan. That’s not what the bond markets say.'

There's just one problem, actually there's several, David Cameron isn't planning on cutting the debt at all (if only he was) he's just planning on cutting the deficit. The deficit is the annual overspend, the debt is the total amount owed. If the deficit is just reduced and that is all that the coalition government is planning then the debt is still increasing.


Johann Hari ends his article with this thought:

'The real reason why David Cameron is imposing these massive cuts has nothing to do with the national debt. It is because he regards himself as, in his words, “the child of Thatcher”, and he wants to pursue her agenda harder and faster than she ever dreamed. He can do the difficult job of selling that to the British people if he wishes – but he should stop doing it on the basis of a swollen, suppurating lie. '

I end my article with this thought: If Johann Hari does not understand the difference between debt and deficit then may I suggest that he should stop pontificating about matters of economics or more people may start to agree with Busted (see the end of his profile page).