Profile picture
Frank van Lerven @Frank_vanlerven
, 9 tweets, 5 min read Read on Twitter
NEW: A Government is not a household - claims of ending austerity ring hollow until we do away with the household fallacy.

The single greatest masterstroke of Cam-Osb era was to undercut future progressive policy by mainstreaming the household fallacy.
The truth is, the household fallacy has been weaponised for purely political ends: to prevent progressive spending policy from gaining legitimacy. Its apparently instinctive logic disguises the truth– what is true for an individual household is not true for the government.
By cutting its spending the government also ends up reducing its own income. So unlike a household, government spending and income are not independent of one another - reductions in government spending when economy is under performing leads to higher debt and lower growth.
As noted by @jryancollins the government expenditure can actually boost the level of national income relative to debt. Over time, this means the debt to income ratio will fall even if government spending is financed by borrowing – making government debt more manageable.
Unlike a household, the government has the powerful backing of a central bank behind it. The CB can help lower the borrowing costs of the government. The government has significant influence over its own borrowing costs. Households do not have this powerful tool at their disposal
In the UK the Bank of England has significantly helped lower government borrowing costs, a good case can be made that the government has acted irresponsibly by not taking full advantage of the fiscal potential the Bank affords it.
Even on its own terms, the household analogy is used fallaciously. Families need to borrow to increase their standard of living- for things like a car or house. as @MatthewLBishop says, this ends up being ​“far more than any country borrows, relative to its income, for anything”.
So happy @NEF is taking on the 'household fallacy' & working to bring fiscal policy back-in. Thanks to those who have inspired us: @AnnPettifor @JoMicheII @jryancollins @L__Macfarlane @ProfSteveKeen @Frances_Coppola @sjwrenlewis @StephanieKelton @ProfTimJackson & Prof Vicky Chick
Also need to give a big a shout out to my best friend, co-author, and future governor of @bankofengland Andrew Jackson research fellow @CUSP_uk. Look out for him #twitter best economist I can expect big tings from him...
Missing some Tweet in this thread?
You can try to force a refresh.

Like this thread? Get email updates or save it to PDF!

Subscribe to Frank van Lerven
Profile picture

Get real-time email alerts when new unrolls are available from this author!

This content may be removed anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just three indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member and get exclusive features!

Premium member ($30.00/year)

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!