Snappy comebacks to stupid questions: the eternal undeath of the credit-card analogy

How to respond when the prime minister says something simplistic and wrong.

One of the most pernicious simplifications in mainstream politics is the "credit card" analogy. You know the one: the British economy is like a maxed-out credit card, and we have a responsibility to pay it off.

It's pernicious because the British economy is nothing like a credit card, maxed-out or not. Britain has control of the very currency in which it owes debt; it can print money to pay bills. On top of that, its effect on the economy which is its revenue source is so large that if it scrimps and saves in order to pay down its debt, there's a very real chance its income will drop by even more.

But the analogy is unkillable, and even if politicians don't cite it directly, they apply its lessons nonetheless—as Cameron did last Thursday:

Labour’s central argument is exactly that. They say that by borrowing more they would miraculously end up borrowing less. Let me just say that again: they think borrowing more money would mean borrowing less. Yes, it really is as incredible as that.

He may not have said the magic words "credit card" (or similar analogies involving "household spending" or "Britain plc"), but the same implication is made: the national debt, and macroeconomics in general, is no more complex than a family budget.

That's not true. But the thing is, even if you apply the same analogy, Cameron's claim is still over-simplistic. Here are just some ways borrowing more money can mean borrowing less:

  • You are unemployed. You have great ability, but few qualifications. You take out a career development loan to pay for post-secondary education. You get a well-paid job as a result.
  • You are unemployed. You have ample qualifications, but no smart clothes. Before the first of a string of job interviews, you borrow enough to buy a suit, ensuring that you win gainful employment and don't have to borrow money to eat.
  • You live in a 1950s prefab. With no real protection against the elements, an uncomfortable proportion of your monthly income goes on heating. You borrow money to pay for insulation, your expenditures drop, and you use the extra to pay off credit-card bills.
  • Annual income six pounds; annual expenditure six pounds sixpence. Result: misery. You borrow some money to put solar panels on the south-facing roof of you Guernsey house, reducing your spending on electricity. Annual income six pounds; annual expenditure five pounds, nineteen shillings and sixpence. Result: happiness.

I could write some detailed sophistry about how each of those analogies apply to Britain. The first is broadly equivalent to "upskilling"; the second to spending money on promoting Britain overseas; the third to fixing our much-vaunted "crumbling infrastructure"; and the fourth to investing in the Green Economy.

But I won't. Because the way to discuss the macroeconomy isn't through trite analogies and dumbed-down explanations; it's through discussions of the macroeconomy. If you want the best discussion of whether Cameron's claims are true, I recommend you turn to Jonathan Portes' exhaustive examination, or Duncan Weldon's blow-by-blow account of the squabble between the PM and OBR. You won't find many comparisons to your own financial situation, but that just means you're getting the good stuff.

Credit cards. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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PMQs review: Angela Eagle cheers Labour MPs against an improved George Osborne

The shadow first secretary of state revelled in the Tories' splits. 

For months, Labour MPs have despaired at their party's failure to exploit the Tories' visceral EU divisions. But at today's PMQs, Angela Eagle gave them cause for cheer. Facing George Osborne in her capacity as shadow first secretary of state (David Cameron is attending the G7 in Japan), she brandished Iain Duncan Smith's description of him as "Pinocchio". "Who does the Chancellor think the public shoud listen to," she dryly remarked, "his former cabinet colleague or the leader of Britain's trade unions?" Eagle later roused the House by noting the scarcity of Brexiters on the frontbench. Her questions were too broad to pin Osborne down, and she struggled to match the impact of her first performance - but it was a more than adequate outing.

After recent reversals, the Chancellor delivered a ruthlessly efficient, if somewhat charmless, performance. When Eagle punched his Google bruise (following the police raid on the company's French offices), Osborne shot back: "She seems to forget that she was the Exchequer Secretary in the last government, so perhaps when she stands up she can tells us whether she ever raised with the Inland Revenue the tax affairs of Google?" 

He riled Labour MPs by describing the party as anti-Trident (though not yet announced, Corbyn will grant a free vote), a mark of how the Conservative leadership intends to use the issue to reunify the party post-referendum. "We look forward to the vote on Trident and he should get on with it," Eagle sharply retorted at the start of the session. But Osborne inevitably had more ammunition: "While she's sitting here, the leader od the Labour Party is sitting at home wondering whether to impeach the former leader of the Labour Party for war crimes." He compared Labour MPs to prisoners on "day release". And he gleefully quoted from Jon Cruddas's inquiry: "In their own report this week, Labour's Future, surprisingly long, they say 'they are becoming increasingly irrelevant to the working people of Britain."

The muted response from the Tory benches demonstrated how badly Brexit has severed the party. But Osborne will be satisfied to have avoided any gaffes or hostages to fortunes. His performance today, his best to date at PMQs, was a reminder of why he is down but not yet out. 

George Eaton is political editor of the New Statesman.