Fraser Nelson has with great pleasure accused Ed Balls of lying, and is now clearly delighted that Balls was so foolish as to call him up, angry, and demand a retraction. 

This is what FN reports EB as 'lying' about:

LIE no1: “We have acted in the downturn, that will mean that the economy is stronger, we’ll have less unemployment, less debt…”
Less debt? No, this was not a mistake. He repeats it here.

LIE no2: “Alistair Darling in the budget set out plans which show the deficit coming down, national debt coming down.”

For number 1, Nelson is clearly wrong: Ed Balls is not lying.  The statement 'less debt' should clearly be taken to mean "less debt than we would have had had we not acted in the downturn".    This is a counterfactual statement: what would the economy look like had the government not acted?  In my view, it would obviously have been in a worse shape, with eventually higher debt and much worse unemployment. Depending on how widely you define the government's actions, the steps they have taken in the downturn include:

• recapitalising the banks;
• cutting VAT temporarily
• bringing capital spending forward
• a myriad of micro-schemes to alleviate aspects of financial distress, such as trade credit drying up

I am in no doubt that these measures have had a good effect on the economy.  The VAT cut is working.  If we had just let the banks collapse, the effects would have been horrendous.   Keynesian spending works when we are well below economic capacity and interest rates are testing the zero-bound.  So Balls is right, and Nelson is being either cynical or incredibly naive in trying to interpret the first statement as "less debt in cash terms in year X+1 than in year X".

I am also surprised by the accusation of Lie Number 2. Nelson justifies his statement by claiming that Balls was trying to fool people into thinking that debt was falling in cash terms. 

No.   In general, you have to describe debt in terms that divide through by the national product.  It is the mechanism by which Policy Exchange, in their very one-sided piece on spending cuts, managed to use the Spectator as a vehicle for claiming that there has been a "second splurge" in spending (in one of the few instances where dividing by GDP provides a misleading impression).   Nelson claims to have the logic of the common man on his side when he says you can't mean the debt-ratio. Why not?  If you don't use the debt ratio, then Margaret Thatcher was an horrendous accumulator of debts:

 No doubt, if he had confronted the Chancellor (and former Spectator editor) Nigel Lawson in 1988, crowing about paying down the national debt, Nelson would have thundered the same words as he has just used on Balls:

"One is money, the other is a ratio. Outside the world of government finance, there is only one interpretation of "debt falling." There is not a person in this country, I said, who doesn't understand the difference between their debt rising, and their debt falling."

and shamed him into admitting that he has burdened the country with HUGE debts, the wicked Thatcherite profligate . . .

Of course not. Debt as a proportion of GDP is the only sensible measure, because it relates reliably to the government's capacity to repay the debt.  If Nelson thinks this is not the standard understanding, he should educate people, rather than opportunistically joining the confused brigade.  To accuse Balls of a monstrous lie because he did not nonsensically use nominal figures to explain fiscal matters (which we think Brown has been doing to confuse the public recently)  is daft.  Or something worse.  It certainly doesn't justify such an extended wallow in moral outrage as this blog descended to.  Unfortunately, it enables the outraged CoffeeHousers to avoid the real point raised by Balls: how much worse would the economy be now had the Tories been in charge,  meant what they said, refused to borrow any more in a recession, and taken the Treasury View Circa 1930 as the model for economic management?

Confronting such questions is not for a partisan publication. As a genuine floating voter, I have always assumed that purpose of the really vituperative right-wing press was obvious: to drive the wavering voter from supporting the Conservatives by nakedly revealing how they really think when allowed to let off steam. Clearly, sponsored by some Machiavellan New Labour type. It worked very well for 12 years.

But from the number of people quite wrongheadedly and furiously agreeing with these columns ("Well, well, well. So here is where we are at, and this is what Germany must have felt like as the Nazis were coming to power." is a typical one), I was in the minority in being so repelled by this sort of unbalanced analysis. This exchange, and the Policy Exchange piece earlier, powerfully demonstrate how much people can be alarmed and confused by misleading descriptions of the fiscal situation.  Our upcoming paper - provisionally entitled "A Balancing Act", will try to act as an antidote.