Warm Banks

metalblue said:
Austerity is the principle of ensuring your income (tax receipts) don’t exceed your outgoings (public spending). There is nothing ideological about it as a principle, we all try to do it every day.

Where it can become ideological is in its implementation. The left would naturally find their home in austerity being managed through tax increases whilst retaining or expanding public spending (the logic here being less money for poor = worse outcomes for social policy, more government spending = growth), the right would naturally find their home in austerity being managed by decreasing public spending and retaining or reducing taxes - logic here is more money for people to spend = growth and government spending offering diminishing returns on growth. The middle find balance in a bit of both.

The approach Cameron and Osborne took seemed to focused on the solving the structural deficit with existing levers (tax and spend, well actually just spend) and not enough on solving it with growth. This, I believe, is what has given us a decade of stagnated growth. There are two things that erode debt, inflation and growth. When inflation was basically zero so why would you pursue policy that resulted in zero growth - although the OBR did rather optimistically predict growth of 2%+ based on the coalition government’s policy which was probably also a factor in these decisions but at some point someone must have realised they’d got it wrong.
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Utter bollocks.
Taxes do not fund public spending.

www.taxresearch.org.uk

Tax does not fund government spending

From my Twitter feed this morning, because this needs to be said time, after time, after time:
www.taxresearch.org.uk
 
metalblue said:
Well that’s some circular reasoning! Let’s break this down, to avoid austerity we need to balance the books, if we don’t balance the books we adopt austerity measures.
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Well that's some simplistic reasoning. You said yourself the left's choice was to raise taxes to balance the books, and that's not austerity.
 
metalblue said:
Well that’s some circular reasoning! Let’s break this down, to avoid austerity we need to balance the books, if we don’t balance the books we adopt austerity measures.
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You don’t have to balance the books purely through austerity measures, that’s exactly where the conservatives went wrong.
 
It's complex. A national budget is not the same as a domestic one and in certain circumstances, a government cutting spending (especially below its income) can actually damage the overall economy.

I wish people would actually study macroeconomics more thoroughly and get away from these simplistic comparisons to a private household, which are 'easy to understand' but a gross simplification of a complex subject.

What we have currently is stagflation. That is a woman of a problem, the worse thing you can have in an economy, and there are no simple answers. I only wish there were.
 
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