UK Election Debate; Debt, Spending Cuts and Tax Rises.

Miscellaneous Newbies
1

Hi All,

This is my first crack at starting an online discussion -so be nice. In the UK we’ve the General Election this week.

One of the topics of debate is the national debt and what to do about it, it’s become the proverbial elephant in the room.

Apart from the obvious AC arguments against the existence of the state what are peoples take on some of the spurious arguments being thrown around? Such as;

  1. Cutting spending will cause a double dip recession.
  2. Cuts will leave a generation on the scrap heap.

Also what is meant by government debt?

Lastly do any of you live in the UK?

2

Hey, I live in the UK, refuse to vote though.

I noticed GB in the last debate repeatedly mentioning “We can’t take money out of the economy as it will threaten the recovery.”

Of course he’s completley wrong, taxing takes money out of the economy, and so does Gov. borrowing too, it drains the capital markets. His illusion is that by expanding government he expands the economy, but the reverse is true.

3

leftie: “1. Cutting spending will cause a double dip recession.”

Here is the short answer; ask if increasing government spending will cause economic growth. If they answer “yes”, then have them explain how this works, because the implication is that a miracle has been discovered, ie, wealth creation by the government simply taxing, borrowing and spending money. If this is true, the the Garden of Eden is at hand.

“2. Cuts will leave a generation on the scrap heap”.

Nonsense. What are they talking about? Are they saying the only way a generation won’t be on the scrap heap is if government spends and borrows money?

“what is meant by government debt?”

The government (or, more precisely, the “People in Power”) borrows money from the private sector, spends it the way the People in Power see fit, and the taxpayer has to pay it back with interest. Since the taxpayer cannot possibly pay it back, the central bank prints money, buys the government debt, and calls it “monetary policy” (this of course leads to the boom / bust cycle).

The People in Power then hold what they call “elections” every few years to create what they call “legitimacy” in the eyes of the taxpayer who suffers the economic consequences of these machinations. Without “legitimacy”, the PIP’s could never get away with this. But, the important thing is the People in Power stay in power. Sure, sometimes the Empire Builders (conservatives) are in control, and sometimes the socialists (labor) are in control, but no matter, same result because there is only one party in every election in every country; the Big Government Party.

The false dichotomy between “conservative” and “labor” is required in order to outrage the voters of each persuasion to bring them to the polls in large numbers, again, “legitimacy” is the goal. The moral thing to do, therefore, is to not vote or to instead cast a blank ballot. I think millions of blank ballots would send the appropriate message.

Good luck with the “political debate” and “elections”. [EDIT: Ignore the bullet points and formatting, can’t fix it]

4

“Cutting spending will cause a double dip recession.”

I don’t know what a double dip recession is. But less govt spending will cause some pain. People who got money for nothing will have to get jobs, probably at very low wages.

However, after a possibly longish period of this, the economy will recover a bit. More things will be produced. Wages will rise. And once it starts getting better, it will keep on getting better.

On the other hand if govt spending continues, plenty of people will get continue to get something for nothing. Which means the amount of “something” out there will constanly diminish. Eventually there will be nothing left to hand out but paper money. Everything else will be gone. Try and eat paper.

Put it this way. Not cutting is like riding a fast car with air conditioning and great stereo speakers on a smooth road that leads to a cliff.

Cutting is getting out of the car, sloshing through a muddy road in the rain, to a warm safe house with plenty of food growing in the garden.

Cuts will leave a generation on the scrap heap.

No, it will leave them poor for a while, till things get better after a few years.

Not cutting will leave the whole country impoverished indefinately.

Also what is meant by government debt?

The govt needs to have money before it can spend it. It can get the money by taxing [unpopular], printing it [causes inflation], or borrowing it from someone [delays the need for taxation or inflation for a while. Of course interest has to be paid on the debt]. This last method means the govt owes money to someone, which is govt debt.

5

Regarding cutting spending causing a recession, that’s very possible - and indeed if the conditions warrant it, then that is the entire point.

Resources must go through an idle period to transition to more socially useful activities. They must be used for production that is in line with consumer demand.

Remember that the Great Depression mercifully ended in 1946 (in the US) or so after government cut spending by 2/3 after world war II. The readjustment was very fast and 1946 was the best year for private sector investment.

6

Hi you referred to the Conservatives as Empire builders. Were you referring to the UK Conservative Party?

What do you mean by Empire Builder? I assume you mean invading other countries to make their resources

the Empire’s.

7

"But, the important thing is the People in Power stay in power. Sure, sometimes the Empire Builders (conservatives) are in control, and sometimes the socialists (labor) are in control, but no matter, same result because there is only one party in every election in every country; the Big Government Party. "

leftie: “Hi you referred to the Conservatives as Empire builders. Were you referring to the UK Conservative Party? What do you mean by Empire Builder? I assume you mean invading other countries to make their resources the Empire’s.”

By “Empire Builder”, I simply mean the party that is not openly socialist as described above. Rather than pushing directly for domestic social programs, it is the party that openly directs the nation’s resources “outward”, into the world. They usually promote a politcal platform of a “strong defense”. They use the military to rally the people. It should be noted that the “Empire Builder” party will also inflict socialist policies on the population, and the “socialist” party will venture into the world to expand the Empire. The only difference is what is emphasized toward the voters during periodic elections (or “legitimacy exercises”).

I am saying that both parties are the SAME. They have the same goals, the same agenda. They BOTH want socialist programs at home, and they BOTH want overseas ventures for various political, economic and military reasons. It’s just that in order to establish and maintain legitimacy, a false dichnotomy must be established so voters will “rally” to one side and “oppose” the other. In a democracy, the People in Power don’t want the voters to feel like they live in an authoritarian state, so the “two party system” was created.

8

Somehow, I have my assumption that the People in Power are no where near as conspiratorial as you make the “mechinations” of gov’t out to be. If they’re anywhere as dimwitted as Gordon Brown… But I digress.

You sound like a libertarian Marxist when you refer to the People in Power having to ascertain “legitimacy in the eyes of the taxpayer”.

Not that there’s anything wrong with that. I mean libertarian Marxism is an ideology of paranoia, essentially.

9

“Cutting spending will cause a double dip recession.”

then explain the depression of 1920-1921

10

I used to live in London. Glad I don’t anymore.

I read a stat that over 60% of the jobs created in the UK over the past ten years are either public sector, or directly dependent on public finance. There is a huge phony economy in the UK that should be liquidated. No “recovery” will begin to occur until this happens. Painful, but necessary. Deficit spending can only hide the truth for so long.

11

"You sound like a libertarian Marxist when you refer to the People in Power having to ascertain “legitimacy in the eyes of the taxpayer. Not that there’s anything wrong with that. I mean libertarian Marxism is an ideology of paranoia, essentially.”

Nope, I’m not a Marxist, libertarian or otherwise. Libertarian Marxism may very well be an ideology of paranoia, but that doesn’t apply to me.

12

To counter your attack on the legitimacy of pluralistic government, multi-party gov’t is a process in much the same way the market is a process. But secondly, It’s hard for me to say whether the population can actually “legitimize” certain things about gov’t at all, because voters often times do not possess the knowledge or desire to make rational decisions when given the opportunity to. As that adament statist Trotsky said of democratic societies, “There is a limit to the application of democratic methods. You can inquire of all the passengers as to what type of car they like to ride in, but it is impossible to question them as to whether to apply the brakes when the train is at full speed and accident threatens.”

13

“To counter your attack on the legitimacy of pluralistic government, multi-party gov’t is a process in much the same way the market is a process.”

I’m not attacking the legitimacy of pluralistic government. Elected government is “legitimate” as far as I’m concerned. I’m trying to point out that it is absurd to think that one chooses something different when voting for one political party or another.

My point is that all political parties are the same, with the same objectives; grow the government, make it more invasive into every aspect of our lives, strangle the life out of the economy, make people dependant government (the people in power).

And there is no conspiracy involved in any of this. It’s plain to see what they are doing, it’s out in the open. Just ask your Congressman what legislation he supports. He never supports repealing laws, closing down government agencies. The solution to every problem is more taxes, more borrowing, more printing, more regulation. This is self evident. This is not a radical conclusion, just look at what the people in power do. And, they are legitimately elected by the people, I do not dispute that.

[EDIT - Cognitivist, I think we are wondering from the OP; you can have the last word in our discussion if you wish]

14

Democracy is still the best mechanism to de-centralize society, you just need enough of a cultural phenomenon towards libertarianism to support the paradigm shift. So maybe voting for social democrats - be they Labour, Lib Dem, Conservative or Green - isn’t the key. But perhaps when enough you-know-what hits the fan, libertarians will exploit the opportunity for what it is capable of. & your tone was conspiratorial, I just had fun playing off of it. Your points are taken. But back to OP of course: I’ve been reading Barron’s recently and they’re predicting a double-dip that will cause yet another wave of stimulus, although not as vigorous as was seen previously by the G20 governments. The political implications, in one article I read, was that the continuity of statism will be interrupted by reactionary backlash to the seeming ineffectualness of the stimulus programs. Perhaps rescinding stimulus in this co-dependent credit market will give us further to fall (world economy) than before the governments’ programs expanded capital and bond maturity beyond real market levels (whatever values those might hold, but I assume they are much smaller than at present)…

15

"Democracy is still the best mechanism to de-centralize society, "

What does political Democracy have to do with decentralizing a society? Any form of government is, by definition, a coercive central authority carrying out all of its decrees by a top-down bureaucratic system of management.

16

I say that the UK should cut taxes for the long-term, even if it’s politically impossible to cut spending. A large cut in corporate, capital gains, VAT, and income taxes would probably make the economy grow at a quicker rate than the national debt. The debt to GDP ratio would fall over time to a more managable level.

17

BTW, see this:

Large changes in fiscal policy: taxes versus spending

We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions.