Cliffs

Not so much disastrous for the economy - just hardship for a lot of people. The cuts have in any case been 'ignored', and will be discussed again in March:

The 'cliff' IIUC is the precipice of revenue not matching public spending. I haven't a problem with that overall. However, borrowing at high rates to cover revenue costs is a recipe for disaster, PIGS-wise. I suspect they'll endure a fire sale, and become slave nations, unless they step outside of the system sharpish.

As for us (UK), we're told wrong:

Rob

I think they're the same thing. The US Keynsian approach has for many run its course and failed to produce results, and this 'cliff' nonsense is market-advocates' spin.

Rob

IMO it's a question of pain now versus pain later. Austerity is pain now and possibly a brighter future, but doesn't get governments re-elected. Quantitative easing and similar measures to flood the economy with money is pain later, a temporary feelgood factor followed by decades of stagnation (like Japan).

Although our government is hitting the soft targets (unemployed, disabled and pensioners) rather than eg tax avoiders, overall they're steering the economy pretty well.

Adrian

But we have the worst of both. Austerity *and* quantative easing. The period of pain has been vastly extended and will be worse in the long run.

Wrong.

I think that for a winning argument you have to be a bit more constructive.

There are lots of people who think the government are going "wrong" fixing the economy because the chosen solution doesn't help them personally.

This doesn't make their opinion right

tim

Not really. Since I disagree with most of the ways the government is handling the economy I don't see how being "a bit more constructive" would be applicable.

If you are asking what would I do instead. Well I wouldn't be using quantative easing as a way of recapitalising banks. Such money should be used to benefit the whole economy. Therefore the money could be directly invested in businesses and infrastructure projects. We could do worse than using it to build some Nuclear power stations, for example.

I wouldn't be targeting the poor, the disadvantaged and the disabled to bear the brunt of the cuts while reducing taxes for the richest and ignoring loopholes which allow multinationals to avoid tax.

I would be repeating the lies such as "We're all in this together" .

Current polices are analogous to a tourniquet around the economy. It may stop the bleeding but it kills the limb.

That's another matter entirely.

The austerity could be worse - compare with Greece, or what the US would be like if they'd fallen over the fiscal cliff.

I agree that quantitative easing has been something of a disaster - the money has gone into the wrong pockets and the net effect has been deleterious to savers and pensioners - but at least they haven't expended a horrendous amount. Some 'hawks' argued for much larger quantities.

The Bank of England probably envisaged that the money would go to the banks in one door and straight out of another in the form of cheap finance for business. No doubt it looked attractive on paper because banks are in the business of lending therefore they have the infrastructure, checks and logistics to manage the process.

It's a matter of pragmatism. Hitting the needy is easy because the poor, disabled and unemployed have little political power - they can hardly go on strike. Curbing the multinationals is a whole different kettle of fish - I'm not aware of any country on the planet which manages it successfully.

I disagree. We might even have a third dip, but overall the economic indicators are positive. On current course the country should eventually come out of it in fairly reasonable shape.

Adrian

Not really

It's just that you seemed to be saying that the current policy was too austere and spending too much, both at the same time. ISTM that (even if it is both) both can't be wrong.

I agree.

Lead time is too long to make any difference.

Even fast tracking some already planned road/rail improvements wouldn't get started for (minimum) two years after you have decided to spend the money on them. It's nice in theory, but it's difficult to target the money usefully, quickly.

I do agree that we shouldn't be starting from here. We should already be two year's in and reaping the rewards. The problem is that the numpties in power (and ALL of those that aspired to being in power) really do seem to have thought that this was a "normal" recession that would have recovered in

12/18/24 months, when ISTM that it was flipping dammed obvious that this wasn't likely (and yes I did say so at the time).

If you are going to cut benefits (be that actual money handed over or services) this is bound to affect the worst off in society as they are the uses of these items. Those in the upper deciles are never going to be affected by a cut in such items as they don't use them.

But IMHO we do have to cut these items, they make up far too much of government spending (welfare/health/education account for 75% of total government spend) for us to get back into fiscal balance without doing so. (see below for tax rises)

I agree that lowering the 50% rate was a big mistake - totally unjustified.

But, in general, the fact is that the "rich"(/bankers) make up far too small a proportion of the economy for increased taxes on them alone to fill the gap. If we decide that we want to get back into balance by increased taxes the only way that it can be achieved is to increase (substantially) a tax or two that "normal" people pay.

The loophole that I think you are referring to is almost certainly un-closable. Get used to it

I don't see that we have any choice unless we are going to put the basic rate of tax up to 30% (or VAT to 50%, or NI to 20%). A stupid half blind Scottish idiot got us into this position by running a current account deficit during boom-time (WTF did he think was going to happen in a down-turn, with that policy!) and everybody got used to a level of services that was unaffordable, but in the short term we're committed to it unless you want to take an even bigger/quicker cut to services than we are.

The really bad thing is the numpties that couldn't manage the finances of a social club outing are going to be let back in charge of the cookie jar if things don't quickly improve from here.

Don't forget, the current government are (apparently successfully) running a policy that is keeping interest rates low. Try and do anything else and they will sky rocket. So not only will you have to find more money to spend on this new (different), whatever ideological thing it is that you want to do, you'll have to find another few 10s of billions to pay the interest on the deficit that the Scottish wanker ran up.

tim

In message , tim..... writes

This country's cost of borrowing has just risen.. .

Do you also blame the dire state of the American economy on the "Scottish Wanker"?

In his role as current, temporary president of G8, Cameron is looking at options to close the loophole.

Some American states impose unitary taxation - a corporation is taxed on global profits based on the proportion of business they do in that state. That would render pointless Starbucks UK hiving off royalties to a Dutch subsidiary and buying their beans from a Swiss subsidiary.

Adrian

not in any noticeable way

no they have their own bunch of idiots spending more than the earn

tim

More reason to invest now for long term.

So start now rather than further procrastination and excuses for not doing anything.

You have to ask yourself, are you in favour of increasing taxation revenues, or making an ideological statement?

Agreed, avoidance has always been legal. What we could do is encourage corporation tax, in much the same way Ireland does

We ought to pass a law where MPs party to a deficit budget become liable to a surcharge and disqualified from office just as local councillors are.

perhaps, but making this decision will have no effect on the current difficulties.

both

I don't believe that reducing the rate will increase revenue. And there is no proof that it will as the data used to justify it was skewed by the limited amount available (and the current state of the economy). (I'll explain further if you insist)

however reasonable this may be, we can't start from here (or anywhere within the next 10 years)

They can since the money is being spent in the wrong places so we have austerity for the majority and the greedy bankers paying themselves bonuses again.

Not so. If a programme had been started at the beginning of the crisis we would be seeing benefits already for the economy.

Agreed.

Exactly.

The richest can and should pay a larger proportion of taxation though. We can't expect the lower & middle classes to pay the lot.

Difficult but not impossible.

One of the problems with the previous government is that they threw money at things and expecting this to be enough. They forgot entirely about value for money.

Agreed.

Don't agree

We'd still be stuck somewhere in the planning process