Tuesday, July 02, 2013

Quote of the Day

"Look, I'm very much in favor of tax cuts, but not with borrowed money. And the problem that we've gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day that proves disastrous. And my view is I don't think we can play subtle policy here."

(Alan Greenspan)


Jim said...

We don't need to borrow money to "Pay for" tax cuts. Just cut down on spending.

I could smoke 100 cigarettes a day, then I realise I don't earn enough money to do that. Now the government would seem to think I have 2 options,
Option 1 - ask my boss for more money in order to spend so much on cigarettes.
Option 2 - If boss says "no" Borrow money by using my visa card to pay for cigarettes.

Well what would appear to be totally unknown to government is that I actually have a 3rd option.

Option 3 - Stop smoking so many cigarettes, if I take this option then I would actually have enough left in my bank account at the end of each month to pay off a bit more from my credit card bill.

Jim said...

Suus non scientia eruca

Chris Whiteside said...

Alan Greenspan was, of course, referring to the situation in America, but the point is relevant to Britain as well, and I don't think it is in any way out of line with your comment, Jim - inyour terms he is attacking "Option 2" as unsustainable.

There are two sustainable ways to fund tax cuts. One is to cut spending: and when your government income is as far out of line with spending as that of Britain was in 2010, this has to be done.

All three candidates for Chancellor admitted when asked during a live TV debate as part of the 2010 election campaign, whether they would have imnpose cuts if elected as severe as any thing Mrs Thatcher ever did, that the answer was "Yes."

If an economy is growing fast, which sadly at the moment the British Economy is not, then the "stabilisers" will increase tax revenues even faster than the economy grows, and in this case you can cut taxes without having to cut spending. This does not often happen.

Jim said...

I can see that Alan Greenspan was indeed stating how "Option 2" is a really bad idea, and I agree with him.

He is saying that tax cuts can not be made (if you like part of "Option 1" because "option 2" is not a good idea.

No where does he mention "option 3" which eliminates the bad "option 2" and also allows for reduction in "option 1" i.e. a pay freeze or cut.

By using option three, then even if I do have to take a pay cut, I can manage my budget in such a way that I still spend less than I earn.

Basically "Option 3" highlights what is the "Elephant in the room" when it comes to discussions in parliament about taxation and borrowing. Questions come up like "how will you pay for a cut in fuel duty?" and the only way they seem to know is to raise the tax take in another area. The obvious answer "by spending less" never seems to come into it.

Chris Whiteside said...

I entirely agree that the option of spending less money is not considered nearly as often as it should be.

You would not believe the level of opposition we got on Copeland council, while the accounts were being sorted out and when it turned out there was a couple of million more in reserves than had been expected or was needed, when the Conservatives proposed that therefore the council did not need to put the council tax up that year.

On second thoughts, Jim, you might believe it because you know something about Copeland Borough Council, but someone who did not have that misfortune would never believe it.