A very important piece of analysis Wat - thank you - and one that deserves a much wider airing. Brown used his years as Chancellore to massively increase in redistribution from ordinary people to the welfare dependent, while also, by his tax credit, giving many people some of their own (taxed) money back as Brown's 'largesse'. Now he plans to do exactly the same thing during the recession. At least Robin Hood was honest about robbing the rich to give to the poor. And at least he only robbed the rich : Brown wants to fleece everybody except his favoured deserving and undeserving poor. And if the economy jacknives as a result ? Oh that will be the Tories fault because [fill this space with whatever comes to mind]
If this is what Gordo does, it will be another major step to a breakdown in the relationship between them what pays in and them what takes out. I will be seeing my feckless neighbours buying plasma TVs and I'll get the bill later.
But surely if Ricardian equivalence holds, then those who are going to face the higher taxes in 2-3 years will save more in anticipation, even if others are consuming more from the tax cuts? Of course, they might be budget-constrained downwards, but as we're talking about people higher up the income-scale, I don't think that would normally be the case.
Interesting "The main beneficiaries will be Gordo's favoured groups - in particular, families with children, lone parents, and those who have not saved. That is to say, they will be the welfare dependent groups who routinely consume more than they produce. Since they are very likely to spend every penny he gives them, he can rely on them to discharge their public duties in full."
Does spending on illegal drugs, smuggled fags & booze, imitation football kits or off-shore gambling websites stimulate the economy ?
Mike,
Can you please explain to me how 'families with children' are one of Brown's favoured groups and will be 'main beneficiaries' of Brown?
Will those thrown out of work in the recession he engineered be beneficiaries? Will low paid parents hit by the 10p tax hike be beneficiaries? Will low paid families paying higher NI contributions be beneficiaries?
The fact is that for married parents, especially those owning their own homes, the amount of assistance they get - even if low paid - from tax credits and the like, is trivial. I know this well - I was made unemployed a few years ago when Brown destroyed the mobile infrastructure development industry in the UK, thanks to his 3G licence tax (I supplied leading edge semiconductor technology to this market). I naively thought, especially having a child, that we might get some sort of assistance - we got almost nothing - apart from a lot of tax credit bureaucracy -as we had savings and my wife had a low paid job.
I then started my own business (because the only jobs available were either in the public sector or in selling pharmaceuticals or mortgages or in tax accountancy - which tells you all you need to know about the Brown boom) but was able to take very little income from it for a couple of years. All I got was demands for income tax, two types of NI contributions and a demand for refund of tax credits (which astonished my wife as we'd had less than £1000 from them in total even though I'd had no income for over a year).
If you are a feckless single parent in 'social accommodation', you might benefit but, believe me, ordinary families are most certainly not favoured by Brown.
I think you'll find the general election will arrive a lot earlier than 2010.
My money would be on Spring 2009 for a smash and grab raid before the IMF get called in.
HJ,
you have me even more scared now, as I feel I am likely to lose my job sometime soon, I have 3 kids (2 at Uni) a mortgage and wifey has a part time job. Gulp. ANy good sources of advice?
Speaking of the Massive scam that is our Money, most people are unaware that our money is borrowed from the International Moneylenders not issued by Govt.
http://adrianpeirson.spaces.live...2F479!
121.entry
Great article Wat, keep up the good works.
Good post. I agree that Gordo will probably use tax credits as the vehicle to 'help the poor', even though it's his fault they are so poor in the first place.
http://www.lettersfromatory.com
Love the phrase 'fiscal illusion' - sums it all up succintly and accurately.
Could the Major explain why Roger Bootle supports Brown's latest wheeze?
Understand the argument that demand might be stimulated by the welfare dependant elements,who are also Labour voters, but will it be the right type of demand. Surely with more money the "chavs" will be out there buying more fags booze and drugs - or is that me just getting older.
"pay the deferred tax hikes post-2010"
Shurely it's more accurate to replace "2010" in such phrases with "election"? And Gordon has lots of form, he doesn't really believe in paying back stuff he's borrowed - qv the £30bn deficit in the 12 months to July 2007, before the crunch had started.
Wat, you may be interested in this article : http://www.voxeu.org/index.php?q...php?q=node/
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"Future spending cuts tend to raise current private consumption and investment via their effects on the long-term interest rate....Lower future spending commitments mean that future taxes won’t have to rise as much."
Sounds obvious, but they have some nice graphs on what happens when you don't "pay" for spending more today by reducing future spending. The best sorts of stimulus are where you bring forward spending that you were already going to do anyway - so eg double the number of people working on CrossRail or the aircraft carriers to get them done in half the time.
Well worth keeping an eye on voxeu.org, it's a CEPR site with articles from a range of leading academic economists. Always interesting, even if you don't agree with them.
I am very worried. As a single man even though I am on a quite low wage, I do not expect to get a tax cut. Even with a spartan life style I am just managing to keep in the black. If the tax cut comes through tax credits the administrative cost will be substantial then there will be the interest to pay back as well. I fear that I will not get the rumoured £1000 now but will have my taxes increased later by several thousands.
Even if we get a change of government it will have to be paid back
Quote:"a further massive extension to the discouragement of enterprise and effort.....
No, more the "systematic persecution of enterprise and effort..."
Why not tell it like it is ?
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