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I'd like to propose a rule for politicos to follow when discussing fiscal policy. I don't expect them to follow it, but I suppose everyone can dream. The rule
by soVeryTired 10y ago
I'd like to propose a rule for politicos to follow when discussing fiscal policy. I don't expect them to follow it, but I suppose everyone can dream.
The rule is this: all proposals for changes to government spending must be revenue-neutral. That is, if you propose a tax cut somewhere, you must propose a tax hike somewhere else to explain how the cut would be paid for. Or if you don't want to propose another tax hike, you must specify what service will get cut as a consequence. Conversely, if you wish to propose a service, you must specify how you will raise the funds to pay for it.
Anything else is wishful thinking, and is storing up trouble for the future.
- bhickey 10y agoThis presumes that deficit spending is necessarily bad. When your borrowing rate is sub-inflationary, you'd have to be a dope to spend today dollars. The UK is still servicing debt on perpetual bonds from the 17th or 18th century. They carry a low interest rate, so it's cheaper to make payments rather than paying off the debt.
- soVeryTired 10y agoI agree that deficit spending can be useful in some circumstances, but I think it should be more like a last resort rather than a first port of call. Otherwise, how can you argue against the reductio-ad-absurdum that all spending should be deficit spending?
- bhickey 10y ago> [I]t should be more like a last resort rather than a first port of call. The obvious retort is that if all spending were deficit spending, people would stop lending us money. Rather than attaching unnecessary ideological baggage to tax policy, we should do the math. When deficit spending is cheap, we should exercise it. When it's expensive, taxes are wiser.