New Internationalist

Tax and cut - it makes no sense

There is a consensus among the political establishment - in Britain, at any rate - that government deficits make cuts in public services and jobs, together with increases in general taxation, inevitable. The only question is how much, for whom, and when.

This is nonsense. Here’s why.

By far the largest chunk of the deficits derives from bail-outs of financial markets with public funds and guarantees. This is very risky, so it comes expensive. What’s more, governments can borrow more cheaply than anyone else. So, one way or another, they should be making a handsome profit. If so, why tax and cut now? If not, why not?

Financial markets must repay what they owe governments, with interest,  and thereby reduce the public debt by a vast amount, making tax hikes and public expenditure cuts now senseless. If not, why not?

Anyone who can’t answer these questions first is in no position to tax and cut - least of all if they speak for financial markets. After all, financial markets, not governments, were bankrupt in the first place.

You can find out more in the latest (March 2010) issue of New Internationalist magazine and in the NI anthology People First Economics

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About the author

David Ransom a New Internationalist contributor

David Ransom joined New Internationalist in 1989 and wrote on a range of issues, from green justice to the current financial crisis, before retiring in 2009. He was a close friend of Blair Peach, once worked as a banker in Uruguay and continued to contribute to New Internationalist as a freelancer until shortly before his death in February 2016. He lived on a barge on the waterways of England’s West Country.

His publications include License to Kill on the death of Blair Peach in 1979 and The No Nonsense Guide to Fair Trade. He also co-edited, with Vanessa Baird, People First Economics.

Read more by David Ransom

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