You can tell from my previous post that I have not had time for a thorough analysis of the world’s affairs this weekend. But some stuff has penetrated through the domestic fog of dogs children flooded cellar and Cloudy, with a chance of Meatballs:
Hat-tip Dillow: Brown to go for Fiscal Responsibility Act (Telegraph). This reminds me of the German Hairshirt- some act that outlaws deficits – which Wolfgang Munchau detested. Chris is right: this is posturing to put the oppo into a bind, though in Germany’s case they – wrongheadedly – believe it (as the letters to the FT after WM wrote shows). I think the Tories’ Office for Budget Responsibility was already going to tie them in this bind.
Will this help Labour? Maybe, if “immolates the country in Deflation” is helpful to a party that really needs a fiscally solvent state one day to take over again. But I don’t think Brown can utter the words “Fiscal responsibility” without getting huge guffaws from Commons benches and Press alike.
Matthew Parris is getting more Tory (though you can’t deny he writes well). This is a lousy reason to prefer VAT to property taxes:
Most of us pay far more in VAT every year than in property taxes; and sales taxes (where the rich and the poor pay at the same rate) are undoubtedly a less “fair” way of raising revenue than council tax. Yet, though you see the VAT element as clearly on your bill as you see your council tax demand in the post, sales taxes never arouse the same fury. Some ways of taking money from people grate more than others.
Tory writer says: “we prefer stealth taxes, please. Don’t be upfront about where you get the money from, even if it’s fairer”.
Parris talks about the psychological abhorrence of stealing from the squirrel’s store of nuts.
All of us, all our lives, strive for laurels on which we can rest; high ground which, once reached, offers us permanent security; shelter which, once built, endures; honour/dignity/ status/certificates/legacies/initials; farms, fields, flats, cottages or mansions … things to our names which we can call our own and which, once secured, are ours.
Yes. This is precisely why wealth inequalities – less discussed by far than income inequality – are so important. So many people never get that ‘permanent security’. When a significant chunk – the majority? – comes from passively enjoying rising property values, which rise because of an artificial constraint on land-supply, a tax like this which helps, in theory, the poorer to keep more of their incomes becomes really compelling. Parris gives every indication of not really knowing or thinking about people in this situation.
I had expected to be flinching at the sound “G20” all weekend. Particularly after the BBC’s spin was really positive – G20 replacing G8, etc – and the fact that rebalancing, surpluses-deficits, the whole Martin Wolf thesis, looked like being taken seriously. But the ever-bearish Simon Johnson sees it as some sort of roadblock on the way back to secure, well-capitalized banking. He comes up with a novel argument against worrying about the international-coordination aspects of this:
But stop worrying about what other countries might or might not do. Establish high capital requirements in the US, and make this a beacon for safe and productive finance.And prepare for the crises that will sweep undercapitalized parts of the world financial system in the years to come.
I flinch every time I read another post about QE, since I am hoping to write something myself before Christmas. But all the more so when it is by Willem Buiter. Because he can throw out more theory and data in one blog post than most think tanks manage in a whole series of pamphlets. Worth reading.