Michael Eriksson's Blog

A Swede in Germany

Only fools and budgets…

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I considered writing something longer on the Sunak/Hunt “Autumn Statement”, but will, with some delay, restrict myself to: (a) expressing my strong disapproval of the massive tax raises and other Labour-style policy decisions, including throwing even more money into the NHS money pit, and my puzzlement over the almost absurd change of direction, from historical tax cuts to historically high taxes;* (b) discussing a general problem with the attitude of many governments/politicians/budgets/policies/whatnot (cf. below); and (c) discussing some unfairness around the Truss/Kwarteng “mini-budget” (cf. below).

*Might this be how the zombie apocalypse really happens? That Thatcher finds herself turning in her grave, over this U-turn, recalls that she is not for turning, and actually rises in wrath, taking the entire graveyard with her?

To (b) or not to (b):

Overlapping with my recent text on servants in charge, a major problem is that government budgets and whatnots are often given priority over everything else—as long as the government has enough money, as long as the government can meet payments, as long as government programs can be financed, …, everything is well. What happens to individual citizens and individual businesses is not considered sufficiently, e.g. in that a higher tax that saves the government budget can strain or over-strain someone else’s budget—many some else’s budgets. (Of course, this will often backfire in the long run, as a reduced growth, more bankruptcies, more citizens in need of government support, whatnot, can have strongly negative effects on future government budgets.)

This attitude is despicable and destructive, as the government* is not a business with a purpose of making money. Its actual purpose is to serve the people—and this purpose is perverted when the people takes second place to the government or the government is turned into its own purpose.

*Be it in the more U.K or the more U.S. sense. The U.S. sense might fit better in this paragraph, however.

This is the worse in the current case, as it was incompetent government actions (mostly relating to COVID, energy, and the Ukraine–Russia conflict) that artificially brought about the poor situation. Indeed, many seem to have used justifications like “we have to fill the hole in the budget; there is a hole in the budget because it was necessary to support the people; it was necessary to support the people because of COVID”, while utterly ignoring that COVID did very little harm and that the problems were caused almost exclusively by the countermeasures, which were not only highly disputable to begin with but have since been proven utterly idiotic. The same, m.m., with the energy situation, the NHS, the whatnot. (More generally, it is often government actions, including sabotaged markets and incentives, too high taxes, too large redistributions, etc., that hamper the economy.)

To (c):

The old Truss/Kwarteng “mini-budget” has often been described in a highly unfair manner, e.g. that it was a “failure” or “damaged” this-and-that. It might have been a failure in the sense that it failed to gain approval (etc.), but that is not the impression created by such formulations (which sound, rather, as if it had been implemented and left the U.K. sinking) and does not appear to be what is intended. However, the simple fact is that it never was implemented, and that negative reactions from various outsiders did some (likely temporary) damage—and not usually justified negative reactions at that. The main permanent damage of this “failure” is likely the replacement of Truss and her tax decreases with Sunak and his tax increases.

(We will never be able to see a head to head comparison of the result of these two approaches in these specific conditions. However, I very strongly suspect that Truss had the better ideas and that Sunak’s approach would have proven worse, had such a comparison been possible. Indeed, fairer judges have pointed to Truss’s failure as one of communication rather than of policy. More: I am convinced that if Truss did go too far, the correct road would have involved moderation—not going to the other extreme.)

A particular danger involved is that the opinions of third parties are given too much weight over having a sound policy. Here, there might have been a legitimate debate on whether high taxes or an unbalanced budget (or inflation, or something else yet) was the greater threat and what should be given what priority. Instead, there seems to have been a panic reaction of “Third parties dislike our budget deficit! I turn! U-turn! We all turn!”, which is not a good way to do politics and might well have done further harm through a hither-and-dither. Moreover, it raises the question what is next: if the opinions of foreign markets, foreign politicians, or, even, the foreign public opinion is allowed to influence domestic politics to a too high degree, the consequences can be devastating, e.g. in that politicians who are opposed to DIE still implement it to keep outsiders happy. (Writing this, I cannot shake the suspicion that something very similar has already happened, notably with the worldwide COVID countermeasures, maybe with the worldwide climate hysteria. If nothing else, there is a near certainty that “Overton windows” are present internationally as well as nationally—maybe, even, an Overton window of “welfare state, good; low taxes, bad”.)


Written by michaeleriksson

November 25, 2022 at 12:35 am

Posted in Uncategorized

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