Time to tax wealth - Covid cost Solution

Bass Reeves

KyussB wrote: »

A debt taken out at a negative interest rate, where only the interest is used for spending and the principal kept unspent for repaying the debt - can not fail to be repaid.

You're reciting the debunked 'confidence fairies' concept of government finances - making handwavy assertions, without any backing, about 'markets' losing confidence in government finances, by arguing that government finances will become unsustainable because...wait for it....the markets will supposedly 'lose confidence'.

It's a completely circular and discredited argument.

Voodoo economics. You would have to borrow a trillion euro to achieve a ten billion fund to spend ing for s 1% negative interest rate. No market would allow Ireland to borrow that amount. Can you imagine if that was sitting there and SF or worse still Bertie Aherne was in power

FVP3

Bass Reeves wrote: »

Voodoo economics. You would have to borrow a trillion euro to achieve a ten billion fund to spend ing for s 1% negative interest rate. No market would allow Ireland to borrow that amount. Can you imagine if that was sitting there and SF or worse still Bertie Aherne was in power

Im not saying that Ireland could borrow a trillion euro at -1%, but if it could it would have **** drum roll *** a trillion euro to spend. Then the government would earn 10 billion over the term but not at once. Of course thats all preposterous.

What isn't preposterous is challenging the 100% of GDP sustainability myth in times of very low interest rates, affordability matters.

TheCitizen

Bass Reeves wrote: »

Voodoo economics. You would have to borrow a trillion euro to achieve a ten billion fund to spend ing for s 1% negative interest rate. No market would allow Ireland to borrow that amount. Can you imagine if that was sitting there and SF or worse still Bertie Aherne was in power

To be fair I don't think I ever heard SF or Bertie advocate such policies. SF for example policy on the cost of introducing Slainte Care was to introduce a modest tax on higher earners over and above the 150 k a year mark.

https://www.reuters.com/article/us-ecb-policy-rates-explainer/explainer-how-does-negative-interest-rates-policy-work-idUSKCN1VY1D2

It's a limited financial tool. It can work short term to create stimulus when everything can get back to normal in the economy. It's only a short term fix though and is not without risk. If it's strung out too long and backfires who gets stuck with the bill? The answer is the punter.

And on here the sages will advocate "hit the lowest earners first".

KyussB

Bass Reeves wrote: »

Voodoo economics. You would have to borrow a trillion euro to achieve a ten billion fund to spend ing for s 1% negative interest rate. No market would allow Ireland to borrow that amount. Can you imagine if that was sitting there and SF or worse still Bertie Aherne was in power

Voodoo Economics is Reaganomics - cutting government spending and cutting income taxes and capital gains taxes - it's associated with extreme free-market economics.

As long as people are able to make a margin on ECB provided QE, through lending to governments, then there's a market for it - and QE isn't going away anytime soon.

1000% Public Debt to GDP at negative rates, with only interest spent, is more a thought experiment on how stupid the austerity narrative on debt sustainability is - there's neither a need for that large an amount of debt, nor for avoiding spending principal - as the normal mechanics of Public Debt based spending are perfectly sustainable.

TheCitizen

KyussB wrote: »

Voodoo Economics is Reaganomics - cutting government spending and cutting income taxes and capital gains taxes - it's associated with extreme free-market economics.

As long as people are able to make a margin on ECB provided QE, through lending to governments, then there's a market for it - and QE isn't going away anytime soon.

1000% Public Debt to GDP at negative rates, with only interest spent, is more a thought experiment on how stupid the austerity narrative on debt sustainability is - there's neither a need for that large an amount of debt, nor for avoiding spending principal - as the normal mechanics of Public Debt based spending are perfectly sustainable.

Someone's been Googling

markodaly

KyussB wrote: »

Surpluses are nearly always a bad thing,

Taking your approach, how does one reduce the deficit or even lower government debt?

as they promote building strong economic growth more on Private Debt instead of Public Debt (a surplus takes money out of the economy, leaving the private and foreign sectors to make up the shortfall - and the private sector will source that partly through debt) - and Private Debt is far far more dangerous than Public Debt.

In boom times, this is exactly why surpluses are a good thing. Takes the heat out of the economy before it boils over.

The focus must always be on maximizing GDP, staying at Full Output and Full Employment, letting Public Debt expand as it needs to do this.
You pass on a poorer economy to your children by not doing this - Public Debt is usually rolled over forever, not paid down - with GDP growth eroding Public Debt vs GDP.

What if debt is growing faster than GDP?

There is no economic 'left', that fails to fight against the various forms of budget balancing narratives (including at an EU level, given the purely political restrictions put in place - that serve no economic purpose) - anyone who fails to fight that, is mathematically putting progressive/left economic issues second, to making accounts balance to an arbitrary/meaningless number, which doesn't have anything to do with economic sustainability.

Its tried and trusted. At the moment, there is no other rule book available that guarantees success or prosperity over time.

KyussB

markodaly wrote: »

Taking your approach, how does one reduce the deficit or even lower government debt?



In boom times, this is exactly why surpluses are a good thing. Takes the heat out of the economy before it boils over.



What if debt is growing faster than GDP?



Its tried and trusted. At the moment, there is no other rule book available that guarantees success or prosperity over time.

You pull back spending when the economy is at Full-Output/Full-Employment - to prevent excessive inflation - which usually entails keeping a small deficit (but much reduced compared to bad times), but not going into surplus.

The stock of Government Debt (the total amount, not vs GDP) typically keeps on increasing forever, for all countries - this is the way it's always worked.

Debt will grow faster than GDP in a downturn, that's normal - you maximize GDP, as that's the fastest and most sustainable way of reducing Public Debt vs GDP over time - without cratering the economy.

Budget balancing is not tried and trusted - no country does it. Deficits are the norm.

Shefwedfan

The SF fans are in, this will go down a new route, everything is FF or FG fault and the answer is SF.....

:-)

SF answer will be tax anyone with a job until they are bankrupt. Then tax the MNC till they leave the country. Then blame everyone else when the country is a mess and everyone has to migrate to anywhere to get a job!!!

Personally I would prefer not to bankrupt the population or drive unemployment through the roof!!!

markodaly

KyussB wrote: »

You pull back spending when the economy is at Full-Output/Full-Employment - to prevent excessive inflation - which usually entails keeping a small deficit (but much reduced compared to bad times), but not going into surplus.

So debt is never paid off. An era of permanent deficits and bigger debts...
I can see why the left love it already.

The stock of Government Debt (the total amount, not vs GDP) typically keeps on increasing forever, for all countries - this is the way it's always worked.

Eh, no not really.

Debt will grow faster than GDP in a downturn, that's normal - you maximize GDP, as that's the fastest and most sustainable way of reducing Public Debt vs GDP over time - without cratering the economy.

Maximizing GDP, what does that actually mean, because its smokes and mirrors to be honest.

Budget balancing is not tried and trusted - no country does it. Deficits are the norm.

They may be the norm, now, but over time they weren't.
Countries with the worst economic outcomes do what you are proposing. Look at Argentina for example.

Simple, back of the handkerchief solutions to age-old economic problems is snake-oil for the naive.

Geuze

KyussB wrote: »

You pull back spending when the economy is at Full-Output/Full-Employment - to prevent excessive inflation - which usually entails keeping a small deficit (but much reduced compared to bad times), but not going into surplus.

At full-employment, say 4-5% unemployment, what should the size of the fiscal balance be?

"A small deficit" might mean 0-1% of GDP?

KyussB

markodaly wrote: »

So debt is never paid off. An era of permanent deficits and bigger debts...
I can see why the left love it already.



Eh, no not really.



Maximizing GDP, what does that actually mean, because its smokes and mirrors to be honest.



They may be the norm, now, but over time they weren't.
Countries with the worst economic outcomes do what you are proposing. Look at Argentina for example.

Simple, back of the handkerchief solutions to age-old economic problems is snake-oil for the naive.

You're pretty much just asserting the opposite of what I've said, without anything to back that. You're not looking to debate, you're just sticking to a narrative.

Geuze

KyussB wrote: »

You pull back spending when the economy is at Full-Output/Full-Employment - to prevent excessive inflation - which usually entails keeping a small deficit (but much reduced compared to bad times), but not going into surplus.

The stock of Government Debt (the total amount, not vs GDP) typically keeps on increasing forever, for all countries.

I agree with this idea of running smaller deficits when tax revenues are plentiful.

It's a pity the current Govt didn't do that in 2018 and 2019.

noodler

markodaly wrote: »

So debt is never paid off. An era of permanent deficits and bigger debts...
I can see why the left love it already.



Eh, no not really.



Maximizing GDP, what does that actually mean, because its smokes and mirrors to be honest.



They may be the norm, now, but over time they weren't.
Countries with the worst economic outcomes do what you are proposing. Look at Argentina for example.

Simple, back of the handkerchief solutions to age-old economic problems is snake-oil for the naive.

It is very difficult to find an example of a country whose absolute debt stock has decreased over time.

It generally does just get smaller as a %GDP in practice.

Not a reason for unchecked borrowing mind.

KyussB

Geuze wrote: »

At full-employment, say 4-5% unemployment, what should the size of the fiscal balance be?

"A small deficit" might mean 0-1% of GDP?

At Full Employment we shouldn't aim for a fiscal balance, we should aim for an inflation target - normally countries aim for about 2% inflation.

That's an added reason why the whole discussion over budget balances doesn't make any sense: The target to aim for, is an inflation target - not an arbitrary accounting number.

biko

Everyone should shoulder the cost of the virus equally.

Geuze

Many of these point on the sustainability of public debt come down to the equations that describe debt dynamics.

https://www.ecb.europa.eu/pub/economic-bulletin/focus/2019/html/ecb.ebbox201902_06~0c96ee6f7c.en.html


"Conversely, a persistently negative (i - g) on government debt would imply that debt ratios could be reduced even in the presence of primary budget deficits (lower than the debt effect induced by the differential).[1]"

KyussB is correct that with a 0% or 1% cost of debt, below the nominal GDP growth rate, then (i - g) is negative, meaning public debt will slowly fall, even as the Govt runs deficits.

However, please note that although 0% is the current cost of new short-term debt, and 10yr debt is maybe 0.50%, they are not the rates on all our existing debt, as the older debt was issued at higher rates.

Geuze

KyussB wrote: »

At Full Employment we shouldn't aim for a fiscal balance, we should aim for an inflation target - normally countries aim for about 2% inflation.

That's an added reason why the whole discussion over budget balances doesn't make any sense: The target to aim for, is an inflation target - not an arbitrary accounting number.

Well if the economy is at FE, with UNR = 4% or 5%, with 2% inflation on target, I think any fiscal deficit should be small.

By small, I would suggest less than 1% of GDP.

Wanderer78

biko wrote: »

Everyone should shoulder the cost of the virus equally.

...but since some are more equal that others, thats probably not gonna happen...

Lyan

Scrap taxes for everyone to be honest. Though if you've just got to raise them then unironically raise it on the lower income folk. It's the rich who innovate and make the jobs. The government can't utilise that money for the common good as well as the rich themselves can.

Wanderer78

Lyan wrote: »

Scrap taxes for everyone to be honest. Though if you've just got to raise them then unironically raise it on the lower income folk. It's the rich who innovate and make the jobs. The government can't utilise that money for the common good as well as the rich themselves can.

theyre pretty damn good at innovating in non productive means anyway, i really cant wait for my trickle down cheque!

KyussB

Geuze wrote: »

Well if the economy is at FE, with UNR = 4% or 5%, with 2% inflation on target, I think any fiscal deficit should be small.

By small, I would suggest less than 1% of GDP.

Most likely, yes - overheating the economy is definitely to be avoided, so as small as 1% of GDP is probably where it would go.

Lyan

Wanderer78 wrote: »

theyre pretty damn good at innovating in non productive means anyway, i really cant wait for my trickle down cheque!

The government wastes money inefficiently. Competitive free markets make us wealthy. The concept of "trickle down" is highly misunderstood by most people. Think about it logically instead of joking.

LeinsterDub

Lyan wrote: »

The government wastes money inefficiently.

Well you'd hardly want them to efficiently waste money

FVP3

markodaly wrote: »

So debt is never paid off. An era of permanent deficits and bigger debts...

Literally the way capitalist economies have always been run. Debt is generally rolled over until it is easy to pay off without substantial increases in taxes in the rollover year. The 1833 debt for slavery was paid off in 2015.

Lyan

LeinsterDub wrote: »

Well you'd hardly want them to efficiently waste money

Touche. I could have worded that better.

FVP3

KyussB wrote: »

You're pretty much just asserting the opposite of what I've said, without anything to back that. You're not looking to debate, you're just sticking to a narrative.

I don't think Mark knows much about economics. Just that right is right.

not the controlling deficits is, in practice, something that right wing parties are very good at.

I'm not full on MMT myself though, although clearly in an era of cheap interest rates the obsession about 100% of GDP is nonsensical. I think Governments should run a surplus, or very small deficit, at the height of a boom.

Wanderer78

Lyan wrote: »

The government wastes money inefficiently. Competitive free markets make us wealthy. The concept of "trickle down" is highly misunderstood by most people. Think about it logically instead of joking.

not only is there inefficiencies in the public sector, so to there is in the private sector, as discussed previously in the thread, theres no such thing as a free market, its a myth, so to is its efficiencies. please explain the concept of trickle down, as you understand it?

FVP3

heres an interesting link on debt and governments:

https://www.economicshelp.org/blog/152634/economics/should-government-run-a-budget-surplus/

Its just an A-Level primer but its good, until the end, explaining that government debt isn't all bad. Its hardly heterodox economics anymore to believe that deficits have their place in many years.

Unfortunately at the end it says this:

This is not to say governments should ignore debt. If a fiscal policy rule is desired a much better policy is to aim at long-term debt stabilisation of around 60-70% (for example). Aiming at long-term debt stabilisation is much better than focusing on annual deficits.

To me we should instead have a criteria that no more than a certain percentage of GDP, or tax revenue, would go to debt servicing.

FVP3

Shefwedfan wrote: »

Start at bottom and work way up

Social welfare:
Shut down the never ending child allowance, 3-4 kids, don’t care but Pick a max and stop, want anymore pay for them yourself
Christmas bonus gone
Stop at source rent for council houses, fix that then come back

The funny thing about this response is that you are almost certainly not rich, and yet a tax on the rich unduly annoys you.

Amazing number of people who defend the rich don't have the arse out of their trousers.

( it's also a false dilemma of course, as we could do both, tax the rich and reduce social welfare, to unsqueeze the middle).

Wanderer78

FVP3 wrote: »

The funny thing about this response is that you are almost certainly not rich, and yet a tax on the rich unduly annoys you.

Amazing number of people who defend the rich don't have the arse out of their trousers.

( it's also a false dilemma of course, as we could do both, tax the rich and reduce social welfare, to unsqueeze the middle).

rather than reducing welfare, how about address the underlining issues that causes things such as long term unemployment etc