One day the Institute for Fiscal Studies will understand tax and its relationship macroeconomics and how not to make fools of themselves when they talk about the two in the same sentence. This will not, I suspect, happen whilst Paul Johnson is in charge there. As the Guardian has noted:
Paul Johnson, director at the IFS, urged the chancellor to raise taxes. Sunak could abolish entrepreneurs relief, which costs £2.3bn and only benefits as few as 5,000 individuals, while also reforming council tax to increase charges on the most expensive homes in the country.
He added: “We have already had 16 fiscal targets in a decade, and fiscal targets should not just be for Christmas. Mr Sunak should resist the temptation to announce another and instead recognise that more spending must require more tax.”
The reality is that in the UK there are six reasons to tax:
1) To ratify the value of the currency: this means that by demanding payment of tax in the currency it has to be used for transactions in a jurisdiction;
2) To reclaim the money the government has spent into the economy in fulfilment of its democratic mandate. You can call this revenue raising if you insist, but it isn't;
3) To redistribute income and wealth;
4) To reprice goods and services;
5) To raise democratic representation - people who pay tax vote;
6) To reorganise the economy i.e. fiscal policy.
The IFS ignores all that. That's because it doesn't understand money. And it's because it thinks there is a tax and spend cycle, when the reverse is true. And glaringly obviously it does not understand that appropriate fiscal policy would right now demand deficit funding of a Green New Deal. Nor can it think outside the box on how to finance that deficit.
Instead it wants another fiscal rule. Whilst any rational person noting that there had been sixteen fiscal rules in a decade would conclude that this shows they are at best of limited worth, or are at most political rhetoric, and in either case are clearly worthless, the small-mindedness of the IFS demands that the balanced budget mantra be enforced instead. Neoliberalism must rule, come what may.
And this is supposedly our premier macroeconomic think tank. No wonder we're in trouble.
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Today it is glaringly obvious that appropriate fiscal policy would demand deficit funding of a Green New Deal.
Two days ago the job required to fund the Green New Deal boiled down to 3 options of which one didn’t involve new deficit funding and was simply to match the right customer with the right government created funding arrangement which meant matching pension and ISA bond holders with the Green New Deal. This was based on an FT article from Green New Deal group member Larry Elliott writing in the FT.
If I was Larry Elliott I would not like being agreed with and then glaringly undermined so quickly.
You reveal your own ignorance
Larry was demanding deficit funding
All that we were showing was that there is a demand for the debt used to fund that deficit
If you can’t join up the dots I suggest you don’t comment
“premier macroeconomic think tank”?
The IFS doesn’t claim to do macro at all.
Its website plainly say “Today, IFS is Britain’s leading independent microeconomic research institute.“
But it talks macro, frequently
If it isn’t about it then it should not comment
I can understand your frustration, but a lot of minds need to be changed – and many, many more need to be opened. As is often the case, JK Galbraith summed it up best: ““Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everybody gets busy on the proof.”
Unfortunately, it almost always needs a crisis of some kind to force politicians and policy-makers to do something that previously was deemed to be totally unthinkable and disastrous, but now, magically, becomes perfectly logical and vitally necesaary. It was thus with Keynes in the ’30s and there are countless other examples since.
I’m certainly not wishing a crisis upon us, but, inevitably, they happen. However, when one does happen, an even greater calamity would be wasting the opportunity presented – as happened in the aftermath of the GFC. Many, of course, would claim that we are living through a climate crisis – and we, indeed, are. But to force the necessary policy changes the impacts of a crisis need to be almost universal and simultaneous. The climate crisis doesn’t satisfy these criteria. And that goes a long way to explain the totally inadequate policy response.
Bit unkind to bookkeepers.
Sorry….
It’s not just the IFS.
The Chief Exec of a UK Research Council started their presentation today by saying that they get their money from HM Treasury who in turn get it from taxes people pay. And its the second time I’ve heard them say this. Guess no one at HM Treasury has told them otherwise. Wonder why….?
Which one?
BBSRC
At least it was biologists and not economists, but actually I would have expected the better of biologists
They can think systems