I have tweeted this:
A UK economic plan in a tweet
Spend money on care and energy efficiency in every constituency. Deliver a strong NHS and better education. Fund sustainable transport
Pay for it with money creation, borrowing, putting savings to use and taxing the income from wealth more
Done
— Richard Murphy (@RichardJMurphy) July 9, 2020
Several thoughts.
First, I know that there's no reference to the private sector in there. That is deliberate. The reason is that investment in the state sector will create the spillovers into the private sector that will then stimulate demand there through a multiplier effect. I believe that at this moment that is the right direction for funding.
Second, creating money is either quantitative easing or an advance from the Bank of England to the government on the Ways and Means Account.
Third, borrowing has connotations in MMT, I know. But right now I think there are many people anxious to save with the government who are being denied the chance to do so. And I happen to think that the government is the depositor of last resort and this should be encouraged.
That overlaps with the third source of funding - from reorganising saving, which is effectively attaching conditions to tax relief. See here.
And yes, tax is part of the MMT toolkit for social change.
Could that plan work? Yes.
Would it be socially advantageous? Yes.
Would it create jobs? Yes.
Could it be funded as I suggest? Yes.
It's a complete plan, in a single tweet.
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Correct policy, succinctly expressed.
However, as you yourself said using the word “borrowing” is slightly problematic. The “converted” will understand what you mean but others will (wilfully) misinterpret.
How about…..
“Pay for it with money creation, huge expansion of NS&I and taxing the income from wealth more”
….just a thought.
I quite like that…..
“Pay for it with money creation, huge expansion of NS&I and taxing the income from wealth more”
I like most of this a great deal. The focus on NS&I is important; perhaps Gilts and TBs could be described popularly as NS&I for the professional investors. But the reference to taxing wealth as “paying” for spending seems to me to fall into the same form of error Mr Parry proposed Richard may have committed……
OK….so your wording is?
This is not easy, so let’s get it right
I must sheepishly confess that I thought I had actually already done it, quite succinctly what you then asked. It only shows, what do I know….?
I can give you the long answer, but you already know this, better than I do.
I am thinking of government borrowing (UK, not foreign) asn the ‘flip-side’ of the coin; simply as the public’s one source of risk-free investment. Anyone with credit in a High Street bank account (after the crash) has a risk-free investment, because it is guaranteed by the government (up to £85,000 I think). In 2008 the government stepped in to give this guarantee, because only the government can guarantee your investment is entirely risk-free. The private sector can’t. the private sector doesn’t. It isn’t up to the challenge.
It is only the Government that can offer risk-free investment. The 2008 crash, and the pandemic have proved that simple truth finally and beyond challenge, but it seems the public does not yet fully understand what that means. NS&I is risk-free investment. During the lockdown, and spite of the hardship of many, because there is currently little private, discretionary spending, personal bank balances for a signifcant number of people have sharply increased. Where will this money go? Some may go into discretionary spending. Some, if not most of this money will find its way to NS&I or gilts. Most people like a safe home for most of their money. Government borrowing is just the Government providing the public with their only source of risk-free investment. If it didn’t exist the Government would require to invent it.
Well that was prolix. I warned you.
Sorry – it was tax I was referring to……
“Sorry — it was tax I was referring to……”
Jings!
May I suggest tax as the Government’s currency waste removal service (not as revenue generation as it always starts with all the sterling currency it will ever require; what it doesn’t have is the goods and services it requires the country to produce); much as used banknotes are removed, but with this difference: in the case of tax the Government collects this waste product as a non-negotiable charge against the individual or company using its currency (which is paid in the waste product), both to ensure everyone uses the currency for their business and to ensure the waste is properly disposed of as non-inflationary waste, or not squirrelled away for individual, illegimitate advantage. Okay, it needs some work, but there it is…….
You are a hard taskmaster Richard. You will be setting exams next.
Only for a selected few….
“illegimitate”?
Jings! Illegitimate. Maybe I have just coined a new term to explain the word ‘tax’ – illegimitate currency.
🙂
Richard, you have elsewhere said that tax does not fund public spending. Rather it has 3 functions: redistribution, influence behaviour and control inflation.
Why then do you hear list taxing income from wealth more as one of the ways to pay for your economic plan?
This is in not an attack on your tweet rather I am seeking clarification on something I may have misunderstood.
I am putting in wealth tax as a) redistribution b) controlling inflation risk
I am nit really suggesting it funds at all
But do remember, tax is vital as inflation control and so it has an indirect role and it’s fair to say so
I get confuse with this, as I hear tax is destroyed upon collection and so do the public.
It is destroyed
But that does nit mean tax is not meaningful and does not play a role in MMT, macroeconomics or social policy
Tax is vital to all three
And yes, I do sometimes have to play to where the audience is
I would leave the tax phrase as is – as Obi Wan Kenobi said, it is true, from a certain point of view.
The general public already think tax should be fair(er), so makes sense to build on that sentiment. Trying to tell people that tax doesn’t actually pay for public services and is just the government reclaiming what is already theirs is going to do much more harm than good!
Very nicely put.
My only query: is energy efficiency enough? Surely we need to invest a lot more in decarbonising both electricity and domestic heating, as well as addressing efficiency. And doing both these things would put a lot of people to work now in very useful and meaningful jobs?
I was looking for a catch all phrase….
My concern with saying “taxing wealth to pay for spending” is that those who pay more (because they get more) will use that to tell the rest of us how wonderful and essential they are and that everyone ought really to be grateful – after all, if it wasn’t for them, where would the money come from for spending? This is already used to justify ever greater tax cuts on greater incomes as it is.
I’d prefer people to know that tax receipts don’t fund spending, but that tax is (or can be) used to improve social and economic justice and prevent the problem of inflation.
How about:
‘Tax the wealth of the wealthy more in order to suppress asset (housing) inflation and their ability to fund and lobby political parties for their own benefit and undermine democracy’?
It might be worth saying something about offshore as well – where the money of the wealthy gets mixed up with that of criminals and who knows what it ends up funding?
Too many characters required ….
Given you can solve depression economics in a tweet, could I bet you can prove viable nuclear fusion power generation on a napkin while sipping a latte.
Sorry, I don’t drink lattes