Wednesday 9 December 2009

PBR

What a pathetic statement.  There was a lot of masquerading as a 'tough guy,' but little actual substance.  I'm surprised the debt and currency markets have been so relaxed about the statement.  There has been little movement in the currency markets, and the FTSE has also remained stable. 

To increase national insurance contributions at a time of mass unemployment is about as sensible as tempting a piranha with your penis. 

Tax rises are not needed.  The Tories, in a pathetic attempt at trying to stay in the 'centre ground,' have not ruled out tax rises.  Cuts in taxation are needed to stimulate demand.  With interest rates so low, there is little incentive to save, so we should cut taxes as much as possible to stimulate consumption.  We should cut spending faster than we cut taxes so there is a net reduction in the deficit.  As I have previously stated, cutting spending does not 'choke' recovery.  Some very interesting academic work by Robert Barro has shown that the maximum possible multiplier effect of public spending is only 0.7.  This is a pathetic amount, and is no justification for crass Keynesian fiscal expansionism.  Growth will eliminate a large part of this deficit.  If we cut corporation tax, more businesses will relocate to Britain.  If we cut income tax at the present time of low interest rates, consumption demand will increase. 

Our country is rapidly becoming the sick  man of Europe once more.  With a little tax reform and a lot of public service reform, this country can become the powerhouse it once was before Labour wrecked it.

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