General Election 2017

[HanoiVillan]

18 minutes ago, Demitri_C said:

Probably because it is going to be significantly higher than it currently is 

That would be a huge problem if it were privately owned, but it isn't. 

[hippo]

47 minutes ago, Dr_Pangloss said:

Although the system as it current exists doesn't seem all that sustainable. The Student Loan company is government owned and will never service all of it's debts at the current rate unless they get more aggressive over loan repayments and even tie in collateral into it's loan contracts (which will never be accepted). As a result the government will have to write off what is effectively it's own issued debt when it becomes clear that in the aggregate, debts will not be fully serviced.

If the idea is that graduates get better paid jobs and therefore should make more a contribution. Well, why not axe all the admin of loans\recoveries\write offs etc... and just increase tax for high earners. 

[peterms]

23 minutes ago, blandy said:

So why would anyone talk about putting this or that Tax up? or cutting spending on this or that thing - why not just create the money to do it instead? Why on earth would John McDonnell, Phillip Hammond...every chancellor ever... tart about with this or that Tax rise or cut, this or that national insurance rate, why would they bother about "tax avoidance and evasion" about VAT and all the rest of it? Why would anyone care about a balanced budget and defecits and all the rest of it. No one needs to pay any tax, then....it's all just virtual numbers, right....

Many reasons.

They are operating on the basis that taxes pay for government expenditure, which is what they and everyone else has been taught to believe as a literal truth, rather than a way of framing something on the basis that we should agree a figure for spending and then stick to it.  Possibly they believe it, possibly they accept the analogy without believing the fiction that underpins it, possibly they think it's too big a step to try to propose budgets which contradict everything the media tell us every day is established fact - people would find it very hard to grasp, because it's counterintuitive as well as contrary to what we have all been told.

We live in a world where perceptions matter much more than fact when it comes to these things.  So for example people think it's reasonable to ask "Where is the money coming from?" when it comes to paying for police on the streets, even at a time when pretty much everyone says we must to this to make things a little bit safer, and yet at the same time, the creation of £425bn for QE attracted little comment or criticism.  So we seem able to accept just creating money for some things, while simultaneously believing it's impossible for other things.

So if taxation doesn't fund government spending (ie national, currency-issung governments), why tax?  Partly demand management, to avoid the economy overheating and consequent inflation.  Partly redistribution for reasons of social justice.  Partly to affect spending choices.  Several of the people who write about this way of viewing spending say we shouldn't be talking at all about the need to tax the rich - I think because their focus is on how spending is financed, thinking that chasing rich people for money that isn't needed to fund spending is something of a distraction.  I take the view that the social justice angle makes it worth while.

People care about balanced budgets because they accept that government budgets are like household budgets, which again is intuitively plausible and also plain wrong.  They also don't realise that a government surplus requires a deficit on the part of the rest of the economy (at least, where foreign trade is neutral).  If you put the proposal of government surpluses to them in another way, eg "The government should tax at a higher rate than it intends to spend, in other words you should pay more for the services you receive than they cost to provide", you might get a different reaction.  And if you explained to people that governments (which issue their own currency) can and do create money at will, then the concept of governments "saving for a rainy day", like a prudent citizen, is inherently nonsensical.

But starting from where we are now, trying to get this set of ideas across in the face of the deafening chorus would be pretty difficult.

There is hope, however.  We have all been taught to believe that banks are intermediaries, lending (sometimes multiples of) what has been deposited with them.  People who explained that banks actually create money at the point of lending, rather than lending something they already have, were ridiculed as cranks.  And yet in 2014 the Bank of England explained hat this is exactly so, and what generations of economics students have been taught is wrong.  Earlier this year, the Deutschebank said much the same.

So these entrenched ideas can be challenged, but it's not quick, or easy.

Once people understand that both private credit and public spending comes from creating money, rather than accumulating it from deposits or taxes respectively, the conversations about what is possible start to become a lot more interesting.

 

[blandy]

18 minutes ago, peterms said:

So if taxation doesn't fund government spending (ie national, currency-issung governments), why tax?  Partly demand management, to avoid the economy overheating and consequent inflation.  Partly redistribution for reasons of social justice.  Partly to affect spending choices.  Several of the people who write about this way of viewing spending say we shouldn't be talking at all about the need to tax the rich - I think because their focus is on how spending is financed, thinking that chasing rich people for money that isn't needed to fund spending is something of a distraction.  I take the view that the social justice angle makes it worth while.

The bit quoted is utter rubbish. Taxation does fund (in part) Government spending. Redistribution is government "spending" - taking money from one part of the population/economy - "rich people" "people who drink, or drive cars..." and distributing it to pensioners or disabled people.... 

Social justice could be "giving money to those who need it and not giving it to those who don't (the rich)". It shows the "social justice" claim as nonsense. A claim to punish one person and help another is not "justice" when no wrong has been committed. A notion of helping someone in need of help and leaving the other in peace, is just.

The problem with the argument you promote is not that it doesn't contain some elements of truth, it very much does, it's that it makes its argument on a few areas of untruth and surrounds them with truth to make it look "honest". But it's not, it's wholly dishonest at its root. And it's why nowhere on earth, no system in any country of whatever politics, operates the way your proposal suggests.

[peterms]

Which taxes increased to finance the £425bn QE?

[Dr_Pangloss]

33 minutes ago, peterms said:

Many reasons.

They are operating on the basis that taxes pay for government expenditure, which is what they and everyone else has been taught to believe as a literal truth, rather than a way of framing something on the basis that we should agree a figure for spending and then stick to it.  Possibly they believe it, possibly they accept the analogy without believing the fiction that underpins it, possibly they think it's too big a step to try to propose budgets which contradict everything the media tell us every day is established fact - people would find it very hard to grasp, because it's counterintuitive as well as contrary to what we have all been told.

We live in a world where perceptions matter much more than fact when it comes to these things.  So for example people think it's reasonable to ask "Where is the money coming from?" when it comes to paying for police on the streets, even at a time when pretty much everyone says we must to this to make things a little bit safer, and yet at the same time, the creation of £425bn for QE attracted little comment or criticism.  So we seem able to accept just creating money for some things, while simultaneously believing it's impossible for other things.

So if taxation doesn't fund government spending (ie national, currency-issung governments), why tax?  Partly demand management, to avoid the economy overheating and consequent inflation.  Partly redistribution for reasons of social justice.  Partly to affect spending choices.  Several of the people who write about this way of viewing spending say we shouldn't be talking at all about the need to tax the rich - I think because their focus is on how spending is financed, thinking that chasing rich people for money that isn't needed to fund spending is something of a distraction.  I take the view that the social justice angle makes it worth while.

People care about balanced budgets because they accept that government budgets are like household budgets, which again is intuitively plausible and also plain wrong.  They also don't realise that a government surplus requires a deficit on the part of the rest of the economy (at least, where foreign trade is neutral).  If you put the proposal of government surpluses to them in another way, eg "The government should tax at a higher rate than it intends to spend, in other words you should pay more for the services you receive than they cost to provide", you might get a different reaction.  And if you explained to people that governments (which issue their own currency) can and do create money at will, then the concept of governments "saving for a rainy day", like a prudent citizen, is inherently nonsensical.

But starting from where we are now, trying to get this set of ideas across in the face of the deafening chorus would be pretty difficult.

There is hope, however.  We have all been taught to believe that banks are intermediaries, lending (sometimes multiples of) what has been deposited with them.  People who explained that banks actually create money at the point of lending, rather than lending something they already have, were ridiculed as cranks.  And yet in 2014 the Bank of England explained hat this is exactly so, and what generations of economics students have been taught is wrong.  Earlier this year, the Deutschebank said much the same.

So these entrenched ideas can be challenged, but it's not quick, or easy.

Once people understand that both private credit and public spending comes from creating money, rather than accumulating it from deposits or taxes respectively, the conversations about what is possible start to become a lot more interesting.

 

This appears to be a restatement of Modern Monetary Theory. Whilst it's certainly true that when a state is effectively the monopoly supplier of it's currency that it can never go bankrupt - by definition, since it can always print money and also erode the value of it's own debt, it's quite obvious for inflationary reason there's an upper bound on this. 

I'm not convinced MMT ideas really work outside of recessions, and thus what they basically assert is basic Keynesian economics. In the good times it'd be fairly irresponsible to run high deficits. 

[PaulC]

2 hours ago, bobzy said:

I don't understand the scrapping of tuition fees.  Are they really a block to anyone going to university?  I was under the impression most people got a low-interest-rate student loan to pay back and, inevitably, those who graduated tended to get better paid employment down the line.  Not convinced it's the best policy, nor particularly pressing if so.

Agreed on the uncertainty surrounding Brexit and imposing higher taxes, too.  The "comfort" I get from this is a] it's fair taxation and b] we currently have pretty low tax rates compared to the rest of the developed world.  To me, businesses are more likely to leave Britain/reduce capacity in Britain if there are large trade tariffs between us and the EU.  I don't think the issue of increased taxation will be as vital.

I don't know if I am being ignorant here but why scrap tuitions fees for everybody instead of just families on medium/low incomes.  Just throwing money away. 

[Dr_Pangloss]

4 minutes ago, PaulC said:

I don't know if I am being ignorant here but why scrap tuitions fees for everybody instead of just families on medium/low incomes.  Just throwing money away. 

It's interesting, most people can't afford to pay it up front, even if you are middle class, a minimum of £27k (or £9k a year) is a lot of money for most. The problem with saddling young people with debt is that it can affect their lives fairly substantially after graduation. It will be hard for these people to get loans of any sort from most banks, student loan debt is of course taken into account for mortgages, it makes things like getting on the housing ladder even harder and this is only amplified by having more debt to pay (i.e. with the hike from £3k to £9k). 

[peterms]

3 minutes ago, Dr_Pangloss said:

This appears to be a restatement of Modern Monetary Theory. Whilst it's certainly true that when a state is effectively the monopoly supplier of it's currency that it can never go bankrupt - by definition, since it can always print money and also erode the value of it's own debt, it's quite obvious for inflationary reason there's an upper bound on this. 

I'm not convinced MMT ideas really work outside of recessions, and thus what they basically assert is basic Keynesian economics. In the good times it'd be fairly irresponsible to run high deficits. 

Yes, it's MMT.  Yes, there's an upper bound to what can be done without creating runaway inflation.  That limit is the available resources, including environmental alongside people, land etc.

MMT is not a policy prescription.   It doesn't argue that the size of government should be a or b.   It describes how monetraily sovereign governments actually work.   One thing it says is that deficits are neither good nor bad - just an accounting residue.  If the private sector wishes to shrink, there will be a government surplus.  Usually the private sector wishes to grow, and so there will be a government deficit.  It's trying to get away from the idea that there is something bad or wrong about this, or that someone has failed to manage things properly - just recognise that when sectors have to balance, then by definition if one is in surplus, the other will be in deficit (again, leaving external trade aside).

The idea of responsibility, another moral judgement, comes from the household analogy.  If a household fails to save in good times and then has nothing in bad times, that looks like poor judgement, or lack of responsibility.  But the idea of a government which creates money putting some aside in a tin under the bed for hard times is just a misunderstanding.

What would be wrong, is when the private sector is trying to grow, for the government sector to aim for a surplus as a deliberate policy goal.  MMT says surpluses and deficits are not goals in themselves, and to see them as such is a basic mistake, caused by thinking governments, like households, have to balance their books, whether in one year or over time.

 

[HanoiVillan]

30 minutes ago, PaulC said:

I don't know if I am being ignorant here but why scrap tuitions fees for everybody instead of just families on medium/low incomes.  Just throwing money away. 

Universality in benefits a] buys the political support of middle-class voters, and b] avoids stigmatising 'free uni recipients' or whatever as an underclass. 

Also I guess for some people it's just a point of principle that you shouldn't have to pay (directly) for a tertiary education. 

[sharkyvilla]

40 minutes ago, PaulC said:

I don't know if I am being ignorant here but why scrap tuitions fees for everybody instead of just families on medium/low incomes.  Just throwing money away. 

That's the thing, as you don't have to pay back until your earn above the average wage, surely it's not a problem for people with low incomes anyway.  Prior to the coalition, if you finished your degree and the only job you could find was stacking shelves, you'd generally still have to pay back your loan.  Scrapping fees for people who may go on to earn very good salaries and putting £11bn worth of burden on the tax payer doesn't seem particularly progressive to me when there's little suggestion that it would make it any easier for poorer people to go to uni than it currently is.

[Dr_Pangloss]

15 minutes ago, peterms said:

Yes, it's MMT.  Yes, there's an upper bound to what can be done without creating runaway inflation.  That limit is the available resources, including environmental alongside people, land etc.

MMT is not a policy prescription.   It doesn't argue that the size of government should be a or b.   It describes how monetraily sovereign governments actually work.   One thing it says is that deficits are neither good nor bad - just an accounting residue.  If the private sector wishes to shrink, there will be a government surplus.  Usually the private sector wishes to grow, and so there will be a government deficit.  It's trying to get away from the idea that there is something bad or wrong about this, or that someone has failed to manage things properly - just recognise that when sectors have to balance, then by definition if one is in surplus, the other will be in deficit (again, leaving external trade aside).

The idea of responsibility, another moral judgement, comes from the household analogy.  If a household fails to save in good times and then has nothing in bad times, that looks like poor judgement, or lack of responsibility.  But the idea of a government which creates money putting some aside in a tin under the bed for hard times is just a misunderstanding.

What would be wrong, is when the private sector is trying to grow, for the government sector to aim for a surplus as a deliberate policy goal.  MMT says surpluses and deficits are not goals in themselves, and to see them as such is a basic mistake, caused by thinking governments, like households, have to balance their books, whether in one year or over time.

 

I honestly don't see how it's massively different then IS-LM, outside of the strong belief in using identities and double entry bookkeeping.

[PaulC]

9 minutes ago, sharkyvilla said:

That's the thing, as you don't have to pay back until your earn above the average wage, surely it's not a problem for people with low incomes anyway.  Prior to the coalition, if you finished your degree and the only job you could find was stacking shelves, you'd generally still have to pay back your loan.  Scrapping fees for people who may go on to earn very good salaries and putting £11bn worth of burden on the tax payer doesn't seem particularly progressive to me when there's little suggestion that it would make it any easier for poorer people to go to uni than it currently is.

His hero is Castro so wonder whether he is following the Cuban model for education and health

[Wainy316]

I'm still waiting for the Conservatives to provide one single reason to vote for them apart from because they're not Labour.

[bobzy]

3 minutes ago, Wainy316 said:

I'm still waiting for the Conservatives to provide one single reason to vote for them apart from because they're not Labour.

Strong and stable Diane Abbott figures don't add up will of the British people strong and stable will of the people strong and stable Diane Abbott this is the most important election in my lifetime strong and stable very clear choice Diane Abbott the most important election in my lifetime will of the British people strong and strong and strong and strong and strong and.... *explode*

[snowychap]

21 minutes ago, sharkyvilla said:

Prior to the coalition, if you finished your degree and the only job you could find was stacking shelves, you'd generally still have to pay back your loan.

Where do you get that from?

[Demitri_C]

4 minutes ago, snowychap said:

Where do you get that from?

I might not go that far but the unemployment figures were certianly higher prior to this period into comparison now.

[snowychap]

Just now, Demitri_C said:

I might not go that far but the unemployment figures were certianly higher prior to this period into comparison now.

Eh?

[bobzy]

11 minutes ago, snowychap said:

Where do you get that from?

Yeah, sounds wrong to me.  Pretty sure when I graduated I didn't have to pay back any of my student loan providing I didn't earn over £15k/year or something (c. 2007).

[wazzap24]

4 minutes ago, Wainy316 said:

I'm still waiting for the Conservatives to provide one single reason to vote for them apart from because they're not Labour.

That one sentence basically sums up their entire campaign. 

They have literally, to a man, offered nothing. In not one interview, debate or TV spot have I seen them offer anything other than scaremongering and deflection. 

They can't defend their record on anything, because it's a disaster. They have come up with a half arsed, uninspiring manifesto, which they don't seem to want to talk about much. Their leader has crumbled and is almost hiding.

It's an absolute travesty that they'll probably end up getting back in. 

Labour are a massive gamble, but at least they are trying to offer something different and a bit of hope. A glass of water to wash down the shit sandwich if nothing else.