Labour Leader: Keir Starmer VI

[droodzilla]

Unless I missed something, ks is not arguing to "remove taxation".

Battle of the straw men here, folks. The key point, politically speaking, is that a national economy is not like a household budget. That's a pernicious lie that the right has ruthlessly exploited to narrow the horizon of political possibility.

Anyone with progressive instincts should push back at that deeply flawed analogy at every opportunity.

The rest is detail, in my view (and detail that hardly anyone here - myself included - is truly qualified to grasp).

 

[Tony L]

I’m not arguing with any of that. I just feel those arguing tax has no relation to public spending are way off the map somewhere well outside of this reality.

 

[droodzilla]

Starmer’s thing with health is going to be prevention, it seems. Got a bad feeling this is going to mean nudges, 5-a-day, traffic lights on food packaging, that kind of thing. Long’90s thinking, it’s what these guys are comfortable with.

https://twitter.com/siennamarla/status/1482300292804665349?s=21

https://twitter.com/siennamarla/status/1482306066335604737

!!!

 

[droodzilla]

I’m not arguing with any of that. I just feel those arguing tax has no relation to public spending are way off the map somewhere well outside of this reality.

ks can speak for himself but I don't think he's claiming that there is no relation - just that it is more complex than: tax receipts = public spending.

Feels like a storm in a teacup as (to me) you both agree that the relationship between taxation, public spending and other macroeconomic variables is complex.

I don't know enough to say much more, but I am certain that we must call out the central lie that a national economy is like a household budget.

I find it helps to think in terms of resources, rather than money, though. Remember Keynes' line that, if we can do it, we can afford it. In other words, money is a lever that government can use to mobilise resources to deliver politically desirable outcomes. This then focuses attention on the political question of what kind of society we want. As always, strip away the mystique of money and focus on the underlying reality.

 

[Tony L]

Agreed. I’ve no issue with any of that.

 

[ks.234]

You haven’t proved anything at all as you are way out on a limb apparently confused by the way government spending is created and blind to the long term effects and balancing. To put it another way you are arguing with Stephanie Kelton, Keynesian economics and the whole of academic theory, not with me. I politely suggest you rewatch the YouTube videos as I’m sorry, and I don’t mean to be rude, but you haven’t understood this.

As I understand it what Kelton is saying is by using inflation and employment as the key metrics in a Keynesian economy it is largely possible to offset government spending against the taxation raised by the employment it creates, i.e. free shit! This makes a lot of sense and has its roots way back in FDR’s America (Hoover Dam etc). The fact a government can create money gives enough of a time-delay to allow this approach without the inevitable spiralling inflation that comes from money printing. MMT is not magic money tree economics (which always leads to inflation and currency devaluation). To my understanding you are entirely missing this time-delay aspect as well as not grasping the critical impact of both pubic and private sector deficits/surpluses, imports, exports, internal investment etc etc. Again, I am not arguing with Kelton etc, she fully understands and articulates all these factors and never once argues to remove taxation! Basically you need at least one more axis on your mental graph.

You haven’t proved anything at all as you are way out on a limb apparently confused by the way government spending is created and blind to the long term effects and balancing. To put it another way you are arguing with Stephanie Kelton, Keynesian economics and the whole of academic theory, not with me. I politely suggest you rewatch the YouTube videos as I’m sorry, and I don’t mean to be rude, but you haven’t understood this.

As I understand it what Kelton is saying is by using inflation and employment as the key metrics in a Keynesian economy it is largely possible to offset government spending against the taxation raised by the employment it creates, i.e. free shit! This makes a lot of sense and has its roots way back in FDR’s America (Hoover Dam etc). The fact a government can create money gives enough of a time-delay to allow this approach without the inevitable spiralling inflation that comes from money printing. MMT is not magic money tree economics (which always leads to inflation and currency devaluation). To my understanding you are entirely missing this time-delay aspect as well as not grasping the critical impact of both pubic and private sector deficits/surpluses, imports, exports, internal investment etc etc. Again, I am not arguing with Kelton etc, she fully understands and articulates all these factors and never once argues to remove taxation! Basically you need at least one more axis on your mental graph.

So what does the Government do with the annual £850b it gets in revenue? Genuinely interested.

The short answer is that it gets taken off the governments debit column, so if it spends out £100b, and takes back £850 in tax, the government is then left £150b in “deficit”. In order to make the books balance the government then sells bonds to cover the deficit, which it calls borrowing.

It is worth noting at this point that that the “deficit”, depicted as a bad thing in Tory mythology, is actually the surplus in the private sector, it is, in short, where the money in our pockets ultimately owes from. Any deficit has to have a corresponding surplus.

“Borrowing” is another bad thing, but if you are the issuer of currency, paying back any debt in that currency is never a problem. As such “borrowing” is an asset swap between government and the pension schemes and insurance companies who buy bonds.

There’s a lot else that could be said about words like deficits, borrowing, full employment, interest rates that give a different perspective to the one propagated by Tory mythology, but top of the list, the thing that everything else hangs off, the biggest myth of the lot, is the observation that tax does not fund our government spending

 

[Cav]

The short answer is that it gets taken off the governments debit column, so if it spends out £100b, and takes back £850 in tax, the government is then left £150b in “deficit”...

So pretty much what I said in #2521.

 

[Tony L]

The short answer is that it gets taken off the governments debit column, so if it spends out £100b, and takes back £850 in tax, the government is then left £150b in “deficit”. In order to make the books balance the government then sells bonds to cover the deficit, which it calls borrowing.

Which shows we have just spent days arguing over semantics! That £850bn is ‘government spending paid for by taxation’, it is just delayed as I attempted (and likely failed) to articulate. We are pretty much on the same page here.

To my mind the key thing (and the reason “austerity” is always such a horrific disaster) is good strategic government spending creates employment as well as infrastructure, which in turn creates both growth and taxation, and given enough time and good management actually pays off the initial investment, i.e. we get ‘free stuff!’.

This sinks the ridiculous Tory ‘household budget’ BS and highlights just how wrong UK government spending has been for decades. Imagine where we would be today if successive Tory and Labour governments had invested in the public transport network, nuclear power etc, and done it properly, not via the spivs and loan-sharks of PFI. All stuff that would benefit the wider economy and benefit all. Especially as we are currently being reamed with ever inflated energy pricing.

 

[PhilofCas]

Yes, they (the Tories) have done a great job, when the average man in the street says ‘how can we afford all these immigrants when we can’t even afford to house all our homeless’, they really have conned a lot of people.

 

[ks.234]

You haven’t proved anything at all as you are way out on a limb apparently confused by the way government spending is created and blind to the long term effects and balancing. To put it another way you are arguing with Stephanie Kelton, Keynesian economics and the whole of academic theory, not with me. I politely suggest you rewatch the YouTube videos as I’m sorry, and I don’t mean to be rude, but you haven’t understood this.

As I understand it what Kelton is saying is by using inflation and employment as the key metrics in a Keynesian economy it is largely possible to offset government spending against the taxation raised by the employment it creates, i.e. ‘free shit’! This makes a lot of sense and has its roots way back in FDR’s America (Hoover Dam etc). The fact a government can create money gives enough of a time-delay to allow this approach without the inevitable spiralling inflation that comes from money printing. MMT is not magic money tree economics (which always leads to inflation and currency devaluation). To my understanding you are entirely missing this time-delay aspect as well as not grasping the critical impact of pubic and private sector deficits/surpluses, imports, exports, internal investment etc etc. Again, I am not arguing with Kelton etc, she fully understands and articulates all these factors and never once argues to remove taxation! Basically you need at least one more axis on your mental graph.

And around you go again in another circle; ridicule, patronising, insult and making stuff up, then back to ridicule, patronising, insult and invention.

Yet again you repeat the invention about “removing taxation”. Nobody has talked about removing taxation, it has even been pointed out to you by other people that no one is talking about removing taxation, but yet again you rebuild this straw man rather than answer a simple question.

I have said nothing about removing taxation, I have said the opposite, I have said that taxation has a necessary role. What I have said, and supported with evidence, is that taxation does not fund our government spending. You have decided to ridicule that idea but been unable to supply any evidence for your assertion that tax does fund our government spending beyond a wiki page that is itself assertion.

You keep suggesting that I revisit Stephanie Kelton videos as if she will provide some proof for your assertion that tax funds government spending. But if you haven’t yet grasped that the very starting point, quite literally, of Kelton’s thinking is that tax does NOT fund our government spending, then you are quite demonstrably wrong

If you were to take the time to actually read some Stephanie Kelton you will read the following in the very first chapter of her most famous book…

“MMT takes as its starting point a simple and incontrovertible fact: our national currency, the US dollar, comes from the US government, and it can’t come from anywhere else—”

— The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy by Stephanie Kelton
​

And as you have suggested I revisit her videos, how about this from the very beginning of her talk

“When it comes to the British Government, money is no object”
​

You keep repeating that I am ignoring the complexities of inflation, unemployment and deficits etc. You keep repeating this straw man despite the fact that I have said that I’m quite happy to get into such complexities as far as I am able within the limits of my reading and research, but if you don’t understand the fundamental starting point of people like Kelton, that is the simple observation that tax does not fund our government spending, any understanding her complexity will be somewhat constrained.

 

[Tony L]

You just made a post upthread (#2547) illustrating exactly how taxation pays for government spending. As such I’ll leave you arguing against yourself.

 

[ks.234]

So pretty much what I said in #2521.

Providing that you’re not taking that accounting model to say that tax funds our government spending, then yes.

The money goes out, some of it comes back and is deleted.

Government creates money into existence, then taxes money out of existence. But there isn’t some sort of back channel that puts that tax money in front of the ability to issue more money.

 

[ks.234]

You just made a post upthread (#2547) illustrating exactly how taxation pays for government spending. As such I’ll leave you arguing against yourself.

Hellfire! And you accuse me of not being able to understand text. Nowhere did I say that taxation pays for government spending. I quite simply did not say that.

In fact, if you actually read, you will see that I said the opposite

 

[Sue Pertwee-Tyr]

I think people are arguing about whether the cart is before the horse, or the horse is behind the cart.

The argument is, I think, that the government doesn’t rely on taxation income in order to spend. It does, however, still need taxation income after the fact to reduce the borrowing requirement and thereby control the value of the currency on the markets to sensible and manageable levels. So both of you are right, but not entirely on the same page.

 

[ks.234]

I think people are arguing about whether the cart is before the horse, or the horse is behind the cart.

The argument is, I think, that the government doesn’t rely on taxation income in order to spend. It does, however, still need taxation income after the fact to reduce the borrowing requirement and thereby control the value of the currency on the markets to sensible and manageable levels. So both of you are right, but not entirely on the same page.

That is certainly my starting point, and I would go on to agree with you that there is a necessary role for taxation after government has issued the money, but Tony argues that such an understanding is “ridiculous”

 

[notaclue]

And around you go again in another circle; ridicule, patronising, insult and making stuff up, then back to ridicule, patronising, insult and invention.

Yet again you repeat the invention about “removing taxation”. Nobody has talked about removing taxation, it has even been pointed out to you by other people that no one is talking about removing taxation, but yet again you rebuild this straw man rather than answer a simple question.

I have said nothing about removing taxation, I have said the opposite, I have said that taxation has a necessary role. What I have said, and supported with evidence, is that taxation does not fund our government spending. You have decided to ridicule that idea but been unable to supply any evidence for your assertion that tax does fund our government spending beyond a wiki page that is itself assertion.

You keep suggesting that I revisit Stephanie Kelton videos as if she will provide some proof for your assertion that tax funds government spending. But if you haven’t yet grasped that the very starting point, quite literally, of Kelton’s thinking is that tax does NOT fund our government spending, then you are quite demonstrably wrong

If you were to take the time to actually read some Stephanie Kelton you will read the following in the very first chapter of her most famous book…

“MMT takes as its starting point a simple and incontrovertible fact: our national currency, the US dollar, comes from the US government, and it can’t come from anywhere else—”

— The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy by Stephanie Kelton
​

And as you have suggested I revisit her videos, how about this from the very beginning of her talk

“When it comes to the British Government, money is no object”
​

You keep repeating that I am ignoring the complexities of inflation, unemployment and deficits etc. You keep repeating this straw man despite the fact that I have said that I’m quite happy to get into such complexities as far as I am able within the limits of my reading and research, but if you don’t understand the fundamental starting point of people like Kelton, that is simple observation that tax does not fund our government spending, any understanding her complexity will somewhat constrained.

I disagree.

© Cloth-Ears 2006

 

[notaclue]

Even without Scotland, Sir Keir now on track to win...

LAB: 314 MPs (+112)
CON: 237 (-128)
LDEM: 24 (+13)
SNP: 51 (+3)
PC: 4 (-)
GRN: 1 (-)
https://twitter.com/BritainElects/status/1482344809838829572

I think we can safely say Sir Keir has done it. The arguments as to whether he could win are over. He could.

Of course, it's all thanks to Johnson being a despicable human being and trashing the reputation of the Tories.

 

[Tony L]

Hellfire! And you accuse me of not being able to understand text. Nowhere did I say that taxation pays for government spending. I quite simply did not say that.

If the state builds say a nuclear power station for £Xbn creating a negative balance sheet and then retrieves £Ybn via taxation to clear/offset that deficit then that money taken in taxation has been used on government spending. Obviously.

 

[ks.234]

If the state builds say a nuclear power station for £Xbn creating a negative balance sheet and then retrieves £Ybn via taxation to clear/offset that deficit then that money taken in taxation has been used on government spending. Obviously.

The spending come first, how can it depend on the thing that comes afterwards for something it has already done? That makes no sense.

Yes, tax is used to balance the books, but that tax money is just a number in one column on a spreadsheet sheet that is taken off another number on a different column. There is no real pot of tax £’s that government dips into before it can spend.

Spending comes first, Taxation happens afterwards.

 

[Tony L]

Spending comes first, Taxation happens afterwards.

I have never argued otherwise. I even tried to add a time-domain to your statements to articulate this. As stated above we seem to be arguing about semantics, we are actually on the same page. To my mind whether taxation is current or (as it is) delayed on a timeline it is obvious it funds public spending. Yes, that money is taken from us after the fact, but that is still its purpose.

PS One could almost use the same argument for pensions etc, e.g. one often hear people saying they have paid in for decades to their pension scheme. Actually they haven’t, the money they paid pays for existing pensioners at that time, they are paying in on the *promise* there will be sufficient resources available to cover theirs when their time comes. There is smoke and mirrors in all this stuff!