Can somebody help me here.
ECON101 tells you Spending and TAXATION are important to fiscal policy. It is allied to the Structural Deficit ( or cyclical adjusted budget deficit). It is the change in the structural deficit that influences economic activity.
Why are people all talking about spending and ignoring taxation. When you do you find both the overall and the structural deficit are less than 1% and falling albeit slowly ( too slowly).
Now compare that to the USA where both are over 5%. Why is not inflation ( and therefore interest rates) going through the roof there?
One reason could be that our speed limit is smaller however it would only explain it a little.
Now I am not saying fiscal policy is right. At worst the budget should be balanced. What I am saying is that it appears everyone appears to have forgotten about taxation. If they did then the spending probleem is plainly exagerated.
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