Wednesday, Nov 18, 2009

One view on how deep future spending cuts might be

Telegraph: Next Government's sentence: tax rises, spending cuts and social unrest

The report, from right-leaning think tank the Policy Exchange, said that the lesson from history is that the next Government should slash its deficit with a combination of 80pc spending cuts and 20pc tax increases.

Posted by cat and canary @ 12:44 PM (921 views)
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1. cat and canary said...

some excerpts:

> Policy Exchange's chief economist, Andrew Lilico, said that if the next occupants of Downing Street hesitate even briefly, they could subject Britain to a currency crisis.

> both Labour and the Conservatives have committed to reducing the Budget "more ambitiously" from next year. But neither has committed explicitly to raising taxes, or to inflicting across-the-board spending cuts. However, the Policy Exchange study says that the lesson of history, and of every major fiscal consolidation both in the UK in the past century and recently in countries including Canada, Sweden and Germany, is that both of these measures may prove necessary

>In previous episodes of fiscal consolidation, the deficit cuts promoted rather than hindered the recovery, but almost invariably created social tension as people came to terms with the resultant austerity.

>the next government will be unlikely to avoid having to cut spending on welfare and defence and laying off public sector staff.

>In all cases studied – even Canada in the 1990s – governments were forced to raise taxes as well as cutting spending in a bid to bring their deficits under control.

>in the 1920s, as Britain faced up to its wartime debts, it was forced to cut civil service numbers by 35pc. In the early 1930s, core public sector workers including police, doctors and those in the armed services faced significant pay cuts.

Wednesday, November 18, 2009 12:49PM Report Comment
 

2. drewster said...

Social unrest is a broad term.

"... recently in countries including Canada, Sweden and Germany [......] but almost invariably created social tension as people came to terms with the resultant austerity."

Did I miss the news? How much "social tension" was there in Canada, Sweden, or Germany over the last twenty years? Even Iceland hasn't seem widespread rioting, although that's partly to do with it being such a small country (if you smash shop windows, it's probably your cousin's shop).

For a real social crisis, look at Argentina. Unemployment went up to 25% during its 1998-2002 economic crisis; and many families were struggling to put food on the table (this in a country which exports huge quantities of food). Will things get that bad in Britain? Who knows....

Wednesday, November 18, 2009 01:27PM Report Comment
 

3. This comment has been removed as it was found to be in breach of our Blog Policies.

 

4. Insanity said...

GEAB N°39 is available! Global systemic crisis – States faced with three brutal options in 2010: inflation, high taxation or default.

http://www.leap2020.eu/GEAB-N-39-is-available!-Global-systemic-crisis-States-faced-with-three-brutal-options-in-2010-inflation,-high-taxation_a3995.html

If you thought 2009 was bad wait for 2010!

Wednesday, November 18, 2009 03:34PM Report Comment
 

5. Insanity said...

Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend
By: Nadeem Walayat
http://www.marketoracle.co.uk/Article15131.html

BE UNDER NO ILLUSION - The central banks will NOT STOP MONETIZING DEBT ! Once started IT CANNOT BE STOPPED ! Forget what the Government of the Bank of England Says or Fed Chairman, Quantitative Easing is here to stay and therefore INFLATION WILL EMERGE IT IS ENIVTABLE ! INFLATION IS THE DOMINENT SCENERIO BEING PLAYED OUT NOT DEFLATION, regardless of what ever is stated today.

THERE IS NO ALTERNATIVE , INFLATION CANNOT BE AVOIDED. THERE IS NO WAY THE LIKES OF THE UK AND THE U.S. CAN SERVICE THEIR EXPLODING DEBT MOUNTAINS WITHOUT MONETIZING THE DEBT, THIS IS NOT SOMETHING THTA MIGHT HAPPEN BUT IT ACTUALLY IS HAPPENING RIGHT NOW !

For instance in the UK - first there was £75 billion might be enough, then £125 billion is DEFINETLY ENOUGH, later £175 billion NOW £200 billion, Tomorrow? The day after ? The week after ? THERE IS NO END IN SIGHT TO QUANTITATIVE EASING !

Wednesday, November 18, 2009 04:11PM Report Comment
 

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