Politics are moderating in the U.K.

Grany

Mick Lynch said if Labour gets more moderate it will disappear

Don't think so, it will be electable, and get the jobs done. And hopefully will ally with other moderate parties with the same aims, Lib Dems and Greens at least.

That makes sense.

Mick Lynch said if Labour gets more moderate it will disappear

but nothing about borrowing Maizie

Must go, but I think you are obsessed by this word. I will try and think of a replacement for you.

And you are making the same assumption in thinking that the only source of government revenue is taxation or borrowing.

I am sorry, I have only just seen this Maizie. After four weeks shut up with Covid, I seem to have a very busy week catching up (and sleeping because catching up is tiring )

I don't believe I am making that assumption, although it suits MMT supporters to assume people are as they can say they are saying something new.

We can increase the amount of money made available by the state and have always been able to. However, I do believe such increases have to be firmly anchored to the value of our economy. This belief would make me want to see investment in the areas that would grow our economy. I have a strong feeling that some of those investments would be approved by the left and some by the right. I also believe that none would be enough for extremists on either side. But balance is what I seek and I am still unsure which lot can produce that. I do not see it being the Truss style far right economists or the MMT far left ones.

I believe we already know how to run our economy. It's the politics that are the problem.

I think whatever these people are trying to prove is still a theory until it is accepted by their peers Maizie. I am not at all sure MMT is in that category.

I agree with much of what Katie says, in as much as I cannot see what is new coming from what seems to be the mainstream MMT economists.

Those on the far left, who want it to support their political thinking, appear to want to take it to extremes. This is mirrored on the far right, where reasonable economic theories are expanded to extremes to suit far-right politics. These become so much more about politics than economics that we end up with what Truss pushed us into.

Sunak is already in trouble. If I found a large, unexpected extra amount in my account, while I would worry less than if it was a negative amount, I would be very worried about why it had happened without my knowledge. I would also be concerned that, if I did not get a handle on this, it could go in the opposite direction.

Playing around with our economics is easy - both extremes are good at it. Balancing it with the needs of all is far more difficult. I would not want any extremist getting their hands on it.

It isn't a theory, Katie59, it's a fact proven by the empirical evidence set out in the research paper I posted. It isn't just bank loans to businesses that are created new money, it is actual state spending.

OTOH, your ideas about 'borrowing' are not factual.

The theory that spending comes before taxation is valid because every business that borrows capital to grow, pays tax on any profit they make. A business would also pay back the capital plus interest as well as the tax they pay.

The problem with the economy is that it has almost never paid back all the capital it has borrowed, it just borrows more year by year. The political needs of the governing party (staying in power) are being met by ever increasing public spending to keep voters happy, everything from sweeping the streets, free nursery places, universal credit and any environmental initiative you care to mention.
All because voters demand it, in theory it should pay back a return in taxation which then can be reinvested but for many decades it has not, so borrowing increases.

But when I asked So, is what you are saying that the collection of taxation, though used to pay for services, does not have to be collected before we pay for them as the Government can borrow against their arrival? You appear to agree that those you are quoting do say this.

Apologies, I should have clarified the statement I quoted from the research paper.

Once the government has spent into the economy the money has been spent; taxation doesn't contribute to the spending. All the taxation does is return to the government the money that it has spent. By taxing it back it ensures that there isn't excess money in the economy to drive inflation. (That was a prime cause of inflation in the Weimar Republic, lots of money creation, but insufficient taxation to claw it back). The expectation that the money will mostly eventually be returned to the state should reassure those who need reassurance (such as the financial markets) that the initial money creation/spending won't be inflationary.

It also stands to reason (to my reason, anyway) that the more money the state creates, the more it will get back via taxation if the state's taxation policies are carefully managed.

Taxation on individuals doesn't have to be increased to pay for anything because the original injection of money by the state has already paid for it, the 'tax take' increases solely because there is more money available to be taxed.

Of course, it isn't simply a case of 'issue the money, tax it all back' because not everyone spends all the money they have received as a result of the state spending the created money. Some of it is saved for later spending (when it will be taxed) and some of it is just saved (hoarded?) to accumulate wealth for its own sake. Which is why I have argued that withholding money from the poorer members of the state, like the refusal to pay the nurses sufficient to compensate for inflation, (who would spend it back into the economy) while allowing to wealthy to accumulate even more wealth, that they don't spend or invest into the economy, is a shortsighted policy.

Nor the DUP

The ERG are not liking this 'moderating' lark, are they?

Well, that comes as a surprise to me, because I have seen myriad posts on GNet which assume that the government funds its spending with revenue from taxation. Maizie

But when I asked So, is what you are saying that the collection of taxation, though used to pay for services, does not have to be collected before we pay for them as the Government can borrow against their arrival? You appear to agree that those you are quoting do say this.

I don't think many/any posters have suggested any tax, other than for pensions, is hypothecated. If taxation doesn't pay for state run services what do they/you suggest it is used for?

MaizieD

P.S.
If you are pulling back from the "we can borrow as much as we like whatever the state of the economy and whatever we spend it on" scenario, I don't see where it differs.

I am not 'pulling back' from something I have never claimed.

That clarifications certainly helps.

P.S.
If you are pulling back from the "we can borrow as much as we like whatever the state of the economy and whatever we spend it on" scenario, I don't see where it differs.

I am not 'pulling back' from something I have never claimed.

I'm not sure it matters who is saying it Maizie. The reason I asked was that I believe that this is how most people think governments already work.

Well, that comes as a surprise to me, because I have seen myriad posts on GNet which assume that the government funds its spending with revenue from taxation.

I posted the academic paper in response to this, from ENO on this thread:

Fact: if you think the government tardy in the processing of asylum applications then be willing to pay more tax.

That doesn't sound to me like someone who believes that the government spends before it taxes. It sounds to me like someone who believes that the government has to up its tax revenue before it can spend. It is just an example of many similar posts.

We know that out of the tax already available, out of managed borrowing, or a mixture of both, such a scheme, once promised, will be started.

And you are making the same assumption in thinking that the only source of government revenue is taxation or borrowing.

You must have missed the extract from the paper that I highlighted

The CF, we find, provides a line of sovereign credit-money to the state itself, backed by the state’s power to raise future tax revenues. Government ‘spending’ should then be understood as a form of money creation.

Yes, ' backed by the states's power to raise future tax revenues', but nothing about borrowing. Because the money initially spent is neither tax revenue or borrowing; it is newly created money. When the government, over the last decade, authorised the Bank of England to raise some £900billion to buy bonds it wasn't anticipating a £900billion injection of future tax revenue. It was technically 'borrowing', because bond are an instrument used for 'borrowing money from investors and institutions, but as it was 'borrowing' from itself it was under no obligation to repay itself. And the money the BoE used to buy those bonds was newly created money.(As all bank lending is).

What I would guess that most people also believe is that we cannot borrow hugely more than the economy can stand or we get the Liz Truss effect.

£900billion of QE demonstrates that the state can 'borrow' from itself (create money) with no adverse consequences. It wasn't inflationary, nor did it spook the markets. Current inflation has nothing to do with QE.

It is the ability of a country with a sovereign currency to create its own money that you are missing in your attempt to say that you knew all along about how a government spends. Your post just demonstrates that you still will not accept this fact and that you don't know about government spending.

MaizieD

I'm not saying it, DaisyAnne. The guys who did the research are saying it. They're the ones who have looked at the whole subject in depth.

I'm not sure it matters who is saying it Maizie. The reason I asked was that I believe that this is how most people think governments already work.

Very few will assume that we have to wait until the Childcare Tax pot has filled up before we start any promised scheme for free childcare. We know that out of the tax already available, out of managed borrowing, or a mixture of both, such a scheme, once promised, will be started. We know that any tax attached in a speech to a specific spend, has not been hypothecated, so will just go into the big barrel of tax money. That has not changed.

What I would guess that most people also believe is that we cannot borrow hugely more than the economy can stand or we get the Liz Truss effect.

I can't see any difference between this and what has always happened. Some governments do it well, some badly. Some are said to have done it well when they have done it badly. Some are said to have done it badly when they have done it well. But that is politics, not economics. If you are pulling back from the "we can borrow as much as we like whatever the state of the economy and whatever we spend it on" scenario, I don't see where it differs.

I'm not saying it, DaisyAnne. The guys who did the research are saying it. They're the ones who have looked at the whole subject in depth.

MaizieD

Let's put it another way. The government doesn't have to tax before it can spend. The Bank of England is by law (1866 Exchequer & Audits Act) required to pay any monies authorised by Parliament. This is not in any way dependent on revenue from taxation or any other source (taxation not being the only source of state revenue)
This means that the state is free to spend whatever it needs on whatever it wants to do.

I'll post a link to my source in my next post. It's in Section 3 of the paper.

So, is what you are saying that the collection of taxation, though used to pay for services, does not have to be collected before we pay for them as the Government can borrow against their arrival?

www.ucl.ac.uk/bartlett/public-purpose/sites/bartlett_public_purpose/files/the_self-financing_state_an_institutional_analysis_of_government_expenditure_revenue_collection_and_debt_issuance_operations_in_the_united_kingdom.pdf

The working link

I suggest that you take it up with the people who have done the research and published the paper. not me DaisyAnne

The analysis is based on an extensive review of current and historical primary legislation, official publications from public authorities including HM Treasury, the Debt Management Office, Her Majesty’s Revenue & Customs (HMRC), the Bank of England (BoE) and other relevant institutions, additional pertinent literature describing the historical evolution of the system, and requests made to the above-mentioned departments under the Freedom of Information (FoI) Act 2000 (Berkeley et al. 2021)

In contrast to previous accounts of the UK state expenditure process (Hills and Fellowes 1932; Ryan-Collins et al. 2012; Pantelopoulos and Watts 2021), we pay particular attention to the role of the Consolidated Fund (CF) as the core legal and accounting construction from which all expenditure and revenue activity is ultimately initiated. The CF, we find, provides a line of sovereign credit-money to the state itself, backed by the state’s power to raise future tax revenues. Government ‘spending’ should then be understood as a form of money creation. This contrasts with the commonly understood idea that government spending is financed through taxation or borrowing from the private sector or via central bank-initiated money creation. Furthermore, we show that it is the UK Parliament rather than the central bank or ministry of finance that governs the CF and thus authorises spending, with the BoE automatically crediting government accounts when spending takes place.

/www.ucl.ac.uk/bartlett/public-purpose/sites/bartlett_public_purpose/files/the_self-financing_state_an_institutional_analysis_of_government_expenditure_revenue_collection_and_debt_issuance_operations_in_the_united_kingdom.pdf

ExperiencedNotOld

MaizieD

ExperiencedNotOld

Fact: if you think the government tardy in the processing of asylum applications then be willing to pay more tax. It’s work extra to budget for running the UK.
And that’s not the Tories fault!

Taxation doesn't fund spending, ENO.

Shortage of staff and failure to recruit more are political choices, not a shortage of money.

Taxation most certainly funds the civil service. To work, they spend public monies - and where does that come from? I am a civil servant and am very aware of the need for value when spending money collected from the public purse.

Good luck with that view, ExperiencedNotOld.

Let's put it another way. The government doesn't have to tax before it can spend. The Bank of England is by law (1866 Exchequer & Audits Act) required to pay any monies authorised by Parliament. This is not in any way dependent on revenue from taxation or any other source (taxation not being the only source of state revenue)
This means that the state is free to spend whatever it needs on whatever it wants to do.

I'll post a link to my source in my next post. It's in Section 3 of the paper.

MaizieD

ExperiencedNotOld

Fact: if you think the government tardy in the processing of asylum applications then be willing to pay more tax. It’s work extra to budget for running the UK.
And that’s not the Tories fault!

Taxation doesn't fund spending, ENO.

Shortage of staff and failure to recruit more are political choices, not a shortage of money.

Taxation most certainly funds the civil service. To work, they spend public monies - and where does that come from? I am a civil servant and am very aware of the need for value when spending money collected from the public purse.

I so hope that it is true, but even if we are more moderate and want to vote LibDem, the FPTP electoral system always works against us.