We Just Got The Ultimate Proof That Austerity Has Failed In The UK
Did you, Business Insider? Did you?
I'm not a big fan of common sense (or a priori reasoning, to use the fancy Austrian Economics terms) when it flies in the face of evidence, but I'll make an exception in this case: you can't, ultimately, have to borrow more if you're really spending less. Yes, I know, General Theory, demand, tax revenue, whatever. No offense, Keynesians.
So either the UK is not really on an austerity program at all, or it is but the effect is delayed. Both make some sense (governments lie, and economic transitions are always initially painful - ask the Russians).
2 comments:
Why can't you have to borrow more money if you are spending less? All that means is that some spending increases income.
While you can't quite compare a personal budget to a national budget, I could cut my spending significantly by getting rid of my car - no gas costs, no insurance, no maintenance. However, I need my car to get to work any form or reasonable work, so doing so would greatly reduce or even eliminate my income. As a result, my borrowing would go up substantially, at least until I maxed out my credit cards.
I don't see why the same can't be true of government spending. To use an obvious example, the IRS is not a major part of the US's budget, but if you eliminated the IRS, the US's income would go down dramatically. The same is probably true of the judiciary, but for less obvious reasons
This is true, I'll definitely grant you could reduce income by cutting the tax-collectors.
Reducing income by cutting spending on anything else, however, is trickier. If we accept for the sake of argument that public schools, family planning, head start type programs, and such work it could definitely be done over the long term. But for the short term, like this, the only way I can see to reduce income by reducing spending is if unemployment insurance beneficiaries are killing themselves when their benefits are reduced, rather than going back to work.
That's extremely flippant, and I'm certainly open to other examples, especially since I don't know the British system.
And of course the bottom line, to borrow your personal spending analogy, is that you don't try to pay university tuition if you can't make the rent, even if it would ordinarily be a good investment.
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