“If they instead put it up to say 7k with promises of increases in future years, then the measures that they’ve announced balance.”
Of course if they do that, it may still impact on current spending in the economy. If people are confident of a further tax cut in a years time then they’ll be a little freer with the purse strings now, boosting demand and hopefully boosting growth, making the cut more affordable. Best case scenario, but could happen i suppose.
That’s Ricardian Equivalence. And if you believe in Ricardian Equivalence then you don’t believe that fiscal expansion can ever work. For if we borrow to spend now then everyone notes that taxes will have to rise in future to pay for the borrowing and thus the spending of that borrowing has no effect as everyone saves it.
If people spend now in anticipation of tax cuts then they’ll save now in anticipation of tax rises….meaning that you’ve just entirely disproved the central assertion of Keynesian economics.