Let’s start the year with idiot sodding stupidity, why not?

And do remember that you don’t pay for any of that spending anyway. That spend comes to £802bn, but revenue looks like this

(revenue pie chart)

That comes to £744bn. So even if you find savings in the first chart there is no way that they will necessarily reduce your tax bill because (as I have long argued) tax does not actually fund government spending. That’s paid for by (metaphorically) printing more of these

(sterling note)

The promise to pay printed on there is fulfilled by accepting such money in settlement of your tax bill, which only exists precisely because the government spent in the first place and has to tax some, all, and on occasion even more than that spending back only because if it did not there would be inflation. Its decision on how much to tax to control inflation then leaves a surplus, balanced budget or deficit, but it does not mean tax pays for the spend: that’s paid for by the Bank of England extending the government credit against its promise to pay, in exactly the same way as all other money for spending is created.

It’s just the wondrous manner in which he moves from a particular accounting elucidation – money creation – to the more general statement – no one pays tax.

It’s still true though that we do pay tax.

GDP is everything done by everyone in the year in the economy. Government claims some 35% or so of that to be deployed as government says it will be deployed. That means that everyone has only 65% of everything done by everyone to deploy as the people doing the doing decide they’d like to.

That’s a tax. Cannot be anything else.

Now, it’s most certainly true that some amount of this government decided deployment is more than worth it. I too think that the existence – even if I quibble with certain parts of it – monopoly on military violence, or a criminal justice system, are worth more than the amount skimmed to make them happen. I’m very much less convinced by some other areas of said deployment.

But it is still true that resources are abstracted to pay for government – that’s tax being paid, the relinquishing of those real resources. Even for those items that are undoubtedly worth it, there’s still that abstraction, that tax.

But, you know, why not start off the new year with the delusions of idiot sodding stupidity?

22 comments on “Let’s start the year with idiot sodding stupidity, why not?

  1. Although I agree with you on the necessity for the military and the justice system to be part of the state apparatus, and therefore funded by some sort of taxation, I’m much less sanguine than you appear to be about whether a significant fraction of the money shovelled in the direction of either of those institutions is currently spent in the material public interest.

  2. How exactly does taxation control the inflation caused by government spending?

    If the government ‘printed’ £50bn and spent it on the Arts, how does a 2p rise in income tax, which taxes everyone, control that inflation?

  3. So does he really think that if the government stopped spending money into the economy, it would disappear? There would be no economic activity whatsoever among 65m people?

  4. I’m with Rob.

    Ask an honest lawyer or court administrator whether the justice system is being operated at even 10% efficiency and you’ll be laughed at.

    As for the armed forces, do the acronyms fubar and snafu not bear careful consideration?

  5. My first post here. There is no link so I cannot see the source Tim. I will not read anything into that. But I have lurked here long enough to guess it is the person called ‘Spud’.You say: ‘It’s just the wondrous manner in which he moves from a particular accounting elucidation – money creation – to the more general statement – no one pays tax.’But he doesn’t make that jump it seems to me Tim.Of course we pay tax each year. He does say that. But that tax is used to ‘drain’ the previous year/years guv spending, for example. Shame he didn’t use this term. It’s what it is there for!
    Guv doesn’t need the tax in advance to spend, he says. Thats all. Not stupid. Becoming common place one hopes. You know too Tim, because you call it an ‘accounting elucidation’. Which is fine. Which leads to Rob aboves question. And why I post. I hope folks here will anwser him and he can then see what is at stake and make up his own mind. Anyway, as to the body of your main point. Which Is actually uneffected by the ‘elucidation’. I completely agree 100% Everything is in what that ‘some’ should be.

  6. @Rob: or more to the point, if the State prints £50bn to give to the poor, how does taxing the rich prevent that additional expenditure causing inflation? They’re hardly in the same parts of the economy. There might be a slow down in the sales of Rolls Royces and yachts, but the sales of Stella and Lambert and Butler would be through the roof, and the makers would be cashing in.

    Its virtually guaranteed under a MMT system in a democracy the pressure would be to give free money to the special cases, and tax someone else to try and reduce inflation.

    As far as I can see a MMT system would require one tax – a consumption tax on everything, no exemptions, and it goes up and down as required. Then it takes money out of the economy in equal and proportionate measure across the board.

    The ultimate irony being MMT is monetarism on stilts – control inflation by controlling the money supply. One wonders how many people now flirting with the idea were manning the barricades in the early 80s when Mrs T was doing exactly what they now propose (only more using monetary than fiscal policy).

  7. One wonders how many people now flirting with the idea were manning the barricades in the early 80s when Mrs T …

    At best they were left in their highchairs for continually spitting their dummies out.

    Hang on a minute …

  8. @MikeW, January 2, 2018 at 3:55 pm

    Post sounds like a wah to me.

    However, if you’re serious: identity is Richard Murphy

  9. Pcar,
    Don’t know what ‘wah’ is.
    You got me there though. I have done the, ‘You are X and I claim my fiver’ thing myself. Fair enough. The war runs deep here. How about just deleting my post, if TW actually thinks that I’m a troll engaged in your ‘spud’ war?
    Jim,
    Thanks
    I was familiar with the argument you pose, have read some MMTers argue, that of course it depends who gets the new money first – banks or old farts v teenage boys, type of thing. Imagine the inflating price of porn and spliff if every teenage boy in UK was given a Guv bung? Or should that be ‘capital’ a Guv Bong? VAT thing. Now you are just scaring the horses
    😉

  10. MikeW, wecome! (from me, at least.)

    “How about just deleting my post, if TW actually thinks that I’m a troll engaged in your ‘spud’ war?”

    So far as I am aware, we don’t do that sort of thing here. If you say something people disagree with (whether trolling or not) people will just argue back. That’s how free speech is supposed to work. You need a thick skin if you plan to stick around, though, because ‘argue back’ can include quite a lot of invective, and some people will stubbornly stick to their opinions no matter what arguments or evidence you present, but ultimately it’s down to whether you’ve got a valid argument. The people worth talking to will recognise that.

    The big problem with the Murphy quote (IMHO) was the following bit:

    “there is no way that they will necessarily reduce your tax bill because (as I have long argued) tax does not actually fund government spending”

    This is like saying that the subsequent 40-years-as-a-wage-slave isn’t what funds your house purchase, or the loan repayments you make from it, it’s the initial mortgage loan itself.

    In a trivial sense, yes, the money used to purchase the house comes from the bank loan, long before you do any of the work. But taking out the loan from the bank simultaneously creates both a debit and a credit, which cancel. That’s an empty book-keeping manipulation in reality – the economic *value* that pays for the house comes from real people producing stuff other people want. The book-keeping is just a device for getting it from where it’s generated to where it’s needed. (And tax is a device for redirecting some of that effort from producing things people want to producing things that politicians think other people ought to have.)

    Murphy keeps trying to find ways to argue that the government can Spend! Spend! Spend! in unlimited amounts without any plan or need to ever pay it back. It’s not an unusual delusion, but the scary thing is that some senior people in politics appeared, at one point, to be taking him seriously.

  11. To second Niv, MikeW, your post was impossible to parse. What is your native language? Obviously it isn’t English, so I for one hesitated to comment on your bizarre post

  12. MikeW

    yes, welcome, there’s lots of fun to be had here. Tim W never links to Murphy possibly because there has never been a reciprocity agreement between them, oddly.

  13. Anyway, as to the body of your main point. Which Is actually uneffected by the ‘elucidation’. I completely agree 100% Everything is in what that ‘some’ should be.

    what does that mean?

  14. If I don’t pay tax then why does the accounting department put a before and after figure on my monthly salary notification and then pay me the lower one? I am confused.

  15. ‘word salad’, had to look it up – real diagnostic. Well I never. One half of my brain is deeply offended,but the other half is a hypochondriac, so may well run with it for weeks.
    Niv, TM Bison, civilised comments appreciated and digested.
    But I don’t think it is quite my cup of tea.
    Best MikeW

  16. @MikeW,

    “wah” – head over to Arrse (google it) and ask there

    No link as TW’s spam filter doesn’t like name.

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