Why would I compare Ritchie to Geoffrey Howe?

Probably because the experience of being critiqued by either is akin to being savaged by a dead sheep.

I normally ignore Tim Worstall. So does almost everyone on the left, and for good reason: he’s a troll cheerleader saying little of worth, offering abuse by the bucket load and encouraging all the worst traits of internet rage and hatred that now so disfigure the right’s contribution to political debate.

Ho hum.

Worstall ignores all this because unlike me he learned economics, but has clearly never thought about it. And the conventional economics to which he subscribes simply does not address these issues. So he comes to the wrong answer, as ever.

That\’s a real zinger isn\’t it? That as I\’m someone commenting upon economics who has actually learnt some economics I must be wrong.

Ho hum.

So let me come to the third argument that he makes, which is that closing the tax gap won’t in any case end austerity. His logic is that all tax paid increases austerity and therefore closing the tax gap would reduce growth.

This is deliberate misinformation by Worstall for a number of reasons. First, we’re not talking about extra taxes here. We’re talking about collecting taxes owing. That’s something very different.

Second, I’ve never suggested we collect these taxes to pay down debt. I’ve suggested we collect them to spend – as a stimulus for growth. Worstall’s claim is only right if the money is withdrawn from the economy, but I don’t suggest that. I suggest it be used to invest in the economy – and that stimulates growth by more than is spent. In that case Worstall’s either not telling the truth (which is likely) or does not understand economics (certain).

At which point understanding economics becomes rather necessary.

Fiscal stimulus is provided by the difference between what the government spends and what it collects in taxes: as is fiscal austerity of course. It is the gap rather than the amount that matters. This isn\’t baby eating neoliberalism, this is straight Keynes.

So, what Murph suggests is that we\’ll take some unpaid tax, money which is currently circulating in the economy and being stimulative, and we\’ll collect it into government coffers and then spend it out again. He has also said that this is a way to close the deficit. And yes, he really has said that even if not that it used to be pay down debt. Which is, as we all know, a very different thing, this stocks and flows thing which is so important to economics.

That is, that he\’s going to use the collected tax money to reduce the gap between what the government spends and what it collects in taxes. This is, I\’m afraid, simply fiscal contraction: austerity.

I wouldn\’t mind his parrotting of crude Keynesianism quite so much if only he could provide any evidence at all of actually understanding it.

6 thoughts on “Why would I compare Ritchie to Geoffrey Howe?”

  1. “He’s a troll cheerleader saying little of worth, offering abuse by the bucket load and encouraging all the worst traits of internet rage and hatred that now so disfigure the right’s contribution to political debate.”

    Would this be the same Ritchie who was saying only this week:

    “Never forget the Tories aren’t like us. We believe in equality. We believe in fairness. We respect each other. We want the best for others as well as ourselves.

    The Tories don’t do that. They want inequality.And to deliver that the Tories need to destroy the state. Their austerity programme is their way of doing that. They want to destroy hope. They want to deny people affordable housing. They want people to be frightened of their old age, unemployment, sickness, child care costs, and so much more. And that’s because they want people to be so frightened that they’ll do whatever the market demands at the lowest possible price.”

    So no rage or hatred there then…….

  2. And he clearly believes that by collecting money from the economy (which costs money to do), giving it to some government infrastructure to decide what to do with (which cost vast amounts of money to do), allocating it to a bunch of projects (which costs a lot of money to do), and then hiring people to do such projects (which is where the money actually gets spent).

    All the stages cost money. All of the stages are open to straightforward corruption, bureaucratic corruption, or bureaucratic incompetence.

    All of these stages are based on the simple unproven premise that the things you are choosing to do with that money are the things that most need doing.

    It’s not even like we need to try this kind of stuff. We know it doesn’t work. If it did, Brasilia would be the most thriving city in the world and was stimulated the Brazilian economy tremendously.

  3. The views on Tories makes me smile. I know a lot of Tories in the local party. Over the years I’ve met several Tory (and other party) MPs. Not one person I’ve met would be able to have the description about Tories applied to them. It is however a psychological issue, often found in countries at war, that the ‘other side’ are demonised in many ways – usually with half-truths and simple lies thrown in for good measure.

    I have to wonder if Ritchie genuinely believes what he writes/says or if its someone else’s words he’s simply repeating. Hey, can we vote to make him chancellor?

  4. Erm, not quite, Tim. Murphy isn’t suggesting that the money would be used DIRECTLY to close the deficit. He has clearly stated many times that the money should be spent on investment projects as a Keynsian stimulus – and he says it again here. He believes that the ensuing growth would increase tax revenues further, which would eventually close the deficit. You can argue about whether such spending would in fact have that effect, but the argument is at least consistent.

    Murphy’s diatribe is remarkable from a man who has many times stated that he doesn’t make ad hominem attacks. I think we should preserve it for the next time he makes that claim.

  5. Murhy’s argument is not quite as ridiculous as you seem to think. If these extra taxes on profits earned outside the UK are collected by HMRC, he reckons that most of them will be paid out of cash reserves and the company spending in the UK will decrease by less than government spending increases. This is probably true in the short run although once the companies relocate so that they only pay UK tax on UK profits, the loss of Head Office jobs will produce a recessionary effect outweighing the short-term benefit of taxing foreign earnings.

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