One, among the many, problems that blemish Richard Murphy\’s suggestions for how he ought to rule the world is that he just doesn\’t understand the simple basics of the subject, economics, that he claims to be expert in.
So, we have this today:
The Prime Minister said yesterday that he could not risk sending between £20 billion and £40 billion on boosting the economy, creating jobs, building social housing, repairing our schools or anything else for fear of increasing interest rates.
OK, so we\’re talking about a little fiscal expansion through infrastructure spending. Could be a good idea, could be a bad one, let\’s leave that aside. But it is at least a respectable idea. There\’s a logic to it, a theory backing it up and so on.
So, now we turn to how Ritchie thinks such fiscal expansion should be financed:
First close the tax gap.
At which point the buffoonery becomes apparent.
No, not the closing of the tax gap (for the moment, leave aside all of his wibble about it). Collecting taxes that are due is not a, per se, bad idea. There might be limits as to how sensible it is to pursue everyone for every last penny, diminishing returns and all that, but the basic principle that people should pay the taxes the law says they should pay seems fair enough.
So neither of these things is, on their own, entirely risible. The combination of the two is.
For increasing the tax take is of course fiscally contractionary. No, it doesn\’t matter whether they put up the rates at which tax is charged and thus collect more or whether they collect more of what is actually due: collecting more tax is fiscally contractionary.
So, what Murphy is actually suggesting is that we should be fiscally expansionary by being fiscally contractionary.
Which is of course insane.
And the insanity comes from the fact that he knows diddley squat of the subject under discussion: economics.