Amazing that he wants a falling tax gap then, isn’t it?

Second, the deficit was smaller than expected this year and smaller than the economy needed. Tax drains funds out of the economy. That’s not by chance. That is its purpose. The government prints the money it needs to spend: it reclaims it through taxation. The spend stimulates demand. The tax reduces it. The net combination resulting in a fall in borrowing means that the economy was deflated by more than the government expected in the last year. The result is that we are, quite simply, worse offer as a result. And many know that.

So why does he want to increase the amount the government collects in taxes?

And he will need to do so: we know the economy is slowing already: it’s a trend that is going to get worse as the impact of Brexit pound deflation feeds though into higher UK prices.

Sigh, the net effect of a devaluation is expansionary.

13 thoughts on “Amazing that he wants a falling tax gap then, isn’t it?”

  1. “The government prints the money it needs to spend: it reclaims it through taxation.” reminds me of MMORPG economics.

    MMORPGs can have complex and subtle economies but the basic simple version is that you have gold sources (killing monsters and taking their bits) and gold sinks (paying repair bills to NPCs) and in between the gold sloshes about between the players and creates the economy. Very few MMORPGS allow for organised lending, or player controlled banks*, so basically your money supply is M0 and you tune things so that the sources are pouring money into the economy exactly as fast as the sinks are removing it, and you call it a day.


    It’s an interesting subject, but I wouldn’t use it to model real life…

    * Eve online a notable exception

  2. I might be being thick here (it has been known), but the complaint is that borrowing is less than expected, n’est pas? Surely that will either be because tax receipts are more than expected or because spending is less – so it’s one or both of these things he’s complaining about. I guess, from history, that he’s not calling for tax cuts.


  3. “The government prints the money it needs to spend: it reclaims it through taxation.”

    It is amazing how many people have been convinced by this internet meme. I have explained to Richard and also many mmt’ers at the Guardian that it simply isn’t true. But no matter how much evidence I provide, which clearly demonstrates that apart from a small overdraft the government does actually tax and borrow before it spends, they refuse to believe it. I point out that a team of people manage the government cashflow. That printing and spending is against EU law. That there simply aren’t the systems and accounting mechanisms in place that they claim. That the policies and operational procedure documents all available online clearly refute this myth. But to no avail. I think what’s happened is that they’ve taken the knowledge that the state with a fiat currency could conceivably spend first and tax later and convinced themselves that this is how it works in practice. A poor knowledge of QE then compounds and confirms their ignorance to them.

    Sadly, my persistent pointing out of provable facts has gotten me banned from both Richard’s site and the Guardian. So I can no longer give them the gift of reality.

  4. Off topic but Soapy Jo is displaying even more stupidity than usual today. I would hate to have that dick as my advocate. If I were guilty, he would get me hanged, drawn and quartered in a Vegan country. As my defence counsel

  5. ..ang on how can the net effect of an international loss of confidence always be the same. Surely if you are a simple economy that only exports beans or offers holidays it isn’t the same as a complex one like ours where exports are usually processed imports ?
    When I think of countries in whom there has been a loss of confidence or a debauched currency I do not think … yahoo look that expansion go!
    Mind you I cannot make head nor tale of your quote.The deficit is lower than expected because Carney cancelled a long promised Interest rate normalisation factored into most households at about 2%. That is a huge stimulus which seems to have gone oddly unremarked.
    When the Pre article 50 misuse of economic levers subsides our structural deficit will be revealed as a whopping great tumescent throbbing .. well basically big thing . That is why they need to make cuts now, as they well know. Good old Brexit

    PS Brexit Balls Up Part 97
    Would you like to apologise to the employees of Vauxhall ( and UBS ..and …) now or will it be later ? Good old Brexit , every ball a coconut

  6. The usual dribble from Newmaniac – he appears to pick up economic arguments from people who are rather more literate and informed before spewing them across various websites like this.

    The core themes are always the same:
    – Newmaniac and his co-religionists are cleverer than everyone else.
    – Brexit is a purely economic issue and remaining in the EU therefore would have been completely neutral.
    – Any job losses or bad news of any kind is a harbinger of doom.

  7. exports are usually processed imports

    True, but what proportion of the value of a RR jet turbine is made up of raw materials (ans. ~1%). What about pharmaceutical manufacturing? Being an advanced economy, we tend to concentrate on manufacturing items with relatively high value add.

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