Inflation cannot result. Presuming the eventual deal is no more than 10% (and I am being an optimist when suggesting that) there will be no wage spiral. What is more, the NHS does not charge for its services: there can be no price impact as a consequence. In that case, most of the government’s argument falls away.
A wage price spiral is not the only possible cause of inflation. Even MMT says that money printing not back by appropriate taxation to claw back the extra money results in inflation. And if we claw the money back through VAT – say, and why not, after all all do gain from the NHS so why shouldn’t all pay for it? – then that in itself will be inflationary for a rise in VAT is.
Man’s incompetent.
Paying the doctors would not only solve an NHS pay dispute, it might well boost the economy as well
The boost to the economy?
The research focused on the fiscal multiplier effects of medical spending. As the authors neatly summarised the multiplier:
The fiscal multiplier is an estimate of the effect of government spending on economic growth. A multiplier greater than 1 corresponds to a positive growth stimulus (returning more than $1 for each dollar invested), whereas a multiplier less than one reflects a net loss from spending.
To summarise the findings, over a range of scenarios the authors found that this was always the case.
Someone, please, beat him around the head with a basic Econ 101 textbook. The greater the multiplier the higher the inflationary effect of the extra spending.
Sigh.
Wouldn’t not paying them more help with the Gini coefficient?
What is more, the NHS does not charge for its services: there can be no price impact as a consequence.
What?
All these glorious, selfless doctors and nurses work for free?
The same selfless doctors who are just in it too help people who are about to go on strike because they aren’t paid enough?
Just because it isn’t paid for at point of delivery, doesn’t make it free…
The man’s a moron. It still has to be paid for from taxes, higher taxes. Which means less to spend elsewhere, so people will demand higher wages… Etc
Anyone ever seen one of these elusive multipliers in the wild? Shot it & mounted its head as a trophy? Was it fish fowl or beast?
Even MMT says that money printing not back by appropriate taxation to claw back the extra money results in inflation.
No, taxation is about releasing resources. MMT is not about Sound Finance but rather Abba Lerner’s Functional Finance. This from Stephanie Kelton:
BUT (!!!!) you have to be sure you’re taking money away from people who would otherwise spend it!! Let me give you an extreme hypothetical to make the point — suppose you raise taxes on Elon M, Jeff B, and Bill G. Just the three of them. How much consumption spending do you think you will discourage? I strongly suspect the answer is something close to 0.0001 percent. For tax increases to have the desired impact, they have to hit people with a reasonably high “marginal propensity to spend.” Biden has pledged not to raise taxes by a single penny on anyone making less than $400,000/yr. Raising taxes on people making, say, half-a-million will discourage some spending. But the farther UP the income/wealth ladder you climb, the less of an impact it will have.
So MMT says tax the rich to limit their political power but you have to tax the middle class to release resources.
Matthew Yglesias makes the same point this way:
I do see the view, from a standpoint of abstract cosmic justice, that it’s annoying to see someone like Elon Musk or Jeff Bezos get so rich without contributing more to the Treasury. So there is a case for taxing wealth or unrealized capital gains or at a minimum changing the stepped-up basis rule. But fundamentally, I do think there are profound reasons why things like VAT and payroll taxes are the workhorses of European welfare states. Musk is not employing 10,000 butlers who can be taxed away and turned into preschool teachers. Inducing him to liquidate financial assets and fork over the proceeds does not generate any real resources that are available for new use. What a Nordic-style tax system does is broadly constrain consumption in order to free up resources for more extensive consumption of health, education, and other social goods.
“So MMT says tax the rich to limit their political power ”
No it doesn’t, thats just your personal animosity to the wealthy creeping in. MMT states that that in order to control inflation you need to raise taxes. And as you rightly point out that means taxing the masses who spend most of their income, in order to reduce their consumption. Targeting the wealthy with higher taxes in order to control inflation won’t work. So higher taxes on the wealthy have nothing to do with MMT, just envy.