“Rules must be put in place to curb excessive borrowing in times when there is no recession or ongoing war.”
The proper “rule” is that deficit should not exceed the value of expenditure that meets the NPV>0 criterion where the V is calculated at marginal costs inclusive externalities. Since marginal costs are less than market prices in recession when people, machines and real estate is less than fully employed and discount rates are lower, this rule allows higher deficits during recession as if fiscal policy was doing “Keynesian stimulus.”
1)monetary policy works best in tandem with fiscal
2) Personal taxes should be more progressive
3) I'm not sure if I'm sold for the lower/no corporate tax higher personal tax tied with capital gains as income. I see how they work in tandem but there are many ways to achieve the same results. So I'm with you in theory perhaps not in method
4) Tighten up all loopholes, evasion, unnecessary credits, subsidies etc....
5) vat
- Transfers of consumption to people in time and circumstance of special need – advanced age, illness, disability/special needs, unemployment, child rearing years -- should be financed with a VAT, replacing the wage tax- Your VAT idea is really intriguing.
In tandem, yes, but it is monetary policy that has to call the macroeconomic shots, if for no other reason that its reaction speed can be much more rapid. I practice I think the Fed is NOT reactive enough, not willing to stat and stop, but still it is more than fiscal policy can do.
This is relatively tangential to this post, but I'll probably forget to ask it if I wait, so here goes:
Why did Brexit go so badly for Britain? My (casual armchair observer) theory is that E.U. works because it's a common market and funded by a VAT. There is obviously plenty of onerous regulations in the European economy, but I suspect the benefits of "free" trade and less industry-specific rent-seeking to massively outweigh the costs associated with renegotiating trade deals. Similarly, a VAT seems like the obvious way to tax goods and services that cross borders (and should be used more in general). Was there a theoretically competent government which would have made it successful, or was it obviously foolish from the start?
Thanks for the confidence. First let me say I don't see Brexit failure being much relates to the things I write about. There is certainly something bad in static equilibrium terms about creating obstacles to trade with your closest trading partners, but much as I'd "like" to, I can't quite believe that is is. (Maybe the point is that being willing to make that mistake was a signal too economic actors that policy would be unstable and maybe bad on average. Did Brexit lead to low savings and investment or could/would that have happened anyway? And terrible land use policies long antedate Brexit)
Yes the VAT is easy to integrate with taxing consumption of goods the same wherever they are produced.
Appreciate the response(s)! I could see how the increased flexibility and ability to negotiate freely with America would be a potentially huge benefit (but geography would always favor Canada/Mexico from the US perspective, so I don't think a reasonable party would have proposed it).
But your comment also made me ponder whether Brexit itself didn't "cause" Britain's current economic troubles, so much as expose the problems of trying to get economic growth while preventing people from actually building anything.
UK with better land use regulation and Brexit might be better than No Brexit and status quo land use regulation. But of course the are in no way alternatives.
“Rules must be put in place to curb excessive borrowing in times when there is no recession or ongoing war.”
The proper “rule” is that deficit should not exceed the value of expenditure that meets the NPV>0 criterion where the V is calculated at marginal costs inclusive externalities. Since marginal costs are less than market prices in recession when people, machines and real estate is less than fully employed and discount rates are lower, this rule allows higher deficits during recession as if fiscal policy was doing “Keynesian stimulus.”
https://thomaslhutcheson.substack.com/p/fiscal-policy-and-everything-else
I learned a lot - My takehomes
1)monetary policy works best in tandem with fiscal
2) Personal taxes should be more progressive
3) I'm not sure if I'm sold for the lower/no corporate tax higher personal tax tied with capital gains as income. I see how they work in tandem but there are many ways to achieve the same results. So I'm with you in theory perhaps not in method
4) Tighten up all loopholes, evasion, unnecessary credits, subsidies etc....
5) vat
- Transfers of consumption to people in time and circumstance of special need – advanced age, illness, disability/special needs, unemployment, child rearing years -- should be financed with a VAT, replacing the wage tax- Your VAT idea is really intriguing.
In tandem, yes, but it is monetary policy that has to call the macroeconomic shots, if for no other reason that its reaction speed can be much more rapid. I practice I think the Fed is NOT reactive enough, not willing to stat and stop, but still it is more than fiscal policy can do.
The way fiscal policy work in tandem with monetary policy is for deficits =< Sum(activities
with NPV>0
This is relatively tangential to this post, but I'll probably forget to ask it if I wait, so here goes:
Why did Brexit go so badly for Britain? My (casual armchair observer) theory is that E.U. works because it's a common market and funded by a VAT. There is obviously plenty of onerous regulations in the European economy, but I suspect the benefits of "free" trade and less industry-specific rent-seeking to massively outweigh the costs associated with renegotiating trade deals. Similarly, a VAT seems like the obvious way to tax goods and services that cross borders (and should be used more in general). Was there a theoretically competent government which would have made it successful, or was it obviously foolish from the start?
Thanks for the confidence. First let me say I don't see Brexit failure being much relates to the things I write about. There is certainly something bad in static equilibrium terms about creating obstacles to trade with your closest trading partners, but much as I'd "like" to, I can't quite believe that is is. (Maybe the point is that being willing to make that mistake was a signal too economic actors that policy would be unstable and maybe bad on average. Did Brexit lead to low savings and investment or could/would that have happened anyway? And terrible land use policies long antedate Brexit)
Yes the VAT is easy to integrate with taxing consumption of goods the same wherever they are produced.
I just read something else that sounds right. Brexit supporters were expecting rapidly to get a Free Trade Agreement with the US.
Appreciate the response(s)! I could see how the increased flexibility and ability to negotiate freely with America would be a potentially huge benefit (but geography would always favor Canada/Mexico from the US perspective, so I don't think a reasonable party would have proposed it).
But your comment also made me ponder whether Brexit itself didn't "cause" Britain's current economic troubles, so much as expose the problems of trying to get economic growth while preventing people from actually building anything.
UK with better land use regulation and Brexit might be better than No Brexit and status quo land use regulation. But of course the are in no way alternatives.