Taxes Suck Demand Out of the Economy

Alistair Darling, Ed Balls and Gordon Brown claim that the Tories will take money out of the economy by cutting government spending, the Tories skirt round the issue by saying they will actually cut waste and undo the government’s proposed N.I. tax hike because it is a tax on jobs. The Tories have balked at directly crossing the Brown/Balls dividing line on tax and spend by directly taking on the idea that somehow government spending is better than the private spending that taxes reduce.  They are still advertising a vote-winning anti-tax message, but they are unwilling to take the argument further that lower taxes stimulate higher economic growth.  How different it is in the U.S. where even Obama ran and won on a tax-cutting platform.  Obama promised the middle-classes a tax break in a budget deficit environment little different to that faced the UK.

The Tory message is no new taxes and a slower increase in debt.  If a candidate in America suggested (as Brown and  Balls do) that raising taxes for the government to spend would support the economy, he would be laughed at, Obama during his presidential campaign said “The last thing you want to do is raise taxes in the middle of a recession because that would just suck up more demand out of the economy and put businesses in a further hole.” If only the truth of that was as recognised across the political spectrum in Britain.


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