Dear Confused British Public.

You confuse me more. If you had simply said “tax the richest 10% by 20% and we will all[*] be happy” then I would have understood the point you were making. But you had to give that bar chart from Nadeem Walayat and so I had to go back to where he first published it where I found that the red bars are just his opinion without any evidence other than that is his opinion. Apparently Walayat’s opinion is that the Conservative government will change tack in 2013 “the Government will abandon its deficit cutting austerity programme during 2013 so as to maximise the the potential for an election win in May 2015″ through tax cuts. Well fine, that his opinion.

Please don’t try and confuse me more, I am still trying to work out whether the “structural deficit” is a real thing, or whether it is a theoretical figure that no one can agree upon but was publicised simply to make Osborne look as if he knows what he is talking about.

[*] well apparently 74% of us would be, clearly 10% would be against it and the other 16% are presumably still confused

Is “the Left” actually advocating this policy or just Greg Philo? If it were, it would richly deserve the contempt of “the public” because it is entirely daft.

Much of the wealth of the wealthiest is indeed held in property and “dead”. But, if you want to tax that money, you need to value a great many properties. Then, many people who own an expensive house need either to sell it to pay the tax or to take out a mortgage. If they are old (many people who own big houses are old) they may not be able to get that mortgage and may be unable to service it even if they did. Don’t forget that, for people who have lived in their home for 20 years or so, the tax will be more than they paid for the house when they bought it. Let’s say that only 10% of all those affected by the tax have to sell up – that would be of the order of 200,000 households and they would be concentrated at the less wealthy end of the 10%. They would be the people near the threshold – who had friends just a little bit less well off than them, who were entirely unaffected. Imagine their seething, incandescent anger and their feeling towards “the Left”

Of course, not all of the wealth of the richest 10% is held in property. Some of it is held in shares. Imagine that the richest 10% of the population all dump a big chunk of their shares at the same time. This will mean that there are more buyers than sellers – bad news for pension funds, cash bonanza for speculators. Will this be good for the stock market? Will this be good for the companies whose shares get dumped?

For others, and, particularly, those approaching retirement, their wealth mostly takes the form of their pension fund. How do you think that people will react to having 20% of their savings for their retirement expropriated? (Especially in tandem with the slump in the value of their pension fund caused by the sell off noted above) How do you think the children, extended families and friends of those affected will react to those retirement savings been grabbed? Not by joining the Labour party I venture to suggest.

This is, without exception the silliest idea I have seen come out of “the left” for some time. If I were a Tory spin doctor I would be putting some real effort into seeing whether I could link anyone more influential than Mr Philo with this idea and then I would be explaining precisely what it would mean to, I don’t know, a 55 year old GP in a marginal area like the South Midlands, an entrepreneur who had poured all his money into starting a company that employed 20 people and now had to raise 20% of its market cap at a time when the company had been denied credit by the banks – that sort of thing.

May I point out that Guido Fawkes has been licking his lips for some time at the prospect of ideas like this consigning Labour to electoral irrelevance for a generation

It was a stupid article, outlining a stupid idea, from a stupid person. I don’t think it is fair to tar the entire ‘left’ with it.

Richard Blogger,

Hello,

Yes the graph is a bit crap, quite crap actually, but it was simply used for illustrative purposes to expose how stupid a super tax to cover one years deficit was. I in no way endorse Nadeem Walayat.

The Left are not proposing this idea, Greg Philo is, but some sections of the left, which had hitherto been proposing deficit spending had endorsed this massively fiscally contractionary plan. I think that disconnect should be glaringly obvious, and I was disappointed that a bit of opportunistic rich bashing took precedence over consistency.

@ 1. Richard Blogger

I wouldn’t pay much attention to Nadeem Walayat he is one of those analysts who plucks figures out of the air to get the data to say what they want it to say. The Investors Chronicle are quite right about the structural deficit. Any time you hear anyone putting forward a hard number for the structural deficit you can be sure they are guessing. It is impossible to know the accurate number until the economy was back operating at full output and GDP growth had returned to a long-term trend.

The coalition budget plans are front-loaded with tax rises in the early years and severe spending cuts for later years. A rather stupid way to balance the budget over the course of the parliament. He might be right that they will change tack around 2013, but the VAT rise is an indication that they will not change spending plans but plan to have a 15 billion tax giveaway before the next election. There was no need for the VAT rise to close the fiscal deficit even if they were determined to close it before the next election. The VAT rise is there to finance a giveaway and at the same time close the deficit.

Greg Philo is, but some sections of the left, which had hitherto been proposing deficit spending had endorsed this massively fiscally contractionary plan. I think that disconnect should be glaringly obvious, and I was disappointed that a bit of opportunistic rich bashing took precedence over consistency.

Its not “massively fiscally contractionary”. Quite the opposite it would actually serve to reinflate the economy by recycling dead money tied up in property back into the economy. The fact that you do not realise this and also appear to think that Tim Worstall is someone arguing from the left suggest to me that you really don’t know what you are talking about.

bubby, of course Tim W is not on the left, but he is someone who also noticed that this would be fiscally contractionary.

Some of that wealth might be sitting there, some of it will be invested in businesses etc.

I don’t see how Philo’s policy would boost demand and take up the slack in the economy, in fact I see it doing the opposite.

As I understood the idea, it was to pay off the /debt/, not the deficit; and the resultant decrease in interest payments would cause a reduction in the deficit by however much Britain Plc’s interest payments on that debt are.

Further, the money wouldn’t actually be taken away from the people being ‘taxed’, but rather, the debt would be split up among that richest set of people for them to pay the interest on until maturation, at which point they’d have to pay – 10 years into the future or so.

I happen to think it’s a supremely bad idea – people get government bonds because (generally speaking) the government can be trusted not to default on such things, whereas private citizens can’t – but let’s at least pan it on what it is, rather than pretending it’s something else and panning /that/.

I do find it amazing that this new “age of austerity” has begun with the wealthiest in society increasing their wealth significantly – how did that come about? – and the idea that they should pay some of it towards getting britain out of its current financial hole doesn’t seem /that/ ludicrous. I mean, if they were american perhaps they’d put the vast majority of it into a charitable fund or some such. Who knows.

I don’t see how Philo’s policy would boost demand and take up the slack in the economy, in fact I see it doing the opposite.

If the money says on servives for the poor, or you reduce taxes on the poor by increasing taxes on the rich, then consumption rises because poor ppl spend a greater percentage of their money on consumption.

“As I understood the idea, it was to pay off the /debt/, not the deficit; and the resultant decrease in interest payments would cause a reduction in the deficit by however much Britain Plc’s interest payments on that debt are.”

Interest payments are currently a smaller percentage of GDP than in the 80s or 90s, if his idea is to pay off debt than this is a supremely stupid idea.

“If the money says on servives for the poor, or you reduce taxes on the poor by increasing taxes on the rich, then consumption rises because poor ppl spend a greater percentage of their money on consumption.”

True the poor have a prospensity to spend even temporary income increases, the wealthy do not. If this was just redistribution with the deficit being left untouched then I think it would have positive effects, but a shift in consumption patterns is not going to make up for a fiscal contraction of 10% of Government outlays.

I still think its a stupid idea and I don’t like being on the same side as Tim Worstall.

Always remember, kids. The Left is a monolithic block of precious academic types who bicker amongst themselves. The Right is the default choice of the majority of humankind at all points and at all times, and this is why The Right is allowed to have incomprehensible ideas and internal disagreements but The Left can never do that or the well meaning but stupid British Public will have no choice but to go for their default, nearly hard-wired position of voting Tory.

That was the point of this article, right?

11 But what was the point of your post?

That “look, some people on the Left disagree with other people on the Left, isn’t that problematic?” is veering close to concern trolling, and has certainly crossed over the border of pointlessville.

Also, graphs aside (The British Public pays attention to graphs? OK, w/evs), “quickly reducing the deficit is harmful if we do it by slashing public spending, but not if we do it by targeting taxation at the incredibly wealthy” isn’t actually a confusing or contradictory position. Deficits qua deficits are far more important to economic theory-mongers than they are to the hypothetical British Public writing this letter. The British Public cares about employment and provision of public services. These aren’t unrelated to deficits and state finances, but it’s a misjudgement to imagine the British Public therefore cares more about deficits than jobs.

@McDuff (11)

Well ‘ang about. I thought the point of this article was that it was a debate within the left, and probably one worth having if we are to combat the bastards in power. We don’t want to be useful idiots making the right’s point for them which we risk doing if we use the wrong [or uneconomically viable] arguments. I personally am following this debate with interest being not too hot on the science of capitalism.

@15

I’d shorterise this post as follows.

“Dear The Left, first you said this one thing, then you said this other thing, and it’s very confusing.”

That’s a substantively different message from “I want to raise a number of technical objections to Greg Philio’s suggested plan for tackling the deficit in the Guardian.” Even if the final third of the post got round to that point, why was it necessary to have all that guff about “The Left” being “untrustworthy” in there?