My alternative solution to higher tax and spending cuts. The article below was published at morganist economics. https://morganisteconomics.blogspot.com/2021/09/beyond-budget-outgrow-government-debt.html Copyright © 2021 Peter James Rhys Morgan. Beyond the Budget - 'Outgrow' the government debt rather than 'Repay' it. By Peter Morgan. 15:10 07/09/2021. Rising discontent with the Chancellor of the Exchequer's plans to increase taxation have led to disaccord within the Conservative Party. The increase in National Insurance Contribution rates has led to the most vociferous disagreement between the backbenchers and the cabinet, which is turning into a campaign to prevent its implementation. However the whole debatecould be avoided by finding an alternative method of funding the Prime Minister's ambitions! Proposed solutions to balance the budget have included taxation increases and spending cuts, which has ignored a massive aspect of macroeconomics. Economic growth can be expanded to provide a more buoyant free market economy, a greater rate of taxation revenue, decreased unemployment and a higher level of GDP. If economic growth is sustained for long periods it could 'Shrink' the government debt as a percentage of GDP, effectively 'Outgrowing' the debt. Outgrowing the government debt prevents the need to increase taxation or introduce spending cuts. As long as economic growth is achieved continuously it can gradually reduce the public debt as a percentage of GDP, avoiding the need to implement the extremely hard policies the Chancellor of the Exchequer the Rt Hon Rishi Sunak MP is proposing. The current balancing strategy assumes a stagnant economy with fixed budgets, alternatively growth can be created. Alternative economic options are available to the Chancellor of the Exchequer through a new strategy embracing economic growth. Presenting two directions the Treasury can pursue in an effort to deal with the increasing government debt. The first option is to 'Balance' the Budget and the second option is to 'Outgrow' the government debt proportionately. The consequences of the 'Balance' strategy are immense and could be inimical to the long term macro economy. Slashing government spending could be illegal if core services are not provided and taxation increases could damage the functioning of the free market economy. The advantages of using the 'Outgrow' strategy include a stronger free market economy, greater taxation revenue and a larger overall economy. The problem with the 'Outgrow' strategy is the limitation to generate further economic growth, although this can be solved through the use of new economic tools. Repayment of the government debt becomes unnecessary if growth is achieved as the amount of debt dwindles as a percentage of GDP over time. Government debt return payments can be minimised by achieving the inflation target and maintaining a low base rate of interest. Using superior economic control tools and new macroeconomic techniques can provide the desired boost in economic growth the economy has been denied, as a consequence of the lockdown. Improving economic policy is possible through a movement in strategy from sluggish budget balancing to a greater rate of sustained economic growth. Advancements in macroeconomics can provide the means to enable the attainment of a higher economic growth target. Changing from the Chancellor's painful 'Balance' economic strategy to the kinder 'Outgrow' economic strategy, could remedy many of the economic problems the nation has encountered amicably.
%% Several ways to do that, wisely based on last 4,000-5,000 years of history. A related example follows. All these local banks[USA] give away ink pens. Sure\ its a short term loss for them, but not much out of a years profits or 10 years profits. They have increased fees, another way to do that, but that's a good way to lose market share. I know UK is a bit different, but the math is the same , as far as principle. Churchill Mortgage never depended on low rates to win market share or balance a budget/Dave Ramsey+ good service still helps them........ .......................................................................
There is great precedent for outgrowing debt. Here in the US we did this precisely after WWII. A study of our debt reduction will show that public investment in things like transportation and development of rural areas through bringing in things like electricity and water infrastructure opened up a great deal of free market growth. Sort of if you build it they will come strategy. I will caution that you will never deregulate yourself out of debt. History shows reducing too much regulation will lead to recession and only increase debt. There is no magic bullet, just smart investments and yes countries in control of their own money can grow out of debt.
Years ago I proposed the notion... 1. Pass a balanced budget amendment 2. Pay down the national debt with 2% inflated money supply above the economic growth rate. 3. In 50 years, the national debt would be retired... slowly enough that we could accommodate to and adjust to it. But nooooooooooooooo... can't do that. Congress has repeatedly voted to reject the notion of "living within our means" with a balanced budget.
This is a bit nuts. Who ever wrote this has no understanding of how money works in the U.S. Economy and the role played by bonds.
%% Actually, Andrew[Old Hickory] Jackson did balance the budget as you noted .[Number 7, in order] Great thing about budgets+ markets; NO one or one group is bigger than markets, not even the Fed+ i like the Fed. I really enjoyed/loved visits to Argentina, but too much regulation, strangely, they love North Americans/hunters, so that may be a special situation. One of several advantages[budgets+ many things] the US + UK have/ look @ their competition-
One of the few really important things I learned during my nearly 80 years as a living primate on this planet is that looking down on your competition is an early warning sign of the smug complacency of those who will soon enough be looking up.
%% Thats'$ possible...... Its so hard to understand, why the rich mans busy skipping+ the poor man pays the band. Lord Have Mercy on The Workin' Man=Travis Tritt/Rhino Records. Its also possible he may have looked @ more bonds charts than you have + doesnt want to buy any bonds .................................................................,
Well, there is the Treasury Bond. One of the few bonds in the world with as close to zero possibility of default as one can get. The Only way the U.S. can default is for the Country to disappear and a new one with a different Constitution takes its place. (that could happen, very low probability however.) All the risk is on the inflation side. The shit eater has no clue what the purpose of the Treasury issuing bonds is. Any time someone proposes that a balanced budget amendment should be passed, you know right then and there that that person hasn't a clue. Or just as bad, talks about paying off the "national debt", which isn't.