Martin Wolf, to keep the welfare state alive, before considering taxes, look at what real economy you need for that.
Sir, Martin Wolf asks: “Will the UK public sector be able to provide the benefits the public expects in return for the taxes it is willing to pay? The answer to that question seems to be “no”. If so, will the promise to provide some universal services be abandoned? Will taxes be raised? Or will debt be allowed to grow until it has to stop?” Wolf answers: “With current commitments, [fiscal] revenue must rise relative to GDP… The alternative is to abandon pillars of the welfare state.” “It is time to talk about raising taxes” May 19.
That starts from the wrong end. The real question should be what future economy do we need so that it will allow fiscal revenues or other means by which not having to abandon the pillars of the welfare state? The answer to that question might be increasing taxes as Wolf recommends but it could also require many other means, not necessarily including extreme ones like to “choose a collapse in life expectancy”
For many decades I have argued the best and most sustainable pension/health plan to be that of having children who love you and are working in a healthy and functioning economy.
I have been blessed with loving children, thank God, but I do fret about the future economy, as there is no way on earth for it to be either healthy or functionable with regulators distorting the allocation of bank credit, with their insane risk weighted capital requirements.
Since 1988, with Basel I, that set the risk weight of the sovereign at 0% and the citizens at 100%, public indebtedness has been artificially subsidized.
Unless that distortion is eliminated it will guarantee to deliver unsustainable public debt levels and an unhealthy economy. That is because whether the statists like it or not, reality is that government bureaucrats do not know how to use bank credit more productively than the private sector’s SMEs and entrepreneurs.
Having allowed the banks to run up such huge exposures to what is perceived as safe, the past and the present, while refraining from financing the riskier future, will cost our aging society much, because frankly, why should our children and grandchildren ignore that regulatory discrimination against them.
If we do not rectify, there will come a day where the young will show the elderly the finger… pointing at the closest “ättestupa”
PS. A 2022 letter in Washington Post: “Before the debt ceiling is lifted, Congress must dare to at least pose a question.”
@PerKurowski
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