Peter Schiff on Government Regulation and Taxation

An excellent video on the outlook of the US economy, the principles remain equally valid over this side of the pond. 

 

The other day saw thousands of protesters take to the streets of London demanding less/no spending cuts whilst "anarchists" tagged shop fronts with "tax the rich" slogans.  Not surprisingly in their haste to win the prize for the most monotonous slogan they all totally missed the fact that you can't have it both ways.  There should be no doubt that the current level of nation debt needs addressing, its either deal with it now or pay back even more later.  Failure to do so by cutting government expenditure requires higher taxes, which would result in even less revenue generated by the private sector and an even more stagnant economy, a situation which will be unavoidable if we don't deal with this problem soon.

Others have suggested that we could grow our way out of the deficit (and no, stimulus doesn't count) and whilst that seems great in theory the fact of the matter is that the only effective way to encourage growth is to reduce the burden on businesses and allow people to save & invest.  George Osbourn's recent budget failed to make any of the necessary adjustments to the regulatory system to improve business opportunities and he probably can't; reductions in taxation will increase the deficit in the short term, adding to the debt and interest levels.  Doing this and praying that the economy picks up before the next election is too large a political gamble for our masters to take.

To summarise, there simply isn't a politically workable alternative to spending cuts that doesn't cause more damage in the middle/long term.  Whilst a rolling back of the tax and regulatory systems would significantly improve the situation (by generating substantial employment and tax revenue), the current "bash the bankers" and "down with evil corporations" attitudes disincentivizes the government from making such "radical" and necessary changes, something these protesters should probably starting thinking about.