Liz Truss - an unending void of horror and pain

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IvanV
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Re: Liz Truss - an unending void of horror and pain

Post by IvanV » Fri Sep 23, 2022 2:04 pm

TopBadger wrote:
Fri Sep 23, 2022 11:28 am
What will happen is the rich will get richer, the poor poorer, and public services will shrink. But then perhaps that's what they're after - not growth.
It smells of melting down the family silver to pay for a big party with your mates, before you get evicted from the house.

She was quite transparent in her election campaign that she was unembarrassed to make handouts to the rich. Too much focus on redistribution, she says, while actively redistributing, but in the immoral direction. Of public services, nary a word has been said. One can only conclude they don't care. The reality of this country is that most of us end up in the hands of the NHS at some point, as the private alternative is quite limited. Mrs Thatcher discovered that personally. I suspect even the Tory's traditional supporters will be offended in the end.

Whatever has been responsible for Britain's static productivity, nothing they have done today will do anything about it. It is clearly nothing to do with such matters. The countries in Europe where productivity continues to grow generally have larger public sectors than here.

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Re: Liz Truss - an unending void of horror and pain

Post by jimbob » Fri Sep 23, 2022 2:21 pm

I have seen it described as Kami-Kwasi economics
Have you considered stupidity as an explanation

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Re: Liz Truss - an unending void of horror and pain

Post by tenchboy » Fri Sep 23, 2022 5:20 pm

This is a good story. run of the mill enquiry, probably a perfectly sound -if quirky - explanation, probably just gifts to promote NFC amongst visiting/visited dignitaries.
Until that killer last line that is. Macaulay himself would have been proud of that.

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Re: Liz Truss - an unending void of horror and pain

Post by noggins » Fri Sep 23, 2022 5:49 pm

Can anyone explain - within the confines of conventional, capitalist, right of centre , economic theory:

If tax cuts stimulate the economy, is there a difference in stimulating effect between giving one rich person 50k in cuts, or 10 middling earners 5k, or 100 wage slaves 500 quid each?

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Re: Liz Truss - an unending void of horror and pain

Post by wilsontown » Fri Sep 23, 2022 6:02 pm

My intuition would be that if you give the money to the wage slaves, they don't have much option but to spend it in the local economy. The mega-rich, on the other hand, would be able to save it, or buy foreign property, or disappear it into some tax-efficient structure or other. However, I don't know if there's any actual evidence on this.
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Re: Liz Truss - an unending void of horror and pain

Post by tenchboy » Fri Sep 23, 2022 6:10 pm

wilsontown wrote:
Fri Sep 23, 2022 6:02 pm
My intuition would be that if you give the money to the wage slaves, they don't have much option but to spend it in the local economy. The mega-rich, on the other hand, would be able to save it, or buy foreign property, or disappear it into some tax-efficient structure or other. However, I don't know if there's any actual evidence on this.
Yep that is what was always said back in the days before evidence was required: the less well off spend it on their mates down the club, a curry and a new fishing rod for the wife; whilst the better off put it in a trust fund to send the children to university.

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Re: Liz Truss - an unending void of horror and pain

Post by Little waster » Fri Sep 23, 2022 6:25 pm

Fuller said: “Back when I was 25, ironically, it was about the time we
had a Conservative government that was looking to cut taxes. What I
felt then is that this meant an opportunity for me.

“This meant if it took a risk with the way I wanted to run my career, I didn’t go down
the plodding path of just step by step.

That I would have a government that was on my side. It encouraged me to look at things like venture capital and look at ways to grow a business... If you’re 25 and see an
opportunity, the government will get out of the way and do what it can
to enable you to take up an opportunity.”
From https://www.theguardian.com/politics/li ... -cuts-live

I bet you are all dying to know about Mr Fuller's fascinating career as a wheeling-dealing risk-taking entrepreneur in the UK in the 80s.

Well he ... joined someone else's management consultancy company in 1984 because them f.ckers are vital.

And then he almost immediately moved to Australia.

And then he moved to South Korea.

And then he moved back to Australia.

And then he moved back to the UK and became an MP.

So he clearly knows exactly what he is talking about.
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Re: Liz Truss - an unending void of horror and pain

Post by Millennie Al » Sat Sep 24, 2022 1:43 am

noggins wrote:
Fri Sep 23, 2022 5:49 pm
Can anyone explain - within the confines of conventional, capitalist, right of centre , economic theory:

If tax cuts stimulate the economy, is there a difference in stimulating effect between giving one rich person 50k in cuts, or 10 middling earners 5k, or 100 wage slaves 500 quid each?
Yes.


I suppose you want the details too.

One way of looking at it is that if you get 50k, that's enough to start a (very) small business (e.g. a market stall), which can generate wealth, thereby providing some growth. If you get £500, that's not really enough to do anything with except spend it. However, looking more deeply into it, if you have 100 people each with £500, that's an opportunity to sell them stuff, maybe by setting up a market stall. You have to find the capital to do so, but having done so and proved it's profitable, you're in a good position to continue in business, thereby creating growth.

Another is from a more mathematical point of view. Both are like gambling on coin tosses. You double your money on heads, and lose it on tails. If you play once with 50k, you have a 50% of ending up with nothing and 50% chance of gaining 50k, so expected value is 50k for zero gain. If you play 100 times with £500 each, your expected gain is identical, but the distribition is different. If you're risk averse, you should play 100x500 as the chances of losing a lot are much less. However, if you're desperate for money (e.g. need 90k to prevent your drug dealer from killingyou) you should play 50k once as that maximises your chance of getting 90k.

Back in the real world, people are very complex, so it's basically impossible to tell what will happen, but that doesn't stop people trying!

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Re: Liz Truss - an unending void of horror and pain

Post by bolo » Sat Sep 24, 2022 2:13 am

wilsontown wrote:
Fri Sep 23, 2022 6:02 pm
My intuition would be that if you give the money to the wage slaves, they don't have much option but to spend it in the local economy. The mega-rich, on the other hand, would be able to save it, or buy foreign property, or disappear it into some tax-efficient structure or other. However, I don't know if there's any actual evidence on this.
My understanding is that this is pretty well documented. Here, for example, is some U.S. data on who spent, versus saved, their 2020-2021 Covid stimulus payments. The differences by income quartile are really clear.

Image

ETA source: https://www.brookings.edu/essay/lessons ... -covid-19/

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Re: Liz Truss - an unending void of horror and pain

Post by bjn » Sat Sep 24, 2022 8:26 am

Paranoid conspiracy theory: they are deliberately crashing the economy so that the Crispin Odey’s of the world, who effectively shorted the UK economy, could make a quick unearned fortune.

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Re: Liz Truss - an unending void of horror and pain

Post by headshot » Sat Sep 24, 2022 9:21 am

bjn wrote:
Sat Sep 24, 2022 8:26 am
Paranoid conspiracy theory: they are deliberately crashing the economy so that the Crispin Odey’s of the world, who effectively shorted the UK economy, could make a quick unearned fortune.
And because they know they have no chance of winning a general election, so they’re poisoning the well so that a subsequent Labour government has little chance of fixing the mess they create and HAS to raise taxes.

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Re: Liz Truss - an unending void of horror and pain

Post by Hunting Dog » Sat Sep 24, 2022 11:21 am

My only theory on what they might be doing (other than being completely and utterly stupid/evil) is that they were actually aiming to devalue the £ to improve our trade balance eventually... but meh, stupid/evil fits better.

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Re: Liz Truss - an unending void of horror and pain

Post by EACLucifer » Sat Sep 24, 2022 11:28 am

headshot wrote:
Sat Sep 24, 2022 9:21 am
bjn wrote:
Sat Sep 24, 2022 8:26 am
Paranoid conspiracy theory: they are deliberately crashing the economy so that the Crispin Odey’s of the world, who effectively shorted the UK economy, could make a quick unearned fortune.
And because they know they have no chance of winning a general election, so they’re poisoning the well so that a subsequent Labour government has little chance of fixing the mess they create and HAS to raise taxes.
And because they know any pledge to reverse these criminally irresponsible tax cuts for the wealthiest will be seized upon by the right-wing press as twisted into claims that they'll be radically increasing tax collected from those tabloids reactionary lower middle class readers.

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Re: Liz Truss - an unending void of horror and pain

Post by IvanV » Sat Sep 24, 2022 3:23 pm

Millennie Al wrote:
Sat Sep 24, 2022 1:43 am
noggins wrote:
Fri Sep 23, 2022 5:49 pm
Can anyone explain - within the confines of conventional, capitalist, right of centre , economic theory:

If tax cuts stimulate the economy, is there a difference in stimulating effect between giving one rich person 50k in cuts, or 10 middling earners 5k, or 100 wage slaves 500 quid each?
Yes.

I suppose you want the details too.

One way of looking at it is that if you get 50k, that's enough to start a (very) small business (e.g. a market stall), which can generate wealth, thereby providing some growth. If you get £500, that's not really enough to do anything with except spend it. However, looking more deeply into it, if you have 100 people each with £500, that's an opportunity to sell them stuff, maybe by setting up a market stall. You have to find the capital to do so, but having done so and proved it's profitable, you're in a good position to continue in business, thereby creating growth.

Another is from a more mathematical point of view. Both are like gambling on coin tosses. You double your money on heads, and lose it on tails. If you play once with 50k, you have a 50% of ending up with nothing and 50% chance of gaining 50k, so expected value is 50k for zero gain. If you play 100 times with £500 each, your expected gain is identical, but the distribition is different. If you're risk averse, you should play 100x500 as the chances of losing a lot are much less. However, if you're desperate for money (e.g. need 90k to prevent your drug dealer from killingyou) you should play 50k once as that maximises your chance of getting 90k.

Back in the real world, people are very complex, so it's basically impossible to tell what will happen, but that doesn't stop people trying!
A well-off person who gets £50k is not going to start up a market-stall. That is not the life most well-off people were looking forward to. I do not think that is how market stalls are started. What a rich person might potentially do is set up a private capital partnership and look for an opportunity to invest in a promising business. But, on the whole, well-off people are less hungry. That's not to say that none of them are hungry and entrepreneurial. But I think there are studies showing that inheritors of wealth are less entrepreneurial than the average.

And a lot of businesses grow by recycling profits as investment. So overtaxing businesses is not necessarily very clever.

But there is no shortage of capital to invest in this country, and businesses are not over-taxed by international standards. What this country has a shortage of is business opportunities that are worth investing in. Many companies have accumulated cash-piles they hand back to investors because they have no better idea what to do with them. This is closely related to the problem of weak productivity. Other countries are leaving us behind and providing better opportunities for investment. There is something about this place which means that when an idea has been developed to the level of making a lot of money out of it has arrived, they up sticks and do it somewhere else.

The way small businesses are generally started in many countries is by people of modest wealth using the security of their houses to borrow money. In developing countries, like Peru, it is often said that a lack of good property tenure is an impediment. So possibly the fact that people can't buy houses until they are older in this country, because they are so expensive, might be an impediment

Ultimately the main economic stimulus from tax reduction is about promoting spending. That's what Mr Keynes had in mind. Obviously, as noggins realises, and set out in Economics 101, if you give money to less well-off people they have greater propensity to spend it. And the things they spend on are more likely to be of local production. Though if production cannot be increased to meet what they want to buy, then it just stokes inflation.

That is why what Truss and Kwarteng have plainly done is hand money out to rich people, behind a faint camouflage screen of economically illiterate arguments. It's not very different from the kind of thing that goes on in kleptocratic regimes, really. The thieves max out the public debt by filling their boots.

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Re: Liz Truss - an unending void of horror and pain

Post by bjn » Sat Sep 24, 2022 4:27 pm

I’ve set up two businesses up in my life, one ended up being profoundly successful within its field, my current one is trying to be profoundly successful.

I’m worried that my current attempt will be scuppered by the tanking UK economy, increased interest rates and a tight labour supply. I would not attempt a start up in the UK right now, you’d be utterly nuts to.

Side track. One observation about doing truly innovative things in the UK, native investors are profoundly risk averse. My first company grew organically and never needed investment or borrowed a penny. My current one has had to go to cap in hand to US investors to raise capital, UK investors were chicken sh.t.

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Re: Liz Truss - an unending void of horror and pain

Post by EACLucifer » Sat Sep 24, 2022 5:06 pm

bjn wrote:
Sat Sep 24, 2022 4:27 pm
I’ve set up two businesses up in my life, one ended up being profoundly successful within its field, my current one is trying to be profoundly successful.

I’m worried that my current attempt will be scuppered by the tanking UK economy, increased interest rates and a tight labour supply. I would not attempt a start up in the UK right now, you’d be utterly nuts to.

Side track. One observation about doing truly innovative things in the UK, native investors are profoundly risk averse. My first company grew organically and never needed investment or borrowed a penny. My current one has had to go to cap in hand to US investors to raise capital, UK investors were chicken sh.t.
Plus if you give everyone a small increase in wealth, that's a lot of customers for a business - start-up or otherwise - and will fuel economic growth better than if the money is invested in things other than the UK economy, as wealthier people are more likely to do.

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Re: Liz Truss - an unending void of horror and pain

Post by Gfamily » Sat Sep 24, 2022 5:57 pm

If you're making a million a year and the govt increases its tax take by £50k you are likely to try to find some way to make your business more efficient to restore your annual income.

If you're making a million a year and the govt gives you an £50k you are less likely to feel the need to find some way to make your business more efficient.

Corporate taxes are applied when money is taken out of businesses, so if you want companies to invest, you surely should increase corporate taxes.

Yes, I know IALMCTT, but their arguments are worse than mine.
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Re: Liz Truss - an unending void of horror and pain

Post by Hunting Dog » Sat Sep 24, 2022 6:56 pm

Gfamily wrote:
Sat Sep 24, 2022 5:57 pm
Corporate taxes are applied when money is taken out of businesses, so if you want companies to invest, you surely should increase corporate taxes.
That would be my dumbass non-economist view. Stick the notional tax rate on profits up, but allow generous allowances for capital re-investment and/or employing more people.

I'd have also thought that the main draw to setting up your company in a country was the ability to actually make a profit (and not be nobbled by unexpected inflation/interest changes etc) rather than the % taken of that profit.

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Re: Liz Truss - an unending void of horror and pain

Post by headshot » Sat Sep 24, 2022 8:11 pm

Well, that didn’t take long did it?
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Re: Liz Truss - an unending void of horror and pain

Post by EACLucifer » Sat Sep 24, 2022 8:35 pm

headshot wrote:
Sat Sep 24, 2022 8:11 pm
Well, that didn’t take long did it?
Absolutely what the despicable c.nts were aiming for. And while they were setting this up, watch what's happened to the value of the pound.

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Re: Liz Truss - an unending void of horror and pain

Post by bjn » Sat Sep 24, 2022 9:24 pm

bjn wrote:
Sat Sep 24, 2022 8:26 am
Paranoid conspiracy theory: they are deliberately crashing the economy so that the Crispin Odey’s of the world, who effectively shorted the UK economy, could make a quick unearned fortune.
The Sunday Times has an article about a bunch of financier Truss backers who shorted the pound.

I hate being right.

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Re: Liz Truss - an unending void of horror and pain

Post by IvanV » Sat Sep 24, 2022 10:23 pm

Gfamily wrote:
Sat Sep 24, 2022 5:57 pm
Corporate taxes are applied when money is taken out of businesses, so if you want companies to invest, you surely should increase corporate taxes.

Yes, I know IALMCTT, but their arguments are worse than mine.
IALMCTT. Corporate taxes apply if you take it out or not. There are other taxes that are avoided if you reinvest it. If it is accounted for as profit, then it is liable for corporation tax, whether you take it out or not. If you take it out, then the shareholders pay dividend tax on it.

Clearly there is some scope for redefining investment as cost within businesses. Clearly it's naughty to do so, but there is no clear red line, just a lot of fog. For example, a maintenance man might spot how to improve the performance of machines. Some investment easily and undetectably defined as maintenance cost. So some money kept within a business and, in effect, reinvested is undetectably redefined as cost and so reduces reported corporate profits, avoiding corporate and dividend taxes.

There are some allowances against corporation tax for certain types of investment. They are a bit careful about it. Back in the 70s or 80s they created some kind of investment allowance, which resulted in lots of stockholding businesses setting up, like wine merchants and art dealers, because those qualified for the allowances. You want people to invest in productive assets, not just stock you will have lying around and resell some time convenient. But in general Britain is ungenerous with investment and R&D allowances.

What did happen in the days of high corporate taxes was that there were a lot more fringe benefits to senior management. Again, there some fudgeability between business expenses and remuneration. In the early days of ITV, for example, when ITV's franchise fee was structured as a high rate of profit tax, they didn't report any profit and their senior executives did very, very nicely. And in general senior managers can grab a bit at the expense of shareholders, even if it is accounted as income and they are taxed on it.

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Re: Liz Truss - an unending void of horror and pain

Post by Millennie Al » Sat Sep 24, 2022 11:37 pm

IvanV wrote:
Sat Sep 24, 2022 3:23 pm
A well-off person who gets £50k is not going to start up a market-stall.
Well, yes, but I was trying to work with the example given. I suppose they might give the 50k to their son or daughter to start a market-stall scale business. It's such a small amount of money that it'll be well spent as a learning experience even if the business fails (to get 50k from the tax cut you need to be earning £916,500 per year).
What a rich person might potentially do is set up a private capital partnership and look for an opportunity to invest in a promising business.
Yes, but then 50k is too small to be worth a special effort. It might be used to increase investment in an existing business they own, or just to buy more tuff (e.g. buy a new electric car).
But there is no shortage of capital to invest in this country,
Indeed. That's obvious from the very low interest rate - lots of money available cheaply to anyone who has a good idea.
The way small businesses are generally started in many countries is by people of modest wealth using the security of their houses to borrow money.
That's ok for people who own their own houses. In principle, someone could start a business by buying a bike and signing up for delivery jobs. Of course the practical problem with that is that the very same thing that makes it so easy to set up also makes it easy for everyone else, so the market is saturated with people doing the same thing, driving possible profits down to zero.
Obviously, as noggins realises, and set out in Economics 101, if you give money to less well-off people they have greater propensity to spend it.
Though investment is also spending. If you own a shop and decide to start doing home delivery, maybe you buy a van, which is spending money on the van. Similarly if you employ more people - that inherently involves spending money on their salaries. There are, of course, ways to invest without spending - for example by buying Premium Bonds, where the money just goes to the government.
And the things they spend on are more likely to be of local production. Though if production cannot be increased to meet what they want to buy, then it just stokes inflation.
Indeed that seems very likely to be the current position - with Covid affecting the supply chains around the world, as well as Brexit for the UK, and then war in Ukraine, it it's very difficult to increase supply.

That is why what Truss and Kwarteng have plainly done is hand money out to rich people, behind a faint camouflage screen of economically illiterate arguments. It's not very different from the kind of thing that goes on in kleptocratic regimes, really. The thieves max out the public debt by filling their boots.
The main difficulty I have in believing that it is being done to enrich the already rich is that the effect is so small. They're only getting about 5% extra, which only seems like a lot to people for whom the absolute amount is a lot. If you earm median wage, £50,000 extra after tax is a hige amount of money, but if you're already earning £1M it's less that the price of the sort of car you probably drive. Based on what politicians usually do, I think it's more likely that the policy is just stupidity in action.

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Re: Liz Truss - an unending void of horror and pain

Post by Millennie Al » Sat Sep 24, 2022 11:55 pm

Hunting Dog wrote:
Sat Sep 24, 2022 6:56 pm
Gfamily wrote:
Sat Sep 24, 2022 5:57 pm
Corporate taxes are applied when money is taken out of businesses, so if you want companies to invest, you surely should increase corporate taxes.
That would be my dumbass non-economist view. Stick the notional tax rate on profits up, but allow generous allowances for capital re-investment and/or employing more people.
Corporate taxes are usually intended to mean corporation tax, which is levied on profits before considering re-investment. As usual with taxation, there are various reliefs which include some forms of re-investment but they are fairly limited. To see the risks of reliefs, consider the example of a business which owns a van. If taxation is not involved, a business will replace the van at a certain point in its life when that is economically wise (well, that's the theory) - e.g. spend £10K to get a van worth £10K more. Add in differing tax rates and a business may decide to replace the van earlier - spend £11K to get a van worth £10K because the alternative is to pay £1,900 tax on the £11K. So you're pushing businesses into wasting money. There's also the problem of deciding what exactly is re-investment, which involves lots of complex rules and regulations.

Taxes which apply when money is taken out of a business are dividend tax and capital gains tax. Though those also have distorting effects. They push the economy towards having larger companies that do everything instead of small specialists.

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