Wrong Way Winston
British austerity measures were announced today, and while the British budget chief says they're fair, we think the details show otherwise. Whether they are or not, extreme fiscal management at times like these is precisely the wrong thing for Winston to do now - as prescribed by Ben Bernanke. Given that the entirety of Europe seems to be engaging in the new fad called austerity, we expect economies to tank across the pond, nationalism to rise and the union to possibly crumble.
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British Austerity
British Treasury Chief, George Osborne called it "the unavoidable budget". Some have billed the new British measures as the toughest peace-time fiscal management action in UK history. Others compare it to the spending retrenchment of the early Thatcher years. The budget unveils spending cutbacks amounting to $25 billion over the next five years.Osborne said the cuts would not impact the least privileged (a kind way to say poor), but take a closer look. A good portion of the British budget cuts target welfare spending. For instance, there will be a three-year freeze on benefits paid to parents for raising children. The poor generally have children, and more of them than the too-busy-to-be-bothered nanni hiring upper crust. The costs of raising children is more of a burden to the poor than rich as well, but you cannot ask human beings to not have any children, a gift of life.
The budget also limits subsidies for public housing, and it will employ new qualifications (read more critical) for those receiving benefits due to disabilities. This Osborne chap seems to be speaking out of one end of his mouth and acting with the other. Hey, a blank statement that the poor will not affected will not stop the media from reporting that it does, chap.
In keeping a fair balance to those who pay for British cutbacks, the U.K. will raise its retirement age, squeezing the most it can out of its aged. I guess it's only fair that the grayed and crooked work a little longer for the good of London, and take some more stress off the rich and well-to-dos. So we punish the poor and the old then aye? I guess London is counting on those folks being too feeble and weak to protest. To be fair, people are living longer these days due to advances in medicine, and they are in better shape as well generally. Maybe we can let this one pass.
What can't pass us by is the British move to raise the Value-Added-Tax to 20%, from 17.5%. The value added tax ensures producers and sellers do not simply pass on taxes to customers, without paying anything themselves. Instead, producers and sellers pay a tax, while still passing the increase on to you. Also, this type of tax does not distinguish between rich and poor, and so the poor end up hurting more because of it, since the money they pay represents a greater portion of their income. Winston, you've done it again! How the new British Administration can pass these measures off as supportive of the poor and elderly is bewildering to me.
While Winston raises $16.3 billion through 2015 via welfare cuts, he'll raise just $2.9 billion via a tax on banks (I don't like indiscriminate taxes either, but this is supposedly to insure against future bank related risks - like the ones just seen played out). Okay, he's also raising the capital gains tax, though he is almost apologetic about it, not via his words, but as voiced by his cutting of welfare (it seems to me an appeasing action for the cold-hearted among the rich in my view). The only bit of aid to the elderly that I can find is Winston's promise to state sponsored retirees, providing them with cost of living increases to their pensions. I guess Winston is just protecting his own here; don't forget he'll be a state sponsored retiree some day. Gee, thanks Winston... Also, he said he would "make sure that the measures are fair." Well, thanks again, but actions speak louder than words.
The U.K. wants to avoid crisis, but while not there yet, you might consider less aggressive actions spread over longer time span. Or, you might try being a bit more creative and perhaps original in finding money, instead of hitting up the poor. It's just so cliche'! It's even reminiscent of old school monarchies situated right there in jolly old England. Well, that spurs a thought - perhaps if the king is back, then Robin Hood might return as well.
I'm a buyer into the the Keynesian view that we cannot pull away life support, or rather the bare essentials, from our struggling economy, lest we flirt with depression. But you do not have to take my word for that; just read the statements of Fed Chairman Bernanke over the past three years.
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