Trickle Down Economics Explained

[Justin Passing]

Something a little odd about all this. Truss had stated weeks ago that there would be tax cuts so markets would have costed this in prior to the event.
The 45% drop to 40% higher end tax is going to cost about 2 billion this year, more next year, but talk of sparking a global economic crisis, IMF intervention and now Moodys threatening to downgrade the UK credit rating seems bizarre, especially given that these tax drops are a drop in the ocean compared to the cost of helping people with their energy bills.

The 'budget' is designed to hopefully support growth but it goes against the orthodoxy of what's been done for the last 12 years, and somebody doesn't like that.

Yes 2bn is not a lot.
I wonder if a lot like me, haven't earned over £150k pa for the last - oooh year or two, so forgot there was a third rate.
I met someone who hadn't checked , and thought everyone who was paying 40% would now be paying 20%. Since he only earns £11 an hour he was pretty píssed off .

Same with Bankers' cap - it's a nothing, really, but it sounds arrogant.
Even the windfall profit extra tax which could be charged isn't much in the scheme... And it could be largely explained away on green investments.
Truss ought to follow the covid Whitty example and have Powerpoints...

 

[fillyboy]

Yes 2bn is not a lot.
I wonder if a lot like me, haven't earned over £150k pa for the last - oooh year or two, so forgot there was a third rate.
I met someone who hadn't checked , and thought everyone who was paying 40% would now be paying 20%. Since he only earns £11 an hour he was pretty píssed off .

Same with Bankers' cap - it's a nothing, really, but it sounds arrogant.
Even the windfall profit extra tax which could be charged isn't much in the scheme... And it could be largely explained away on green investments.
Truss ought to follow the covid Whitty example and have Powerpoints...

Not enough to spark a global financial crisis. What seems to be ruffling feathers is a breakaway from Keynesian tax and spend policy that has overseen lack of growth for the last 20 years. She promised a supply side revolution and won the leadership contest on that basis, that's what she's delivered.
It's got to be worth a shot, the policies of the last 20 years have certainly done nothing for growth.

 

[IT Minion]

Not enough to spark a global financial crisis. What seems to be ruffling feathers is a breakaway from Keynesian tax and spend policy that has overseen lack of growth for the last 20 years. She promised a supply side revolution and won the leadership contest on that basis, that's what she's delivered.
It's got to be worth a shot, the policies of the last 20 years have certainly done nothing for growth.

The beatings will continue until morale improves.

 

[ajohn]

Not enough to spark a global financial crisis.

Global? Ours isn't. Your neglecting the dropping of Sunak's increases and some reckon the high end tax cut costs £5b - pass on that. It's also seen as an ideological tax cut that increases debt. The other one is too. Behind this is a view that the changes wont have there intended effect - real growth. Then comes the statement more tax cuts to come oh we haven't done the work needed to see the overall effects. That appears to be down to the new broom starting to sweep too soon. If all of that had been done first reactions might have been different. A delay of a month in announcements wouldn't have mattered at all. Another problem is that these sorts of changes have been tried before.

Then another factor - the GBP drop against the USD and the Euro and having an importing economy. The 2 most used currencies. Suppose there is some yen too. Guess what - we have fallen against that too.

Ideological factors. More people will be going into various poverty levels. Inflation on basics is higher than the headline figures. Some income levels can stand being squeezed. Some can't. In terms of helping people the basic rate cut doesn't achieve much at all. Doubling the allowance wouldn't help that much either and would be a stupid thing to do for all. As we don't use abacuses any more I have often thought these step changes in the taxation system are stupid. Things could change smoothly. That might share the load more evenly.

Then the power subsidy. A loan that gets paid back when costs reduce. Their overblown piece of paper freely admits that this is a rather woolly area. Debt levels and future prices behaviour.

Base rate changes. Personally I am amazed that some form of housing price crash has been held off for so long. Intent seems to be one way or the other to keep allowing them to increase. The emergency rates have allowed them to increase even further. Savings just keep getting worse less and less. People have had inflation based pay rises for years and years now. Not this time though. As the inflation levels in all areas are not even the poorer get poorer. At some point they need support even in work. The only thing that can effectively increase wages is shortages of people in particular areas or strikes.

 

[carmanmemoranda]

It's got to be worth a shot, the policies of the last 20 years have certainly done nothing for growth.

How long have the Tories been in power ?

Is it their policies that have done nothing for growth ?

 

[fillyboy]

How long have the Tories been in power ?

Is it their policies that have done nothing for growth ?

Keynesian policies have been around for a long time. Maybe it's time for a change. It might work, it might not. I'm certainly not aware of a monetary/ financial policy that's guaranteed to work, are you?

 

[Notch7]

Keynesian policies have been around for a long time. Maybe it's time for a change. It might work, it might not. I'm certainly not aware of a monetary/ financial policy that's guaranteed to work, are you?

Liz Truss is just a puppet for libertarian lobby groups. Mostly the IEA

There is no economic policy, it is merely self interest by fossil fuel and disaster capitalists.

 

[carmanmemoranda]

Keynesian policies have been around for a long time. Maybe it's time for a change. It might work, it might not. I'm certainly not aware of a monetary/ financial policy that's guaranteed to work, are you?

No.
I've never changed my goalposts so quick either.

 

[ajohn]

Keynesian policies

I think you should go an read exactly what those are. Not modifications of them.

 

[Odds]

An interesting article in the Grauniad where several high earners offer their reactions to the KamiKwazi measures taken by the government as ""cruel and greedy" - and several insist they'll donate most or all of their windfall to charity. Not sure how that'll 'trickle down' into the wider economy but you can only buy so many cars.

 

[Deleted member 18243]

How long have the Tories been in power ?

Is it their policies that have done nothing for growth ?

Only for growth in government.

Our healthy and efficient private sector has been pushed out and replaced by inefficient public sector parasites. Pen-pushers and number-crunchers by the million.

 

[Justin Passing]

Only for growth in government.

Our healthy and efficient private sector has been pushed out and replaced by inefficient public sector parasites. Pen-pushers and number-crunchers by the million.

Truss does have a point about productivity.
Wife told me today that the Finns have a particularly efficient health service, on a fraction of our number of staff. How true I don't know but I can believe it. Years ago I went to a military hospital - they've all gone now. (Haslar was the last I think).
Chalk and cheese comparing that with plain NHS.

When I was employing people, there were always a few who'd do 2 or 3 times as much, much better, than the ordinary. That was the case with software contractors too, but with those it could be 6 or 8 times as much. A few of them earned that multiple compared with a "permie", because they were good value.
So whose tax would you cut, when the ones working their nuts off are paying far more tax on the money they earn?

 

[ajohn]

Wife told me today that the Finns have a particularly efficient health service, on a fraction of our number of staff

Population 5.5m so I'd expect a lot less people. Finland is the Scandinavian country who's debt tends to increase. Their trade balance is near zero unlike the others.

Truss does have a point about productivity.

In manufacture that largely depends on how much money is put into it and that needs to be scaled in terms of competitiveness and market sizes. That applies to items that can be made on a production line. Those have a cycle time. Either a machine or person has a set time to do something or the other before the next item appears. If people are involved time and motion study can determine how long the operation should take. That is also used on piecework. An operator might do just one thing to some item but not on a production line. More time will usually be given so that the person can go home early when they have met their quota or earn a bonus - the amount they are likely to produce will produce is known but that can result in too much stock of the part.

Then there has to be some method of getting parts to the line or person. People need breaks. On a line floaters may be needed to allow for toilet time if needed. The next aspect is over all supply from external sources. Ideally stock of that never builds up but remains at some set level that will be as low as possible as it's dead tied up money.

There is another type of production. A line isn't possible so some person effectively gets a box of bits and puts them together. That needs tying in with the supply of bits. Getting those in a "box" might be a sort of production line. Say a number of plastic moulding machines and others but may be say a moulding machine producing a run of one part followed by another and so on. Cost and market size again. The moulding machine cost has to show a profit. It will probably produce parts faster than they can be used anyway and that in some ways relates to how the parts are designed. All production areas do. That cost needs to be recovered as well.

Service industry. Never worked in it but probably similar to my design area. Productivity of that is likely to depend on management style. I suspect most of ours is financial though. With IT support there may be enough needed for a company to have it's own or it can use contractors. The NHS does from what I can gather for some of it anyway. Contractors can crop up in the manufacturing design areas as well. Eeaier to loose them when not needed or for cost reasons - not enough work to employ. Temps in many areas as well but take the NHS I have heard of one that had been a temp for so long she should have been employed as it would cost less - an agency worker. This sort of thing does go on in all "contractor" type areas,

 

[Vinty]

Trickle down economics.

Rich man p*****g himself after a bout of excessive self indulgence, while the poor man at his feet licking up the mess in the hope of some sustenance.

 

[ajohn]

Trickle down economics.

Peculate up economics? Maybe a geyser.