The UK is instituting austerity measures to bring its budget deficit under control:
1. L30B of spending cuts
2. Freeze on public worker pay
3. Increasing VAT to 20% from 17.5%
4. Bank tax on assets
5. Drop corporate tax from 28% to 24% over 4 years
6. Raise capital gain tax from 18% to 28%
I get the spending cuts, as the government can't spend what it doesn't have. But raising taxes? Economic growth and job creation does not emanate from higher taxes... Listen to a Harvard professor about what works....
"There have been mountains of evidence in which cutting government spending has been associated with increases in growth, but people still don't quite get it." -Alberto Alesina, Harvard University Professor
Politicians don't appear to have the... gumption to make the hard decisions to cut costs... Yes, it will mean job losses, but it seems we can't afford:
1. two wars at once
2. union contracts that call for annual pay increases (tax revenues are going down, not up)
3. universal health coverage without more stringent cost controls
4. not to have a pension cap per year to cut off the public servants retiring on $150k or more in annual pension
Perhaps the most likely economic path from here is sluggish growth and few new jobs for years. I'm just worried that if the U.S. continues to pursue fiscal strategies like the UK, we'll suffocate what little growth we have.
