As J.K. Galbraith noted, “There is nothing alarming about this. Just as the public debt can be eternal, and need never be paid off, a net debt position for Social Security and Medicare can likewise be eternal as well, since the government’s net deficit is balanced by the nongovernment sector’s net surplus. Spelling out the balance sheet in full for “the nation” would be good financial- reporting practice. And in this case, it would usefully reduce the scare-content of claims that focus on liabilities without acknowledging the corresponding assets.”
People in Britain need to take on board one key fact from this – that private wealth is necessary as a balance to government debt. We are not only weak because we have large government debts. We are also weak because we have over two generations destroyed private wealth for reasons of socialist dogma. This hurts everybody, including the poor.
Wealth is the opposite of debt.
Brown was exceptionally prone to fail. If he had been able to see a surge in private wealth levels through eliminating capital taxes, maybe his debts would not now look so bad. He attacked both sides of the account at once. Britain has the highest Inheritance Tax in the world. It weakens us as a nation.
More on Galbraith from Nadler on kitco.com
- Overwhelmingly, the present deficits are caused by the financial crisis. The financial crisis, the fall in asset (especially housing) values, and withdrawal of bank lending to business and households has meant a sharp decline in economic activity, and therefore a sharp decrease in tax revenues and an increase in automatic payments for unemployment insurance and the like.
- According to a recent IMF staff analysis, fully half of the large increase in budget deficits in major economies around the world is due to collapsing tax revenues, and a further large share to low (often negative) growth in relation to interest payments on existing debt. Less than ten percent is due to increased discretionary public expenditure, as in: stimulus packages. This point is important because it shows that the claim that deficits have resulted from “overspending” is false, both in the United States and abroad.