So, economic stimulus

[fivemack]

VAT has gone down by 2.5% as of 1 December, which means the fancy camera I want to buy could conceivably cost 15 quid less in the New Year than it does now. Of course, fancy cameras being made mostly of microchips, it's likely to cost fifteen quid less anyway thanks to process optimisation in the silicon foundries of Taiwan, but hopefully these are cumulative.

But the purpose of an economic stimulus can't just be to move lumps of consumption around by a few months; I don't think that even in the current climate it's necessary to run a big sale in November purely so that you have the cash to pay the salaries for your shop workers in December.

So Alistair Darling's job is to make Britons more profligate than they are now for the next two years (despite the financial mess being, as far as I can see, a function of a decade of unbalanced profligacy) and more frugal than they are now for at least four years to follow. I don't see how subtle tweaks to the tax system can do this; indeed, I don't know if it can be done. Interest rates are the obvious instrument, but profligacy and frugality are functions of upbringing and circumstance in that order; after-tax interest rates on straight savings accounts are now below the rate of inflation, but this has meant that I grumble slightly, keep most of my money in just-as-insured short-term bonds, and devote slightly more to the stock market where there's a possibility of higher returns.

What government policy would make you go out and spend more in February?

Comments

[monkeyhands.livejournal.com]

I've wanted to tie the highest/lowest salary ratio for ages, but making it flexible by pinning the corporate tax rate to that ratio is _lovely_ .

Thank you!

Of course, what would actually happen would be outsourcing of all low-paid roles to service companies that would then outsource all their high-paid roles.

Yes, almost certainly, especially since a lot of companies are already outsourcing to avoid their existing obligations to employees. I personally think that you have to deal with outsourcing directly, through legislation, rather than trying to make it less attractive to employers by giving workers less rights.

[arnhem.livejournal.com]

One possible strategy is to define the maximum and minimum salaries as being not only for the salaries within your own company, but within all the companies that you provide services (as distinct from goods or produce) to or purchase services from.

Still gets very difficult to pin down (is software "services" or "goods" - probably depends on how you sell it - to a single customer or in the mass market?) and might just turn into a further morass of complex legislation with lots of edge cases.

And I still don't see how to apply it to the civil service, schools, hospitals, universities ...

I still (pace S. above) like it; if only because it provides a nice incentive for the selfish buggers who strive for maximum pay at all costs to apply their selfishness for the benefit of others as well as themselves.

[monkeyhands.livejournal.com]

I've been thinking about how to apply it to the public sector since you mentioned it in a previous comment because at first I couldn't see how it would work. Now I think perhaps it could be even easier than applying it to the private sector because it's basically government that sets public-sector salaries (although they have to be reasonably attractive when compared to equivalent private-sector salaries).

The difference would be that instead of pinning earnings ratios to corporation tax, you would use top-down policy to set those earnings ratios. The chief executive of Wherever Primary Care Trust would have his salary linked to the salary of the lowest-paid cleaner because that would be what they have to do to comply with the guidelines.

As for the other points you make in the comment above: yes, yes, and YES.