Forget cutting 65 billion out of the budget – let’s cut 102 billion!

It’s cutback Friday! Hurrah! What will be cut this week?

Well, everything actually. Rajoy has just announced that he will actually cut the budget by twice as much as originally planned.

He was going to cut 65 billion out of the budget over the next two years.

He will now cut: 102.15 billion euros!

You know, that’s an awful lot of money. It’s equivalent to 10% of GNP.

Somehow, despite all this cutback, it seems that Madrid expect tax revenues to raise over the next three years, and not just because of the IVA increase.

3,5 billion taken away from townhalls next year. 19 billion from the regions. 15 billion from health and a further 15 billion from Education.

And so it goes on….

One Reply to “Forget cutting 65 billion out of the budget – let’s cut 102 billion!”

  1. The IVA increase may well wind up reducing tax income in and o fitself. Unlike income tax, it’s highly regressive. Most of it comes from low-income groups, since the poor tend to need to spend all of their money to buy the things they need to survive (groceries, replacing household items etc.) whereas the rich just stuff it in a bank in the Caribbean and forget about it. Since the poor have no excess income, if costs increase because of IVA, they buy less, so the the inceased income from the IVA raise is largely wiped out to begin with. But, since they buy less, more small shops are likely to go under, lowering the IVA take still further, and also putting more demand on the welfare system, meaning costs actually increase at the same time as tax take goes down.

    Also this reduced retail activity, shrinking the economy and so counteracting the cuts in bringing down the deficit (the economy begins to shrink faster than the cuts shrink spending, so meaning that the deficit actually increases even as state expenditure decreases).

    In short, Rajoy’s regressive policies will likely result in a downward spiral – just as has happened in Greece. You can’t get out of a recession by sucking money out of the economy and stuffing it in a savings account. It needs to get gotten into circulation as quickly as possible. Create jobs, keep welfare payments up as these both put money on the high street. Keep education and healthcare going as these are investments in avoiding long term costs later (chronic/acute healthcare costs, and criminal behaviour and/or generational unemployment). Instead make cuts where money isn’t being recycled and/or there is no major social repercussion – i.e. military expenditure, *CENTRAL* government administration, and “vanity” cultural programmes (i.e. central government programmes that have little street impact), whilst focusing revenue raising on tackling corruption (haha!!!), eliminating loopholes and progressive tax that takes revenue from unproductive capital (i.e. money stuffed into trust funds, stocks and savings) rather than money in general circulation that is keeping small businesses alive and unemployment from being far worse.

Leave a Reply

Your email address will not be published. Required fields are marked *


This site uses Akismet to reduce spam. Learn how your comment data is processed.