Liz Truss and Kwasi Kwarteng couldn’t have planned their own humiliation more perfectly. The bold assurances they were sticking to their plan for unfunded tax cuts for Britain’s richest, the headlines that Truss was, just like Maggie, “not for turning”, the party conference increasingly overtaken by speculation not merely that the tax cut plan wouldn’t get through Parliament, but that Truss might be dumped, Kwarteng even dropping to friendly journalists his conference speech doubling down on the tax cuts… all ahead of the late night retreat: the tax cuts were no more.
The next day Kwarteng limped into interviews and on to the conference stage, humiliated, abashed, even admitting that maybe celebrating the tax cut plan with a group of champagne-quaffing bankers right after announcing it was a bad look.
But the retreat only addresses the more obvious and easily solved problem facing this toxic combination of ideologues and idiots. Kwarteng’s mini-budget last week contained an array of other tax cuts, or abandoned plans for tax increases, that all still have to be paid for, because the UK budget is already deep in deficit.
“It doesn’t make any sense that this would suddenly fix the Conservative Party’s lurch into totally untethered fiscal easing,” one investor told the Financial Times. Financial markets now expect interest rates will still have to rise faster than expected before last week — just not quite as high, not quite as fast.
So either Kwarteng and Truss continue to leave the pound and gilts (British government bonds) vulnerable to hostile market sentiment by insisting on higher borrowing, or they announce spending cuts to offset the tax cuts.
The forthcoming budget to reveal those cuts — which they insisted would not happen until late November — has been brought forward to later this month, in a sign of how desperate they’ve become to reassure markets.
Even Tory ministers and ex-ministers are circling the wagons around welfare payments. Kwarteng is refusing to rule out cuts to welfare payments at a time of increasing misery in the UK, something his colleagues know will make a deeply unpopular government even more hated.
The next step is likely to be not jettisoning more of the tax cut package from last week, but jettisoning Kwarteng himself, giving him the honour of having one of the shortest chancellorships in history.
Truss is already distancing herself from him, revealing over the weekend that Kwarteng didn’t take the tax cut plan to cabinet — which is where it would have been killed off by ministers with more of a feel for the mood of the country and of financial markets.
Even markets, where self-interest rules 24/7, understand that trickledown economics is voodoo, that handing billions in tax cuts to the wealthiest doesn’t increase growth, it merely entrenches inequality and, if it’s not paid for, increases the fiscal vulnerability of governments. It remains to be seen what other delusions of Kwarteng and Truss the markets will have to correct.
What’s your take on the leadership of Liz Truss and Kwasi Kwarteng. Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
Liz probably thought she was emulating Maggie and would be cheered on. In fact she confirmed everybody’s idea that she is an air head.
There is a lesson for Albanese here. Stopped the Phase 3 tax cuts and start addressing some of our many problems caused by past under-investment.
Yep absolute nutters. On top of that we are marching towards WW111. In Aus we are the 49th state and Marles is fighting for room with Biden’s suppository.
Alaska is the 49th State. We are the 51st.
From today’s Guardian Australia: These tax cuts are already legislated, and due to come into effect in July 2024.
That means there are 627 days until they take effect. Given the msm treatment of PM Gillard over a carbon tax that was not tax, Albanese would be mad to try to rescind the tax cuts until he is absolutely sure he has the numbers in both houses.
And given the unreliable voting patterns of people such as Senator Lambie the ALP would be mad to rely on the actions of those who now express opinions to some media outlet that are quite different from how they voted on the tax cuts.
I cannot see what the rush is. We are not the UK.
“I cannot see what the rush is. We are not the UK.”
Yep, if Labor rush it, it’s a broken promise and class warfare at that. If closer to them taking effect the economic conditions are still bad, then there’s at least circumstantial grounds for the class warfare broken promise.
That’s right, you two.
None of the current crop of agitators for changing the cuts stand to suffer any pain whatsoever.
The rush is that every day that we get closer to the next election, the less chance that Albanese will have the courage to cancel them. The thought that he will suddenly see the light in 2024, a year before the election, is frankly laughable.
Not only that, but with the UK example of the market response to their tax cuts, and the subsequent U-turn, the stage is already set with the props in place for some serious conversations with the Australian people. If they can’t be sold in the current environment, I’d hate to think how much worse the Govt is expecting things to get in order to make a change of mind more palatable.
The tax cuts got legislated because the then Government refused to split the bills. Labor wanted the low range tax cuts but had to vote for the whole package. The Gvt used the low paid as hostages.
Albanese need not have gone to the election vowing to keep all the cuts but he did. Since then times have changed when it was discovered how far in debt we are. My view still is that he should cancel the cuts and live with any criticism. Far more people are asking him to do that than the votes he might lose, if any. He will lose votes if he does nothing.
He would have the numbers in the HoR and he would get them in the Senate with Greens and independents help.
Had h
Had he done so, he risked being scorched by the aspirationals as in 2019.
This fallacious claim is becoming entreched as common knowledge as did the equally untrue ‘Greens spurned ETS’ no matter how often disprved by facts- aka reality.
Shorten lost because he told different groups different, often opposite things, apparently unaware of the invention of the electric telegraph.
He deserved to lose but we did not deserve Scummo & his Uglies for 3 years. The current PM is just as weak, dissembling and mendacious and we will duly suffer for giving Labor a majority government.
Only minority government is obliged to respond to the will of the electorate.
I think the community would appreciate a another tier in the taxation bracket.
Geez I despair at MSM. when will they realise their responsibly to community and country. I am sure their profitability would improve.
Chalmers essentially said everything is on the table today when asked about the Stage 3 tax cuts. “As we do finalise the budget, we will put a premium on what is responsible, what is affordable, what is sustainable and what is sufficiently targeted to deal with the economic cards that we have been dealt.”
Dutton is already signalling he’ll have none of it, declaring that the situations in Australia and the UK are entirely different. I haven’t seen if he explains just how.
That’s a good sign, isn’t it? Much as we piners for Gough might wish for crash through or crash, or at least bold, as a long game there might something in this government’s measured approach.
Agree, as Labor know that if they signal or publicly plan any firm direction on such issues or policies they will be crucified and dog whistled by our (right wing) legacy media complex.
I think the phase 3 tax cuts are going to be used as a blunt object applied to the back of the heads of the opposition.
Stupid is as stupid does!
Damn straight
“this toxic combination of ideologues and idiots”. I would say accurate. Also, from John Crace in The Guardian, about Truss: “She is the queen of the clusterf–k. The Trussterf–k.”. Good stuff, but is it less defamatory than ‘unindicted co-conspirator’?
Where, or how will the line be drawn?
Glad someone has said out loud that the Truss brainfart was trickle down economics and that it is “voodoo”.
Obviously this will not bother true fruitcakes like our beloved LNP but it leaves them with no excuses in the eyes of sane people.
Reaganomics…aka Voodoo Economics…that less than amusing combination of The Trickle Down Effect. The Laffer aka The Laughable Curve aka The Back of The Napkin Math..which started the USA on the slippery slope from creditor to debtor nation.
In 1981, Reagan lamented the Carter Administration “runaway deficits”, approaching $80 billion, about 2.5 % GDP.
Within only two years, however, “The Gipper” had succeeded in enlarging the deficit to more than US$200 billion, 6 %GDP.
At the end of the Reagan/Bush era it had was down to US$150 billion, almost double what it had been under Carter.
However National Debt had climbed from US$995 billion, when Reagantook office, to $4 trillion by the end of Bush1’s presidency.
Under Reaganand Bush GOP Administrations it climbed as a % GDP from 26% to 42%.
Clinton managed hold/wind back both of them in returning the budget to a surplus of some US$280 billion and reducing the National Debt to 35% GDP.
Dubya, The Faux Texan, previous unlamented GOP encumbrance in the White House, managed to outdo “The Gipper” and Dad.
Setting an unenviable record, the deficit was to be $482 billion in the 2009 budget moving from black to red ink in the order of US$750 billion from the end of Clinton’s term.
Lest We Forget both The Afghan Imbroglio and The Iraq Fiasco itself alone at a cost of c US$3 Trillion*
Then there was the Wall Street Tsunami where so much money was sloshed around, including the socialist style buying of bank shares, that would blow out to in excess of US$1.5 trillion.
The National Debt followed suite, the 2009 estimate being US$9.7 trillion.
And that was before the Global Financial Chicken came home to roost.
It is interesting to note that from 1978-2005
Under Democratic Presidents: Federal Spending went up by 9.9%. Federal Debt by 4.2%, GDP by 12.6%.
Under Republican Presidents : Federal Spending was up 12.1%, Federal Debt by 36.4% , GDP by 10.7%
*The Three Trillion Dollar War: The True Cost of the Iraq Conflict. by Joseph E. Stiglitz, Linda J. Bilmes
W. W. Norton & Company; 2008 ISBN: 0393334171 978-0393334173 LC:DS 79.76 .S698 2008
Thatchernomics continued the idiocy based on austerity, deregulation to allow the supposed free market to operate and that together with so much privatisation for Tory donors, with supposedly low taxation and a strong opposition to unions.
Bravo – excellent post and evidence.
Lo, then came, as the Scots have him, The Radge Orange Bampot…
Under Obama, the economy started its improvement in recovering from the disaster that was caused by that previous Republican encumbrance in the White House, Dubya, The Faux Texan, viz: the Wall Street Tsunami, The Global Financial Chicken that came home to roost and that Three Trillion Dollar “wars” aka The Iraq Fiasco and then also theThe Afghan Imbroglio that the US finally quit in 2021!
Obama reduced the deficit by more than 75% from 2010 and unemployment went from over 10% to 4.5% when he left office. Trump immediately blew the deficit back to 2012 levels.
In fact there were 15 quarters during Obama’s administration when GDP growth surpassed 2 percent, There were eight quarters of growth of at least 3 percent, including three of 4 percent or better. The highest GDP growth of Obama’s presidency was during the third quarter of 2014, when it hit 5.2 percent.
However when under the Radge Orange Bampot both his Tariff War* and Tax Cuts took effect.
The Tariff Wars reduced US exports and hit jobs in the farming and manufacturing sectors, which combined with Tax Cuts reduced the US federal tax take, as well as state based imposts.
Trump had to say the US government would add another USD15 billion to the Farm sector, in particular soy bean and pork producers, hit by the Tariiff War, to the USD 25 billion already committed to US Farm Bills.
That meant that that USA which needed to borrow back in May 2018 c.$300 billion dollars a week just to fund Federal spending and make Federal debt payments needed to borrow even more in the coming years. As well Washington’s borrowing costs had climbed rapidly.
This is because Federal revenue declined due to the tax cuts, so the government needed to borrow more to make ends meet.
The Trump White House had to sharply alter its current US deficit estimates up, when the annual deficit rose above $1 trillion for the first time since 2013,
The US Treasury Department has observed that in just the first 10 months of the 2018 fiscal year, the US deficit totaled $684 billion, a startling 20.8 percent rise over the same period in 2017, mostly due to the December 2017 Trump tax revisions.
US government revenue was up just 1 percent in 2018 to date, according to the Fed, as a big drop in corporate tax payments at the hands of the Trump administration has seen tax earnings for the Fed drop significantly.
Total government spending — particularly by the US military — has risen 4.4 percent, according to reports, after Congress boosted corporate-friendly programs and now suffers under the rapidly rising cost of financing an enormous debt,
*Despite what The Radge Orange Bampot said, those tariffs impose a cost on the US wholesaler and distributor of items and products…a cost that can be absorbed by the wholesaler and distributor or passed on to the consumer, this raising retail prices.
They did not cost China anything, that is unless the US wholesaler and distributor of items and products can almost instantly find a non Chinese supplier of the products in which they deal.
All this in the term of a so called President who claims that he would In April 2016 as the then-candidate promised the $US19 trillion national debt would be eliminated “over a period of eight years” during an interview with The Washington Post.
It is like these 2 ideological idiots have been heaven-sent to spectacular demonstrate the lunacy of the whole neoliberal project at the expense of their dignity. And we though the Muppets were incompetent. They were and thankfully too incompetent to reach the UK acme of incompetence. Outdone by our former imperial masters again.
Despite Albo and Chalmers’ apparent determination to further entrench inequality in Oz, even they must have gotten the message that the stage 3 tax cuts are a colossal dud.
Come on now boys, take your courage in hand and deal with the inevitable News Corp backlash.
And throw in a fossil fuel super profits tax for good measure despite whatever stupid promises you made them (behind closed doors naturally) prior to the election.