Monday, July 27, 2009

Credible Promises

Keynes didn't appreciate that it is hard to cut government spending once you start spending during a recession, so how will our budget deficit vanish to remove the temptation to print loads of new currency? This quote from Yahoo today suggests that taxes will rise sharply in two years but if I anticipate this do I save today? Will people vote for Republicans who won't follow through with this tax "medicine"?

"U.S. officials told reporters that the U.S. side stressed to the Chinese that the United States has a plan to bring the deficit down once the economic crisis has been resolved. Officials said Bernanke discussed the Fed's exit strategy from the current period of extraordinary monetary easing."

What is this plan? Democrats raise expenditure and know that they can't ex-post cut expenditure so somebody's taxes are going up. We may move to Bermuda to avoid our patriotic duty.