Saturday, 17 September 2011

Fiscally responsible states

In a recent article, James Delingpole wrote:
Sure a "successful Euro" would be massively in Britain's interests if we lived in a parallel universe where: the EU were a democratic entity which prized, above all else, the sovereign rights of its constituent states; the EU were not a two-speed economy where the interests of heavily socialised, terminally corrupt spendthrift southern whacko member states like Greece diverged enormously from those of stolid, hardworking, fiscally responsible states like Germany;
Though I accept the spirit of what he's saying, I took issue with his last point:
Last time I checked, Germany had a massive national debt (1.8tn euro according to this site: ).

It's only fiscally responsible by comparison to other states!
To be fiscally responsible, a government must balance the books, and take steps to eliminate past debts (personally, I think default is the best option, but failing that, debt should be steadily paid down to zero by running budget surpluses).

I'd also suggest that there's nothing responsible about balancing the books on a high-taxing, high-spending model, as government control of large portions of national income will make citizens poorer than they otherwise would be. Bureaucrats have neither the knowledge nor the incentive to spend efficiently.

But as it happens, I can't think of a government that has consistently balanced the books on a high-spending, high-tax model. It would seem there are limits to how much revenue the government can collect through taxation alone.

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