What do George Osborne and Mitt Romney have in common?
Both George Osborne and Mitt Romney have recently been criticised for stating that the United Kingdom and the United States are countries facing massive debt burdens. With increasing deficits, the leaders have stated that the problems are caused not by taxing the rich too little, but instead a wider problem; giving too much when there is too few to pay. This problem is caused by a variety of factors, but it is certain that taxing everyone more lead to more problems. Instead, the solution lies elsewhere.
The window of opportunity to sort out these issues is closing, so something needs to be done soon. Debt markets are currently more concerned about the problem in the Eurozone, but eventually, these issues will subside, and interest will turn to other problems. With massive deficits and debt mounting, the situation in the United States and the UK is simply untenable. People have claimed that we need the government to lead recovery, but in reality, that is just going to make problems worse. Basically, both countries spend more money per person than they collect, and when the debt is being spent on consumption, rather than investment, like it has been, it can only cause problems in the long term.
This cannot be solved by taxing people more, as it’s likely that both countries are running past the maximum of the Laffer Curve, meaning that higher taxes will just lead to lower revenues. The middle classes are already been squeezed, with inflation higher than wages, meaning that real incomes are falling. Due to this, consumption and growth is being hit, leading to additional problems.
However, we can instead look at what the government spends, particularly welfare spending, which has annual spending of £116.1 billion in the UK. Romney recently attacked a similar culture in the US, with Osborne taking steps to stop this rising further, such as preventing an extra £2.3 billion by suspending the link with inflation for two years. I believe that this is fair, as why should hard working people have to cope with falling real income, while others on welfare don’t have to? Work has to pay more than simply sitting at home if you are fit and able to work. At the moment, the system relies upon the unemployed seeking work themselves, but this hasn’t worked; leading to our unattainable welfare spending.
Jobs are available. For starters, there are 541,000 Polish people in the UK, with 95% of them working. They have come here to take advantage of the work, filling, for the most part, jobs that most British people consider below them. Instead, British people without a job need to understand that if they don’t have a job, they need to take any job. If the only job available is cleaning toilets, they must take it. It might lead to a better job, or can give them some income while they find something else. 1.57 million people claimed Job Seekers Allowance in August, meaning that this strategy could really help solve the problems in the UK. For example, that’s around 500,000 jobs that Polish people have taken that could have been taken by somebody else unemployed. Once you consider other people who have moved to the UK for similar reasons, it’s likely this could go a long way to eliminating a lot of the current welfare spending. With this, the country would then be able to receive more per person than it spends, due to decreased spending and increased revenue, helping to solve the deficit and debt problems. I’m not saying we need to remove all immigrants, as they contribute to society. Instead, it hints at the problem with the benefits culture.
46% of registered voters are dependent on the state, either due to pensions, working in the public sector or on benefits. This is simply unaffordable, as you cannot rely on one half of society to pay for the other, as this leaves for no spending on other things or for their future pensions. You also cannot afford extra spending during the bad times, not having the luxury of a surplus during periods of growth, seen with the UK running a deficit in 51 of the past 60 years. You cannot do anything about pensioners or those who are actually physically unable to work, but the country does drastically need to reduce those on benefits, by getting them into work.
Both the UK and the United States need to deal with their debt, and it seems that both Romney and Osborne are beginning to understand that. Romney might not be an amazing candidate, and Osborne might not be the most liked politician, but at least they understand that something needs to be done about the government’s problem of spending more than they are receiving, helped by the massive welfare spending. The books cannot be balanced by increasing taxes, so instead we need to focus on getting people back into work. Jobs are available, but people see them as beneath them. This needs to change. We can then finally start to deal with our debt problem.