3.5.2.3 The Need for Compromise on Public Spending
Politicians cannot do all they want to do, because there is a need for compromise on public spending to take account of economic realities
As described above, individualists want a largely privatised economy with low taxes (3.5.2.1), and collectivists want the State to provide good public services and generous social protection (3.5.2.2). Neither ideological camp can have all that it wants, though, and a compromise agreement must be reached. The difficulty of reaching that compromise was vividly illustrated in January 2018, as described in the BBC article: US government shutdown: How did we get here?.
The need for compromise on public spending is resolved politically, as discussed later (6.7.1), but those negotiations must take account of economic factors:
● Whatever the political ideology of a government, there is a need for prudent economic management (3.3.8). The government must avoid an ever-increasing level of government debt, which would be a burden for taxpayers in later years. It must also be able to give financial markets confidence in its economic management, so that they don’t increase the interest rates on public borrowing
● The individualist preference for low government spend, to allow lower levels of taxation, must be offset by the need for investment for medium to long term benefit (3.2.3).
● Sufficient tax must be levied to pay for the government’s spending plans, but there is disagreement about where the burden should fall and there is a practical limit on how much tax can be raised in total (3.2.4).
● Value for money, rather than ideology, should determine the choice of public service providers – as analysed below (3.5.3). Some privatisations don’t work in the interests of anyone other than the provider.
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/3523a.htm.