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 has been vividly illustrated recently, 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:
· Tax income fluctuates across the economic cycle, so affordability must be assessed over the long term; the government must be able to repay some debts during the good times, so that it can afford to borrow in the bad times – and avoid an ever-increasing level of government debt which would be a burden for taxpayers in later years (3.3.8.1). Individualists must accept that they need to raise enough tax for the economy to be sustainable.
· There is a limit on how much tax can be raised (3.2.4.6), putting an economic constraint on the collectivist desire for high spending.
· Whatever the political ideology of a government, there is a need to be able to give financial markets confidence in economic management – so that they don't increase the interest rates on public borrowing (3.3.8).
· 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 is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).