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 (, and collectivists want the State to provide good public services and generous social protection (  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 (  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 (, 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.


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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/edition04/3523.htm.