Taxes and handouts

George Bernard Shaw once said that a government that robs Peter to pay Paul can always count on Paul’s support. He left it to us to imagine what Peter’s reaction might be. The same thing applies to a government which raises taxes while announcing it will be hiring rural policemen. It might be sure of the hirees’ support but can it depend on the support of those who will be paying for them? The truth is that taxpayers have a boiling point which they reach when they realize the particular measure is putting their household budgets in the red. Despite the opposition’s cries of «tax storms» this summer, no one is listening. Taxpayers will see the results much later, and will simmer in silence. The real economy always wreaks vengeance on politics, whether the adjustment is moderate, drastic or even non-existent. Drastic adjustment might lead to clashes with only small groups, but has real economic effects that spread out over time. However, a moderate adjustment or no adjustment at all creates a vicious circle within the economy. Increased expenditure calls for increased revenue, and increased taxation brings about pressure for greater wage increases. When a large enough sector of the population lives directly or indirectly off the state, wage increases create a need for higher taxation and so on. We shouldn’t look just at the immediate cost of enlarging the public sector but at its cost over time. For example, hiring 4,000 rural police officers at very low wages will lead to strikes and demands for higher wages two years later. Unless the economy emerges from the vicious circle of deficits, there is no hope for either the country or its political life. What is needed are structural changes, not higher taxes.