We all know the endless sisyphian cycle between the Left and Right. The Right practice fiscal discipline, and with much effort, increase the available funds in the treasury. Then the Left get voted into power, and squander all that was saved, in a populist spending spree.
Recently, the US Republicans have invented and implemented the "starve the beast" strategy, whereby they cut tax rates and encourage spending on conservative causes like defense, to the point where there is no money left for the welfare state to grab.
It amounts to fiscal brinksmanship, but it creates a situation whereby any Leftist govt voted into power would not be able to raid the treasury to fund populist programs, because there would be nothing left there to grab.
BJP and others should adopt a similar policy. Once elected, they should max out spending on useful things like infrastructure, which can only help India's development. Then if/when Congress/Left get back into power, there won't be anything left for them to grab to spend on their vote banks.
By spending to the point of fiscal irresponsibility, it would force any successor govt to balance its books. This would break the ant-grasshopper cycle that occurs between the political Right and Left.
Just some thoughts. Comments?
5 comments:
Sounds good, at a high level. But I am not sure if that's a strategy to starve the beast or if GOP wants it's rich donors to be richer. What they are really after is the SS and that is in lot worse shape. And moreover, do we want BJP to make our defense spending to be as big a percentage as the US's?
-Sage
http://wows.wordpress.com
Sixth pay commission, farm loan waiver, oil bonds, fertilizer bonds, NREGS... who would have thought the 'dream team' managing India's finances would take us so far away from fiscal responsibility? The next govt will spend the better half of its tenure putting the finances back on track.
Govt to borrow $23.8 bn in first half of '08-09
http://economictimes.indiatimes.com/Market_News/Govt_to_borrow_238_bn_/articleshow/2896075.cms
Again, that's why I feel that a conservative govt should 'use it or lose it' -- ie. by not engaging in deficit spending, then it means whatever unspent potential is left available, will instantly be exploited by a Left-wing govt for populist purposes, when it comes into power. Better to leave them with nothing, thus forcing them into fiscal responsibility, and depriving them of the opportunity for populist shenanigans.
Please note that I'm not saying that a BJP govt should spend purely on defense. I'd actually prefer that they mainly spend on infrastructure, which would be more beneficial for the common man and for the economy. But they should not leave any extra spending potential remaining for the greedy Left to exploit once they reach office.
An interesting read: Why is India doing China's dirty job?
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