UK Prime Minister Warns "Years of pain ahead, No Trampoline Recovery"; Time for U.S. Public Unions to Share the Pain Too

In contrast to US cheerleaders foolishly predicting a "Checkmark Recovery" (see Disputing the Alleged "Checkmark Recovery") British Prime Minister Cameron says "Years of pain ahead"

DAVID CAMERON has warned that the economy is in a far worse state than previously thought and signalled that Britain faces years of “pain” as the spending axe falls.

The prime minister indicated a sharp downgrade in official growth forecasts and revealed that welfare and public sector pay would bear the brunt of budget cuts.

It is understood that tough measures being considered to help control the £156 billion budget deficit include benefit freezes and cuts in child tax credits. There are also likely to be below-inflation pay rises for state employees on top of next year’s planned freeze.

The prime minister said there would be no “trampoline recovery” of the economy. He warned there was a “serious problem” with forecasts inherited from Labour of robust 3% growth next year.

“There is a huge amount of debt that has got to be dealt with. Crossing our fingers, waiting for growth and hoping it will go away is simply not an answer,” he said.

“The country has got an overdraft. The interest on that overdraft is swallowing up things that the nation should otherwise be spending money on. We have got to take people with us on this difficult journey.”

Cameron gave a clear hint of the priorities for the emergency budget in two weeks’ time. “You have to address the massive welfare bills,” he said. “You have to address public sector pay bills. You have to address the size of the bureaucracy that has built up over the past decade.

“Otherwise you will have to make reductions across the board which you don’t want to do. We need to address the areas where we have been living beyond our means.”

However, he refused to rule out an increase in Vat, which many analysts believe will go up from 17.5% to 20%.

Cameron signalled a softening of his stance on capital gains tax, which is due to go up this month from 18% to nearly 40% to help pay for the Lib Dem aim of taking the low-paid out of income tax.

Facing a growing rebellion from Tory backbenchers, the prime minister said he was considering some sort of relief for investors selling assets such as shares or second homes that they had held for a long time. “I totally understand the arguments,” Cameron said. “I did not come into politics to punish people who want to do the right thing and save.”

"Welfare and Public Sector Pay Would Bear the Brunt of Budget Cuts"

Ding-Ding-Ding, except for the tax hikes, the UK almost has a winning policy. Why should there be any raises for government workers, especially the top end? If public workers think they can do better in the private sector, I say let them try.

In the US, we need to add military spending to that mix to have the ideal platform. It is time to exterminate both union pestilence and military waste beyond what is genuinely needed to defend the US.

In regards to military spending I think we can easily get by with 15-30% of what we are currently spending. However, I would settle out of court right now for a quick 50% reduction to be reviewed again in a few years.

Time to Share the Pain

In spite of the incessant howling of public union members (some write me nearly every day), most public union members have not felt any impact in this recession. It's time to share the pain.

We do not need a pay freeze for public employees, we need to privatize as many of them as possible and cut the pay and especially benefits of the rest.

I wholeheartily endorse the plans of cities to outsource police and fire department duties.

For a prime example, please consider San Carlos California Ponders Dissolving Police Department, Outsourcing Duties; Redwood City Mayor says "It's the Wave of the Future".

In New Jersey, Governor Christie Leads the Way on school vouchers, union dues, and economic change.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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