Why Don't Govs Save Taxes?

[Seeker]

Now, I'm not the biggest fan of Keynesian economics by any means...but I do understand the logic of 'smoothing the dips by trimming the peaks'.

The problem is, governments have never paid for 'smoothing the dips' BY trimming the peaks. Too unpopular.

The best way would be to set aside tax revenue in 'good times' in some sort of valuable, inflation-resistant form like metals or energy or whatever.

Then you could dip into that 'rainy day' fund during recession.

Problems: Everyone thinks good times will last forever, and the temptation to spend money rather than 'waste' it 'just sitting there' is intellectually stupid but politically virtually irresistable.

So instead we get the silliness of the government using inflation to 'smooth the dips' rather than reducing spending or saving.

Basically two questions:

1. Will it ever be possible for government, or government departments to save and set aside tax revenues, for rainy day funds and long term capital projects?

It seems to make a heck of lot more sense than always borrowing.

2. Will it ever be possible for politicians to drastically cut spending? Why not? Why stupidly wait until events force ones hand?

[Kontiki]

There are cases of this happening, albeit fairly rarely. It's typically from resource windfalls (Alberta, Alaska, Norway, etc.)

[Maniac]

Most states have massive amounts of debts, so trimming the peaks, if it happens, is usually in the form of reducing state debt.

[Arrian]

The problem is, governments have never paid for 'smoothing the dips' BY trimming the peaks.

Irritating, isn't it?

-Arrian

[BeBMan]

2. Will it ever be possible for politicians to drastically cut spending? Why not? Why stupidly wait until events force ones hand?

They usually don't want to hurt potential voters or lose other forms of support. Until they're forced to do it and can sell it as a "no alternative" move for the greater good.

*Bebros 0,5 cents

[Darius871]

It's not the governments' fault; they're simply compelled by idiot voters who think they can have their cushy entitlements and tax cuts at the same time. No politician who is interested in keeping his/her job is crazy enough to say a peep about tightening our belts, and that applies to both sides of the aisle. Or at least in the U.S.

[OneFootInTheGrave]

it is very simple... such a government will have VERY reduced chances of being elected... and noone want's reduced chances do they?

I add 0.5c on top of BeBro's

edit: and Norway is borderline communist anyway so they don't count

[Ben Kenobi]

I don't understand why AB just doesn't let it pile up for a few years so that they are making more off the interest then they need to fund the programs.

That way if things do turn sour, you'll be able to ride them out much easier. Stelmach is an idiot.

I would vote for any politician who wanted to have enough funds to not only wipe out our debt, but to make sure that we could eliminate taxes altogether.

[Riesstiu IV]

I seriously read this as "Why doesn't god save Texas?" when I first glanced at the title.

[Blaupanzer]

The US was running a surplus and paying down the debt run up by Reagan when Bush took over. The Repubs and Clinton conspired to pull this off by making revenues larger than total spending. That logic completely escaped the Bush administration.

Why is it hard to balance the budget, let alone run a surplus? Raising taxes affects everyone. Cutting spending usually directly affects some specific group, not everyone. So in the next election you have everyone a little peeved and some groups very peeved. Not a good start for reelection.

[onodera]

That's what we did here, set up a reserve fund where oil export tax went.

[Naked Gents Rut]

The real answer is that you can't buy a trillion dollars worth of gold or oil and expect to be able to dump it on the market during a recession and get your money back. It's a terrible investment.

[Jon Miller]

The best thing to do in a boom time is to invest in your country so that it can survive a bust better.

That is to invest in infrastructure, education, health, etc.

JM

[Arrian]

Actually, you get more back for the buck if you invest during bad times (prices are lower, more people need to find work, etc). Government spending should be counter to the economic climate (more in bad times, less in good).

-Arrian

[Blaupanzer]

Arrian indicates he is a Keynesian. A lot more people are these days than a few years ago. Clinton and those congressional sessions agreed with you and Arthur. The last eight years in the US has seen the rise and fall of the "Get it while you can" school. We could hang a few of them for violating the Geneva convention. According to the outcome at Nuremburg, intentional torture and the ordering of its use are hanging offenses. So I guess the got it while they could.