We have had some commentary on "A balancing act: fair solutions to a modern debt crisis".  Most of it is positive. 

Martin Wolf agrees with our endorsement of the Labour government's response to the recession, as well as the call for a greater burden to be borne by property taxes.  Martin emphasises spending cuts to a greater extent than we have.  Given how difficult they will be, it is quite natural and right that commentators keep up the pressure on this subject: without such pressure, the broad-based support for necessary pain will not be achieved.  

But the fact that we highlighted the need for tax rises has allowed our views on spending cuts to be blurred somewhat. Our position is not "forget about spending cuts, put up taxes instead".  We merely point out that the pace at which expenditure is due to be cut is already ahead of that achieved by Thatcher or Major, and will surely hit some buffer. There are limits - political, contractual, practical -  to how much this can bear: limits that may be easy to ignore in the more impractical fringes of think-tank-world, or indeed in the blogosphere, but which cannot be ignored if the purpose is sensible advice that a government can adopt.  Furthermore, public sector receipts as a proportion of GDP are due to be around 38 per cent in 2013-14 (Table C7).  Now look at the history (Table C16). We are not about to hit Swedish levels, circa 1971.

On the tax-spending mix, the position taken in 'A balancing act' is quite simple.  Spending should fall from around 48% to 41% of GDP.  This will require cuts of at least 2-3% beyond 2014, the date to which current plans stretch.  Debt stability can be achieved with taxes at about 39-40% of GDP. Not doing anything with taxes is unfair: some of the beneficiaries of the debt are tax payers, not just those living off the state in some way.    Current plans only get taxes to 37.9%.  So we need to discuss that last 1%, and ideally do it in a way that doesn't crucify future growth.  Here's how. 

Samuel Brittan writes in more detail about the paper in the FT.  It was a pleasant surprise to find that he had noticed it- but less surprising that he agreed with the major lines; through his writings, in particular the excellent collection "Against the Flow", Sam Brittan has been an enduring influence on liberal economists everywhere. Long ago, he was airing issues that are still whirling around the financial crisis - such as a target for asset prices, inflation targeting, increased taxation of wealth.  He has a calmer approach to the question of fiscal deficits - see this piece for example, - and draws particular attention to our suggestion that the government ties its hands against inflation with more index-linked bonds. Read his book: in combination with "The View from Number 11" (by his one-time colleague Nigel Lawson) it is an excellent reminder that many of the big questions of economics have already been chewed over. 

The comments on the Libdemvoice piece largely focus (approvingly) on the increase in property taxe, though with a more radical bias than we thought practical.  Our proposal is a supplement to council tax, which could probably be introduced relatively easily.  A full-blown move to land-value tax could not be assessed in such a short paper.  Some people think a crisis is a great opportunity for radical change.  But the risks of a mis-step will be even greater in 2010 than during the calmer years that went before.  Introducing a wholly new form of revenue, replacing another one presumably (otherwise the result is a crunch caused by the excess taxation), and hoping to hit the nail on the head first time, allows valour to get the better of discretion. 

 I would like to have read a hard-core fiscal hawk defending what Will Hutton calls "primitive Samuel Smiles Thatcherism", in a piece that agrees with our dual take on government responses to 1980 and 2009.  As ever, his article is well worth reading.  Will's recent willingness to praise the Conservatives makes his stinging criticism of their implied fiscal approach more damning. 

Whether through our influence or not, a discussion of tax-rises is beginning to surface.  The Guardian's leader talks of "The other half of the black hole", writing "as the country wakes up to hard times, the revenues ledger in the public books is getting none of the attention being lavished on the outgoings column."  Their ideas have some eerie parallels with ours:

"Houses are taxed too little compared to other assets, which is one reason why they grew so expensive; by bringing the gains realised on selling pricey family homes within the tax net or by recasting council tax, a determined government could not only raise money but also do away with this distortion."

Larry Elliott weighs in as well. 

The best opposition to the paper was Tom Papworth's comment to the earlier blog entry, calling for the government to 'take the honest and prudent approach of paying for expenditure out of current taxation'.   So the budget should always be balanced?  Wow.  I was personally a big fan of Liberal Polemic, Tom's now-inaccessible Libertarian take on the world.  But I am amazed at the idea that the only sensible or ethical approach for a government to take is so narrowly defined.  Is that also true for individuals?  Should they never attempt to smooth finance, regardless of shocks or bumps?  This would be a quite extraordinary exercise in self-denial - McCawberish in its sophistication, daft for an individual, even worse for a state (which as Sam Brittan points out is quite a different animal from an individual). Personally,  I find it hard to stubbornly ignore such a quantity of Keynesian insights in one go. 

Of course, there are items of spending that can be cut.  But dragging out Trident and ID cards, endlessly, does little to cover a multi-billion pound deficit that is due to recur every year.  It reminds me of student debates I attended at the LSE: every time some mature head introduced the notion of a fiscal limit to whatever dream the student had just proposed, the answer would come back "Cancel Trident".  Whatever its merits, cancelling Trident cannot be the gift that keeps giving: you can't cancel it once in 2011, then twice more in 2012, and then a few times more in 2013 in order to fund a tax cut.