AltAusterity Digest #65 September 13-19, 2018

The U.S. Senate has approved an $850 billion spending package which includes funding for the Department of Defense and Department of Health and Human Services, among other agencies. Multiple spending bills were tied together in the hopes that priority areas for Republicans and Democrats, defense and health respectively, would pass simultaneously with bipartisan support. It is the intention of Washington’s lawmakers to use September to finish other spending bills, and iron out discrepancies between the House and the Senate before the new fiscal year begins October 1st.

The Guardian’s economic editor Larry Elliot reflects on the nature of the economic recoveries 10 years after the global financial crisis of 2008. In the pre-crisis years, a mix of deregulation and the availability of cheap credit allowed for the private sector to load up on debt. When the markets turned following the collapse of Lehman Brothers, the response of many governments was to nationalize the debts of the private sector, lower interest rates to historic lows, and to increase the money supply in the economy through quantitative easing. According to Elliot, history is repeating itself as low interest rates have encouraged investors to take on riskier investments, including in emerging markets. The net effect has been to raise the global stock of private and public debt in relation to GDP to historic highs, prompting the Bank for International Settlements to raise flags about the “material risks to financial stability.”

Despite the deep recession gripping South Africa, President Cyril Ramaphosa has said there will be no mass layoffs in the public sector. This contrasts an announcement from the National Treasury made in June that it would consider layoffs and early retirement for public sector workers to avoid breaking its pledge to cut spending. Ramaphosa’s announcement came at a trade union federation electoral conference in Johannesburg. As the economy continues to struggle, the unemployment rate stands at 27 percent.

The OECD’s report “Tax Policy Reforms 2018” identifies that one of the main trends over the past year includes the tendency of governments to lower taxes on businesses for the purposes of boosting investment. While this trend has been in place for a much longer timeframe, corporate tax cuts have been used increasingly in the past year including in Argentina, France, Latvia and the United States. The Director of the OECD Centre for Tax Policy and Administration, Pascal Saint-Amans, has dismissed the notion of this being a “race to the bottom,” and instead has categorized is as a “race to the average.” However, if countries with higher-than-average tax regimes lower their tax rates, it will in fact lower the average. The average corporate income tax rate across the OECD has dropped from 32.5% in 2000 to 23.9% in 2018

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