Respected Historian claims the government is creating a bleak economic future

Niall Ferguson is one of the most respected historians of economics in the country and in a recent Reith Lecture on the BBC he commented that the financial actions of the government today are creating a bleak economic future for generations to come as public spending cuts and a higher tax burden will be necessary in the future.

In his lecture, Ferguson cites the well-known economist Lawrence Kotlikoff, who calculated that in order to reduce the future burden on generations to come, the government either needs to increase the total amount of taxation by 64 percent immediately, or reduce the amount of federal spending by 40 percent. This is the only action that would plug the gap and mean that future generations will not be responsible for current spending.

He has been compiling something which he has called ‘generational accounts’ for the past 12 years and he has said that the government need to take dramatic action if they want to close the fiscal gap that will exist between generations. He has also suggested that one of the best ways to tackle the country’s debt would be to increase the basic income tax rate up from 20 percent, to 40 percent in order to balance the books.

He commented, “We need to restore the social contract that exists between the different generations. This is one of the biggest challenges of economics that is facing democracies in the developed world today. We cannot rely on expenditure statements and current income and the government should not see this as an option.

Businesses would never succeed if they went on in this fashion, and the government should realise that they cannot either. The governments are publishing financial statements that would be regarded in the business world as completely misleading, on the scale of Enron.”