US PRESIDENT JOE Biden has hit out at “trickle-down economics” as he prepared for a meeting with Liz Truss, who plans to slash taxes in the hope of stimulating growth.
Biden said he was “sick and tired” of the theory that cutting taxes for businesses and the wealthy will see the benefits “trickle down” into the pockets of poorer workers.
His comments came as British Prime Minister Liz Truss today said she is willing to be an unpopular Prime Minister to bring in measures she believes will grow the economy.
Truss confirmed she would be reversing the national insurance hike and axing the planned increase to corporation tax, ahead of Chancellor Kwasi Kwarteng’s mini-budget on Friday.
The new Tory leader also effectively confirmed a plan to scrap the cap on bankers’ bonuses as she argued she needs to make “difficult decisions” under her gamble to go for growth.
But as she was speaking, Biden tweeted criticism of the type of economic policy she was advocating – a day ahead of their meeting at the United Nations summit in New York City.
“I am sick and tired of trickle-down economics. It has never worked,” the US President said.
I am sick and tired of trickle-down economics. It has never worked.
— President Biden (@POTUS) September 20, 2022
We're building an economy from the bottom up and middle out.
While his criticism was surely for a domestic audience, it underlined the differences between the two leaders’ stances just as Truss says she wants to foster closer ties with international allies.
Downing Street has hit back and said it would be “ludicrous” to suggest Biden’s criticism of trickle-down economics was directed at Truss.
The Prime Minister’s official spokesman said: “Any suggestion that it’s in some way a direct criticism of UK policy would be ludicrous.
“No two countries’ economies are structured in the same way, each have unique challenges.”
Prepared to be unpopular
Truss was asked during a round of broadcast interviews on the 102nd-floor observatory of the Empire State Building if she is prepared to be unpopular.
“Yes. Yes, I am,” she replied to Sky News.
“What is important to me is we grow the British economy because that’s what will ultimately deliver higher wages, more investment in towns and cities across the country. That’s what will ultimately deliver more money to people’s pockets.
“In order to get that economic growth, Britain has to be competitive. If we put up taxes, if we have arbitrary taxes on energy companies, if we have high corporation tax, we’re not going to get that investment and growth…”
She insisted the cost to the taxpayer of her energy package, being paid for by borrowing rather than a windfall tax on the profits of energy and oil giants, is “not what has been projected”, with estimates as high as £150 billion.
Truss accepted the benefits would fall in favour of the rich – at least initially – but rejected claims of unfairness as she bet on growth trickling down to the rest of society.
“I don’t accept this argument that cutting taxes is somehow unfair,” she told Sky.
“What we know is people on higher incomes generally pay more tax so when you reduce taxes there is often a disproportionate benefit because those people are paying more taxes in the first place.
“We should be setting our tax policy on the basis of what is going to help our country become successful. What is going to deliver that economy that benefits everybody in our country.”
She claimed that criticism that it was unfair to fund cuts by borrowing to be paid for by future generations is “what people on the left of politics often express”, despite polling suggesting a windfall tax would be popular.
Truss confirmed to the BBC that she will be reversing the national insurance hike and axing the planned corporation tax rise that were the policies of Boris Johnson’s administration.
“I’ll always work to make sure that we are helping those who are struggling. That’s why we took the action that we took on energy bills because we didn’t want to see households facing unaffordable bills,” she said.
“And that’s why we’re going to take the action on national insurance, reversing that increase as well.
“So, yes, we do have to take difficult decisions to get our economy right.
“We have to look at our tax rates. So corporation tax needs to be competitive with other countries so that we can attract that investment.”
With Truss anticipating a general election in 2024, she is gambling that benefits will come from potentially unpopular policies such as that on bankers’ bonuses.
Critics have taken issue with the timing of lifting of the bankers’ cap limiting payouts to twice their salaries, with the cap introduced by EU legislation in the wake of the 2008 financial crisis.
She said the priorities of voters will be issues such as job opportunity, investment, high street improvement, road building and phone signals at the next general election.
The Institute for Fiscal Studies says that cancelling the corporation tax rise will cost £17 billion per year, though the think tank acknowledges the figure does not account for how the move might affect investment.
The financial experts also say the reverse in the national insurance hike will cost £13 billion annually.
Includes reporting by Press Association
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