Liz Truss pursues the “waterfall economy” despite Biden’s contempt

British Prime Minister Liz Truss and US President Joe Biden met formally for the first time at the United Nations General Assembly in New York City, following the economic policy clashes between the two leaders.

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LONDON – The UK government will announce sweeping tax cuts for businesses and the wealthy on Friday, in a controversial mini-budget that shows just how far new Prime Minister Liz Truss is willing to go to overhaul UK economic policy even as it attracts political anger.

Truss – whose “Trussonomics” political stance has been compared to that of his political idols Ronald Reagan and Margaret Thatcher – said he was willing to cut taxes at the high end of the economic spectrum in an effort to stimulate UK growth, in a strategy typically dubbed a “waterfall” economy.

But the approach, which comes as Britain faces the worst cost-of-living crisis in decades, has drawn criticism from both UK political opponents and Downing Street’s closest international ally: the US president.

Biden, in a tweet Tuesday, said he was “sick and tired of the cascading economy”, adding “it never worked.”

Downing Street said it was “ridiculous” to suggest the comment was directed at Truss, according to the FT. The White House did not immediately respond to CNBC’s request for comment.

It came a day before the couple formally met for the first time in New York on Wednesday, after which time Truss tweeted that “the United Kingdom and the United States are firm allies”.

What is expected of the mini budget?

The UK growth-focused mini-budget, to be announced on Friday by new UK Finance Minister Kwasi Kwarteng, is expected to include plans to eliminate planned corporate tax hikes, the end of the cap on bankers’ bonuses and a potential cut in the duty stamp, the tax paid on the purchase of a home.

Kwarteng also confirmed early Thursday that the government will cancel a recent increase in taxes employees pay on earnings, known as national insurance.

I don’t accept this argument that cutting taxes is somehow unfair.

Liz Truss

UK Prime Ministers

Critics, including the British opposition Labor Party, have argued that such measures disproportionately benefit the rich. Higher income earners will receive greater relative savings from the tiered NI tax than lower income earners, for example, while retirees and benefit recipients will be exempt from the savings.

However, Truss said Tuesday he was willing to be unpopular if necessary to revive the UK economy.

“I don’t accept this argument that cutting taxes is somehow unfair,” he said News from heaven.

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“What we do know is that people with higher incomes generally pay more taxes, so when you cut taxes there is often a disproportionate advantage because those people pay more taxes in the first place,” he added.

More details are also expected on a previously announced limit on energy bills for households and businesses, which were pushed higher after Russia’s war in Ukraine.

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“With all that has been said and done, we estimate that the government’s spending package could exceed £ 200 billion over the next two years, destroying existing plans for fiscal consolidation,” he told CNBC via email.

Ryan noted that the government’s fiscal measures could “significantly reduce the possibility of a deep and prolonged UK recession,” but added that risks remain in terms of medium-term high inflation and increases in government deficit and net debt. of the United Kingdom.

The Bank of England said Thursday that it is possible that the UK was already in a recession.