I disagree on the VAT. I think it's a bad tax because it's flow through, and therefore, exponential. As far as a consumption tax, I agree there. Rewarding savings and investment is the right approach. As far as the Irish deficit used to finance bank debts, you know more about that than I do. But if I recall, the Irish ran those monster deficits long before their banking sector crashed, ya?
Mitt Romney won't rule out the possibility of a VAT Tax
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I disagree on the VAT. I think it's a bad tax because it's flow through, and therefore, exponential. As far as a consumption tax, I agree there. Rewarding savings and investment is the right approach. As far as the Irish deficit used to finance bank debts, you know more about that than I do. But if I recall, the Irish ran those monster deficits long before their banking sector crashed, ya?
Coincidentally to the discussion of Ireland, Krugman had this to say today:
"European Fiscal History (not fitting the script)
Nice paper in Vox (link) decomposing the rise in debt-GDP ratios for troubled European economies. Iâd make special note of this observation:
Projections suggest that some European countries had an unsound fiscal stance (in terms of debt-to-GDP ratio evolution) well before the 2008â09 financial crisis (Greece, Portugal, the UK); on the contrary, others had a sound fiscal stance (Spain, Ireland, Italy).
To understand what this means, you need to know that the combined GDP of Greece and Portugal is a bit over $500 billion (the UK isnât in crisis), while the combined GDP of Spain, Ireland, and Italy is more than $3.5 trillion. So the economies now in trouble were, overwhelmingly as measured by economic importance, following sound fiscal policies before the crisis.
Yet the whole European response has been based on the assumption that fiscal profligacy was the villain."
http://krugman.blogs.nytimes.com/2012/01/05/european-fiscal-history/
"European Fiscal History (not fitting the script)
Nice paper in Vox (link) decomposing the rise in debt-GDP ratios for troubled European economies. Iâd make special note of this observation:
Projections suggest that some European countries had an unsound fiscal stance (in terms of debt-to-GDP ratio evolution) well before the 2008â09 financial crisis (Greece, Portugal, the UK); on the contrary, others had a sound fiscal stance (Spain, Ireland, Italy).
To understand what this means, you need to know that the combined GDP of Greece and Portugal is a bit over $500 billion (the UK isnât in crisis), while the combined GDP of Spain, Ireland, and Italy is more than $3.5 trillion. So the economies now in trouble were, overwhelmingly as measured by economic importance, following sound fiscal policies before the crisis.
Yet the whole European response has been based on the assumption that fiscal profligacy was the villain."
http://krugman.blogs.nytimes.com/2012/01/05/european-fiscal-history/
Democracy is proving incapable of cutting spending once it is institutionalized. The government simply cannot or will not reduce spending.
California is a decent example. Everyone is aware of the large and unreasonable pension benefits afforded to state employees yet instead of making *any* attempt to reduce that spending Gov. Brown is asking for billions in new tax revenue.
Labor Unions are at the root of the problem. This country should make organized labor illegal.
It's not the government per se, its the people we elect. We have true conservatives and we have the people you support. We need to get rid of the people you support and populate our legislative halls with people like Ron Paul, who advocate for a Constitutionally limited federal government that won't tax us to death and won't run up 15 trillion dollar deficits while depleting the ss trust fund.
Money is also an issue but when less than 40% of the population votes that's the much bigger issue.
I am certainly happy with disagreement...
And yes, the Irish govt was running a deficit prior to the crisis, but they had the room for it, as their prior stock of government debt was just so low. So, just like some others, they were running a deficit that they could easily afford.
In general, the more I think about it, the more I conclude that the US, being a mature economy, should have some sort of a consumption tax, while its income and corporate taxes should be lower. IMHO, that would be a more optimal setup. Not that I am any sort of expert or anything.