November 18, 2010

GOOD POLICY IS GOOD POLITICS:

Confronting the monster: At last, plans are appearing to cut America’s deficit. But will politicians and the public embrace them? (The Economist, Nov 18th 2010)

At present, compared with other countries, America taxes income too heavily and consumption too little. A sensible solution would therefore be a value-added tax; every other rich country has one. The Domenici-Rivlin report suggests a 6.5% “debt-reduction sales tax”. A carbon tax, or a higher petrol tax, could play the same role.

The proposals are bold; but no one who is making them currently holds office. Will America’s politicians ever dare sign on? Research by Alberto Alesina of Harvard University has found that, contrary to political wisdom, governments that enact austerity measures are often re-elected: Denmark’s in the early 1980s and Sweden’s and Canada’s in the 1990s, for example. Support for Britain’s austerity-preaching Conservatives has remained strong, though the measures will not bite until next year.

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Posted by Orrin Judd at November 18, 2010 3:27 PM
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