måndag, augusti 01, 2011

My take on the dept ceiling deal

It’s good there is a deal to raise the debt ceiling in US. As a friend pointed out earlier today, lots of dedicated public servants and scientist would stop getting paid, people would stop receiving the support they needed and the global finance market would risk to collapse if US went into default. All good then, at least for the next 24 hours.

But still, raising the debt ceiling doesn’t automatically lead to a reduced federal deficit. The Republicans won’t accept raising taxes. The Democrat doesn’t like to cut spending. They need to compromise the make decisions and I’m afraid the Democrats have to give up on raising taxes for the richest and the Republicans have to give up the spending cuts. If they not agree, there will be automatic spending cuts for the defense and for the social security systems.

To solve the long term problems, I think this is what is needed:
1. Raise taxes, especially for the richest. But I also think US needs a federal sales tax and increased taxation on pollution, including climate gas emission (fuel for instance).
2. Cut spending, especially the defense budget.
3. But continue spending on education and increase investments building a high speed rail network. That is, invest in building America stronger for the future.

Two more things
- Simplify the tax system. Why not look at the principles behind “århundradets skattereform” (“tax reform of the century” in Sweden in 1990).
- Don’t be tempted to solve the current problems with more protectionism. Then the US industry will continue to lose competivity.

Writing this I guess I’ve made myself unelectable if I ever move to the US… But isn’t there any American politician that could support this?



Anonymous Sven said...

Regarding tax hikes, the votes in congress just aren't there. And even if tax revenue is raised, just cutting defense spending won't be enough. The US desperately needs an entitlement reform.

Also, I don't think it is practical to impose a federal sales tax on top of state sales tax. A federal VAT might be a better idea, but I really can't se a way forward on that in the near future.

tisdag, 02 augusti, 2011  

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