Friday, June 12, 2009

Tax and Spend

Willem Buiter writes:

These figures should not come as a surprise. Obama’s plans for public expenditure are conventional, middle-of-the road social democratic spending plans. You cannot have social democratic spending ambitions if you are not able to impose social democratic tax burdens.

My fears about the sustainability of the US public finances is based on my belief that the US public believes there is a Santa Claus: that you can have the higher benefit levels and higher-quality provision of public goods and services without paying the price in the form of higher taxes or user charges.

The admonition holds in reverse for France. The French enjoy a high level of public provision (though to hear the complaints, they don't seem to enjoy it as much as they should). Sarkozy was elected on a Santa Claus platform: taxes would be cut, but the social-democratic benefits would be maintained (to be paid for easily, as always in campaign platforms, by "cutting out the fat").

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