Sunday, July 31, 2011
Americans could learn from us on deficit
Americans could fix their big deficit/debt crisis relatively painlessly.
All they have to do is pay the same level of taxes as Canadians do.
U.S. politicians are playing brinkmanship over raising the debt limit. Posturing and ideology have replaced any hint of intelligence or common sense. The risks to the U.S. and world economies are serious.
Basically, the problem is simple
The U.S. spends much more than it takes in. The Tea Party politicians pretend that it's feasible to cut spending by 40 per cent as a solution. It's not.
But there is a solution. The U.S. collects taxes equal to 24 per cent of its GDP. If the take was increased to 31 per cent - the amount collected in Canada - the current year's deficit would fall from $1.5 trillion to $500 billion.
We manage with that level of taxation. Our economy is stronger than the U.S. economy. Our society, arguably, functions better. Creativity and entrepreneurship aren't strangled.
If the U.S. tax revenue was increased to the OECD average of 34.8 per cent of GDP, Americans have a balanced budget without cutting anything from spending.
Most of us grumble about paying taxes, especially when governments do goofy things with our money - like spending on fast ferries or stadium roofs or mismanaged convention centres.
But the current level of taxation in Canada isn't obviously punitive. We share the costs of services like schools and health care and police and get obvious value for much of the money we send off to government. OECD countries function well, for the most part, with their levels of taxation.
It's not like the money disappears. Seniors get pensions and spend the money in their communities. The navy employees a few thousand people in Victoria, and buys services from scores of companies. We drive on the roads that our tax dollars pay for, and call the police when we need them.
It irks some that the payments are compulsory. I can boycott stores I don't like or decide not to eat out, but I have to send a cheque off to Revenue Canada. People without kids pay for schools. People who oppose the war in Afghanistan pay for bigger military budgets.
But that's the price of living in a democratic society. It's pretty good value.
Taxes pay for services we need. We can and should go wild when governments waste our money. We shouldn't pretend that paying for the things we need and use is somehow a bad thing.
American politicians seem trapped in fantasyland.
Let's hope we learn from their delusion.
Posted by paul at 12:51 PM