Brazil has declining debt, a strong consumer base, and a fiscal deficit far below that of the U.S. and most of Europe.
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Despite a tripling of the monetary base since 2008 and cumulative deficit spending of 36% of GDP, America has experienced below trend economic growth and stubborn unemployment in the current recovery.
At the same time, the extra spending the Republicans have acquiesced to is dismaying the deficit hawks in their base, and will doubtless prompt some divisive primary challenges.
How can such a puny manufacturing base ever aspire to close such a gaping deficit?
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As our economy grows and people get back to work, the debt and deficit will naturally decrease with a rising tax base, increasing consumer spending and the public investment that comes with greater revenue and improved consumer confidence and business sentiment.
The main deficit problems since 2009 are a permanently higher spending base (see Footnote No. 1) and the slowest economic recovery in modern history.
During the 2008 campaign, for instance, then-Senator Obama suggested that the programs giant long-run deficit could be addressed by busting the wage-base cap and imposing the payroll tax on a larger amount of income.
Countries with heavy debt burdens (like Italy), whose tax base has collapsed (Ireland and Spain), which had a big budget deficit to start with (Britain) or whose long-term growth prospects have been hit hardest (Spain) should fear a sudden loss of investors' confidence more than those with smaller deficits (Germany), better demographic prospects (America) or a reserve currency (America again).
After Toronto took a 2-1 lead against Phil Hughes on Lind's RBI single in the fourth and Izturis' run-scoring double off the base of the right-field wall in the sixth, the Yankees overcame a deficit for the fourth straight day when Lyle Overbay hit two-run homer in the seventh that was caught on the fly by Yankees reliever David Robertson in the right-field bullpen.
The significantly higher tax base that would result under lower capital income taxes means that such a reform would be deficit-neutral, provided that either transfer payments were reduced by less than 2% of GDP or a national consumption tax of less than 3% were adopted.
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