Simon Johnson, “Does the U.S. Really Have a Fiscal Crisis,” Economix Blog, The New York Times, 02/25/11

“…(O)ur tax system is completely antiquated. For the same level of tax revenue relative to G.D.P., we could greatly reduce the distortions (e.g., disincentives to work) just by modernizing. The right and the left agree that we should tax consumption more and income less, but neither is willing to make any kind of meaningful move toward a value-added tax (VAT).

The right seems afraid that this tax will be too effective and power an expansion of government. The left thinks a VAT is inevitably regressive (imposing more burden on poorer people), despite all the evidence that the impact of VAT depends on how it is designed — because you can choose what gets zero taxes (e.g., baby clothes) and high taxes (e.g., yachts).

The only room for bipartisan consensus here seems to be what we got in December 2010 — a big tax cut. Cutting taxes is nice, but only if it is consistent with keeping the budget on a sustainable path.

How does the Republican initiative to cut spending fit in with these budget issues? Not very much is the generous answer. The Republicans’ proposed cuts at the federal level are for discretionary nonmilitary spending, but this is small as a percentage of the budget (and therefore of the economy).

But the problem here is bipartisan — as it was with the tax cut last year. None of the leadership on either side is willing to talk openly about how our biggest banks caused great fiscal damage. No one is willing to explain why our health care costs continue to rise. And no top politicians currently champion real tax reform.”

http://economix.blogs.nytimes.com/2011/02/24/does-the-u-s-really-have-a-fiscal-crisis/?ref=business