Below is my published letter in the " Letters to the Editor " section of the Australian Financial Review,
In the letter “US debt default inevitable in the long term” (AFR, October 18), Tim Walshaw contends a default will eventuate, based on the current trends.
But any such default would be as a result of political ineptitude to preclude any sensible compromise incorporating taxation reform. US federal tax revenues (excluding local and state tax regimes) will be only 17.4 per cent of GDP in 2014. The massive deficits and debt explosion are the product of previously enacted, unsustainable tax cuts legislated at the height of the global financial crisis and, to a lesser extent, the cost of wars in Iraq and Afghanistan combined with increased funding for unemployment and food stamps, whose recipients now number 48 million.
Further tax revenue problems are due to the action of large multinational companies adding to their non-US holdings abroad to ensure their increased earnings remain in low company tax rate countries. Having an unsustainable tax base has been conveniently ignored by Congressional members who contend the budget deficit should only be eliminated by cuts to government spending. This intransigency to accommodate a mixture of tax increases and a scaling back of future benefits, opposed vigorously by civil libertarians and a radicalised Tea Party, ensures the current stalemate is likely to continue.
Hence the looming sovereign debt problem is due entirely to political brinkmanship and dismissal of any alternative that may provide fairer and more ethical outcomes.
Brinkmanship the issue, not debt, in US
PUBLISHED: 23 Oct 2013But any such default would be as a result of political ineptitude to preclude any sensible compromise incorporating taxation reform. US federal tax revenues (excluding local and state tax regimes) will be only 17.4 per cent of GDP in 2014. The massive deficits and debt explosion are the product of previously enacted, unsustainable tax cuts legislated at the height of the global financial crisis and, to a lesser extent, the cost of wars in Iraq and Afghanistan combined with increased funding for unemployment and food stamps, whose recipients now number 48 million.
Further tax revenue problems are due to the action of large multinational companies adding to their non-US holdings abroad to ensure their increased earnings remain in low company tax rate countries. Having an unsustainable tax base has been conveniently ignored by Congressional members who contend the budget deficit should only be eliminated by cuts to government spending. This intransigency to accommodate a mixture of tax increases and a scaling back of future benefits, opposed vigorously by civil libertarians and a radicalised Tea Party, ensures the current stalemate is likely to continue.
Hence the looming sovereign debt problem is due entirely to political brinkmanship and dismissal of any alternative that may provide fairer and more ethical outcomes.
Lindsay Byrnes
4 comments:
Most 'liberal' economists in the US today are in a massive state of denial as to the damage done to the real, productive foundation of the US economy by nearly 70 years of Empire-building at the expense of developing a truly sustainable economy that could meet the real interests of the American people far into the future.
For the first couple of decades of the post-War period, the US could do nothing wrong in the sense that every other large capitalist economy had been devastated by the War, whereas in the US it propelled a period of unmatched prosperity and progress. By the 80s, the fusion of US Empire aims and US-centred corporate globalization largely detached from its productive base. The lost growth, wealth and well-being of Americans was replaced by a hyper-financialized zombie economy.
Even a very small tax placed on high speed financial transactions could do much to defuse the current problems. I'll continue to keep my fingers crossed for a more ethical outcome but I won't be holding my breath.
Best wishes, Lindsay
Agree Susan !! -fingers crossed for better/more ethical outcomes.
best wishes
As always, good insight Lindsay. And along with political brinkmanship, the U.S. has polarization beyond reason in political discourse. Resilient bunch, but in a corner these days, the Yanks.
Hope you are well and nice to drop in!
Hi Gary,
thanks - feeling better!
B/wishes
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