Tuesday, November 22, 2011

Tax Levels

From Don Talyor:

If we adopted 21% of GDP as a future target for balancing the budget, we would be saying government spending will be less while the baby boomers are eligible for Medicare and Social Security than it commonly was when they were paying taxes to support these same programs. This will be very hard. Plans seeking balance at lower levels seem implausible.

I think that this is worth keeping in mind. A 21% of GDP budget target would already be a painful and difficult process to achieve with the headwinds we have already due to population aging. Lower levels require a really novel idea about how to reverse these headwinds.

But the options that might really shift the balance (immigration) seem to be out of favor right now.

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