What’s the main fiscal and/or economic problem in the European Union?
- Is it that the burden of taxes and spending is very onerous today?
- Or is it that the burden of taxes and spending will become more onerous in the future?
The easy and correct answer is that both are major problems. But some people think the problem is that EU nations don’t tax and spend enough. To make matters worse, this kind of thinking infects the bureaucrats at the European Commission, which has released a new report that reads like a Bernie Sanders campaign screed. It starts by pretending that that Okun’s tradeoff doesn’t exist.
…taxation can contribute to both social justice and sustainable growth, as well as financing the benefits which underpin the social citizenship contract… Contrary to the rhetoric about the inevitability of a trade-off between social justice and economic growth and a fiscal crisis of the State, the problems of financing the welfare state are far from being inevitable. …everyone should be willing to pay their share of the costs involved, whether individuals or companies.
It then explicitly endorses “pay as you go” as a model for fiscal policy, even though that approach is utterly impractical for a region with aging populations and falling birthrates..........To Read More....