I have a new article on the recently decided consumption tax (VAT) increase by the German government, where I point out how this will have a negative effect on Germany’s already weak economy and that Germany’s large budget deficit should be solved by lower spending instead.
Germany should learn from the experience of Japan, whose VAT increase in 1997 sent the economy into a recession, but whose recent deficit reduction through spending cuts have been associated with strong growth.
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I think it’s no conicidence that the increasing welfare expenditures and buget deficits in germany goes hand in hand with an increasing willingness to use the military in Nato or Uno missions and even plans on using the military to aid the police in domestic security which has been unthinkable here since the 3. Reich. I don’t consider it that impossible anymore that we might eventually begin a third world war with Europe and USA fighting the arabic/islamic nations.
It’s no fun to be german.
Unfortunately one of the worst things about VAT (GST in Australia) is that it is not a consumption tax but a production tax, unless certain adjustments are applied, and these both increase compliance costs and reduce the government’s short term cash flow. The result is that investment gets hit hard too.
Follow the examples of Japan. Follow the examples of Reagan and Clinton in the US. Cut the growth of government and loosen regulation and you get growth.
The only thing left out was to cut the growth in the money supply and you will have longer term prosperity.
Bill,
I don’t think Reagan cut the growth of government at all.
Yancy:
No president I know of has ever cut government spending. Maybe Andrew Jackson or Thomas Jefferson? Recently, in terms of growing government, Clinton was number one with a rate of 0.3 percent his first term and significantly higher his second. Reagan had a rate of about 3.5% for both terms. His should have been lower except for the defense build up to fight the already on life support Evil Empire.
Reaganomics was not really about cutting government as it was about finishing the deregulating started but not finished under that bozo Carter. De-regulating the price of energy contributed more to the destruction of the Soviet Union than any piece of defense equipment.
Germany: Democracy at its best!!!!
How can they be sure it won’t actually decrease their government’s income (laffer effect..)?
Warren Harding (to give just one example) cut government spending – perhaps that is why the establishment historians go on and on about corruption in his Administration whilst ignoring the (far greater) corruption in the Administrations of F.D.R. and Harry Truman.
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