The priorities Bush says he has for his second term and some of the hints of what he will do sound great. But, like Maudlin says, he has a narrow window of opportunity before the next recession hits hard.
Tort reform is the biggest long term structural change he can do and it should be relatively easy. If done right, it will remove a huge burden on the economy, perhaps as much as 5% of GDP.
Reforming SS is also good, and, IMO, is doable only if he can find the money for the transition. Although Maudlin suggests a surtax on the rich, I think a better way to finance the transition would be a low percentage national sales tax on non-essential goods. Note that since most of this tax will fall on imported goods (food and medicine will be excluded and are mostly produced in the US), it is essentially a tariff that does not violate trade rules. Incidentally, if anybody wonders why Europe with all its structural problems is running a trade surplus, look no further than its hefty VAT. Finally, a national sales tax, devoted to financing the SS transition, boosts national savings by definition -- in fact it is all savings.
The other idea of simplifying the tax system is great, but harder, because it gores so many sacred cows. But people should forget about getting rid of income taxes in favor of a VAT. A VAT can pass if it is devoted to an urgent need, like saving SS, as I said above. Perhaps a small part of the new VAT can be used to help with tax simplification. |
