How One Tax Can Create Higher Spending Today, Lower Deficits Tomorrow

How can you stimulate the economy and cut the deficit at the same time? How about announcing an upcoming tax on the stuff people buy. The threat of the tax encourages you to buy that couch before the government slaps a tax on it, but the government tax raises money. Higher spending today, lower deficits tomorrow.

Maya MacGuineas calls it a "temporary consumption tax deficit-surtax." That sounds multisyllabic enough to be a chemical compound, but the idea is simple enough:

A temporary VAT would also address the problem many of us have with a permanent new consumption tax on top of the existing tax system: that it would take pressure off Congress to cut spending by producing so much revenue

The temporary VAT would go away as soon as the budget was balanced (or reached another agreed upon fiscal goal). That way there would be ongoing pressure to cut spending as soon as possible. The entire country would be rooting for policymakers to fix the budget and eliminate the VAT. Suddenly, there would be a built in constituency for fiscal responsibility.

Read the full story at CNN.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Life as an Obama Impersonator

"When you think you're the president, you just act like you are above everybody else."

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

VIdeo

Life as an Obama Impersonator

"When you think you're the president, you just act like you are above everybody else."

Video

Things Not to Say to a Pregnant Woman

You don't have to tell her how big she is. You don't need to touch her belly.

Video

Maine's Underground Street Art

"Graffiti is the farthest thing from anarchy."

Video

The Joy of Running in a Beautiful Place

A love letter to California's Marin Headlands

Video

'I Didn't Even Know What I Was Going Through'

A 17-year-old describes his struggles with depression.

More in Business

Just In