Changing the GST

While some still see the idea as impossible even after the UK, the idea of using consumption taxes as a policy instrument for fiscal stimulus is still floated around the world. The latest is Alan Krueger writing in the NYT economics blog:

Why not pass a 5 percent consumption tax to take effect two years from now? There are many different ways to implement a consumption tax, but for simplicity think about a national sales tax. In the short run, the anticipation of a consumption tax would encourage households to spend money now, rather than after the tax is in place. Along with the rest of the economic recovery package, this would help jump-start spending in the economy and thereby boost production and employment.

The failure of unregulated markets

[HT: Simon Johnson] MIT’s Daron Acemoglu has written one of the best essays on the financial crisis and what it means for economics that I have read. He argues, convincingly, that forgetting about what drives economic growth when formulating policy is a big mistake. Importantly, it has been all too easy to forget about how important institutions are in advanced economies as we trotted along with seeming economic prosperity for a decade. Continue reading “The failure of unregulated markets”

Portfolio Bounceback

Well, it requires your own input and it depends critically on rates of return but the New York Times provides a calculator that neatly tells who when you might expect to forget about the financial crisis of 2008.