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Required U.S. Tax Rates?

A short article in The Wall Street Journal 'Real Time Economics Blog' titled 'To Contain Future Budget, U.S. Must Raise Taxes By 35%, Cut Entitlements 35%' - reading time 1 minute - reports on an International Monetary Fund ('IMF') working paper titled 'Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?' - reading time 30 minutes.  The IMF paper states its findings are that:  "under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent.  A delay in the adjustment makes it more costly".

 

I have said in many of my commentaries that the 'U.S. piper has to be paid' at some point, and that the only source of funds available to any government are the various forms of taxation that either exist, or that government legislates.  Can you imagine the 'hue and cry' if the U.S. Federal Government today legislated a 35% increase in taxes, and all transfers to entitlement programs were cut by 35%.  Moreover, can you imagine what that would do to the financial circumstance and lifestyle of Main Street Americans.  Even wealthy Americans might 'feel the pinch'.  Even if you can print your own fiat currency, you can't continue to get further and further in debt without ultimately suffering serious consequences - and in the end postponement strategies won't work.  Whether or not the conclusions in the IMF paper are credible in their quantum, from my perspective I think that as a minimum they have to be 'directionally right' - meaning that there is an 'ill wind blowing'.