This Keynesian idea of "curing debt with debt" has been implemented to stimulate the world economy and avert another great depression. But how will governments restore balance in their public finances?
Action must be taken to overcome the deficit on our payments and this would be my immediate priority. A reduction in spending is necessary, but where will these savings be made? Public sector efficiency gains would be one means. Cuts in welfare benefits, especially for the voluntarily unemployed, may well be another. However, we cannot dispute that a rise in the level of taxation, despite its political implications, is the only foreseeable solution. A stronger progressive tax system would ensure more equal income distribution, while also paying off the accumulated debt. With tax havens diminishing, its effectiveness should be increased.
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