This just came out on Bloomberg. The current Japanese prime minister Yoshihiko Noda says he can get a consensus and coalition on doubling the sales tax rate.
Bloomberg reports in Noda Says Deal Possible With Opposition to Double Consumption Tax:
Japanese Prime Minister Yoshihiko Noda said he thinks he can reach a deal with the opposition to double the 5 percent consumption tax in order to shore up the country’s social security system.
“I believe we can come to an understanding,” Noda told journalists from overseas media organizations today in Tokyo. “I sense that our debate is beginning to jibe.”
This guy is a goner
The combination of an aging society and a declining birthrate has put Japan in an “unprecedented situation” as the government seeks to rein in soaring welfare costs, Noda said. All political parties understand the urgency and must work together as “the question is how to secure stable financing for a sustainable social security system.”
Ha! Ha! Ha! That just shows how delusional this Noda guy is... He has to say stuff like this to the foreign press. Back at home, to the Japanese press, he'd get laughed at.
Sadakazu Tanigaki, head of the main opposition Liberal Democratic Party, yesterday said on NHK Television that “it would be best” for Noda to seek a new mandate before submitting his tax legislation. He denied media reports that he and Noda met on Feb. 25 to discuss the situation.
Translation: The LDP doesn't want to seem responsible for raising taxes or not being able to fund social security, so they know that if they can force an election in summer, Noda will be out of office and they can keep kicking the can down the road - in the same way as we they been doing for twenty years.
The LDP has it right too. Noda hasn't even been prime minister for a year yet his popularity ratings are already weak enough that he could never stand a chance of winning any kind of election at all. Twenty seven percent approval rating is disastrous. Especially if you stand on an election platform of raising people's taxes!
Why don't they take a page out of Ron Paul's playbook? Cut spending first before even talking about raising taxes and maybe you'll get public sympathy.
Forty percent of voters oppose Noda’s tax plan, compared with 46 percent who support it, according to an Asahi newspaper poll published Feb. 14. Noda’s approval rating fell to 27 percent from 29 percent the previous month. The paper provided no margin of error for its survey of 1,741 people on Feb. 11-12.
Former DPJ leader Ichiro Ozawa, who is on trial for violating campaign financing laws, today on TV Tokyo reiterated his opposition to Noda’s tax plan. Nine lawmakers left the ruling party after it approved the proposal to raise the consumption tax to 8 percent in April 2014 and 10 percent in October 2015.
Really, what's the point of this nonsense article? There won't be any sales tax increase under this prime minister. He will be out of office if he really tries to do so. The crisis amongst the public and the political circles hasn't come to a boiling point (because people don't understand how exponential growth of our debts and interest rates on those debts are going to affect us). And, until this really hits home, people will not tolerate a sales tax increase.
We're way past that anyway. Even with a tax increase, if it is not coupled with a massive decrease in government spending, it will not matter because our debts will continue to accumulate along with the interest on those debts. Past history has shown that tax increases will not help as the government will deficit spend any increase in revenues it gets. When Noboru Takeshita was prime minister and instituted sales tax in 1988, he claimed that it would end our debt problem. It didn't. It couldn't without a cut in spending. After years of borrowing, we are already well past double the GDP in debt. We need to begin paying down that debt before any talk of a sales tax increase will even matter. That means we must massively cut spending right now.
This is basic mathematics, folks.
We need to cut spending, including interest on our debt - as well as paying down that debt to under what is received in revenue - as well as having tax increases to fix the problem we are in. I am against any and all tax increases especially if they aren't coupled with massive cuts in spending - and that's not cuts in future proposed spending, that's cuts in today's current budget.
It's simple. If you get five, you cannot spend seven. Once you owe fourteen, even if you start getting six, you still cannot spend seven. You will have to lower your spending to under all income in order to start paying back past debt and interest or you will never get out of the hole.
Where to cut? Well. I'm sure we can start with cutting government waste and ridiculous spending on prevention of victimless crimes like prostitution, gambling, drugs, and ridiculous police raids on establishments that have waitresses sitting at tables with customers or arresting owners because people are drinking and dancing at restaurants on Saturday nights!
Anyway, Noda will be gone by September because he doesn't understand these basic concepts and can't do simple first grade math...
The best thing that could happen is a massive across the board cut in government services, but, in a country that changes prime ministers every year and has elections every summer, that isn't going to happen as politicians won't cut services because they want to give away our money so that people vote for them.
Our current system is ruined and there is no way to fix it. We are sliding down a steep slope into insolvency.
The good news is that we won't have a sales tax increase this year. The bad news is that none of these other Japanese politicians are able to grasp first grade mathematics either.... Nor will our next prime minister.
Cutting out the wasteful spending on policing vice crimes is a fine idea, but is certainly going to be a drop in the bucket in terms of the budget of the Japanese government.
Without having seen the statistics, I can make a good guess as to where almost all of the spending is taking place. Military, medical support and pension type payouts for the elderly, government infrastructure boondoggles, subsidies for government owned businesses, and interest on the debt.
What would you want to cut in order to meaningfully reduce the Japanese government's budget deficit?
Reducing military spending in a big way would be somewhat risky in terms of security, but I would do it anyway.
Ending the boondoggles implies an end to all government infrastructure. It all needs to be sold to the private sector, every road, every building, every railroad, every post office, every airport. All of it. Let the owners figure out how to pay for new infrastructure and upkeep.
My answer is too simplistic in such a short space, but here goes:
Absolutely, I would end all military cooperation for wars like supporting refueling of NATO & US ships in the middle east.
I would also cut all government staff pay by 50%. I would cut all social security payments by 20% across the board... I think we can get away with the social security cuts... Japan has had deflation for 20 years. The only thing that has gone up in price is gasoline - most foods have not. People can ride the trains.
Sure, if I did that, I'd be out of a job quick. But someone's going to have to do it sooner or later. Sooner is better. Later everything will have to
Later everything will have to be slashed by much higher levels... Printing money won't help us.
Isn't around 50% of the JPG's budget, interest payments on debt? Also, isn't their income shortfall over 50% of their budget, which must be financed through more debt? Said another way, isn't the JPG's budget already so bad, that if every yen in income was used to pay the interest on the debt, that there still wouldn't be enough money to pay it?
That means they are already so far in the hole, the options they have are limited to increased taxes, decreased spending, monetary inflation, or default. The picture of the dragon eating its own tail comes to mind.
I don't have the time, but I I think the Gov. of the BOJ mentioned that idea is to eventually raise the sales tax to 12!
I believe here: http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1293
Plus, hasn't the 10% sales tax idea been floating around for the last 5-6 years?
They can't really raise taxes, especially sales taxes, without shrinking the private sector, or decreasing savings, which decreases investment in capital and debt in the future.
A problem with decreased spending, is that there tends to more fat that remains after the cuts. The most likely things to be cut, are things that benefit the public, like say schools and hospitals, whereas the least likely to be cut would be “pork fat” like roads and bridges to nowhere.
One of the catches with inflation is, how can they have major inflation when the population is aging, and the velocity of money is in a tailspin. The phrase trying to push on a string comes to mind.
It seems the only real option is a default in one form or another.
My conclusion is that the people of most OECD countries are in bad shape, but the people will be in very bad shape in Japan. What do you think Mike?
I think we are basically F'ed! We need government that faces the music: http://modernmarketingjapan.blogspot.com/2012/03/in-1949-japan-started-on-road-to.html
What? Wait? No. I mean we don't need any government... It was government that got us into this problem. Haven't they done enough?
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