Congress Urges Spending Restraint

Congress Urges Spending Restraint
Facing Largest Deficit Since 1945, Obama Names Official to Help Retool Budget

The nation's budget deficit will soar to an unprecedented $1.2 trillion this year, congressional budget analysts said yesterday, a startling tide of red ink that could dampen enthusiasm on Capitol Hill for some of President-elect Barack Obama's most ambitious priorities.
In the first official estimate of the damage done to the nation's finances by a weakening economy and various financial-sector bailouts, the Congressional Budget Office (CBO) reported that the gap between government spending and available revenue will exceed 8 percent of the overall economy by the end of September, a chasm not seen since the end of World War II.
The news drew a grim reaction from Congress, where the chairman of the Senate Budget Committee, Sen. Kent Conrad (D-N.D.), called the figure "jaw-dropping." While lawmakers said they expect to dig this year's hole even deeper by approving a massive stimulus package aimed at pulling the nation out of recession, Conrad and his House counterpart, Rep. John M. Spratt Jr. (D-S.C.), said they have warned Obama to limit the package to temporary measures that will not add to the deficit in future years.

U.S. Congressional Budget Office Articles on washingtonpost.com

A VAT European style Tax for the U.S.?

How to pay for the deficits? A new Tax system? VAT (Value Added Tax)?
It will be a very complex and long-term operation. It could be a way to satisfy the Government's insatiable appetite for money, a boost and a stabilizing factor for the economy. The Jury is still out.
(Living in a country , with a government having an obese appetite for money -the Netherlands, where there has been VAT for about 40 years now, VAT is not so bad, although it should be less, the highest tariff should be 10% or 12% instead of 19% - it can also act as a break on economic activities. Governments should also learn not to waste money or simply use VAT to fill in holes in the budget.)

Like it or not, there's only one way we're going to be able to pay for our ballooning deficit: a value-added tax. (Full article on CNN Money)

NEW YORK (Fortune) -- It's highly possible, if not inevitable, that Americans will soon live under a radically different tax system - one that the pundits and politicians aren't talking about.
It's called a value-added tax, or VAT, and it's been used for decades to pay the bills and sustain the immense growth of governments around the world, from France to Mexico to Australia. Created in 1954 by a French (Maurice Lauré) economist, the VAT is the most potent, efficient machine for revenue generation yet invented.
The genius of the VAT is that, while the consumer pays it, the actual cash is mostly collected from producers before it reaches the retailer. Since the VAT is essentially a hidden charge embedded in the price of goods and services, raising the VAT doesn't arouse nearly the uproar caused by increasing income taxes.
The ease with which a VAT can be increased points to one of its big drawbacks: Governments see it as an easy way to pay for increased spending, which is a potential drag on economic growth.