Of all the many countries that need to cut their debt, Japan, the U.S. and the U.K. will find it most difficult to avoid damaging their longer-term growth prospects and increasing inequality, the Organization for Economic Cooperation and Development said Tuesday.
In a paper by its economists, the OECD said that of its 34 members, the three have the largest combination of spending cuts and tax hikes to make if they are to reduce government debt to 60% of gross domestic product by 2060.The OECD concluded that some countries won't need any extra fiscal consolidation, including Denmark, Estonia, Germany, South Korea, Norway and Switzerland. Another group-comprised of 16 countries that include Australia, Italy, the Netherlands, Spain and Sweden-can reach the 2060 goal using measures that are least harmful to growth and equality. A group of six countries-including France, Greece and Ireland-can reach the 2060 goal without too much use of harmful measures.
But Japan, the U.S. and the U.K. will have to make much greater use of more harmful measures, because the scale of the cuts needed and the positions they start from make it difficult to reach the goal with less harmful measures.
But Japan, the U.S. and the U.K. will have to make much greater use of more harmful measures, because the scale of the cuts needed and the positions they start from make it difficult to reach the goal with less harmful measures.
In Japan, the OECD said increases in personal income and sales taxes are likely to play a big part in meeting the 2060 target, while the government can also charge more for the services it provides. Cuts to health spending and public sector investment may also contribute.
Source: WSJ
