Tackling the US Deficit

The Economist Online (2010). A modest proposal. Retrieved February 27, 2010 from: http://www.economist.com/world/united-states/displaystory.cfm?story_id=15560210&fsrc=rss

This article, published on The Economist’s website on February 19, 2010, reports that President Obama has appointed a special commission, by executive order, to look for ways to cut America’s deficit. This bi-partisan panel is to report to Obama with their recommendations by December 1, 2010. Obama is looking to bring the budget deficit into balance by 2015. This news is important to businesses and to managers because many believe that the real goal of the commission is to introduce a value-added tax (VAT), which is generally seen as a regressive tax that overly affects the poor. Many also believe this would give Obama a backdoor approach to raising taxes on the middleclass and poor, which is contrary to his campaign promises. If a VAT were to be implemented, prices for affected consumer goods would increase and quantity demanded for the same goods would decrease, thereby affecting many businesses and the economy.