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inergy tax-such as a carbon cuts, reductions in entitlemenis, tax-at this time. Nevertheless, I and tax increases. For example, in his book Memos to the President, would like to tilt at this windmill. The most pressing economic former Budget Director and CEA problem facing the United States is Chairman Charles E. Schultze sugthe huge federal deficit and the col- gested that $95 billion of deficit relapse of the saving rate. The net sav- duction come from budget cuts, ing rate over the 1989-90 period fell $140 billion from taxes, and the rest to 3% of GNP.compated to an aver- from lower interest costs as the defiage of 8.2% between 1959 and 1980. cit is reduced. In the United States, we are financIf a political consensus emerges ing an excess of consumption that deficit elimination must be purthrough foreign debt. The deficit ex- sued and that new taxes will be necacerbates a number of economic essary, the question of what type of problems. For one thing, it greatly tax should be employed arises. It is reduces the amount of domestic important that the taxes be aimed at savings available for investment, curbing consumption and increasslicing 3.6% of GNP from the 6.6% ing net savings. It is no more feasiprivate saving rate. By reducing sav- ble for a nation to increase savings ings, the deficit reduces long-term without curbing consumption than productivity and income and places it is for a household. Hence, a a tremendous debt on future genera- broad-based consumption tax tions. Finally, a large deficit greatly would be more desirable than inreduces flexibility in coping with come, payroll, or business tax inrecessions. creases. Overdependence on oil imports Two principal options are availposes a potential long-term problem able. A value-added tax (VAT)-in and represents the second largest essence a form of national sales outflow of US. dollars abroad. The tax-is a major source of revenue oil price shocks of 1973-74 and for European countries. The other 1979-80 created inflationary pres- option, a broad-based energy tax m s and recession throughout most [such as a carbon tax), is currently of the world. Although energy secu- being considered by EC countries. rity has receded as a threat, it has not If either a VAT or energy tax is endisappeared. The United States cur- acted, various options are available rently produces about half of its oil. for reducing inequities. With an enFinally, energy consumption poses a ergy tax, a country can provide as0013-936x/92/0926-207$03OO/O B 1992 h eirican Chemical Sociel
Many influential indiv
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technology products and service2 related to the environment, health, and national security.
Iimiron. W.Technol.. Vd. 26, No. 11, 1
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