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A reformed fiscal policy is vital to renewing US productivity
Richard H. K. Vietor, Baker Foundation Professor, is an expert on how nations compete—and he’s worried about the United States. Vietor focuses on government policies, laws, and other actions that affect competitiveness, defined as the ability of a nation’s companies to succeed in the global marketplace while its people enjoy a high and rising standard of living.
Vietor, with HBS collaborator Matthew Weinzierl, associate professor of Business Administration, and Marvin Bower Fellow, has found that US fiscal policy is eroding the nation’s competitiveness by underinvesting in infrastructure and education while increasing spending on entitlement programs. The corporate tax code, mortgage-interest deduction, and absence of a value-added tax all contribute to the problem. These policy failings are evident in the rising federal deficit.
“The US government will have to confront these problems. It would be far better to do so now, rather than at some future date, under duress, when our creditors have begun to lose faith,” Vietor says. He advocates a 2 percent VAT, new taxes on gasoline and carbon emissions, and spending cuts in defense and entitlements.
(Published April 2014)
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