An article today titled ‘Bye-bye, recession; hello, higher taxes’ reports the IMF as saying most countries will need to raise taxes in the future to pay off the trillions of dollars they spent in fighting the global recession.  IMF’s Chief Economist is reported as saying that “the time will soon come to pay the piper (related to government stimulus spending) and that higher taxes in nearly all countries is inevitable” and that “the recession that began early last year is virtually over, but … that it has left deep scars that will take years to heal”.

I have said in previous blog posts that taxes will have to be raised in the U.S. and other developed countries to finance both ongoing deficit spending and incremental deficits related to bail-out and stimulus packages.  That said, it seem oxymoronic to me to say on one hand that taxes will have to increase (which has to reduce the amount companies and consumers will have to spend) without commenting on and quantifying the effect that will have on prospective continuity of GDP growth (i.e. which is implicit in ‘economic recovery’).  This doesn’t seem like rocket science to me, in fact it seems to me to be much like sitting down with a comparatively simple jigsaw puzzle comprised of quite large pieces.  It may be that many of the economists and others who regularly comment on things economic are playing with old jigsaw puzzles with missing pieces.

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