Almost all the industrialized economies are struggling under the weight of enormous debt levels. The problem is their government revenues are too low. Debt-ridden countries like the United States, Ireland and Japan need to raise their taxes to a similar level to Germany.
A Commentary by Peter Bofinger
The global economic and financial crisis has led to a dramatic increase in government debt in recent years. Within the Organization for Economic Cooperation and Development (OECD), member countries’ average debt ratio — i.e., public debt relative to economic output — increased significantly from 72 percent in 2007 to more than 100 percent in 2011. And there’s no turnaround in sight for 2012. In hindsight, there is no doubt that the states were correct to increase their debt. Without an expansionary fiscal policy and the extensive support programs for the banking system, the global economy would have plunged into a 1930s-style Great Depression during the past few years. (more)