Only in the artificial bubble of Washington do you find people who are willing to make preposterous statements such as those contained in this David Ignatius column. He writes that we should adopt a value-added tax to avoid a Greek-style fiscal crisis, apparently oblivious to the fact that Greece adopted a VAT and still had a fiscal crisis:
The sensible real-world answer, many economists argue, is a value-added tax that would encourage saving at the same time it pays down the deficit to manageable levels. …A particularly dangerous example of this law of political inaction is the Greek debt catastrophe in Europe. Americans haven’t been paying much attention to this one (because . . . it’s Europe!), but it’s getting scary in financial markets.
He also does not understand how a VAT works. It does not encourage savings. Just the opposite. It doesn’t discourages savings as much as an income tax, to be sure, but it creates a larger wedge between income and consumption. The best that can be said is that the larger wedge applies equally to current consumption and future consumption.