May 22nd, 2013
09:10 PM ET

Economy needs both reform and investment

By Fareed Zakaria

The U.S. tax code is at the heart of a system of institutionalized, legal corruption. The code is so vast because companies, industries and lobbying groups receive special preferences in return for campaign contributions, a cash-for-favors scheme that Washington would denounce as crony capitalism in any Third World country.

You can see the corruption at work in the fierce opposition to efforts to lower the corporate tax rate. After demanding this reduction for years, companies are now lobbying hard — and spending heavily — to retain their own special tax breaks, which is what drove rates up in the first place.

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soundoff (4 Responses)
  1. Muin

    Why do u keep bringing up Greece as example like conservatives? Greece and U.S are not the same. Fortunes of greek changed because their wealthy rich don't subsidize their govt. anymore. They have plenty of opportunities to park their cash somewhere else in the world. In U.S, sometimes union leaders got themselves bloated pension package by giving up future worker rights. In fact, that happened in many countries of the world. Now those bloated pensions have to go. Simpson-bowl already made a package for your article. All president and congress have to do is accept it.

    May 23, 2013 at 1:34 am | Reply
  2. Nike

    No financial reform, no financial structure will make USA successful, unless USA stops importing unnecessary products from non-alliance countries. USA needs start believing that only strong partnership with European Union and N.A.T.O. countries will get USA success and bring back Glory Days.

    May 24, 2013 at 8:29 am | Reply
  3. wjmccartan

    Its interesting the mention of glory days, you do realize that corporate taxes were much higher in those days. Corporations and special interest groups have done nothing but attack the middle class since then, check it out, the 1950's and 60's had much higher tax rates for corporations. Then they became people, for all intents and purposes corporations are recognized as "human". This trickle down idea has done nothing but make the rich richer and the middle class poorer. Tax reform is absolutely needed, the IRS should have an outside group go in and put things in order, so the American public gains at the same rate as these "humans". After all where are they making their money but at the expense of the American taxpayer. Trickle down my eye.

    May 24, 2013 at 3:56 pm | Reply
  4. Pawan

    Keynesian economics is not a panacea. If it were, Zimbabwe would be the richest country in the world. Structural reforms, geared to making the economy as efficient and low-cost as possible, is the only thing that will help in the long-run.

    Where money-printing, or stimulus (call it what you want) would help, is in buying time to put those structural reforms in place, to avoid major dislocation while those changes happen. Stimulus, whether monetary or fiscal, has it's own costs, and cannot be sustained indefinitely without itself causing major economic damage.

    So here's the problem. America has chosen to go almost entirely towards the stimulus route, and perhaps because of political gridlock, has implemented virtually no structural reforms. In effect, they've wasted a huge amount of time and money. The lack of reforms means that the present tepid level of economic growth can never be self-sustaining.

    Europe, on the other hand, has in fact implemented structural reforms in a lot of areas, but has done so in a self-defeating way by not allowing for any transition. They will be fine in the long run, but the short-term pain is causing major dislocation in a lot of places. That's bad too.

    So yes, you need both stimulus ans structural reform, but it's important to understand why. Stimulus can only buy time, until the real economic and business efficiencies are implemented.

    May 27, 2013 at 8:25 am | Reply

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