Averting Public Debt Tsunami

Jan Janků and Jan Libich

World Economics, 2023, vol. 24, issue 4, 19-38

Abstract: This study introduces an innovative policy proposal designed to improve the fiscal stance of most countries towards long-term sustainability. We suggest implementing ‘deficit taxes' for individuals and (100-fold higher) ‘deficit fines' for politicians in any year in which a (cyclically adjusted) budget deficit occurs. In line with the theory of ‘rational inattention', these taxes and fines will incentivise voters and politicians to stop ignoring debt accumulation and the threat of a fiscal crisis.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:wej:wldecn:909

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