Presenting a Future Vision of Public Finance
Associate Professor, National Graduate Institute for Policy Studies
Public finance is an important election issue. Even if priority is given to economic recovery for the foreseeable future and the policy of "Not running after two hares" of public finance and structural reform is correct, financial reform cannot be avoided. The present deficit is not at a level that can be solved by economic recovery.
From the viewpoint of the ratio of GDP accounted for by tax revenue and the degree of tax revenue elasticity,1 the increase in tax revenue when GDP exceeds 1 trillion yen is only in the region of 220 billion yen, even by a fairly optimistic estimate. An increase in GDP of over 130 trillion yen will therefore be needed to resolve the current deficit of approximately 30 trillion yen by a rise in tax revenue through economic recovery, and this is quite a difficult level to achieve without assuming a bubble economy. Taking into consideration the natural increase in social security costs in the future, wide-ranging expenditure cuts alone will not be enough and a tax increase must be included in the debate. The political parties must present a vision of public finance that boldly confronts the future situation. The following two points must be taken up at this time.