Does anyone remember that movie with Michael Keaton over 25 years ago called Gung Ho? Where a Japanese car company bought out an American plant and there was a clash of the working attitudes of the East and the West? Well, its 25 years later and what do a sideways stock market, a bloated pile of national debt, and a struggling overall economy continue to plague Japan. Wait a minute that last sentence sounds eerily like the United States instead of Japan. Don’t we have a sideways stock market, a bloated pile of national debt, and a struggling overall economy? Could it be what Japan is considering doing is a premonition for what will see in the next Gung Ho movie here in the United States?
In a deal that could lead to Japan’s first substantial steps toward reducing its burgeoning debt burden, Prime Minister Yoshihiko Noda agreed with the country’s two largest opposition parties Friday on legislation to double the country’s consumption tax. (source: NY Times)
Mr. Noda has staked the fate of his administration on the bill, which would double Japan’s five-percent sales tax by 2015, hinting that he could call a general election if the plan fails to pass parliament before the current session ends next week. (source: NY Times)
During weeks of negotiations, Mr. Noda argued that Japan must raise taxes to shore up its social welfare and pension systems, which have come under growing strain as the country’s population ages. Japan’s public debt has already grown to over twice the size of its gross domestic product as social welfare spending grows and tax revenues dwindle in a deflationary economy. (source: NY Times)
It’s certainly looming in our near future after the upcoming Presidential election that w will have to shore up our Social Security and Medicare system as they are both under fire with the baby boomer generation aging and less tax money going into the system. We saw Herman Cain come out with the 9-9-9 plan, but that type of ideas got quickly put to bed when Mr. Cain dropped out of the running for President.
Under the legislation proposed in Japan, a 5 percent consumption tax would be raised to 8 percent in April 2014, and to 10 percent in October 2015. Japan last raised the consumption tax rate from 3 to 5 percent in 1997. (source: NY Times)
As of yet, nobody has really laid out a game plan on how we will a) balance the overall budget in the United States, and b) start chipping away at the almost 16 trillion dollars of debt we have in the United States. With the commonalities of our overall financial situation, I wonder if an increased consumption tax is coming for our future? Could it be that we take a play from the playbook of the Japanese? I guess we’ll have to wait to see Gung Ho Part II.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc – The Leaders in Gen X & Y Financial Advice and Services
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