Your Macroeconomic Edge

Chapter 1

Introduction

Avoiding Californication

Once a proud and vibrant state that exercised such strong influence to be called a “hegemon,” it now slides downhill in genteel, sclerotic decline. Its generous welfare system is supported by an ever-shrinking number of taxpayers, because high taxes and regulations have driven most young, ambitious entrepreneurs to greener pastures, leaving behind the old and the dependent. The government is experiencing declining tax revenues, despite raising tax rates several times and imposing taxes on products and activities that previously were exempt. Government makes up for inadequate revenue by borrowing more and more, spooking investors who have downgraded its bonds and who demand ever-higher interest ...