Dogs and Demons_ Tales From the Dark Side of Japan - Kerr [119]
As McCormack points out, Japan can dispose of its debt in three possible ways: increase GNP (rapidly), tax, or inflate. An explosive growth in GNP is unlikely. So the next alternative is taxes, and over the next twenty-five years taxes could skyrocket to the point where they surpass notorious situations such as Sweden's. Withholdings that in 1997 took a bite of about 36 percent out of the average taxpayer's income are estimated to soar to more than 63 percent by the year 2020 – and these tax increases do not take into account the burgeoning national debt.
The consumption (sales) tax rose from 3 to 5 percent in 1997 – and there is strong pressure to raise it to 10 percent or more once the economy recovers. Indirect taxes, such as road tolls, surcharges such as the Ministry of Health and Welfares tax on medicine, and a myriad of fees levied by other distressed agencies will also double and triple. Meanwhile, the level of services will decline, pension payouts will drop, and patients will be called upon to bear a larger share of medical costs. Add the rising consumption tax, and by 2025 the average Japanese citizen could end up paying up to 80 percent of his income to the government.
Obviously, this isn't going to happen – such high taxes would strain taxpayers to the breaking point. Hence it would seem that «printing money» (having the government buy bonds or deposit money in banks), thereby causing inflation, would be the obvious next step. But this, too. Taggart Murphy points out, may not work, since it would undermine the value of government bonds; at the same time, banks, grown cautious after the Bubble, might not turn around and lend the money to the public. We're back to the Mole Game: Cut down on government spending, and millions of people (including politicians) will be out of work. Raise taxes too high, and even the long-suffering Japanese public will rise up in anger. Print money, and government bonds lose their value. So what to do? Nobody knows.
All this comes of supporting an artificial regime so long that everyone's livelihood depends on it. So elaborate is this structure that to change any part of it threatens the whole; hence it is nearly impossible to make serious reforms. Facing a similar situation, Abraham Lincoln recounted the following story:
Two boys out in Illinois took a short cut across an orchard. When they were in the middle of the field they saw a vicious dog bounding toward them. One of the boys was sly enough to climb a tree, but the other ran around the tree, with the dog following. He kept running until, by making smaller circles than it was possible for his pursuer to make, he gained upon the dog sufficiently to grasp his tail. He held on to the tail with a desperate grip until nearly exhausted, when he called to the boy up the tree to come down and help.
«What for?» said the boy.
«I want you to help me let this dog go.»
Some believe that the Japanese save according to «Confucian ethics.» Others point to the fact that high land prices force people to save, since they have no alternative if they wish to own a home. In any case, Japan's stock of savings is not nearly as secure as it looks, for mice have gotten into the storehouse. Behind the scenes, personal and corporate debt is gnawing away at Japan's savings.
Surprisingly, and this runs contrary to the common wisdom about Japan, the Japanese people have an avid aptitude for debt. Credit-card use quadrupled from the mid-1980s to the mid-1990s. Of course, expanded use of credit cards is not what it seems on the surface, for the anti-consumer nature of credit in Japan means that most cards are highly restricted and do not provide much credit as we usually understand it: most people must pay their cards monthly in full. Even so, the public has developed its own form of tobashi,