imbalances through yet higher taxes would exacerbate the already high tax rates that EU
citizens are facing - 40 percent for the EU benchmark economy.
Finally, one response to the fiscal measures proposed in this chapter is that different
underlying assumptions may generate wide variations in estimates of fiscal and
generational imbalances and in their ratios to GDP or tax bases. However, that does not
constitute an argument against adopting such measures; instead, it suggests a reason to
supplement them with estimates of the associated uncertainty. The usual response to
uncertainty is to be “cautious” about embracing long-term measures. However, under
rapid population aging and prospects of steep increases in the costs of social insurance
programs, a policy of “wait and see” may be just as dangerous as it could deprive
policymakers of key information on policy trade-offs and cause more delays in adopting
fiscal reforms. Indeed, large changes in fiscal imbalances due to small changes in
underlying economic assumptions (discount and growth rates, etc.) is more likely if the
underlying long-term future fiscal shortfalls are larger rather than smaller. But if that is
the case, it indicates the need for haste rather than caution in adopting the fiscal measures
suggested herein.
83
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