Forum Summary: A Grand Coalition for a Rise in the Consumption Tax is the Only Way

Meridian 180’s inaugural online forums began in the wake of unexpected circumstances. While the project members and the staff were preparing for the official launch in July 2011, the world witnessed the devastation of the 2011 Tohoku earthquake (Higashi Nihon Daishinsai) on March 11, 2011. In response to this disaster, the members of Meridian 180 decided to launch forums on March 19 to discuss both the immediate and long-term responsibilities of intellectuals during such crises. Two scholars from Tokyo, Professor Naoki Kasuga (Hitotsubashi University) and Professor Yuji Genda (University of Tokyo), immediately sent us their articles and took the initiative to lead Meridian 180’s inaugural forums. This summary will review the forum chaired by Professor Genda entitled, “A Grand Coalition for a Rise in the Consumption Tax is the Only Way.”

Starting from March 20, 2011, Professor Genda led a forum based on his recent news column featured in the March 22 edition of Japan’s Yomiuri Shinbun newspaper (the article was entitled “It is necessary to secure stable financial resources for restoration: Increase the consumption tax by forming a grand coalition”). In this article, Professor Genda proposed ideas about “how those of us who live in Japan [are] to fulfill our responsibilities” for restoration without “imposing the burden on the victims of this disaster” (a burden that requires a tremendous amount of money, labor, and patience). Reflecting on “Japan’s already critical financial state even before the earthquake,” he suggested a few ideas to “secure stable financial resources”: he proposed 1) to raise the consumption tax rate decisively, 2) for a younger generation of politicians to voice their views in a more transparent fashion and unite themselves across different political parties and persuasions, and 3) to achieve tax reform through a grand political coalition. Professor Genda continued that such “decisive action” is necessary “in order to overcome difficulties” and “is the only way to repay the dead.” Professor Genda’s proposal sparked the interest of members of Meridian 180, greatly, leading to the exchange of various perspectives that directly and indirectly related to the contents of the proposal. The forum participants were particularly interested in Professor Genda’s 1) underlying definition of “those of us who live in Japan,” and 2) his idea of the consumption tax as a stable financial resource. Professor Annelise Riles (Cornell University) questioned the relationship between “more positive models of national unity” and “the ugly underpinnings of nationalism.” This discussion considered what Professor Naoki Sakai (Cornell University) pointed out as the “lack of attention to the pseudo-religious nature of nationalism,” and the threat of the sort of “anti-foreigner rhetoric” that Professor Riles observed after 9/11. Other forum participants also commented that Professor Genda’s idea of a “grand coalition” reminded them of the rhetoric of “national union” and “all-out battle” during the WWII era, acknowledging the many possible risks associated with such nationalistic ideologies. These concerns have also been connected to concerns about inequalities and discrimination toward those who do not fit into the category of “national subjects.” Meanwhile, other participants, such as Professor Genda and Professor Shigeki Uno (University of Tokyo), discussed how to engage in restoration efforts within the framework of the nation-state rather than questioning its conceptual basis. The Tohoku Earthquake is still imposing the dangers of “national unity” on us to this day. To secure stable financial resources, Professor Genda proposed a “decisive raise of the consumption tax rate.” The forum participants agreed that it is necessary for the Japanese government to go through structural reform, particularly with regard to implementing a tax reform to forge a more equitable distribution of reconstruction burdens. However, the forum participants proposed several different ideas about how to implement and practice the reform policy. Professor Levon Barseghyan (Cornell University) commented that “during the next year or two, increasing the consumption tax will lead to further deterioration of aggregate demand and deepen the problems in Japan's industrial and service sectors.” Also, Professor Douglas Kysar (Yale University) pointed out that “a consumption tax can be sharply regressive unless it is implemented with elaborate exceptions and rebates.” In addition, policymakers must consider carefully “how the proceeds of the consumption tax might be utilized.” In response, Professor Genda stated that consumption tax will provide suitable financial resources for the restoration because “the purpose of the tax hike is clearly defined and the future use of the revenue from the tax is predetermined.” He also noted that, “approximately 70 percent of corporations in Japan are currently not paying corporate tax due to their declining earnings.” Finally, a financial specialist in the forum commented that even though “[i]t would be appropriate to temporarily use income tax as a reconstruction financial resource… Professor Genda’s first opinion, raising the consumption tax, [i]s also compelling considering the costs associated with income tax collection and the percentage by which direct taxes may realistically be raised.” Since he chaired the forum, Professor Genda has been working on the restoration effort through a variety of channels--notably, he has been serving as a specialist committee member for the Japanese National Cabinet. In this forum, the members of Meridian 180 critiqued Professor Genda's policy proposal, and then engaged in an important discussion about how intellectuals should immediately respond to restoration efforts. The more we exchanged our ideas and comments over Meridian 180, the clearer Professor Genda’s proposal became, and the richer the discussion comments became.