The OECD just released its Economic Survey of Mexico and here’s a chart that immediately caught my attention. As you can see, the fiscal burden of government has jumped dramatically this century.
Looking at that chart and seeing a near-doubling of the country’s spending burden in just 25 years, the logical response would be to urge dramatic Milei-style spending restraint combined with structural reform such as a Swiss-stylespending cap.
But you won’t be surprised to learn (assuming you’ve paid attention to previouscolumns) that OECD bureaucrats are recommending higher taxes and bigger government.
I’m not joking. Here are some excerpts from the report.
Higher revenues are needed to safeguard fiscal sustainability and boost productivity-enhancing spending…Fiscal consolidation is now underway… Mobilizing additional revenues would help address priority spending needs and safeguard fiscal sustainability. …Raising revenues and improving the quality of public spending are essential to safeguard fiscal sustainability and create space for productivity-enhancing investments. Public spending remains relatively low and key areas such as education and health already receive less funding than in OECD and regional peers. Expanding revenues…can improve strategic planning and help reconciling spending needs with fiscal prudence. …here is room to increase tax revenues. …Further consolidation should therefore rely primarily on raising more revenues, while protecting and gradually increasing spending… Mexico faces growing spending needs in areas critical for long-term growth and inclusion, such as education, digitalisation, the green transition and infrastructure. …A stronger medium term fiscal framework would allow these priorities to be financed sustainably by linking new spending commitments to credible revenue increases… Gradually mobilizing additional tax revenues is essential to maintain fiscal prudence while addressing spending needs… Environmental taxation remains also underutilised in Mexico, limiting its potential to both support climate goals and mobilize additional revenue. …There is also potential to raise more revenues through health-related taxes. Mexico has recently announced increases in taxes on sugary drinks and tobacco, positive steps to both increase revenues… There is also room to strengthen the taxation of alcoholic beverages.
Lots of rhetoric, as you can see, with much of it based on the laughably anti-empirical assertion that a bigger burden of government spending somehow will increase prosperity.
The bottom line is that the OECD wants Mexico to significantly increase the burden of both taxes (nearly 5 percent of GDP) and spending (nearly 4 percent of GDP).
Just in case you think I’m being unfair, here’s a chart from the report that specifically outlines how the bureaucrats are proposing a bigger fiscal burden.
To be fair, the OECD is not displaying specific anti-Mexico animus.
In just the last year or so, the bureaucrats have also pushed statist fiscal policies for Chile, Thailand, Greece, and the United States. And those are just the examples I noticed and wrote about.
Heck, sometimes the OECD targets entire regions, calling for higher taxes and bigger government in Africa, Asia, and Latin America.
But lets not focus too much on OECD malfeasance.
The main purpose of today’s column is Mexico’s bad economic policy.
So let’s close by citing a recent article in the U.K.-based Economist about the poor economic record of the ruling Moreno party. Here are some relevant passages.
With Nicolás Maduro ousted and regimes in Cuba and Nicaragua flailing, the Fidel Castro-inspired left that once held sway over Latin America is fading. Yet across the southern border of the United States, a different kind of left-wing politics is…still alive. …as Morena has become more entrenched it has looked ever less likely to rescue Mexico from its most serious problems…corruption and a feeble economy. …Claudia Sheinbaum, Mr López Obrador’s hand-picked successor, has…a problem. Under Morena, Mexico has no money. Its economic growth has long lagged behind that of its neighbours in Latin America and comparable emerging economies in Asia, but the Morena years have been the most sluggish in a quarter-century. …With weak growth and little sign of a turnaround, few believe the government can maintain expansive welfare payments until the end of her term, in 2030.
Of course, that could be true statement for just about any country in the world (I even have a two–part series about the U.K. needing Milei-ism).
P.S. Shifting back to the OECD. It’s very irritating that American taxpayers finance the biggest share of the OECD’s budget. And it was very disappointing that the Trump Administration did not include the Paris-based bureaucracy when it announced its intention to pull out of 66 different international bodies.
