Equally, raising taxes on higher-income households and corporations, in a country where the tax system is already fairly progressive (and the tax burden, at least by emerging-market standards, relatively high), could undermine the already anaemic pace of economic growth or trigger capital outflows.
These households are more likely to default on their obligations than the typical borrower, but this increased risk is priced into loan terms. Although the bankruptcy rate remains elevated, it has edged down on balance in recent months, likely because of the pickup in economic growth in the United States since mid-2003.