"Under the FairTax, the value of all government transfers, including the FairTax prebate, would be reduced by the amount of the FairTax. "
The information posted from the Kotlikoff et al paper shows that statement to be incorrect:
"Nominal federal transfer payments TR that are not taxed under current law must remain high enough to command the same goods and services under the FairTax as they do under current law."
From your earlier post, your claim was:
"Under the FairTax, the value of all government transfers, including the FairTax prebate, would be reduced by the amount of the FairTax. "
The information posted from the Kotlikoff et al paper shows that statement to be incorrect:
"Nominal federal transfer payments TR that are not taxed under current law must remain high enough to command the same goods and services under the FairTax as they do under current law."
Of course, you misunderstood Kotlikoff and failed to post the formula that appeared with Kotlikoff's quote that actually confirms my statement. Here it is:
TRFT = TR07 (1+α)Where:
TRFT is nominal federal transfer payments under FairTax in 2007; TR07 is estimated nominal federal transfer payments under current system in 2007; α is the percentage by which market prices under the FairTax would exceed expected prices in 2007 under current law.
This is showing that under the FairTax, nominal federal transfers must be increased by the price increase caused by adding the FairTax to consumer prices. In other words, the value of federal transfers are reduced by the amount of the FairTax, so you have to increase the nominal amount of the transfer to keep the same real value.