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To: justshutupandtakeit

"I see no way it would not cause a drastic drop in consumption initially though and thereby a deep recession or worse."

A common misconception. What it would do primarily is to shift the prices of US produced goods relative to foreign produced goods so that the demand for US produced goods would increase significantly. Unlike a tariff, we could simply point out to the WTO and our trading partners that we would be taxing foreign products the exact same way that we are taxing our own.

The other major reason for economic stimulus is that we would be jettisoning several hundred million $$$ in compliance costs.

Primarily because of those two factors, the economy would boom, even though there would be an initial net decline in consumption. That decline, however, would consist entirely of a decrease in the consumption of imports, partially offset by an increase in the consumption of US produced goods.


494 posted on 02/04/2005 12:28:41 PM PST by phil_will1
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To: phil_will1

I don't believe it to be a misperception but neither of us can prove our assertion.

Nor do I see a price impact on US exports unless you actually expect the working class will accept a decrease in wages. This it will never do since it will likely be paying more in taxes than currently since revenue neutrality is a key in the proposal.

Compliance costs are paid to specialists reducing their income will also reduce overall income which will be a negative at least in the short run. And there has been enough complexity already discussed in a FT that there will still be need for tax experts. Perhaps not as much as now but that is debatable.


510 posted on 02/04/2005 1:36:05 PM PST by justshutupandtakeit (Public Enemy #1, the RATmedia.)
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