Funny from an economics book -Larry Summers in 1988 (Bruce Bartlett's book)

I just finished reading Bruce Bartlett's "The New American Economy:The failure of Reaganomics and a new way forward"

There is an oft-repeated saying about the VAT (Value Added Tax) made by economist Larry Summers back in 1988. The reason the United States doesn't have one, he said, is because conservatives view it as a money machine and liberals see it as a tax on the poor. We will have a VAT, Summers predicted, when liberals figure out that it is a money machine and conservatives see that it is a tax on the poor.


This is the article that Bartlett paraphrases
http://www.nytimes.com/1988/12/19/business/tax-watch-the-likely-forms-of-new-taxes.html

economics (lack thereof)

Best

The GOP's misplaced rage

http://www.thedailybeast.com/blogs-and-stories/2009-08-12/the-gops-misplaced-rage/full/

Everything else is Forbes

Republican Deficit Hypocrisy

http://www.forbes.com/2009/11/19/republican-budget-hypocrisy-health-care-opinions-columnists-bruce-bartlett.html

"at least the Democrats don't go on Fox News day after day proclaiming how fiscally conservative they are, and organize tea parties to rant about deficits, without ever putting forward any plan for reducing them. Nor do they pretend that they have no responsibility whatsoever for projected deficits, at least half of which can be traced directly to Republican policies.

It astonishes me that a party enacting anything like the drug benefit would have the chutzpah to view itself as fiscally responsible in any sense of the term. As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt. Space prohibits listing all their names, but the final Senate vote can be found here and the House vote here."

We Can't Cut Spending (because not killing granny is really expensive)

http://www.forbes.com/2009/09/17/federal-budget-spending-opinions-columnists-bruce-bartlett.html

Medicare Part D money quote

http://www.forbes.com/2009/05/14/taxes-social-security-opinions-columnists-medicare.html

"The unfunded portion of Medicare part D, which was rammed into law by George W. Bush and a Republican Congress in 2003, is also covered by general revenues under current law and has a present value of $15.5 trillion or 1.2% of GDP forever

Bartlett certainly makes the case for the VAT in the book I just finished.

A VAT is going to increase the tax at every level of production which will put the end consumer on the hook for all the taxes due. If most of your income is providing subsistence and that will be taxed more, you're screwed! I could deal with VAT so long as it didn't include essential items such as food, housing, and those things necessary for an individual to live. If you want to do a VAT, only apply it to non-essential items or those that are beyond your ability to pay for them within three years.
It might be that my understanding of VAT differs from yours. If you could enlighten me more than the meager resources of Wiki and other internet searches, I'd love to consider their thoughts.

it seems to me the last thing you want to do is tax consumption thereby curtailing consumption. VAT is nothing more than a tax on poor people. How about restoring progressivity to the federal income tax code, for starters?

He points out that the end user IS paying for all of the tax but he deals it with from economist stand point-which is, to me, always a bit standoffish and not down to the checkbook of the consumer.....anyway...


He points out that the coming entitlement crush of the boomers retiring will send the debt as a percent of GDP (can't find the stat looking quickly through the book) to unprecedented levels. He then gives the example, often of "Europe" as a whole, of the degree that VAT is used for tax revenue created outside of the US vs inside the US "Taxes on goods and services average 32 percent of revenue in Europe (total government) versus 16.8 percent in the United States (including state and local government). European countries also generally tax capital more lightly than the United States does."

This book is Bartlett reconsidering Keynesian economics. He chronicles its rise (depression) and its fall (inflation). He also discusses Friedman, monetarism, and even George Laffer without any flippant characterisations of any of them.

He points out that there is no evidence that tax cuts help to balance the budget-mostly because they don't generate any increase in tax revenue and because no one will control spending. Specifically that the Bush tax cuts of 2001 took debt as the percentage of GDP from 57% back to where it was when Clinton took office 67%.

He says that the looming Social Security problem (and Medicare I think) was near an agreement between Clinton and the Republicans until.... the impeachment nonsense.

He says that Republicans need to come to grips with the fact that there is a welfare state (SS, Medicare) and burying their heads in the sand will not make it go away. He praises Bernanke. Not a big fan of the stimulus. And pointed says that the Republicans have every bit of the blame for the financial and housing meltdown as you and I know they do.

Bartlett was Jack Kemp's economic guy. He was in the innermost circle of the right on economics but this is not a "oh please forgive me" book- he rarely talks about himself. It is a cold economics book for the most part. Bartlett wrote "Impostor" about Bush and was cast out completely from his former world.