Author: James Pethokoukis

Multiple reports suggest Andy Stern will be leaving his job as head of the politically powerful SEIU. The union, which represents healthcare and public employees, was instrumental in passing healthcare reform. In other words, he has contributed in two ways to America’s fiscal woes. First, health reform may prove a budget fiasco since its tax hikes and spending cuts  were used to expand coverage rather than cut the budget deficit. Second,  fat pay and benefit packages for public sector unions are a big reason so many states like California have long-term fiscal woes. As this David Feddoso story found:

Among states whose government workers are less than 40 percent unionized, median per capita state debt is $2,238. Among states with between 40 and 60 percent of their government workers in public sector unions, the average debt is $3,609. Among states with more than 60 percent of the government workforce unionized, the average (median) per capita debt is $6,380.

Interestingly, Stern will be a member of Obama’s deficit commission. So there are at least a couple of issues that need addressing that he will be an expert on.

Those who argue that Democrats might lose one or both houses of Congress are making an economic argument. Slow growth/high unemployment = angry, anti-incumbent voters. But what if the economy really perks up? First some analysis by Larry Kudlow:

Sometimes you have to take your political lenses out and look at the actual economic statistics in order to gauge whether we’re on the road to recovery or not. … No one has written more about the future tax-and-regulatory threats from the big-government assault of Obamanomics. But most of that is in the future. The current reality is that a strong rebound in corporate profits (the greatest and truest stimulus of all), ultra-easy money from the Fed, and some very small stimuli from government spending are all working to generate a cyclical recovery in a basically free-market economy that is a lot more resilient than capitalist critics would have us believe. So conservatives should not lose their cool and blow their credibility over a cyclical rebound that is backed by the statistics.

And now the econ team of Wesbury and Stein at First Trust Advisors:

Unfortunately, there is a group of people who still haven’t arrived at the station – mostly because they confuse politics with economic forecasting. Many Republicans and quite a few conservative television commentators are still trying to use the Clinton/Carville method of winning elections – “It’s the Economy, Stupid.” As a result, they keep telling anyone who will listen that the Obama agenda is going to kill the economy – RIGHT NOW.

But they will be wrong. It is true that more government spending and regulation, higher taxes, and government mandates will erode growth in the future. And it is true that recent growth in government will make it less likely the US will be the home of the next Apple iPad-type device. The fact of the matter is that big government and high tax rates hurt the entrepreneurial spirit and slow economic activity (see growth in Europe versus the U.S.).

But arguing that this recovery is not happening is a losing proposition. It is happening; And it’s V-shaped. We expected a V-shaped recovery as the panic ended, as monetary velocity returned and because Fed policy was easy.

Me: I think the key here is to see what happens with unemployment, incomes, housing and gas prices.  Certainly the economic consensus is for unemployment to stay above 9 percent. And my own analysis shows a big lag between an economic turn around and public perception. Perhaps the jobless rate will outperform on the upside as it has underperformed on the downside. One thing to keep an eye on is Obama’s approval rating which is now 45-48, according to Gallup.

The death of FDR in 1944 meant no New Deal, The Sequel. What did happen? This (via the WSJ):

Instead, Congress reduced taxes. Income tax rates were cut across the board. FDR’s top marginal rate, 94% on all income over $200,000, was cut to 86.45%. The lowest rate was cut to 19% from 23%, and with a change in the amount of income exempt from taxation an estimated 12 million Americans were eliminated from the tax rolls entirely.

Corporate tax rates were trimmed and FDR’s “excess profits” tax was repealed, which meant that top marginal corporate tax rates effectively went to 38% from 90% after 1945.

Georgia Sen. Walter George, chairman of the Senate Finance Committee, defended the Revenue Act of 1945 with arguments that today we would call “supply-side economics.” If the tax bill “has the effect which it is hoped it will have,” George said, “it will so stimulate the expansion of business as to bring in a greater total revenue.”

Me: Research indicates that top U.S. tax rates are already on the wrong side of the Laffer Curve. And our corporate tax rates are highly uncompetitive internationally. All play into a New Normal thesis over the long term.

White House budget chief Peter Orszag thinks his old colleagues at the Congressional Budget Office are being too pessimistic over the potential budget savings of healthcare reform (via The Hill):

“I think if anything, the deficit impact may well turn out to be larger than what was projected by the Congressional Budget Office for two reasons,” Orszag said at an event sponsored by the Economic Club of Washington. ”One, if you look at the history of projections on major pieces of legislation, they’ve tended to be too conservative rather than too optimistic,” he said. “And second, the scoring largely does not take into account this evolution toward paying for quality, which I think in this decade will begin to pay off.”

Me: Interesting, the International Monetary Fund thinks Orszag’s Office of Management and Budget might be too optimistic about its overall fiscal forecasts. This from the folks at e21:

The IMF working paper makes a compelling case that the Office of Management and Budget (OMB) uses unrealistically low interest rates in its forecasts of future debt and deficit levels, assumes too rapid a recovery, and overstates the speed at which countercyclical entitlement expenditures will fall in response to economic growth. As the IMF explains (page 14), “aging and health related spending are not the key drivers of this debt build-up.” Indeed, policy choices are.

Optimism is nothing new. As the IMF explains, “the past record of budget projections shows a strong tendency for ‘optimistic’ budget forecasts.” With the exception of 1993 to 1997, OMB projections have underestimated the growth of deficits and debt. What’s different about the Obama team’s projections is the magnitude of their optimism. The IMF estimates that to stabilize debt below 70% of GDP would require a fiscal adjustment of about 3.5% of GDP. In nominal terms, that would require some combination of spending cuts and tax increases equal to roughly $600 billion in 2014 alone.

Government officials are like professional sports coaches: Most are hired to be fired and fatigue nabs the rest.

Persistent talk about the imminent departures of President Barack Obama’s economics squad leaders, Timothy Geithner and Lawrence Summers, will surely prove right, eventually. But the day may be further off than many observers think.

From the get-go, Washington insiders pegged both experienced economic officials as short-timers. Personal tax issues marred Geithner’s confirmation hearing as Treasury secretary. Then stocks tanked when he touted a half-baked version of the administration’s bank rescue plan. And his involvement with bank bailouts as president of the New York Federal Reserve will never be popular.

As for Summers, none doubted his intellectual brilliance, but his appointment as National Economic Council director was considered an ill fit given its mandate to coordinate rather than generate policy. Some party liberals pegged Summers a victim of “cognitive capture” by Wall Street for his past role in deregulation. So recent press reports that he’s unhappy and wants to leave sooner rather than later seem superficially reasonable.

But both serve at the president’s pleasure. And the White House is on a bit of roll. Why tweak a winning team?

Healthcare passed and financial reform is gaining momentum. Then there’s the economy, a former politically toxic asset that is starting to rise in value as recovery takes hold and job growth reappears. Liberal criticism that a deficit-obsessed Summers was wrong to push an $800 billion rather than $1.2 trillion stimulus seems less relevant by the day.

The same goes for arguments that troubled banks should’ve been nationalized. Geithner’s much-derided bank stress tests attracted some $185 billion of private capital and sent bank stocks soaring. His approach to currency discussions with China also looks to be bearing fruit.

While some party activists and union leaders may wish for a house cleaning, there’s no pressing need for the White House to comply. Finding replacements would be tough. Anti-Wall Street sentiment limits the pool of possibilities, particularly at Treasury. Reshuffling existing personnel is problematic, too. Shifting budget chief Peter Orszag to the NEC would be a gift to Republicans, who would use the confirmation hearing of his successor to put the Obama budget deficits on trial.

While Summers and Geithner may possibly desire to leave mid term, there’s little reason to nudge them — if anything, the president should be begging them to stay put.

This is from the New York Times is important (as outlined by me):

1) A stronger renminbi could prove a mixed blessing for the United States. If China cuts back sharply on purchases of Treasuries, then the Obama administration could find it harder to finance American budget deficits.

2) But with the Chinese economy booming, a small move in the renminbi may still leave the central bank struggling with trade surpluses and a tide of speculative investment into China. That could force it to continue buying Treasuries with the extra dollars.

3) A slightly stronger renminbi that fluctuates each day against the dollar will mainly hurt low-margin, labor-intensive industries in China like shoes and textiles, they said. Many Beijing officials have been worried about job losses in these industries if the currency appreciates. Much of this production is already starting to move out of China, notably to Vietnam and Bangladesh, where labor costs have stayed low. And Chinese factories producing these goods have been struggling to find enough workers in the last two months as the economy grew powerfully this winter, stoked by heavy bank lending, strong demand for workers in the retail sector and rising government spending on high-speed rail lines and other infrastructure investments.

4) More high-tech industries, like the production of computers, have tended to favor a stronger renminbi. Further migration of labor-intensive industries to other countries could free up more workers for high-tech work, making it it cheaper for these industries to import materials that are priced in dollars. Such a development would create more Chinese competition for high-tech operations in America, however.

Me: I certainly don’t think the Obama administration views this is a silver bullet for the U.S. economy or the elevated levels of unemployment. More like it might help at the margins. The real benefit of appreciation is avoiding a highly destructive trade war.

Bruce Bartlett adds this on the speculation about Tim Geithner and Larry Summers:

Keep in mind that one reason for creation of the NEC in the first place was to give Bob Rubin someplace nice to hang his hat while waiting for Lloyd Bentsen to move on after being given Treasury to protect Bill Clinton’s right flank. Keep in mind also that Geithner is widely viewed as being under Larry’s protection. Without that it is quite possible that Tim would be gone already, given the generally poor grades he has gotten from across the political spectrum. Finally, remember that the appointment as NEC director does not require Senate confirmation, which may be an attractive quality in this political environment.

Someone like Roger Altman, former deputy Treasury secretary, might be a good replacement for Larry and, eventually, Tim. Knowing how badly Roger would like to be Treasury secretary, I’d start packing my bags if I were Tim and Roger became my de facto White House boss.

I think Jon Corzine may also have aspirations for being Treasury secretary, but considering how badly his term as governor of New Jersey went I suspect that considerable time will need to pass before he is politically viable again.

Me: I think all this is really premature. I think Geithner’s stock has skyrocketed and will only elevate further if the economy improves the way the WH thinks/hopes it will. Roger Altman, by the way, wants a VAT, like, yesterday.  And a BIG one.

Cato’s Mike Cannon thinks Ben Bernanke’s comments on budget deficits should have come weeks ago. And he thinks he knows why they did not (excerpts):

If Bernanke really wanted to warn the American public about the dangers of rising budget deficits, then a congressional debate over creating two new entitlement programs would be the most important time to deliver that message.  … Had Bernanke delivered his populist warning before January 28, it could have jeopardized his confirmation by the Senate to a second term as Fed chairman. Had he done so between January 28 and March 21, he would have suffered a storm of criticism from Democrats (and possible retribution when his term came up for renewal in 2013) because his sensible, responsible warning would have made moderate House Democrats more skeptical about ObamaCare’s new entitlements.

Bernanke’s behavior thus reveals why ObamaCare’s cost would exceed projections and would increase the deficit. Knowledgeable leftists, notably Tom Daschle and Uwe Reinhardt, recognize that Congress is no good at eliminating wasteful health care spending because politics gets in the way. (Every dollar of wasteful health care spending is a dollar of income to somebody, and that somebody has a lobbyist.) The Left’s central planners believe they can contain health care costs by creating an independent government bureaucracy that sets prices and otherwise rations care without interference from (read: without being accountable to) Congress. ObamaCare’s new Independent Payment Advisory Board is a precursor to what Daschle calls a “Health Fed,” so named to convey that this new bureaucracy would have the same vaunted reputation for independence as the Federal Reserve.

Politics affects Bernanke’s behavior and the Fed’s behavior. Politics will defang the Independent Payment Advisory Board, and many of ObamaCare’s other purported cost-cutting measures.

Me: This is worrisome. Too much of policy, whether it is  future a Health Fed or the deficit commission, is based on the ability of outside panels to end run Congress —  and of Congress to ultimately cede power.

The Weekly Standard reports some interesting bits from a breakfast chat by Congressional Budget Office Director Doug Elmendorf. The charming Mary Katharine Ham has some quotes:

1) “Many people in Congress are interested in it,” he said of the VAT, a national sales tax that adds between 10 and 20 percent to purchases in European countries where it’s been implemented. “We’ve had conversations with a number of members and their staffs.”

2) Elmendorf also declined to estimate what a VAT tax level would need to be to cover the 2020 budget deficit, which the CBO predicted will be 90 percent of GDP: ”That would put us in a very select group of developed countries,” he said. “There are relatively few developed countries that have debt-to-GDP ratios that high.

3) “Economists think about people deciding how hard to work or how many hours to work,” he said, explaining that the decision to take a higher paying job or work more hours is partly based on being able to buy more stuff with one’s money. “Any wedge between value you’re producing for your employer and what you can buy is a wedge that can distort. It is still a tax.”

4) “If we were to adopt a VAT tax in this country, it would be subject to many of the same (tax) preferences the income tax is subject to,” he said. “The VAT tax itself could become very complicated.”

5) “It’s not impossible that the [deficit]problem could go away,” he said. “It’s also no less possible that it could get a lot worse.” The CBO’s 90-percent figure was intended to fall somewhere in the middle of all possible outcomes.

I am writing a column on this, given the rumors about Larry Summers soon departing.  But a few quick thoughts:

1) The only folks who really seem hot for these guys to leave are liberal activist groups and union folks. Basically the Huffington Post crowd who want to break up the banks and spend another trillion dollars on stimulus.

2) I think the WH believes the economy will begin to be a slight breeze at its back in the months ahead, a not unreasonable economic conclusion. Why muddy the narrative with departures?

3) If Summers is sick of the job, he’s sick of the job. Whatever. But I don’t think there is a great desire to push him out by the WH political team or the POTUS.

4)  As for Geithner, his slow start, including tax troubles, made him a permanent subject for resignation rumors. But the success of the stress tests and perhaps now some movement on the China currency issue  have thickened his heat shield considerably.

5) What if the Dems lose both houses of Congress in the fall? The assumption is that there will be a total house cleaning on the other end of Pennsylvania Avenue as well. I am not so sure about that.  Replacements for the econ team would be tough to find given the party’s anti-Wall Street fervor, especially at Treasury. Plus, if Obama thinks his policies are right and progress is being made, then he is is going to stick. Recall that after the 1982 disaster for Republicans, President Reagan didn’t replace Don Regan at Treasury. Now after the Dem 1994 disaster, Lloyd Bentsen did leave, but he was never going to be a long-termer anyway.

Reuters has the scoop:

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax “was not as toxic an idea” as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves. “If at the end of the day we need to raise taxes, we should raise taxes,” he said.

Me:  It would be tough to find a think-tank economist or policymaker who doesn’t believe a VAT is on its way as part of a strategy to raise taxes.  (As I wrote earlier this week.) And not just on the rich. On the broad middle class.  But it is no magic bullet.  A VAT can be tricky to implement and could merely fuel more government spending. This will be a major political battle. I don’t see how it happens without a financial crisis as a spur. At the very least, a VAT would have to replace much of the current tax system and accompany major entitlement reform. Where to begin!?

Right about now the White House is probably thinking about packing the courts. Just as the Roosevelt-era Supreme Court voided a key New Deal effort to regulate commerce in 1935, a U.S. appeals court just put the kibosh on a Federal Communications Commission effort to regulate the Internet. This far and no farther, the court said to further federal intervention in the American economy.

The appeals court kneecapped FCC intent to impose net neutrality as part of its grand broadband plan. Such rules would seek to prevent phone and cable companies from potentially charging providers that supply huge amounts of bandwidth-gobbling traffic. This regulatory debate has been turned into an unusual David (scrappy web firms) vs. Goliath (entrenched telecoms) morality metaphor. Despite being three times larger by market capitalization, Google, for example, still has far more “cool” cachet than Comcast, which challenged the FCC. The Davids are also Friends of Obama, giving massively to his presidential campaign.

But what it all really comes down to is who will pick up the tab for future network upgrades to handle applications such as high-definition video. In a net neutral world where prices were fixed at, essentially, zero, the telecom operators would pay — before passing costs along to consumers, of course. On the other hand, maybe operators want to charge content providers tolls for putting their traffic into express lanes. Or perhaps another business model is just around the bend. Under net neutrality, the current system would be locked into place.

Government should have high hurdles to clear before setting prices. In the end, net neutrality seems little more than rent-seeking by content providers who wish to use government to distort market forces in their favor. It’s akin to a computer maker successfully lobbying for price controls on shippers like FedEx when transporting goods from China. When it bought new planes, the shipper would have to eat the cost or pass it downstream.

The Internet tussle is unlikely finished. The FCC might ask for the decision to be reconsidered or seek review by the U.S. Supreme Court. The Obama administration could also turn to Congress to clarify the regulator’s authority. A more radical option, one advocated by consumer groups, would be for the FCC to legally reclassify broadband. Such a move would give the agency broad power to regulate the Internet like it was the old-fashioned landline telephone service. That sort of command-and-control apporach hardly seems a policy suited for the 21st century.

As usual, Joel Kotkin nicely encapsulates the problem at hand:

Now the question is whether the president can refocus on jobs. This will take, among other things, backing off the economically ruinous climate change agenda. Even the most gullible economic development officials are beginning to realize that “green jobs” are no panacea. In fact, as evident in Spain, Germany and even Denmark, over-tough green legislation can destroy the productive capacity of the most enlightened industries. Similarly in green strongholds like California and Oregon, the mounting climate change jihad could slow and even explode the incipient recovery by imposing ever more draconian regulation on businesses that can choose to migrate to less onerous locales.

There are some hopeful signs of Obama’s repositioning. His recent moves embracing nuclear power and off-shore oil drilling, however inadequate, show that he’s at least trying to triangulate between the green purists and the unreconstructed despoilers. Some sort of moderated energy legislation–there’s no way to get the more radical House version through the Senate–would reassure businesses and the public that the president has jobs as his No. 1 priority.

That, according to Ray Fair of Yale University. Other private estimates put the number in the hundreds of thousands, if not millions.  AEI’s Phil Levy explains the methodology involved:

Our more aggressive bidders use a crude approach. They look at the trade gap, assume that every billion dollars of trade deficit equates with a certain number of jobs, and multiply. Fair, in contrast, uses years of data to estimate a detailed model of how the global economy works. Then he reruns the model under the assumption of a 25 percent appreciation in China’s exchange rate. His model contains the same effects that the others rely on—increased demand for U.S. goods as Chinese imports become more expensive. But he sees offsetting effects as well: decreased Chinese output and imports; increased U.S. prices; decreased U.S. wealth and wages; increased U.S. interest rates. He finds the latter effects more than outweigh the former.

My friend Bruce Bartlett over at the Capital Gains and Games blog asks whether conservatives should have supported Hillary Clinton in the 2008 presidential race:

I wrote a couple of columns in 2007 telling conservatives that they really should consider lending some support to Clinton if they believed, as I did, that Obama was much more liberal than her and that whoever won the Democratic primary would probably win the general election (see here and here). … So would conservatives have been better off following my advice and helping Hillary Clinton to get the Democratic nomination, rather than futilely wasting their efforts on McCain, Mitt Romney and other Republican candidates who could not win and were considered far from ideal from a conservative point of view anyway? … I think the evidence suggests that Hillary Clinton could have won the Democratic nomination with just a little bit more support, and probably would be governing significantly more conservatively than Obama. For one thing, given her disastrous experience with health care reform in 1993-1994, it’s reasonable to assume that she would have stayed away from that issue at all costs.

Me:  Bruce derives most of his evidence from the idea that Hillary’s centrism has seriously influenced the direction of Obama’s foreign policy. Now I certainly have no reason to believe Hillary wouldn’t have pushed hard on healthcare reform. She certainly spent a lot of time and resources creating a detailed plan during the campaign and then promoting it.

As for economic policy more generally, you couldn’t produce a more centrist Democratic economic team than the one Obama has assembled: Summers, Romer, Goolsbee, Geithner. No actual Republicans (probably not) but no one that “progressives” have much fondness for either. As for actual policy, Hillary would likely have favored a big stimulus plan and major healthcare reform. Would she have been tougher on the banks? Coming out of the pro-Wall Street Clinton presidency and her time as NY senator, I doubt it.

Henry Blodget says he’s pretty confident taxes are headed higher to deal with the historic rise in federal spending  and agrees with Northern Trust’s Paul Kasriel that higher rates won’t be an economy killer. Blodget quotes Kasriel:

The economy performed pretty well in the eight years ended 2000 even though the top marginal tax rate was higher in these eight years than it was in the prior eight years. The economy did not perform better because of the increase in the top marginal tax rate. Nevertheless, this increase was not sufficient to derail economic progress. In the eight years ended 2008, the economy performed relatively poorly despite the lower top marginal tax rate.  The economy did not under-perform because of the marginal tax rate cut. Nevertheless, the cut in the tax rate was not sufficient to enhance economic performance. The point of all this is that although tax rates matter, they are not all that matters.

Me: I agree that taxes matter but they are not the only thing that matters. But they do matter a lot.  Back when tax rates rose in the 1990’s, the economy was starting from a position of strength, not weakness. There was already  a powerful, self-sustaining recovery in place. Let me point out this 2009 study that examined the affect of higher marginal tax rates on the rich:

Taxes trigger a host of behavioral responses designed to minimize the burden on the individual. … all such responses are sources of inefficiency, whether they take the form of reduced labor supply, increased charitable contributions, increased expenditures for tax professionals, or a different form of business organization, and thus they add to the burden of taxes from society’s perspective.

Following the supply-side debates of the early 1980s, much attention has been focused on the revenue-maximizing tax rate. A top tax rate above X is inefficient because decreasing the tax rate would both increase the utility of the affected taxpayers with income above X and increase government revenue, which can in principle be used to benefit other taxpayers. … Using our previous … the revenue-maximizing tax rate would be 55.6%, not much higher than the combined maximum federal, state, Medicare, and typical sales tax rate in the United States of 2008.

And this is before the 2011 tax increases and the increase in taxes related to healthcare reform. We are probably now on the wrong side of the Laffer Curve.  Greg Mankiw also makes the case that Americans are not undertaxed compared with the rest of the planet’s advanced economies.

When will the other chaussure drop? Now that America has gone French (and German and British) with universal healthcare, expect Washington to eventually propose a European-style, value-added consumption tax to pay for it — as well as the rest of the historic rise in federal spending. But U.S. voters are in a severe anti-tax mood. It might take another financial crisis to give politicians the will and hubris to ignore them.

Here’s how it might all play out:

1) For Washington insiders, it’s a matter of “when” not “if.” Politicians and economists I chat with from the White House to Capitol Hill to the Federal Reserve think a VAT inevitable. Healthcare reform has only hardened that consensus. Spending cuts to pay for expanded coverage may not happen. Either way, the budget numbers scream for action. Annual federal spending as a share of GDP will likely outpace revenue by at least six percentage points for years to come. Trillion-dollar deficits the norm.

2) Just slashing spending is one option. But that would require a radical reshaping of social-insurance schemes as outlined by Rep. Paul Ryan in his recent white paper, “A Roadmap for America’s Future.” The war over healthcare would seem a minor skirmish by comparison.  A battle worth fighting, but a coalition of the willing might be small.

3) Maybe a broad income tax increase? So far Washington has shown an appetite for nicking only the rich. And one study suggests the tax burden on wealthy households is approaching — or has perhaps even exceeded — the revenue-maximizing level. That’s right, America is on the wrong side of the Laffer Curve again. Even assuming the rich wouldn’t flee to tax shelters, top income tax rates would need rise to economy-crushing levels to balance the budget.

4) Anyway, it’s smarter to tax consumption broadly rather than work and investment narrowly. Especially in an economy that needs less of the former and more of the latter. And that is what a VAT does. Few doubt its ability to raise massive amount of revenue with fewer disincentives than the current system. But if the economics are clear, the politics are a puzzle in Tea Party America. VAT proponents assume political intransigence without a financial crisis to spur action, just as market chaos helped get the $700 billion bank rescue passed in 2008.

5) Yet there is a reasonable scenario where America would accept a VAT. In fact, it is the only scenario under which we should accept a VAT.

First, Washington would have to demonstrate it could manage the public purse by reforming entitlements in a Ryan-esque manner. A tall order, but a necessary prerequisite or else voters would fear that entire six-point budget gap would be closed by tax hikes via a VAT. So, in the end, government spending needs to be dramatically cut. (Preferably, we would never need to get past this step.;)

Second, a VAT would have to completely overwrite the current complex and inefficient tax code. If not, voters would fear getting hit by both VAT and income tax hikes. A VAT can’t be an add on.

Third, every sales receipt in America would have to indicate the VAT penalty. But politicians love the hidden aspect of a VAT as way of duping voters. To them opaqueness is a feature, not a bug.

Fourth, the intended tax burden should be kept level at first. A pro-growth VAT — one that does away with corporate and investment taxes — might produce more revenue merely by expanding the economic pie.

Still a tough sell. Better skip the part about the French.

Ed Yardeni makes the comparison:

What a big relief! I’m not referring to the great stock market rally over the past year, but rather to Tuesday’s “Big Bang.” Particle physicists used the Large Hadron Collider near Geneva to simulate the event that might have occurred at the beginning of the universe. A few Doomsayers warned that the experiment could create a black hole that would suck us all into oblivion. Fortunately, they were wrong. However, even if a doomsday scenario is a small risk, shouldn’t all of us on the Planet Earth get to vote on whether the experiments should proceed? A spokesperson for the physicists said, “We are not doing anything that nature has not done before.” That’s not very reassuring. (Where did all the dinosaurs go?)

It all reminds me of ObamaCare. The legislation was passed despite lots of dire warnings that it will blow up both the healthcare system and the federal budget. Nothing terrible has happened so far, though the predictions are that it will be a slow-acting black hole. There has already been a collision between Congressional Democrats and a few CEOs over the adverse impact of the law on corporate earnings and retiree drug benefits. This spat along with the passage of ObamaCare haven’t unnerved stock investors so far. Maybe that’s because they are relieved.

Forget about being forced to buy health insurance. Aren’ t Americans pretty much forced  by our complex tax code to buy tax prep software or see an accountant? That is a mandate, too, notes Howard Gleckman of TaxVox:

The government does not specifically require us to hire paid tax preparers or buy commercial software, of course. But it has, in effect, left millions of taxpayers with no real choice. Congress has created a tax code that makes it nearly impossible for many Americans to file returns without paid help. And even those who could … are so intimidated by the whole process that they pay people to help them anyway.

Thus, in 2005, 89 percent of individual taxpayers either used commercial software or hired paid preparers to help them do their civic duty. Just 11 percent, according to my colleague Eric Toder, filed returns on their own.

Yet, we just shrug and pay our $59 for commercial software or pony up between a few hundred and a few thousand dollars to paid preparers. No constitutional challenges. No state attorneys general at the barricades. Many of us, in fact, are likely to spend more money hiring a human being to do our taxes than we’ll pay in penalties for refusing to buy insurance ($95 in 2014 increasing to $695 by 2016). Indeed, I’m willing to bet that more of us will pay somebody to prepare a tax return than will purchase medical coverage, despite the insurance mandate.