Posted by Daniel J. Mitchell
The White House has announced that it is nominating Alan Krueger, a professor at Princeton, to be the new Chairman of the Council of Economic Advisers.
In a Freudian copy-editing slip, the Fox News story (at least as of 8:44 a.m.) says “Krueger’s job will be to provide policy prescriptions on ways to spur unemployment.”
That’s obviously tailor-made for a joke about the Obama Administration not needing any help when it comes to stimulating joblessness.
On a more serious note, though, I’m worried about Krueger’s sympathy for a value-added tax (VAT). Here’s what he wrote back in 2009.
…a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook. In addition, a consumption tax would encourage more saving in the long run. Many economists consider a consumption tax an efficient way of raising tax revenue, especially in a global economy. The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy.
To be fair, Krueger was very careful to leave himself some wiggle room, even going so far as to write that, “I’m not sure it is the best way to go.”
But it seems rather obvious that Krueger, like other leftists, wants this giant new source of revenue. Heck, President Obama also has semi-endorsed a VAT, saying it is “something that has worked for other countries.”
The President’s assertion is especially foolish. After all, European nations imposed VATs about 40 years ago, which simply encouraged more spending and more debt — and now several nations are on the verge of bankruptcy.
If that’s “something that has worked,” I’d hate to see the President’s idea of failure.
The real lesson is that the United States should not copy Europe’s mistakes. This short video has the key arguments against this European-style national sales tax.
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