I have been thinking a lot about Beverly Martin's April 22 letter supporting the Fair Tax published here. Just on April 21 the New York Times posted a story about how today Americans more than ever are more pessimistic about the economic outlook and direction of the country. I share that pessimism as does Ms. Martin.
Unlike Ms. Martin, I do not expect any magical solution in the tax code to usher in a new millennium. If only it could. The Fair Tax is concocted to benefit the wealthy. Middle and low income citizens would be made to bear the brunt of government. Is that fair?
To have a national sales tax replace the current tax system the Sixteenth Amendment to the constitution would have to be repealed. That is a heavy lift and not likely to happen. Consumption taxes could be enacted on the state level but it would destroy our state government and heavily burden our populace.
Ms. Martin's arguments rest on the shoulders of Lawrence Kotlikoff, an economist from Boston University and a wellknown quantity. Dr. Kotlikoff is a dooms day soothsayer. He tells everyone the U.S. economy is already bankrupt. That is not an economic view widely accepted. In 2005 he wrote "The Coming Generational Storm." When I read it at the time I thought he made some very good observations about aging world populations. But his predictions were dire. We old people are going to kill the golden goose. He says something has to be done about old people's excessive needs.
According to Kotlikoff the problem with us old people is that we want just too much medical care. Talk about death panels. Kotlikoff would slash Medicare spending much as the Paul Ryan budget that has been proposed and accepted by the current U.S. House Republicans. It is balance the budget on the backs of the elderly. Nowhere in Kotlikoff's book does he talk about medical cost containment. Insurance and pharmaceutical costs skyrocket but government takes a back seat to the free market while you and I are gouged. Being a veteran, I get my drugs at a tenth of your cost because the government negotiates pharmaceutical contracts for big group discounts for veterans. Cost containment can exist.
Kotlikoff and Ms. Martin have not thought through the Fair Tax any more clearly. Their misguided beliefs will cost us.