Last week I wrote a letter to the editors of The Wall Street Journal (WSJ). Unlike a previous letter, which I shared in the prior post last week, this letter was not published in a print edition.
The letter referred to two opinion pieces in the February 27, 2017 print edition of the WSJ. The first article was entitled, The Illusory Flaws of 'Border Adjustment', and the second article was entitled, The 'Longshoreman Philosopher' Saw Trump Coming in 1970.
The author of the first article, Martin Feldstein, believed the tax would net the U.S. $1 trillion over ten years whereas the author of the second article, Reuvan Brenner, shared the wisdom of Eric Hoffer, a U.S. philosopher that lived last century.
Upon reading my letter you may noticed that I favored the latter article over the former and in doing so I hit on two common themes of mine, cause and effect and the national debt.
My letter entitled, The ‘Illusory Flaws’ in “The Illusory Flaws of ‘Border Adjustment’” is as follows:
Mr. Feldstein doth ignore the law of cause and effect and or he must think foreign exporters to the US are imbeciles. Based on what he wrote in his opinion piece entitled, The Illusory Flaws of ‘Border Adjustment’, I believe he may be one of the “alienated intellectual[s]” attributed to Eric Hoffer per Mr. Brenner in his opinion piece below Mr. Feldstein’s entitled, The ‘Longshoreman Philosopher’.
More specifically, if a US exporter to another country experienced a prompt and ongoing loss of gross margin of an additional 2000 bps or 20% ---and most likely a business loss (assuming operating margin in line with S&P 500 at ~ 700 bps or 7%), would he expect the exporter to do nothing? The exporter will eventually stop exporting (either going out of business or from a smart business decision) and or increase prices.
Big picture, a tax is restrictive and will eventually lead to a reduction in consumption (and a drag on GDP, which I would think he would know). Maybe this convoluted and faulty thinking led him and other advisers to persuade President Reagan to believe in what his immediate successor had previously termed ‘voodoo economics’ (aka supply-side economics) because, arguably, voodoo economics led to an expanding debt obligation that began on Reagan’s watch and still continues today, 30 years later (please see chart at metrocosm.com).
We have serious problems that need serious solutions, not tax and spend gimmicks that fail to ignore relevant impacts.
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