Might President Trump stumble onto a good policy?
I don't have much faith in the Trump administration's economic policy, but I see one small glimmer of hope. The president plans to announce his new tariff policy on April 2. So far, he has said two things about it. First, the goal is reciprocity. Second, he wants to treat a value-added tax, which most other nations have, as a tariff.
I don't buy either of these arguments. On reciprocity: Why should I shoot myself in the foot just because you shoot yourself in the foot? On the value-added tax, he is just wrong. A value-added tax is a consumption tax, not a trade restriction. (See here.)
But what if these two misguided arguments together lead Trump to propose a value-added tax?
That would be great. The new tax could finance cuts in other, more distortionary taxes, reduce the budget deficit, or some combination of the two. I have written about the virtues of a value-added tax here and here.
I know, I am probably engaged in wishful thinking.
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