Taxing consumption is still wrong

Ugh.

Very stupid column courtesy of John Tamny at Forbes a few weeks ago lauding Eduardo Saverin (of Facebook fame) for renouncing his US citizenship so he won't have to pay capital gains taxes, or "feed the beast" according to this prick author.

Tamny says Saverin is an American hero.  He thinks US spending is wasteful, and that it would be so much better if Savern could just keep all his money and invest it in a bigger job-creation machine. This is the same libertarian, "free market" nonsense that's failed time and time again. Maybe the abolition of capital gains taxes would increase entrepreneurial investment, but it wouldn't be invested in sectors that are necessary to social welfare, e.g. education, healthcare, and defense.  Instead, we'd perfect the iPod and have holographic TVs, maybe even develop some new medical equipment (most investment has been in the technology sector lately), but everyone would be too poor to use it except the investors.

Then he says we should switch to a consumption tax.

Well, I've talked about this before. Here's the graph I made:

Consumption taxes aren't fair. They don't even make economic sense. Get it? 

Austerity Foolishness

There's an important point that Paul Krugman's been making lately, that a lot of people don't seem to get.

If everyone slashes spending at the same time, it's a problem.  Similarly, if the private sector implements its own "austerity" measures because it feels like it's racked up too much debt, and the government concomitantly does the same thing, there's going to be a surplus of available human capital (too many workers who can't find jobs) and a lot of money that's invested sub-optimally.  What that means is that a big spender (i.e. the government) needs to give the economy the push it needs. That's the only way markets are going to be able to recover.

Having a car to get from place A to place B may be necessary, but it's obviously not sufficient.  You also have to have gas, you need a driver, and you need someone willing to turn the key. Same logic.

Of course, there's an important relationship between economic downturns and the environment (there's an excellent paper by Stern and Bowen on this). Basically, environmental initiatives need a big player (again, the government) to get them rolling, and since economic depressions demand government spending, there's a huge opportunity during a depression (cough *now* cough) to make some substantial green investments.

Also, if anyone says Solandrya to me, I'll slap a...