Saturday, April 23, 2011

WSJ Sets the Ground Work for a Consumption Tax

Mark Whitehouse at WSJ attempts to earn his central planning merit badge with a post that says:
$1.2 trillion [that's] how much Americans spend annually on goods and services they don’t absolutely need.

This Easter weekend, Americans will spend a lot of money on items such as marshmallow peeps, plush bunnies and fake hay, begging a question: How much does the U.S. economy depend on purchases of goods and services people don’t absolutely need?

As it turns out, quite a lot. A non-scientific study of Commerce Department data suggests that in February, U.S. consumers spent an annualized $1.2 trillion on non-essential stuff including pleasure boats, jewelry, booze, gambling and candy. That’s 11.2% of total consumer spending, up from 9.3% a decade earlier and only 4% in 1959, adjusted for inflation. In February, spending on non-essential stuff was up an inflation-adjusted 3.3% from a year earlier, compared to 2.4% for essential stuff such as food, housing and medicine...

The sheer volume of non-essential spending offers fodder for various conclusions. For one, it could be seen as evidence of the triumph of modern capitalism in raising living standards. We enjoy so much leisure and consume so much extra stuff that even a deep depression wouldn’t – in aggregate — cut into the basics.

Alternately, it could be read as a sign that U.S. economic growth relies too heavily on stimulating demand for stuff people don’t really need, to the detriment of public goods such as health and education. By that logic, a consumption tax – like the value-added taxes common throughout Europe—could go a long way toward restoring balance.
Yes, life is to be lived for the greater good. No non-essentials for you until every derelict has a luxury studio with a view of the Pentagon.

That is, of course, unless you are the President, Charlie Sheen or some other elitist where no luxury can be spared and no law can't be broken.


1 comment:

  1. The distinction between 'essential' and 'non-essential' is arbitraty bullshit. But don't Keynesians WANT people to spend? He better be careful what he says, lest he offend his Keynesian superiors.