Dumb Economic Idea of the Day

Perhaps we can foster both consumption and investment by enacting a progressive consumption tax — to take effect in five years.

No, not the Republicans: they have too many every day there to keep track of. Mine.

Two facts keep gnawing at me:

1) The economy needs more consumption. There is a huge shortage of aggregate demand.

2) But over the long run, one way to avoid bubbles is to have a higher savings rate, from which to develop greater investment.

How about this as a possibility? Enact a progressive consumption tax, of the kind that Ed McCaffrey or the RBC’s own Robert Frank have proposed, but write it so that it does not take effect for another five years.

To the extent that people respond to incentives, it will give people reason to spend now rather than hoarding, because future consumption will be taxed. And then the progressive consumption tax will kick in, fostering savings and investment.

No, it’s not a panacaea. Yes, I’m sure it’s full of problems. But it’s better than a whole lot of what the Masters Of The Universe have come up with over the last few years.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.