Here is the link, via Greg Mankiw.  If we are comparing the Fair Tax to the traditional VAT, compliance is issue number one and I’m not convinced by Kotlikoff’s defense:

This [compliance] is a reasonable concern, and one I share.  In examining the real revenue-neutral FairTax rate, my co-authors and I ignored compliance issues, not because they are unimportant, but rather because we had no firm basis for estimating their impact…

…it’s clear that the incentive to cheat will be significant. But it’s also clear that the incentive to evade income taxes is greater than would be the incentive to evade the FairTax.  Moreover, much of the evasion under the FairTax would come in the same form and done by the same actors as evasion under the income tax; for example, a waitress who fails to collect FairTax on tips is also, presumably, not paying income taxes on those tips under the current system….   

The reasons I’m not overly worried about evasions number five.  First, the vast majority of retail sales occur in major retail outlets, like WalMart.  Second, we’ll have vastly fewer taxpaying entities (14 million rather than more than 100 million) on which to focus our enforcement efforts.  Third, we’ll have hundreds of thousands of otherwise unemployed IRS agents, accountants, and tax attorneys to enlist to enforce a single tax.  Fourth, we can always compel firms to report, via 1099-type forms, their sales to other firms.  This will provide the same records that arise under a VAT.  Fifth, the government can stipulate that all retail sellers provide buyers with a written receipt, regardless of whether the transaction is or is not in cash, specifying that the FairTax has been paid. Thus if sellers don’t mail in the taxes, there will be a paper trail of the evasion. Sellers who try to bribe buyers to forgo receipts and split the FairTax among themselves run the risk of having the buyer turn them in.   

I would say this: push for a Fair Tax and if you’re lucky you’ll get something like a VAT, if only for reasons of enforcement.  Plus you’ll also get the same income tax we have now, which isn’t going away anytime soon.  New Zealand, of course, did something like this.  "Fair Tax = Tax Increase"; it’s a pretty good and simple slogan.

On most of Kotkiloff’s other points, he’s simply "fighting for a draw," as they say.  Think through federalism with no federal income tax as a base for state and local taxes.  The transition issues are a monster.  If encouraging savings is the main goal, why not just eliminate the taxation of capital income under the current scheme?

Here is a long NYT piece on the Bernanke regime; here is Anna Schwartz complaining about Bernanke as Fed chair.  In the comments, I am taking nominations for the following: given perfect hindsight, what should the Fed have done and when?  Keep two things in mind: a) looser money sooner probably would not have helped the credit problems (and might have tied the Fed’s hands later on), and b) your recommendations cannot refer to actions which predate the Bernanke regime.

People used to think that more population was bad
for growth. In this view, people are stomachs–they eat, leaving less for
everyone else. But once we realize the importance of ideas in the economy,
people become brains–they innovate, creating more for everyone else….

In the 20th century, two world wars diverted the energy of two
generations from production to destruction. When the horrors ended, the
world was left hobbled and split. Communism isolated much of the world,
reducing trade in goods and ideas–to everyone’s detriment. World
poverty meant that the U.S. and a few other countries shouldered the
burdens of advancing knowledge nearly alone.

The battles of the
20th century were not fought in vain. Trade, development and the free
flow of people and ideas are uniting all of humanity, maximizing the
incentives and the means to produce new ideas. This gives us reason to
be highly optimistic about the future.

That’s me, writing at Forbes.com.  Read more about why the economics of new growth theory gives me reasons to be optimistic here.

Privatizing toll roads in the U.S. may result in significant diversions
of truck traffic from privatized toll roads to "free" roads, and may
result in more crashes and increased costs associated with use of other
roads, according to a new study.

It’s interesting how congested, dangerous, public roads are framed as a problem of safe, fast, toll roads!  The problem, however, is easily solved.  Price all the roads!  Unrealistic?  Foolish?  Not at all, especially not for large trucks which are the focus of the above study.  The key is to tie the price to the truck not to the road.  With today’s GPS technology trucks can be outfitted with GPS devices that can price all roads according to time, congestion, quality and a variety of other factors.  In fact, just such a system is working in Germany right now.

In other congestion news the DOT is finally allowing airports to charge landing fees based on congestion.  This is good news for travelers who can thank the economically-astute, Harley riding, no-nonsense Secretary of Transportation, Mary Peters.

By the way, Transportation Secretary Peters wrote the foreword to Street Smart: Competition, Entrepeneurship and the Future of Roads, a very good book on road pricing and privatization edited by Gabriel Roth and published by the Independent Institute (where I am the director of research.)

From Brad DeLong.  Excerpt:

The best way to keep a stimulus bill from becoming a lobbyist-pleasing ineffective and destructive Christmas tree in which a lot of the money goes to people who won’t spend it and a lot more to people who shouldn’t get it is to keep the legislative vehicle simple and clean. Boosting employment in the short term by cutting a lot of identical checks by April if we need to is something congress and the IRS can do. And Obama’s plan seems to me to have the best chance of doing that–if he can sign Pelosi and Reid up to move a clean, focused bill.