Saturday, June 26, 2010

Watch out for the "emergency" VAT in December

How are we going to start paying off a 1.7 trillion dollar annual debt? Answer: a European style Value Added Tax (VAT). Near the end of the year, the President's Blue Ribbon Deficit Commission will come out with a report which will basically say the deficits are unsustainable (what a surprise) and suggest a round of spending cuts and tax increases. I suspect strongly that the Obama Administration will warn the public that without large tax increases we'll suffer dramatic economic hardship (a.k.a. the Chinese won't be our T-Bills because they would become unreliable) and ask the Congress for the VAT to cope with the "emergency." It would be very hard to pass but in the rump session after the election I wouldn't doubt the Democratic majority's ability to push legislation through. After passing such an unpopular health care bill over massive public opposition using budget "reconciliation" I believe they could pass just about anything they really wanted.

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