Here’s how almost gratuitously terrible the mainstream media’s treatment of trade-related issues is. Even when good and important ideas somehow win its praise, full endorsements are withheld because they might actually reduce the deficits that keep slowing American growth and hiring.
Thus I was floored this morning when I saw Washington Post columnist Charles Lane support centering U.S. tax reform around a value-added tax. By concentrating on consumption, a VAT inevitably has the effect of penalizing imports and subsidizing exports (which of course are consumed abroad). Because the United States is the only major trading country without a VAT, the resulting discrepancy has been a major contributor to the trade deficit. Leading trade lawyer Terence P. Stewart estimated five years ago that the VAT disadvantage totaled $350 billion – equal to fully half the U.S. current account deficit (which also measures investment flows) at that time.
Lane praised a VAT as a politically more realistic tax reform proposal than the “Lower rates, broader base” approach that has dominated the debate for decades. He added that by promoting saving and investment and discouraging consumption, the levy would strengthen the nation’s financial stability.
His one objection? “The United States, and the world, rely on the American consumer to fuel growth, so higher consumption taxes here might be…radical…and not necessarily in a good way.” Which of course is like saying, “I’d stop drinking excessively except I’d miss that great buzz.” How is the nation going to balance its books better – and thereby avoid inflating a new borrowing and spending bubble that could again threaten a global meltdown – without downshifting its consumption to some degree?
In fact, Lane’s apparent aversion to addressing the trade deficit brings up another dispiriting aspect of the American trade policy debate and the media’s coverage of it. Had I or anyone else approached him with the message that a VAT was needed because it could speed up the recovery by reducing the trade deficit, I’m sure he would have brushed it off (politely, of course). But frame the idea as a tax reform panacea and he’s all ears — up to a point.
It makes me wonder. Should Lane’s column teach trade policy activists that their ideas should be disguised more cleverly? Or that even if they are, the mainstream media will reject them because, whatever their other results, they might actually help solve our trade problems?