Consumption Patterns

I am not alone in believing that the American Dollar will strengthen this Year. It is hard to explain exactly why I feel that way, but I think the United States is following a pattern first explored by Japan, and from which the EU is just emerging. It may mainly be based upon domestic saturation of the Consumption market combined with the savings in materials Cost associated with the new Technology; literally put, those Consumers who will utilize the new Technologies have become cognizant of the capabilities of the new Products, and will only purchase exactly those Products which serve their directed purpose. This could mean up to approximately 30% less Consumption purchases in the domestic market, as Consumers route their Consumption based upon accurate knowledge of their Needs.

Brad DeLong remains critical of the Huckabee Fair Tax plan, basically following the analysis of William Gale (pdf). This examination holds that the tax rate must be around 44% Tax-exclusive in order to remain revenue neutral (maintain the same amounts of Taxes collected). Brad adds on the Big Ticket knockdowns, and the federal prebates, and soon derives a Tax rate in the high fifties percent-wise, when moving to the Check-Out Counter. Arnold Kling brings the best argument to the table, stating that Consumption taxes reduce taxation on those people who earn more than they consume, which forces much higher taxation on those people who basically consume what they earn. The entire Movement, therefore, is in no way revenue neutral, but a probable 30% Tax Hike on Consumers.

The entire Consumption pattern would be drastically changed by such a Taxation. Consumers would rapidly learn they can adjust their Tax payments by alteration of their Consumption practices. There are both Pros and Cons to this activity: Consumers will immediately begin to demand Products of greater durability and lifespan, Consumer investigation of Product will become more concentrated and extensive, with Purchase coming only after satisfaction of those desires; an extended Business Cost for Retailers, who will be faced with larger necessary Sales staff, less Consumer traffic, and more articulated Buyers. Entertainment Products will decline in Sales, while equally being forced to exhibit extended longevity. I can go into other varied effects, but will leave it there, as this Post mainly focuses on Consumption patterns. lgl