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FairTax Gets Unfair Interview
CNN’s Soledad O’Brien
warns of the impending “devastation” of the economy with the FairTax.
By Megan Alvarez
August 4, 2005
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With “fair tax” legislation on the table, CNN’s Soledad O’Brien
resorted to scare tactics in her August 3 interview with Neil Boortz
on “American Morning.”
Boortz and Rep. John Linder (R-Ga.) have written a new
book, “The FairTax Book,” to garner support for the legislation that
aims to replace all current federal income taxes with a single
consumption tax added to all goods and services at the final retail
sale. |
See Video |
O’Brien could not let her interview pass without
telling the audience how the tax would “devastate” the economy.
O’Brien mentioned the devastation three times during the interview.
She pointed to groups like AARP, which claims the tax
is “unfair to seniors” and the National Retail Federation, which
says the tax would cause “a three-year decline in the economy, a
four-year decline in employment” and “an eight-year decline in
consumer spending.” She then said, “But every economist who
disagrees with you says it’s going to devastate the economy.” As if
she had not pointed out the critics’ claims enough, O’Brien, for
good measure, mentioned the “devastation” a third time, saying to
Boortz, “Answer my question for me: The people who say it’s going to
devastate the economy, at least out four years, maybe even longer.”
With O’Brien’s dire predictions it was unlikely that
anyone in the audience could have come out with a positive
impression of the FairTax, but the questions that O’Brien asked can
be addressed with a little research.
First, O’Brien asked, if “you get a tax every time you
purchase something, doesn’t that clamp down on spending?” In his
response, Boortz was correct to point out that there would be no
disincentive to buy, because goods and services would be roughly the
same price once the tax was implemented as they are now.
This is the case, because, as noted on Fairtax.org,
“All goods and services already contain the embedded costs of the
current tax system in their prices. When these embedded taxes are
removed, prices come down. Dale Jorgenson, Ph.D., former chairman of
the Economics Department at Harvard University, has projected an
average producer price reduction of 22 percent for goods and
services in just the first year after the adoption of the FairTax.”
Thus, with a 23 percent FairTax, goods and services would be roughly
the same price.
Secondly, “devastation” of the economy is unlikely.
Fairtax.org estimates that gross domestic product (GDP) would
increase by an estimated 10.5 percent in the first year alone.
Additionally, the economy’s capital stock would rise by 42 percent,
its labor supply by four percent, its output by 12 percent, and its
real wage rate by eight percent. These are good indicators of the
clearly positive effect the FairTax could have on the economy – a
stark contrast with O’Brien’s “devastation.”
O’Brien owes her audience a better discussion of this
critical issue rather than unfounded predictions. Boortz and others
have made proposals on how to improve the tax code and deserve fair
interviews to present their proposals.
For more
information on the FairTax:
Required Reading for the Tax Revolution
Fairtax.org
Fairtax.net
New Voters Alliance
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