Overall,however,firms and consumers alike would be no worse off,advocates say:That's because the dollar would eventually strengthen in response to short-term changes in the flow of trade,offsetting higher after-tax costs of imports and depriving exporters of any unearned windfall.
So what's the Koch brothers'beef? Their self-interest is a bit obscure:Koch Industries is privately held,and its financial data are not publicly disclosed. Still,the conglomerate is quite obviously a major player in chemicals and petroleum refining,sectors that import nearly half of their supplies and thus could take a short-term hit from the GOP tax plan,according to a JPMorgan Asset Management study.
Publicly,however,the Kochs maintain they would"greatly benefit,"as a recent statement from their top lobbyist put it. Their worry is that the plan"will distort the market,increase consumer prices and create an uneven playing field for companies and consumers,"with"devastating"long-term economic consequences. Koch Industries has funded a report by the Brattle Group,an economic consulting firm,arguing that border adjustment would drive up gasoline and diesel prices.
They have a point,in the sense that the GOP plan depends on a lot of variables - dollar appreciation chief among them - that might not pan out under real-world conditions.
As the JP Morgan study notes,the greenback would have to rise 25 per cent to offset what would be a new 20 per cent tax on imported inputs - propelling the US currency to its highest level on record.
The international consequences of that are unforeseeable,but unlikely to be totally benign for everyone. Bear in mind that many other countries - China comes to mind - can and will manipulate exchange rates to protect their own short-term interests.
Trading partners could also challenge the GOP plan as a discriminatory subsidy at the World Trade Organization. That's because it includes a deduction for wages paid by US-located firms,importers and exporters alike - a break that would obviously not be available to competitors abroad.
Neither President-elect Donald Trump nor tax-writers in the Republican Senate have embraced the House GOP plan yet;it may never come to fruition,in which case the surprising little debate between the Kochs and their presumed flunkies will have been academic.
Still,the tiff is interesting as a case study of internal GOP politics - and of the US economy's"path dependency."
Theoretically free to reinvent our national business model,we are actually constrained by countless accumulated policy decisions of the past and all the accumulated investments and other commitments that were made in reliance on them. Change is scary,even for the richest men in the world.