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an income tax credit. For instance, if you had a $1000 income tax
credit, a $10,000 family that paid $1000 in VAT would get it back in
its income tax. A $20,000 family that paid $2000 worth of VAT
would get $1000 back. You can make VATs as progressive or as
regressive as you like. But none of the things I've just described
would be regarded as politically popular.
BERNARD AVISHAI: Why would these things be unpopular?
LESTER THUROW:
If
I came to you and said: "Look, I'm going to make a
Japanese family out of you; you now consume 95 percent of your
income, and I'm going
to
adopt various techniques to force that
down to 80 percent," I would be reducing your standard of living
quite dramatically for a period of time.
DANIEL BELL: We can have a deferred income-we did it during World
War II.
LESTER THUROW: Oh, in a war environment you can. What you need to
think of is a moral equivalent of war. Since it takes five to ten years to
build major new facilities, then in some sense you're saying that
American society faces the choice of deliberately cutting its standard
of living now, in order to put the economy back on track five to ten
years from now, or letting its standard of living fall more slowly in
the 1980s-and it will continue
to
fall in the 1990s.
DANIEL BELL: The fascinating thing is that for the last fifteen years, the
left has not talked of economic growth, it has talked of redistribu–
tion, whereas in the last five years the Republicans have talked of
expansion, of growth, etc.
LESTER THUROW: I think that is only partially right. There is a
tremendous difference within the Reagan administration between
what I will call the "old right" and the "new right." The new right is
dictating the current right strategy-the strategy of Kemp, Laffer,
and Stockman-all the people who think we have to go for economic
growth because we have to raise the income of the $18,000 house–
hold. The old right is arguing that this is not the highest priority.
It
argues that stopping inflation is the number one priority. I think we
are going to see a tremendous dispute within the Reagan administra–
tion as to whether one goes the growth route or the anti-inflation
route. I don't think it is clear which way they are going to go; so I
think it is only half-true to say that the right advocates growth.
ROBERT NOZICK: At some point, people are going to start asking where
we will be four years from now.
LESTER THUROW: Well, it depends on whether voters are going to vote
on real income or on the inflation rate. The old right will tell
Reagan that if he does what Laffer, Kemp, and Stockman want, he is
