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Well, well. In addition to repaying TPC's generosity by impugning its integrity, Kevin Hassett said stupid things taxpolicycenter.org/taxvox/will-co… 1/
He claimed that transfer pricing driven by corporate taxes inflates the measured US trade deficit, which is possible. Here's how: 2/
Suppose a multinational operating in the US either buys inputs from or sells inputs to a subsidiary in a lower-tax jurisdiction. 3/
It can cause profits to disappear here and reappear overseas by overpaying for what it buys and underpricing what it sells. 4/
Reduce the tax and it might stop doing that; so measured imports will fall and measured exports rise. Hence smaller paper trade deficit 5/
But Hassett claims this means more jobs -- which is stupid. NOTHING REAL HAS CHANGED. It's just accounting, with no effect on production 6/
I can't help thinking back to Dow 36K. In that book Hassett didn't just make a bad prediction; he engaged in multiple dumb misconceptions 7/
Summary here: web.mit.edu/krugman/www/do… At the time, there were people saying, "Oh, he can't have been that dumb." Yes he could -- and can. 8/
