In one of his first contributions on EconoFact, La Follette School Professor Menzie Chinn discussed President Donald Trump’s proposed wall on the Mexican border. Chinn, one of the United States’ leading experts on currency exchange rates, also is co-author of the widely praised Econbrowser blog.
EconoFact is a nonpartisan publication designed to bring key facts and incisive analysis to the national debate on economic and social policies. It is written by leading academic economics across the country and published by the Edward R. Murrow Center for the Digital World at The Fletcher School at Tufts University.
In Who Will Pay for the Wall, Chinn offers insights into a possible Destination Based Cash Flow Tax (commonly referred to as a Border Adjustment Tax) that would be applied to U.S.-Mexico trade to fund the wall.
This type of funding mechanism, Chinn says, would likely result in an increase in prices of all consumer goods and would cause consumer choice to decline.
“To the extent that the Destination Based Cash Flow Tax is determined to be inconsistent with World Trade Organization principles, it is likely to spur retaliation on the part of our trade partners,” said Chinn, who is coauthor with Jeffry Frieden of Lost Decades: The Making of America’s Deb Crisis and the Long Recovery.
“Over the past two decades, we have seen the opposite of a ‘trade deficit drag’,” they wrote. “Larger trade deficits have occurred when the economy has been growing more rapidly, and smaller trade deficits when the economy was performing poorly.”
Econbrowser, meanwhile, was named one of the top 100 economics blogs of 2016 by the website Intelligent Economist. Other top blogs include Real Time Economics by the Wall Street Journal, Free Exchange by The Economist, and Ben Bernanke’s Blog.