[Bigun]

I see that you are once again cherry picking only what YOU want to quote and ignoring much more relevant data from that paper.

pg 12 -"Therefore a rise in the price level would be possible only if accommodated by an increase in the money supply. Put another way, without monetary accommodation, prices faced by consumers under the FairTax would not rise. Any changes to the level of monetary accommodation, i.e. increase in the money supply, would cause prices to increase in the same proportion."

pg 23 -"We assume that the monetary authorities do not accommodate the adoption of the FairTax, which is to say that they restrain the growth of the money supply sufficiently to prevent market prices from rising. As mentioned, this is merely a simplifying assumption. We could just as well have allowed for monetary accommodation, so that there would be no fall in producer prices under the FairTax. Doing so, however, would merely have made the algebra more complicated without changing the results."

[groanup]

Thanks for posting that. I knew there was more to the post than met the eye. Salute.

[Your Nightmare]

Let's look at the two quotes:

"The first is the major capital gain that the federal government stands to accrue if, as seems likely, the Federal Reserve fully accommodates the introduction of the FairTax and permits consumer prices to rise by roughly 30%."

"We assume that the monetary authorities do not accommodate the adoption of the FairTax, which is to say that they restrain the growth of the money supply sufficiently to prevent market prices from rising. As mentioned, this is merely a simplifying assumption."

So he thinks it's likely that the Fed would accomodate a price increase but assumes they won't for the model to make things simpler.

[Your Nightmare]

It looks like you missed this quote from Kotlikoff in regards to the assumption that consumer prices would not rise.

"Private consumers would receive lower (gross) wages under the FairTax, because producer prices fall."