Category Archives: political economy

Social Engineering with Taxes

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Dr Alan Blinder, Princeton University Professor of Economics and Public Affairs, is at it again.

First, some side issues which he raises:

Since the economy as a whole created 5.41 million net new jobs over the past three years, you might expect that about 4.51 million of them were in the private sector and about 900,000 were in the public sector.  In fact, the private sector created 6.56 million net new jobs over the past three years while about 1.14 million net government jobs were eliminated via layoffs and spending cutbacks.

Never before in postwar history has government employment declined during a recovery. Compared with historic norms, we’re down over two million government jobs.

Never mind that the private sector’s performance is about 2/3 of what President Barack Obama promised with his 2009 stimulus and less than that compared to other recoveries, held back by his interfering policies.

Separately, the reduction in government employment is a good start.  Government remains far too big, and it’s not a jobs welfare program: further cuts in Federal employment are warranted.

Then,

Real GDP growth has averaged a paltry 2% per annum over the past three years.  But growth of GDP excluding government purchases—the things governments buy, including hiring workers—has averaged 3%.

But this just confirms how much government interference is inhibiting recovery.

Next, he offers a partial solution:

So Congress could make a good start on faster job creation simply by ending what it’s doing—destroying government jobs.

There’s that employment security welfare claptrap made explicit.  Government actually has a few very specific tasks, named by the Constitution, and no other thing to do at all.  It doesn’t need to employ lots of workers, outside of soldiers, sailors, marines, and airmen, in order to do those few tasks.

Now, he comes to his tax policy as social engineering tool:

Virtually since the Great Recession began, many economists have suggested offering businesses a tax credit for creating new jobs.  While details matter, the basic idea is straightforward: Offer tax breaks to firms that boost their payrolls.

For example, companies might be offered a tax credit equal to 10% of the increase in their wage bills over the previous year.  No increase, no reward.

You might imagine that Republicans would embrace an idea like that.  After all, it’s a business tax cut….

Here’s that foolishness of using taxes to drive our economy to a government goal.  No.  The ways to help our businesses and spur hiring include reducing—or even eliminating—taxes on businesses, canceling the additive costs and outright taxes Obamacare imposes on businesses for hiring, and stopping paying the unemployed for not working.

And no, the “tax credit” isn’t at tax cut at all.  It’s an increase in spending.

Blinder also had this idea:

Suppose Congress enacted a partial tax holiday that allowed companies to repatriate profits held abroad at some bargain-basement tax rate like 10%.  The catch: the maximum amount each company could bring home at that low tax rate would equal the increase in its wage payments as measured by Social Security records.

Again, no.  Eliding the social engineering claptrap of the suggestion, temporary tax moves have no effect.  We’d be better off moving to a territorial tax scheme at the new reduced overall business tax rate.  Or eliminating the business tax altogether.

Blinder concludes with this:

My general point is that the fiscal cupboard is not bare.  There are things we could be doing to boost employment right now.  That we are not doing anything constitutes malign neglect of the nation’s worst economic problem.

Indeed.  Let’s reduce/eliminate business taxes, get Obamacare off the backs of businesses, and restore unemployment payments to the status quo Harding right now.

National Wealth

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John Hinderaker, of Power Line, suggests that

we have an utterly inept government, which, on top of its incompetence, places little value on economic growth.

President Barack Obama is on record as believing

I do think at a certain point you’ve made enough money.

Whether Hinderaker is right about the ineptness is a separate question.  What is clear, though, from Obama’s policies and his continued proselytizing of them in the face of their utter failure from a free market perspective is this: when Obama made that remark (the 2010 mid-term election campaign season), he was talking about our country as a whole, not just a few of his evil Fat Cat Wall Streeters.

Government’s Commerce Power Grab

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The Federal government wants to nationalize another American private industry, this one nascent rather than burgeoning.  The State Department wants to classify privately owned and operated manned space vehicles as weapons and then to control these as such.

In a proposed Amendment to the International Traffic in Arms Regulations (recall that Secretary of State John Kerry says in all seriousness that the US will sign the just concluded international arms control “treaty”), State insists pretty much that anything that flies into space must be a weapon, and so cannot be allowed to leave the United States government’s control.  The immediate effect will be to hinder, if not destroy, a budding space tourism industry, an industry that has such serious enterprises as Virgin Space, Xcor, and SpaceX, as major players.

Here’s the money part of the proposed amendment:

§ 121.1 General. The United States Munitions List.
* * * * *
Category XV—Spacecraft Systems and Related Articles
(a) Spacecraft, including satellites, manned or unmanned space vehicles, whether designated developmental, experimental, research or scientific, or having a commercial, civil, or military end-use, that

…
(4) Provide space-based logistics, assembly or servicing of any spacecraft (e.g., refueling);
…
*(7) Have any of the following electrooptical remote sensing capabilities or characteristics:
(i) Electro-optical visible and near infrared (VNIR) (i.e., 400nm to 1,000nm) or infrared (i.e., greater than 1,000nm to 30,000nm) with less than 40 spectral bands having an aperture greater than 0.35 meters;
(ii) Electro-optical hyperspectral with 40 spectral bands or more in the VNIR, short-wavelength infrared (SWIR) (i.e., greater than 1,000nm to 2,500nm) or any combination of the aforementioned and having a Ground Sample Distance (GSD) less than 30 meters;
(iii) Electro-optical hyperspectral with 40 spectral bands or more in the midwavelength infrared (MWIR) (i.e., greater than 2,500nm to 5,500nm) having a narrow spectral bandwidth of Dl less than or equal to 20nm full width at half maximum (FWHM) or having a wide spectral bandwidth with Dl greater than 20nm FWHM and a GSD less than 200 meters; or
(iv) Electro-optical hyperspectral with 40 spectral bands or more in the longwavelength infrared (LWIR) (i.e., greater than 5,500nm to 30,000nm) having a narrow spectral bandwidth of Dl less than or equal to 50nm FWHM or having a wide spectral bandwidth with Dl greater than 50nm FWHM and a GSD less than 500 meters;
*(8) Have radar remote sensing capabilities or characteristics (e.g., active electronically scanned array (AESA), synthetic aperture radar (SAR), inverse synthetic aperture radar (ISAR), ultra-wideband SAR) except those having a center frequency equal to or greater than 1 GHz but less than or equal to 10 GHz AND having a bandwidth less than 300 MHz;
(9) Provide Positioning, Navigation, and Timing (PNT);
…
(7) Non-communications space qualified directed energy (e.g., lasers or RF) systems
…
(9)  “Space-qualified’” cesium, rubidium, hydrogen maser, or quantum
(e.g., based upon Al, Hg, Yb, Sr, Be Ions) atomic clocks, and specially designed parts and components therefor….

Notice that: any commercial enterprise that looks to maintain its commercial systems in space (e.g., repair or refuel a satellite, an orbiting space station, or later a mining station) can’t do so—the maintenance support vehicles would be weapons.

Any commercial enterprise that wants to equip its space vehicles, satellites, orbiting space station(s), or those future mining station(s) with sensing equipment so as to have advanced warning of approaching debris can’t have those sensors—they’re weapons.

Any commercial enterprise that wants to equip its space vehicles, satellites, orbiting space station(s), or those future mining station(s) with navigation equipment or clocks so those systems can know where they are and where they are going can’t have those nav systems—they’re weapons.

Any commercial enterprise that wants to mine the solar system (asteroids, comets, planetary moons, what-have-you) or destroy any approaching debris before collision can’t have the lasers with which to do so—mining and colliding debris destruction are weapons-centered efforts.

This overreach by this administration has to be stopped.  The power grab, even in the age of nationalized health industry and government diktats for the financial industry, is atrocious.

The proposed amendment can be read here and here.

 

h/t Spirit of Enterprise

False Premise

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Reuters talked about a CBO study commissioned by Congressman Chris Van Hollen (D, MD) that purported to look at tax deductions in our tax code.

The top 10 tax deductions, credits, and exclusions will keep $12 trillion out of federal government coffers over the next decade, and several of them mainly benefit the wealthiest Americans….

Never mind that the claim proceeds from a couple of false premises, as I’ve beefed about before.  For one thing, it’s not the government’s money, so of course it doesn’t “keep $12 trillion out of federal government coffers.”  Such a claim presumes that the money belongs in the federal government’s coffers.

For another, even were the money in some sense due the government, the government’s need for the money hasn’t been established, and so any discussion of monies “lost” is…premature…at best.

James Taranto, writing for The Wall Street Journal, had additional problems with the study.

[W]hat makes the CBO study misleading is not the frame but the anchor.  The CBO uses the Joint Committee on Taxation’s definition of “tax expenditures” as “deviations from an individual income tax structure that incorporates the existing regular tax rates, standard deduction, personal exemptions, and deduction of business expenses.”  But as a practical matter, many of these “deviations” are integral to our tax system.

And

[T]he JCT/CBO definition of the tax “structure”—the anchor that holds in place all the study’s assumptions—is arbitrary.  Two examples will suffice to make the point.

The two tax credits in the CBO list—the EITC and the child tax credit—differ from the exclusions, deductions and differential rates in that they are available only to taxpayers with relatively low incomes.  Indeed they are available to “taxpayers” who don’t pay taxes, which is to say that in some cases they can result in a negative tax liability—an actual subsidy, as that word is commonly understood.

Thanks to those credits, taxpayers at the lower end of the income scale get some benefit from “tax expenditures.”  But other redistributionist programs like food stamps, Medicaid, and Supplemental Security Income are left out of the CBO’s analysis merely because they are not administered through the income-tax system.

The CBO’s study also is a typically static study that, from the assumptions dictated to the CBO by Van Hollen for this one, cynically ignore, among other things, how the people being taxed and the economy in generally will react to changes in these “tax deductions, credits and exclusions.”

Deficit and Revenue

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[S]enior White House officials now say they haven’t found a sufficient number of Republican partners willing to accept the revenue increases Democrats say must be part of any compromise.

In other words, Progressives’ “compromise” is for the opposition to go along with their demands for more revenue.  Never mind that revenue questions are no part of the deficit or of the resulting debt.

The shrinking of the deficit, although still too large and at any size contributory to our debt, results from already increasing revenue to the government.  The increased revenue, though, comes not from tax increases (the payroll tax holiday expiration goes to the Social Security System, not to the general Treasury, and the tax increase on those making over $400,000 totals to chump change compared to any year’s deficit) but from the slowly improving economy.  Thus, Progressives’ increased tax rates aren’t necessary to increase revenues to the government.

Spending cuts are what are needed to eliminate the deficit and so to start paying down the debt.  This graph, from The Wall Street Journal, illustrates the matter:

Revenue is up, even in Obama’s hindered recovery, but spending is up more in the projection.  The economy is producing the revenue needed (eliding the question of needing even that much); government needs to do its part and cut spending.  Drastically.