Say Anything Blog

The anti-corporate Left is so afraid of evil corporations they’d rather see them taxed out of business than have the increased revenues from lower taxes to fund their pet projects. Those figures don’t even take into account the increased tax revenues from stockholders who get higher dividend checks and those are often taxed at higher rates than corporate rates. The left claims to want more money for things like helping the poor but they don’t, they just want to punish the one thing they’ll never have, success. Envy, jealousy and greed are not what anyone reasonable bases their ideology on but it’s all the Left bases theirs on. If it wasn’t for a few useful crutches like denial, dishonesty and projection the left would collapse overnight.

Why is the United States absent from this list???  Because this list is not really applicable to the United States and its tax structure.  DO NOT believe the neo-con, right-wingnut, corporate welfare mentality of Rob Port.  Here is why…

===============

Do Corporations Really Pay Income Taxes?

Because we are dealing with all aspects of taxation, we need to look at how corporate income taxes affect final retail prices.

People have all kinds of notions regarding corporate taxes. Some think they are too high and others think they are far too low. But the reality is that businesses really don’t pay any income taxes.  Ask yourself:  Where does the money come from to pay company taxes? It comes from the customer, of course!  Businesses pass all their income tax costs on to the consumers in the form of higher prices.  They have to do so in order to meet expenses and make a profit.

Some people resist this idea that corporations don’t really pay taxes. They want to believe that “Big Business” does pay taxes because they have always been told, “The rich evil corporations MUST pay taxes because they make too much money!”

They have been told this so often that they believe it to be a fact. But it isn’t true. Corporations really don’t pay taxes. One way to convince people that corporations don’t pay taxes is to ask them, “Have you ever heard of the magic drawer that corporations have? You know, the “magic drawer” where they pull out all of the money to pay taxes with?” They will realize then that there is no such drawer. Then you ask them, “Where does a company get every single dollar that it has?” There is only one answer: “from its customers!”

Every dollar comes from the customer, so this means that the customer pays all corporate taxes. This is not a commonly discussed idea but it is obviously the truth!  So next time you hear someone screaming for “higher taxes for the corporations,” just realize that they are actually demanding, “higher prices for you!”

kade - the fact that corporations don’t pay income taxes doesn’t figure into the Laffer Curve. We “neo-con, right-wingnut, corporate welfare mentality” types are well aware that consumers end up paying all of the “corporate” taxes.

Really, if you want to debunk the reality of a prime tax rate, you’ve got to do better than that. Try again. And try to leave your nonsensical insults out of it.

Why is the United States absent from this list???  Because this list is not really applicable to the United States and its tax structure.  DO NOT believe the neo-con, right-wingnut, corporate welfare mentality of Rob Port.

Corporations pay MORE tax dollars to the govt. with lower tax rates.

FYI the US is a member of OECD
kade: Tell me about the business you run and your experience with corporate tax rates? I’m sure we’d all love to know!

Trolls. It’s what’s for breakfast!
And then I eat their lunch.

Arthur also predicted the price of oil will be $40/bl. before the end of the year.(:^)

The anti-corporate Left is so afraid of evil corporations they’d rather see them taxed out of business than have the increased revenues from lower taxes to fund their pet projects.

Ain’t that the truth! One step to the side of this thinking, I would offer is how liberals see big corporations as one think and say huge malignant labor unions as something else. When in reality they are essentially the same. Teamsters, government workers, teachers, and so on are all big corporations, but they don’t count to the left because they like those corporations!

C.

But the reality is that businesses really don’t pay any income taxes.

Ultimately, this is true, but they do face the market distortion created by excessive taxation.  The consumers who really pay the nosebleed taxes have less to spend on what they want to buy, so that affects how corps(and other businesses) market and create their products.  Govt confiscation of our earnings affects everyone negatively, except for the political class, which benefits from what is a detriment to the rest of us.  The govt is the main practitioner of class warfare.

Hope and change, in a free world, are the private possessions of motivated individuals.

Chris, I guess you are going to be busy Sunday afternoon?

Una Salus Victus Nullam Sperare Salutem

But the reality is that businesses really don’t pay any income taxes.

Trolls. It’s what’s for breakfast!
And then I eat their lunch.

The report was about the effects of globalization.  When we look at the original, we find that all of the OECD countries saw increases in corp tax / gdp, regardless of whether their tax rates went up.  The point, presumably, is that increasing trade is driving increases in corporate profitably. 

W/o further analysis, the data cherrypicked by the WSJ doesn’t tell us about the laffer curve.

Robert108:

Ultimately, this is true, but they do face the market distortion created by excessive taxation. 

Yeah… like say, gasoline taxes at the pump.  Perfect example of just how screwed up you can make something that wasn’t working that well to start with…

Well sumbeech, kade.  You are on the internet tubes talking to us, so I’m guessing that you not only have access to those tubes, but also an electronic computational device to communicate.  The US might not be on that list, but OECD data are not an endangered feces.  It would take 10 minutes of googling (and giggling when you discover how liberal retards running some EU shipwrecks don’t understand the mechanics of taxation) to discover our corporate tax scheme and collections.

Don’t ascribe wackadoodle conspiracy theories to everything.  I didn’t go read the article, but it likely mentioned the equivalent numbers for the US.  The difference is that WSJ readers are about 30 IQ points higher than NYT readers and don’t solely rely on graphs for all of their “news reading.” Just about like watching Goretard’s enviroweiner movie doesn’t constitute research into, you know, the actual truth about glow-ball climate hysteria.

2Hotel9 Yeah I will be watching the race. I look forward to this a lot.

Go Kimi Go!

C.

One oft-missed point about excessive taxes is how they tend to drive smaller businesses out of the market.

My Senator, Byron Dorgan, wrote an op/ed today in which he complained about the lack of competition among oil companies.  He said that the big, nasty oil companies had driven all the little guys out of business.  But the reality is that the excessive taxes levied on the oil industry drove the little guys out.

As Robert108 points out, taxes distort the market.  When the government increases tax burden on your business you have to increase prices (or cut back on expenses) in order to remain solvent.  But you can only do that so far as you still have to compete with your rivals, so what you end up with is less profit margin.

And the only way to deal with smaller profit margin is to increase the volume of your sales.  Companies with larger sales volumes can absorb the expense of increased taxes more easily because they can survive on smaller margins than the smaller companies.

Liberals hate big business, yet one of the factors that has most contributed to the rise of corporations is excessive taxation and government regulation.  Because the only way to deal with those things is to be a gigantic organization.

When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

-- Thomas Jefferson

Rob’s recently listened-to songs:

Rob: Great post!  Taxes also eat up funds for both increased capitalization and R&D, which is probably why there is such a push to use taxpayer money for R&D; the govt has dried up a lot of those funds.

Hope and change, in a free world, are the private possessions of motivated individuals.

Exactly right.  Invention and innovation cost money.  Often lots and lots of money, and the only way a company can do that is by making lots and lots of money.

But to a lot of people in the government, private sector profits are obscene…

When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

-- Thomas Jefferson

Rob’s recently listened-to songs:

Rob: The govt doesn’t do research; it only uses our own money to buy our votes.  The govt doesn’t invest, it spends, and the govt doesn’t capitalize, it subsidizes.
The quickest way to destroy the best economy in the history of the world is to take it out of the hands of those who built it(private citizens) and to give it to the govt.  Fails every time it’s tried.

Hope and change, in a free world, are the private possessions of motivated individuals.

Robert108:

The govt doesn’t do research

This is a pretty extreme claim… how do you explain the existence of DARPA, NASA, USDA, NOAAA, etc let alone public universities… all of which have research areas?

Regarding research… the other thing to keep in mind is that companies won’t make investments that don’t have short term payoffs.  Research that need long-term investments generally will get ignored by corporations, so without government investment, there would be no way to get there from here.

And Robert108, if building a road system isn’t a form of capitalization, what is it?

I didn’t go read the article, but it likely mentioned the equivalent numbers for the US.

I couldn’t get past the preview, but the chart conveniently elides the OECD nations that don’t fit the laffer thesis. (Spain, for example, saw no change in rate yet saw one of the biggest leaps in revenue as a % of GDP).

Also, other things being equal, a simple look at a chart may tell us something about the effect of tax rates generally on revenue; however, other things aren’t exactly equal.  Corporations are able to reincorporate, create holding companies, and exploit transfer pricing rules / dividend repatriation in ways that individuals obviously can’t, such that the role of these factors would have to be backed out of the data before extrapolating to the laffer curve for individual rates.

Why should it matter, these are real world results of the taxes paid by corporations. 

As far as individual rates let’s look at the success of The Kennedy, Reagan and Bush tax cuts for increasing revenues. 

Then let’s look at Europe.  What one country bereft of national resources has pulled themselves into affluence in the last 20 years?  Ireland by creating a low tax business environment.

Liberals aren’t about spending money, they are about punishing successful people.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Research that need long-term investments generally will get ignored by corporations, so without government investment, there would be no way to get there from here.

I think that’s interesting.  My concern with public research is that it’s often spent more for political reasons than sound scientific reasons. 

Take Fetal Stem Cell research, maybe I’m wrong and it will be a good thing, but the hype the proponents are saying really seems to be out of touch with reality at this point.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

I agree, and would add that until FASB and IASB can hammer out a unified version of GAAP, casual comparison of US corporations vs. international companies is impossible.

But within a range, and to a degree, I think the empirical results support the idea that a reduction in taxes will increase total tax revenue.  On both an individual and corporate level, there’s also a psychological component, even if the tax shift isn’t large.

I should’ve used quotes, Whilster...I was responding to jpe.

Research that need long-term investments generally will get ignored by corporations, so without government investment, there would be no way to get there from here.

We didn’t build this economy on govt research, so your contention is BS.  We are transferring way too much money out of the private sector and into the public sector, where it is unproductive.

Hope and change, in a free world, are the private possessions of motivated individuals.

And Robert108, if building a road system isn’t a form of capitalization, what is it?

You give the sole example of govt spending that benefits the public in general, but even there it’s not so clear-cut.  If the roads are built where the public wants them, then OK, but when they are built to suit the political needs of the govt, then it’s not such a good deal.  Example: The “Bridge to Nowhere” in Alaska.
Even when govt spending is beneficial, it isn’t necessarily efficient.

Hope and change, in a free world, are the private possessions of motivated individuals.

until FASB and IASB can hammer out a unified version of GAAP, casual comparison of US corporations vs. international companies is impossible.

I don’t know that his would be all that important since we’re comparing results within those countries. 

Let me explain in a different way.  If we had two tax systems(say states) and I was under one and you were under another we couldn’t necessarily compare our incomes.  You may make more money but you may be a harder, smarter worker than me. 

On the other hand if we lower both tax rates we could make some generalizations on the effect of tax rates.  Perhaps both of our family incomes went up enough to pay more in total taxes paid.  That would be a valid way to compare high and low tax rates.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Robert108:

The govt doesn’t do research

This is a pretty extreme claim… how do you explain the existence of DARPA, NASA, USDA, NOAAA, etc let alone public universities… all of which have research areas?

You just cut off the second half of my statement, which was done to promote misunderstanding, I guess.  What I said was that they don’t do research so much as use our money to buy our votes.  I don’t think you can ignore the political aspects of govt spending.  It is an inefficient way, in terms of cost/benefit, is less than the private sector.
Your premise that the private sector won’t invest in the long term is simply untrue.  In fact, private businesses do it all the time, especially in pharmaceuticals.  The govt-mandated(FDA) approval procedure, for instance, has demanded that companies be sure of their profit before they even enter the field, which reduces the number of drugs that are available to us.  The road to hell is paved with good intentions.  The private sector market isn’t perfect, but it’s a lot better than any of the alternatives, in most cases.

Hope and change, in a free world, are the private possessions of motivated individuals.

But within a range, and to a degree, I think the empirical results support the idea that a reduction in taxes will increase total tax revenue.

That’s certainly the case in Europe, where corps are more mobile (and the same would likely hold for U.S. states, other things like state infrastructure being equal).

I don’t know that his would be all that important since we’re comparing results within those countries.

The general point is correct, though.  Nominal tax rates may have decreased while GAAP may require that more revenue be realized, resulting in a higher real tax rate. 

Tax policies have to be taken into account here.  And, indeed, one thing that the OECD paper suggests, and which the WSJ declines to mention, is that the increase in revenue was helped by broadening the base of corporate taxes - eg, more companies were subjected to the tax, while the nominal rates themselves were lowered.

Carrick: More on the “private sector won’t do long term investment” charge.  Before taxes went so high, and before the govt got so greedy for our earnings, the short term profits paid for the long term research.  The money confiscated by govt from the private sector simply removes a lot of that money that formerly went into long term research and development, and pours it into the usual govt social engineering projects.
Simply because the govt does one or two things fairly well, like national defense and road-building, is no reason to increase their spending in other areas.

Hope and change, in a free world, are the private possessions of motivated individuals.

But within a range, and to a degree, I think the empirical results support the idea that a reduction in taxes will increase total tax revenue.

Wanted to clarify my response here.  IIRC, empirical data suggests that for every $1 cut in tax revenue, $.30 is recaptured due to increased activity. 

In Europe, by contrast, we’d expect a much higher increase (as Whistler pointed, Ireland in the mid-90s is a great example) because of the competitiveness of the jurisdictions and the ease of corporate relocation.  Ireland cuts taxes, and EU corps shift operations there. 

It’s a revenue shift rather than a revenue increase.  And that’s a large part of why American corporate tax revenues increased in the last few years.  We drastically cut taxes on dividend repatriation, and the revenue shifted to America from other jurisdictions.

That’s a different phenomenon from supply-side economics, which predicts revenue generation, rather than revenue shifting.

Again, it could very well be the case that the data supports the supply side theory within the parameters presented (OECD nations 1996-2006), but we don’t have enough information here to make that argument (and the OECD paper doesn’t; the WSJ just takes the graph out of context and superimposes its own conclusions)

And, indeed, one thing that the OECD paper suggests, and which the WSJ declines to mention, is that the increase in revenue was helped by broadening the base of corporate taxes - eg, more companies were subjected to the tax, while the nominal rates themselves were lowered.

If that’s the case I don’t see much wrong with that.  Why should the government levy taxes against one business and not against another.

In fact we should broaden the tax base for the US income tax to any income above the poverty line.  We’ve got too many losers who think someone else should pay for their free lunch.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

IIRC, empirical data suggests that for every $1 cut in tax revenue, $.30 is recaptured due to increased activity.

This is misleading in the respect that higher tax rates do not necessarily result in a straight line increase in revenue collected.  The reason for this is that high taxes create tax avoidance behavior, which lowers the actual amount of revenue collected compared with projections.  That’s why tax rate cuts are not tax cuts. Not only do lower tax rates leave more money in the productive sector, but they also decrease tax avoidance behavior.

Hope and change, in a free world, are the private possessions of motivated individuals.

Robert108:

More on the “private sector won’t do long term investment” charge.

Not exactly a charge, more of an obvious statement of fact..  In the past, you’ve basically agreed to this: If there isn’t a short-term return, businesses generally won’t sink a dime into it.  This “they are taxing the businesses to high or they would be” is a new angle on your part.

What business would invest in roads, training of children, and so forth?  Yet these all represent long-term investments by the nation.

Can you see them putting money into technologies like nuclear fusion that might take four decades to come to fruition?  Yet these are necessary for our long-term viability as a nation.

Robert108:

You just cut off the second half of my statement, which was done to promote misunderstanding, I guess.  What I said was that they don’t do research so much as use our money to buy our votes.

What horse manure.  They invest in the NSF to .. buy our votes???

Utter poppycock.

Hahaha.  Rob’s expletive deleted got triggered with “p.o.p.p.y.c.o.c.k”.  (Also known as “nonsense.")

What’s the point in using a robot that can’t do better word discrimination that that?

Robert108: .  Example: The “Bridge to Nowhere” in Alaska.

That probably isn’t even a good example.  Have you had the chance to look at the economic analysis for the bridge?  In terms of dollars, it probably would have brought in tourist dollars far in excess of the cost of the bridge.  That certainly was the justification in the proposal to build it in any case.

Carrick: While there may be one or two govt programs that are actually good, the vast majority of them are at least wasteful, and at most simply vote-buying.  Your naming one good program doesn’t refute what I said at all.  I notice you didn’t address my points about short term profits being used to fund long term research(the way we built up our economic system) and how we got here in the first place, which was by R&D in the private sector.  Despite your denial, pharmaceutical companies and oil companies exist because they do long term research and investment.

Hope and change, in a free world, are the private possessions of motivated individuals.

That certainly was the justification in the proposal to build it in any case.

It was actually political patronage, but don’t let that bother your belief system.  In truth, govt supplied roads are generally good; a toll road system would probably be less satisfactory, but there are many examples of graft and corruption in the building of roads.  I do maintain that roadbuilding is one of the few legitimate functions of govt, so no argument there.  Like everything else, it’s a tradeoff.  I just don’t think that govt reasearch is a good tradeoff, in the vast majority of cases.  Better to leave the money in the private sector.

Hope and change, in a free world, are the private possessions of motivated individuals.

Example: The “Bridge to Nowhere” in Alaska.

That probably isn’t even a good example.  Have you had the chance to look at the economic analysis for the bridge?  In terms of dollars, it probably would have brought in tourist dollars far in excess of the cost of the bridge.

Of course that begs the question why the rest of us should pay for developing a tourist area for someone else to profit.  If they’re going to profit they should pay the cost, right?

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

TW: Good point!  Govt projects should be for all people, not special interests.  Unfortunately, that is often not the case.

Hope and change, in a free world, are the private possessions of motivated individuals.

In the past, you’ve basically agreed to this: If there isn’t a short-term return, businesses generally won’t sink a dime into it.

I said nothing of the kind.  What I said was that there are no long term investments without short term profits, which is exactly true.  Without the short term profits that produce wages for income earners, there are no taxes to fund govt spending.  Never forget where the money comes from, Carrick.  I have also given two examples of private sector businesses that have, and continue to do, long term R&D: the pharmaceutical industry and the oil industry.  Without their investment, our world would be quite different today, and those are just two examples.
Funny you should mention “the training of children”.  Private schools continue to provide superior education, while the public sector schools have mostly degenerated into indoctrination factories.  I repeat: there are a few legitimate functions of govt, and national defense and roadbuilding are two of them.  They are wasteful, but they do a satisfactory job.

Hope and change, in a free world, are the private possessions of motivated individuals.

Robert108:

have also given two examples of private sector businesses that have, and continue to do, long term R&D: the pharmaceutical industry and the oil industry

These are both examples of applied R&D, where the the costs and risks are controllable.  Even discoveries, like the transistor, that are listed as being privately funded, actually had all the basic research long-finished (the basic research was the discovery of the “semi-conductor").

I should have been a bit more explicit that I was discussing basic research, not applied R&D. The nature of basic research is that there are no guarantees for success, or for any monetary gain from the outcome. 

That said, your comment about corporate taxes is perfectly valid.  We should substantially reduce our corporate taxes, which no doubt would increase the amount of applied R&D that corporations invest in.

Your comment about private education is of course a valid one.  A pharm company isn’t going to provide an education, but somebody else will, if there is a profit in it.

What happens when it is a service that is needed that provides no profit incentive though?

What happens when it is a service that is needed that provides no profit incentive though?

Carrick: First, thank you for the thoughtful reply.  Your questions are a great example of the essential divide between socialism and free enterprise.  The socialist looks at private enterprise as being obsessed with profits at the expense of the social fabric, especially the “oppressed workers”, and the free enterpriser wants to put self-interest in charge of everything.  Obviously, the socialist way results in lowered productivity of capital assets, and the free enterprise system doesn’t provide for some basic needs, as you have pointed out.
What I have experienced in my life is that “profit incentive” is misunderstood by socialist thinkers.  It could be the “profit” of seeing your child getting a good education, which is illustrated by wealthier people paying for the public educational system through taxes, and in addition, paying for private education, which is generally superior. Without the higher earnings made possible through the free enterprise system, they would be stuck with a mediocre public education for their children, so some portion of their “profit incentive” for becoming wealthier is the desire to provide their children with a superior education, which breeds a better educated population, which leads to greater productivity, etc.  Money is merely a means to an end, and I don’t think socialists really understand this truth.  They seem to fear self-interest, and instead try to sell self-sacrifice as the way to a better society.  The results speak for themselves, I think.  It’s certainly not an “all or none at all” proposition, in my mind, and so the free enterprise system must also have social considerations, but they should be the minimum required to yield an orderly society, but not overly so.  We are constantly seeking this balance, IMO.

Hope and change, in a free world, are the private possessions of motivated individuals.

What happens when it is a service that is needed that provides no profit incentive though?

The short answer: Who decides what services are “needed”, other than the demand for it by the consumers?  This is the beauty of the free enterprise, demand economic system.  I agree that some “basic research” has turned out to be useful, eventually, but how much of it has not turned out to be useful?  You have to compare the two numbers to have a real idea of the cost/benefit relationship.

Hope and change, in a free world, are the private possessions of motivated individuals.

I should have been a bit more explicit that I was discussing basic research, not applied R&D. The nature of basic research is that there are no guarantees for success, or for any monetary gain from the outcome.

I can see some need for basic research, but the problem comes about that the money can be spent in a political manner rather than what’s needed.

I’m sure the “good guy” basic research scientists will claim that they don’t have enough money.  I would contend that if federal research money were spent well we’d be able to accomplish everything that should be accomplished.  On the other hand maybe we really do need to know how the sleeping habits of college freshman affect their credit histories.

If conservatives have a problem with paying for federal research don’t blame the conservatives.  Blame the bureaucrats that are mispending the money.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

TW: Well stated.  As an individualist, I just don’t like the govt making decisions for me, especially when it comes to spending my money.  I’d rather do it myself!

Hope and change, in a free world, are the private possessions of motivated individuals.

I agree with you Robert, we need the government to provide some basic things.  I resent that the people on the left think that Government is Santa Claus and can give everyone everything they want.

Most government actions extract an equal amount of pain from someone else. 

Because of that Government should only act when there is a clear compelling need, not just because it sounds nice.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Whistler:

I’m sure the “good guy” basic research scientists will claim that they don’t have enough money. 

Actually, Most of us have no complaints with the amount being spent (the distribution could use some work though).

If conservatives have a problem with paying for federal research don’t blame the conservatives.  Blame the bureaucrats that are mispending the money.

There are always going to be people who get their panties in a wad over, for example, the study of the sex life of the African bee.  These people are not so much conservative as anti-intellectual, because generally it takes about three seconds of coherent thought to understand why this research is vital.

But I’ve no complaints about research funding under conservatives.

Generally it has been under liberal presidents and congresses such as Carter and Clinton, that research dollars tanked.  They would rather we spend all of our dollars on entitlement spending.

Generally it has been under liberal presidents and congresses such as Carter and Clinton, that research dollars tanked.  They would rather we spend all of our dollars on entitlement spending.

Exactly.  In my experience, lefties only want to fund the science that fits their ideological model. Despite the propaganda to the contrary, lefties are the real anti-science crowd.

Hope and change, in a free world, are the private possessions of motivated individuals.

Robert108:

Who decides what services are “needed”, other than the demand for it by the consumers?

This is the real question of course, because there are services like national mail, national defense and road systems that don’t fit into the consumer-demand-driven model.

I think it’s perfectly a good idea to acknowledge that these exist, that government is needed to provide these infrastructural investments.  And I regard them as investments because government revenue is tied into how sound the decisions on infrastructural spending are made.  And believe it or not, much of this spending is driven by long-term cost-benefit analysis.  So to describe it as a “buy-out” of votes is a bit one-dimensional in thinking here....

This is the beauty of the free enterprise, demand economic system.  I agree that some “basic research” has turned out to be useful, eventually, but how much of it has not turned out to be useful?  You have to compare the two numbers to have a real idea of the cost/benefit relationship.

I guess I have two reactions to this… what possible value has the Hubble telescope given us from a cost-benefit analysis?  Yet I would say that nearly all Americans would agree that this was one of the best investments we have ever made in federal spending.

Cost-benefit doesn’t work well when it comes to addressing intangibles benefits.

How it is decided is fairly complex, and to me interesting.  It involves a mixture of Congressional decisions, that usually are based upon research studies within Congressional offices, mixed with decisions by funding agencies about how to proportion their spending over the research areas they control.  Surprisingly (to me at least) the latter is generally more political than the former, since it usually involves fewer people in the pipeline of the decision making.  As such, it generally is less well spent than the discretionary spending directly authorized by Congress.

This is the real question of course, because there are services like national mail, national defense and road systems that don’t fit into the consumer-demand-driven model.

And of course I have also asserted this numerous times. You err slightly in that those things are not market-driven, but they are demanded(and used) by the public; it’s just not through the operation of a market.  One reason is that national defense, for instance, is by nature a monopsony, which means “one buyer”, and is thus not amenable to a normal market type operation.

I guess I have two reactions to this… what possible value has the Hubble telescope given us from a cost-benefit analysis? In order to justify the confiscation of taxpayer money, it should pay off in some way, eventually, and probably will. As I have pointed out before, not all benefits are directly measured in dollars. Yet I would say that nearly all Americans would agree that this was one of the best investments we have ever made in federal spending. Is this a result of polling?

Hope and change, in a free world, are the private possessions of motivated individuals.

Sorry, hit the “submit” button too soon.  To continue:

How it is decided is fairly complex, and to me interesting...etc.

Very little of it involves the voting public, which I find alarming, as one whose money is being spent for me.  Never forget, Carrick, that in this country, money comes from the cooperation between labor and capital, with very little contribution from govt, other than the passive part about ensuring a stable money supply and enforcing contracts.  We pay for everything.  The reality is that the govt is dependent on us, not the other way around.

Hope and change, in a free world, are the private possessions of motivated individuals.

Me:

Yet I would say that nearly all Americans would agree that this was one of the best investments we have ever made in federal spending.

Robert108:

Is this a result of polling?

Subjective opinion, based on seeing the strength of the public’s reaction to NASA’s attempts to abandon Hubble.

What criterion would you use for the measurement of the intangible benefit that something like the Hubble project, or for example, for a repair mission? 

These really are big issues.  Government does not operate efficiently.  Neither, in the short-term, do companies.  In both cases, it is a feedback from the voters/consumers that correct bad decision making.  For companies, the model of free market system is nearly optimal, though you and I perhaps have some disagreements over what that word “optimal” means.

Democracy fixes some of the problems with central decision making.  The question is how do we optimize the input of informed voters to the process?

I think it’s perfectly a good idea to acknowledge that these exist, that government is needed to provide these infrastructural investments. So stipulated; the real argument is the extent to which that should be done; I want to keep it to a bare minimum. And I regard them as investments because government revenue is tied into how sound the decisions on infrastructural spending are made. The term “investment” has a specific meaning, and govt spending doesn’t fit that meaning. By its nature, govt spending is for the purpose of doing what the market would not ordinarily do.  That doesn’t mean it might not be beneficial for the govt to spend our money, it’s just not an investment. And believe it or not, much of this spending is driven by long-term cost-benefit analysis. I don’t believe that so much, at least not in economic terms.  On the other hand, it almost always yields a favorable cost/benefit outcome for the politicians, since they bear none of the cost. So to describe it as a “buy-out” of votes is a bit one-dimensional in thinking here....  Actually, the term I used was “vote-buying”, which is where politicians promise to benefit some group at the expense of another, or by promising to improve our lives, if we will just give them more power over our money and our lives. Of course, we have to vote for them to get this “improvement”.

Hope and change, in a free world, are the private possessions of motivated individuals.

Subjective opinion, based on seeing the strength of the public’s reaction to NASA’s attempts to abandon Hubble.

I don’t remember getting to vote on that one.  I would have voted “yes”, btw.

These really are big issues.  Government does not operate efficiently. Agreed. Neither, in the short-term, do companies. In fact, companies that don’t operate efficiently in the short term go out of business; it’s basic economics. In both cases, it is a feedback from the voters/consumers that correct bad decision making. Right, in the case of business, wrong in the case of govt.  Example: The War on Poverty; seven trillion and counting-no significant reduction in poverty directly attributable to the program. For companies, the model of free market system is nearly optimal, though you and I perhaps have some disagreements over what that word “optimal” means.  I’m sure. For me, it has to do with the four freedoms: Personal, economic, religious and political.

Hope and change, in a free world, are the private possessions of motivated individuals.

Robert108:

I don’t believe that so much, at least not in economic terms. 

I’ve been peripherally involved in a number of these decisions, and while you’re right it’s not just economic factors that get considered, it is generally the case (except for corrupt politicians) that economic factors are included.  Another factor could be general welfare, such as with the decision to improve the road system in Mississippi in response to a study showing Mississippi highways to be the most unsafe in the country.

Usually economics get decided at the “policy level,” because it is at the policy level that the politician can defend his actions.  For example “encourage the interactions between universities and local industries” might be a policy decision.  Funding requests from local companies and universities to a congressman’s office that further the policies of the Congressman affects the likelihood that these requests will be honored…

Robert108:

The War on Poverty; seven trillion and counting-no significant reduction in poverty directly attributable to the program.

This just demonstrates that our feedback loop isn’t optimal.

What do we do to fix it?

Nice to see the work of an Islamic scholar getting praise. Arthur Laffer cites Ibn Khaldun as his source for this graph.

Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric.

This just demonstrates that our feedback loop isn’t optimal. A massive understatement!

What do we do to fix it?

Short term: vote the bastards out.
Long term: Real education in economics for society as a whole.  The lies that the politicians tell about it are just amazing to me. If the population were more economically savvy, a lot of wasteful spending would be avoided.  A lot less vote-buying would take place.

Hope and change, in a free world, are the private possessions of motivated individuals.

Now, see what you did, flamer, you done broke their rhythm. It was oddly mesmerizing.

Una Salus Victus Nullam Sperare Salutem

Real education in economics for society as a whole. 

I concur absolutely! This has to start in school, with taxation worked into the curriculum for mathematics.

Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric.

If the population were more economically savvy, a lot of wasteful spending would be avoided.A lot less vote-buying would take place.

Unfortunately, government tax revenue would fall as people took more advantage tax breaks and loopholes available to them. Given, successive governments wouldn’t have to invest in quite so many ‘cash-cows’, but, alternatively, they do serve a purpose as panacea for public disapproval.

Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric.

Another factor could be general welfare, such as with the decision to improve the road system in Mississippi in response to a study showing Mississippi highways to be the most unsafe in the country.

Isn’t that the fault and responsibility of the Mississippi politicians and voters?  I can see that the federal government has a need to promote the interstate highway system. 

After that shouldn’t the states be able to decide what they need and can pay for?

Of course the Mississippi example is somewhat better than your bridge to nowhere example.  That’s because at least federal money will benefit a large number of people (I hope).

The bridge to nowhere will enrich certain landholders who will see their property values skyrocket.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Whistler, I don’t have a quick response to that.  Basically, given the system we have, rural states get more taxes back than they pay to the federal government.

There are arguments on both sides on this one, for example urban states with higher population densities can operate more efficiently than rural ones with low population densities.  See for example this.  Here is the key graphic:

Basically both North Dakota and Mississippi are “welfare states” looked at this way.  Pretty much the same objection that Rob throws out about federal spending on reservations could equally be leveled at either of these states.

At least with respect to economic development of rural states, one does expect some return for your money in terms of future government revenue and a growth of the economy.  The argument goes along the lines… given a pot of money to spend on economic growth, which would do better… develop a relatively underdeveloped region or return the money to the strongly developed region? 

I’m guessing the former, but there could be an argument for the latter, and even an argument against spending any economic development money....

Carrick: Left mostly to itself, the market tends to be self-adjusting.  The poorer states offer lower operating expenses for business and living, and so will tend to attract capital in many areas.  The only thing that can gum up this constant self-adjusting process is govt, which tends to use confiscation and coercion, along with an ongoing judgment about what is “right”, rather than market forces.  It is generally a false concept that govt spending our money actually results in “economic growth”, at least more than would have taken place without their confiscation and redistribution agenda.

Hope and change, in a free world, are the private possessions of motivated individuals.

Of course, if the economic stimulus is of the form of infrastructural development (like with road system improvement example), I think that would into the demesne of government spending.

Of course, if the economic stimulus is of the form of infrastructural development…

That’s not economic stimulus; it’s support for the possibility of economic stimulus.  The real stimulus is the money confiscated from the taxpayers.  All the govt can do is cause as little damage as possible, and hope that there is some return.

Hope and change, in a free world, are the private possessions of motivated individuals.