Campaigning To Bust the Budget

One thing the parties have in common

Steve Chapman | January 14, 2008

The presidential campaign feels like it has been going on for three years and will not produce a winner till nearly 10 months from now. But eventually, it will end. When it does, the victor will finally take a look at the challenges ahead and recall the man in Abraham Lincoln's story who was tarred and feathered: If it weren't such an honor, he said, he could do without it.

That's because life after Election Day is short on giddy moments of upbeat anthems, cheering crowds and confetti showers. It is long, though, on the toil of budget-making. And in the next administration, that will be not only an arduous task but a thankless one.

The federal budget suffers from only two problems. The first is that expenditures are expected to rise. The second is that revenues are scheduled to fall. Consequently, the deficit, a not-insignificant $163 billion last year, is set to grow by leaps and bounds for the foreseeable future. So is the size of government, which is on track to break all previous records for bloat.

Unless, of course, our leaders acknowledge the looming crisis and take the steps needed to avert it. But most of the presidential candidates would rather kiss Dick Cheney on the lips than admit the need for Americans to accept painful sacrifices.

Listening to the Democratic contenders, for example, is like listening to a 4-year-old tell Santa what she wants for Christmas—an array of cherished desires, and no sense that someone has to pay for them. Universal health insurance! Affordable college! Grants for child care! Money for schools! Every doll ever made by American Girl!

According to the nonpartisan website PolitiFact, which assesses the accuracy of what candidates say, all the programs envisioned by Hillary Clinton would add about $174 billion a year in outlays. And that was before she unveiled a $70 billion fiscal stimulus plan Friday. Barack Obama, according to a November analysis in the McClatchy newspapers, has promised "at least $181 billion in new annual spending on middle-class tax cuts, health care and retirement and energy plans."

How would they pay for it all? Their prime source is repealing the Bush tax cuts for the wealthiest households. What they don't acknowledge is that those tax cuts are already scheduled to expire in 2010, helping to eliminate the deficit. But if the money is going to be used to close the fiscal shortfall, it can't be used to pay for new programs.

Clinton says she intends not only to shower us with blessings but balance the budget. Can that be done? Of course—if she is prepared to raise taxes far more than she has let on.

If Democrats love spending money, Republicans love cutting taxes. Not so long ago, they assured us that lower taxes would inevitably force lower spending. In his time in office, though, President Bush has refuted that claim.

Since 2001, federal revenues have declined by 7 percent as a share of gross domestic product, while federal outlays have grown by 9 percent as a share of GDP. When you increase spending without increasing revenue, you aren't cutting taxes but raising them—for future taxpayers.

Things are not about to improve on the spending side, even if the GOP contenders were far more frugal than the incumbent. In fact, the retirement of the Baby Boomers, coupled with rising health care costs and other obligations, promises to make Bush look like Silas Marner.

Federal spending now amounts to less than 20 percent of our income. The Congressional Budget Office says that given current trends, it could rise to a whopping 56 percent of our income by 2050—more, on an annual basis, than we spent to win World War II.

But among the Republicans, only Fred Thompson has been willing to risk the wrath of the elderly by calling for a cut in the growth of Social Security benefits. The supposedly fearless John McCain targets pork-barrel goodies, which are only a small part of the problem. Mitt Romney and Mike Huckabee strenuously dodge the entitlement issue. No one is publishing lists of programs to be cancelled and departments to be razed.

This suggests a dismal lack of ambition. Less than a decade ago, the federal budget was not just balanced but piling up surpluses. Everyone agrees it was a great achievement. And everyone running for president seems to agree it should never happen again.

COPYRIGHT 2008 CREATORS SYNDICATE, INC.

Comments

|1.14.08 @ 8:14AM|#

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the Public Treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy always followed by dictatorship." From: "The Decline and Fall of the Athenian Republic".

|1.14.08 @ 8:25AM|#

But why should *we* have to make sacrifices. It should be the *corporations* who are taxed their fare share, so that *we* can have the things that all the *civilized* nations on earth have.

|1.14.08 @ 8:36AM|#

There's a lot of ways to get a balanced budget and I'm sure that we'll hear a fair share of them in this thread, unfortunately, most of them are impractical from a politic standpoint. Someone with the balls to push through pension reform and get the government out of education and health care would be a good start.

For Gaijin: Your argument/quote is wrong on a basic level, people don't vote money out of the treasury and is there a democracy that has ever ended in that way ?

|1.14.08 @ 8:55AM|#

The first is that expenditures are expected to rise. The second is that revenues are scheduled to fall.

I think we're on the wrong end of the Laffer curve, here.

I know, joe's gonna kill me, but we need serious tax cuts and program cuts across the board; the tax cuts stimulate growth for future overlays, while the program cuts give us instant reduced spending.

Somebody's gonna have to look some folks in the face and say "no free goodies for you this year; mommy and daddy need to pay their bills".

Gray Ghost|1.14.08 @ 9:16AM|#

As Chapman alludes, the 800 lb gorilla in the corner isn't discretionary spending, it's the entitlements. Either Ken Shultz or the Commonsewer is where I heard it first, but I think you can reform Social Security by treating it as a welfare program for the elderly/disabled, something to prevent Gramps from having to eat dog food at 75. As a welfare program, you can means test it, and kick out everyone who doesn't need it to avoid starvation.

This is in addition to what will be tried: raising social security taxes (that will be the first thing tried, guaranteed.); raising eligibility ages, lowering payouts. This means of course, that many people---boomers---will see no return from their lifetime of contributions. To which I say, get in line with the rest of us. I agree with the commentator I heard who said he'd gladly give up all rights to the Soc. Sec. contributions he'd already made, if he was allowed to cease future contributions to the system. He had as much faith as I do---zero---that money would be there when we retire. So means test Soc. Sec., which will leave a surplus, which will help defray some of the other expenses of Gov't.

That puts the gorilla on a diet, but still leaves a good 500 lbs to go: Medicare/Medicaid. I have no idea how you begin to pay off on the promises already made on that sucker. Borrowing J sub D's crystal ball, like Soc. Sec tweaks, it'll probably start with raising taxes in an attempt to cover expenditures. Then will come price controls. Doctors will not be paid above "X", and will be prohibited from turning away M/M patients, as it will be re-defined as age discrimination. I see Texas style malpractice "reform" becoming national, in an attempt to cut costs. Google Proposition 2 for details.

Ultimately, the answer to Chapman's question will be that we simply can't afford all of these expenditures and promises, and so we will redefine what those promises actually say.

|1.14.08 @ 9:19AM|#

Absolutely - if entitlement spending continues to grow at the projected rate, cuts in defence and non-defence discretionary will be pissing on a forest fire. Public finance will be the key issue for the next administration... but will it recognise that? I wish I were more confident - hell, I wish I had any confidence at all.

LarryA|1.14.08 @ 9:29AM|#

But most of the presidential candidates would rather kiss Dick Cheney on the lips than admit the need for Americans to accept painful sacrifices.

Not quite accurate. The candidates are more than willing for us to sacrifice earned income, civil rights, and personal liberty. But I suppose they don't consider those "painful."

Either Ken Shultz or the Commonsewer is where I heard it first, but I think you can reform Social Security by treating it as a welfare program for the elderly/disabled, something to prevent Gramps from having to eat dog food at 75.

I'm afraid any government run by the two major parties is far more likely to ban dog food.

Elemenope|1.14.08 @ 9:34AM|#

But why should *we* have to make sacrifices. It should be the *corporations* who are taxed their fare share, so that *we* can have the things that all the *civilized* nations on earth have.

After all, it's the *corporations* that benefit from public expenditures for infrastructure, like power generation and interstate transportation, so they may power their factories and move goods and services to their customers.

And isn't it the *corporations* that benefit disproportionately from a public education system? After all, the student *might* get an education, but the corporation is guaranteed a pool of literate and numerate, basically obedient and well-socialized potential employees.

If the government provides health insurance and retirement insurance, that means that *corporations* don't have to, and since health care is guaranteed, that means that employees will stay on average healthier and thus more productive.

As you can tell, I find the standard libertarian response to corporate taxation to be, eh, *stupid*.

|1.14.08 @ 9:43AM|#

Fiscal irresponsibility, bipartisanism at its worst.

|1.14.08 @ 9:46AM|#

. Then will come price controls. Doctors will not be paid above "X"

Government price "ceilings" have a funny way of becoming "floors." That's where a great deal of price inflation in medical costs came from in the first place, I believe. Rationing of "free" health care is not only inevitable but beneficial in the aggregate.

How many measles shots and similar sorts of basic high-return procedures are we willing to forego in order to provide a liver transplant for a single comatose leukemia patient?

|1.14.08 @ 9:51AM|#

As you can tell, I find the standard libertarian response to corporate taxation to be, eh, *stupid*.

I wish I'd coined this. "Corporations don't pat taxes, corporations collect taxes." Wherever and whenever I read/heard that it struck me as an obvious truth. Rebuttals?

R C Dean|1.14.08 @ 9:51AM|#

Your argument/quote is wrong on a basic level, people don't vote money out of the treasury and is there a democracy that has ever ended in that way ?

As to the first objection, I am satisfied that the quote is accurate if, in a representative democracy, the people vote themselves money out of the Public Treasury via representatives who campaign on this basis.

As to the second, you know, offhand, I can't think of any. The democracies that have fallen have fallen either to invasion from outside or to internal revolution, with the revolutionaries generally promising to spend the Public Treasury on, you guessed it, The Peepul.

R C Dean|1.14.08 @ 9:56AM|#

After all, it's the *corporations* that benefit from public expenditures for infrastructure, like power generation and interstate transportation, so they may power their factories and move goods and services to their customers.

They don't benefit any more than indiviudals do from public infrastructure. Why should they pay a disproportionate share for it, which payments will only be passed on to their customers anyway?

And isn't it the *corporations* that benefit disproportionately from a public education system? After all, the student *might* get an education, but the corporation is guaranteed a pool of literate and numerate, basically obedient and well-socialized potential employees.

How do corporations benefit from education more than the people who are actually educated. Those folks not only get the intangible benefits of education, they also get better jobs and, indirectly, a wealthier economy to live in?

And, again, taxing corporations disproportionately will only result in the extra cost being passed on, etc.

If the government provides health insurance and retirement insurance, that means that *corporations* don't have to, and since health care is guaranteed, that means that employees will stay on average healthier and thus more productive.

If you think corporations will not continue to offer benefits in excess of the state minimum, you are sadly mistaken. After all, we have had Social Security for generations, yet during that entire period the private sector has continued to offer pension and retirement benefits.

Really, though, the fundamental objection is that taxes on corporations are indirect taxes of consumers. Because they are passed on as the cost of goods and services, they are functionally equivalent to a sales tax (which tend to be regressive). I am always amused by progressives pushing regressive tax schemes.

|1.14.08 @ 9:59AM|#

Elemenope -
I wasn't advocating lower corporate taxes at the expense of others. I was merely trying to make the point that somehow outrageous spending is seen as affordable as long as its direct source is somewhere other than our own pockets.

Of course *we* can have universal health care. We'll just make the wealthy people pay for it for everyone!

Also, I should point out that it goes both ways. Why should I, as a business owner/operator, be forced to pay into systems which I don't wish to use any more than a private citizen is? Public higher education is a huge government subsidy to business, but what if I had a business for which there was no program of *study* in higher education and both had to pay in-part for the training of everyone else's employees and in-full for my own?

|1.14.08 @ 10:02AM|#

Also, I concur with P Brooks that price ceilings become price floors, or at the very least, pricing points.

|1.14.08 @ 10:11AM|#

I'm a fan of private retirement accounts. Having said that, from a fiscal perspective they might actually make things worse. You'll still need to pay benefits to those retired and retiring under the old system, but you'll miss the money of "contributors" who switch to the private system. It could be like cutting the wrong wire of the fiscal time bomb.

And while we're at it, can someone explain why there is a cap on taxable wages at all? It seems like there would be strong bipartisan consensus in doing away with them, even with things going smoothly: Liberals would be appalled at such blatant regressivity, and conservatives would be more than happy to give up the cap in exchange for a lower rate.

|1.14.08 @ 10:13AM|#

Chapman says "none" of the candidates talk about gutting departments or programs.

ER,Steve--Ron Paul talks constantly about gutting the military industrial complex, the medical industrial complex, the Departments of Education, Energy and Commerce, etc.

Oh, right! He's not cosmopolitan enough! I forgot!

|1.14.08 @ 10:16AM|#

people don't vote money out of the treasury and is there a democracy that has ever ended in that way ?

One could argue that the federal republic structure of the US was, for all intents and purposes, destroyed by just such an event in the elections of 1932, and replaced by a totally different form of govt with power concentrated in the national govt.

|1.14.08 @ 10:18AM|#

Much as I'm sure I'll be flamed for saying this, health care costs would drop a lot if we repealed the federal laws prohibiting ERs from turning patients away.

|1.14.08 @ 10:23AM|#

Also, while people voting money out of the treasury may not be the immediate cause of a democracy's fall, it is sure to weaken the society by perverting the economic system (why work when you can just sit at home and collect welfare?), making such a democracy ripe for invasion or overthrow.

Elemenope|1.14.08 @ 10:26AM|#

Reinmoose --

Oh, I know, and I agree; we should buy only what we can pay for, and the money collected for different social and infrastructural projects should not be disguised through indirect taxation. However, I maintain that corporations are as entities, on average, greater *direct* beneficiaries of public expenditures than any average collection of citizens who compose them, and yet they are not taxed proportionately to that benefit.

RCD --

Really, though, the fundamental objection is that taxes on corporations are indirect taxes of consumers. Because they are passed on as the cost of goods and services, they are functionally equivalent to a sales tax (which tend to be regressive).

That would only be a useful argument if salaries increased proportionately to corporate profits (they don't). Instead, past behavior indicates that the relative economic benefits of lower corporate taxes would benefit only a small minority of corporate agents and stockholders (i.e. corporations are capital 'sponges', which distribute net profits away from the consumable market) at the expense of employees *and* customers (who, by-and-large, are employees of a similar corporation).

The regressiveness only comes into play because market pressures are insufficient to incentivize corporate reinvestment in employees /consumers directly (that is, in a manner that encourages lateral consumption) such as increased salaries and lower prices or goods. Instead, market pressures are valved out by corporations by raising the price of goods; this is a choice they make willingly, and is not inevitably a consequence of corporate tax hikes, per se.

|1.14.08 @ 10:26AM|#

health care costs would drop a lot if we repealed the federal laws prohibiting ERs from turning patients away.

We could allow evil corporashuns to open Kwik E Kare facilities which could alleviate the need for people to use the ER as a doctor's office. But what would Mayor Menino say?

|1.14.08 @ 10:48AM|#

P Brooks,

That also helps, but I'm thinking more of the people who use the ER as a *free* doctor's office, which the Kwik E Kare won't substitute for.

|1.14.08 @ 11:03AM|#

Windtell:
For Gaijin: Your argument/quote is wrong on a basic level, people don't vote money out of the treasury and is there a democracy that has ever ended in that way ?

Honestly, I don;t think the quote is even real...but as to the idea of voting money out fo the treasury, it doesn;t take much to infer the relationship between the treasury and voting for pols who promise your special interest some entitlement paid out of the treasury (e.g., healthcare, education)for the "quote" to be logical/relevant.

I think Crimethink and RCDean make valid points unnecessary of repetition regarding the implications.

|1.14.08 @ 11:03AM|#

Less than a decade ago, the federal budget was not just balanced but piling up surpluses.

Although looking at the data, the deficit reduced in each year of the Clinton administration, that was a happy windfall caused by the tremendous run-up in the stock and real estate markets and general economic growth, not by sound fiscal planning.

And we've had exactly 5 years of surpluses in the past 46.

robc|1.14.08 @ 11:08AM|#

interesting (to me) question related to the corporate tax thing:

Could we (effectively) institute the fair tax by eliminating the individual income tax and upping the corporate tax (the question about S corps becomes big at this point, not that I would mind passing thru my profits to me at a 0% tax rate. However, if Im forced to become a C corp, I sure as hell am raising my base salary to something more reasonable).

This gets around all the fair tax arguments but does become a sales tax on corporations basically, especially if it is a fairly flat rate.

|1.14.08 @ 11:08AM|#

I agree with you, Crimethink, but the minimal infrastructure requirements combined with General Practitioner's office -style staff, of Kwik E Kare make it more likely to be affordable, even for the "self-insured."

There will inevitably be some people who will spend a full day in the ER waiting for an aspirin and a band-aid, just so they can skip out on the bill.

|1.14.08 @ 11:19AM|#

How would they pay for it all? Their prime source is repealing the Bush tax cuts for the wealthiest households. What they don't acknowledge is that those tax cuts are already scheduled to expire in 2010, helping to eliminate the deficit. But if the money is going to be used to close the fiscal shortfall, it can't be used to pay for new programs.

But...but...John Edwards says repealing the tax cuts will eliminate the deficit! And give us universal healthcare! And energy independence! And more Social Security benefits! And a prepetual motion machine! And a lifetime supply of Sierra Nevada Pale Ale for everyone!/snark

Elemenope|1.14.08 @ 11:23AM|#

I should point out, ex post, that there is a way out of the quandary of corporate sponging (which has already been proposed in legislation by, of all people, Ron Paul and Dennis Kucinich). That is encouraging through the tax-system the formation of employee-owned corporations. It is the only way to guarantee that as profits go up, the income is distributed back into the consumer market.

What Paul and Kucinich proposed was essentially huge tax-breaks for corporations that do some significant form of direct profit sharing at all levels of the corporation. That, in addition to a decently high base corporate tax rate, would reduce the regressiveness of a high corporate tax.

|1.14.08 @ 11:39AM|#

this is gonna seem petty, but I think it's important.

"Barack Obama, according to a November analysis in the McClatchy newspapers, has promised 'at least $181 billion in new annual spending on middle-class tax cuts, health care and retirement and energy plans.'"

Tax cuts ARE NOT spending. I would hope Reason would get this right.

|1.14.08 @ 11:44AM|#

Tax cuts ARE NOT spending. I would hope Reason would get this right.

If they don't come attatched to spending cuts, they're just as bad as spending.

robc|1.14.08 @ 11:49AM|#

Cesar,

They are just as bad "on the deficit" as spending (unless of course we are on the other side of the laffer curve, in which case, never mind) but they are not just as bad as spending.

|1.14.08 @ 11:54AM|#

They are just as bad "on the deficit" as spending (unless of course we are on the other side of the laffer curve, in which case, never mind) but they are not just as bad as spending.

They lead to more spending by increasing the size of our debt, meaning we get stuck with bigger and bigger interest payments which is spending.

If met with spending cuts in an equal amount, however, tax cuts are great.

|1.14.08 @ 12:20PM|#

Of course, for the voting money out of the treasury, the relationship between people voting for pol's and the pol's granting pork projects is obvious, but "the people" still can't vote the money out, which is a good thing because there's lots of greedy folk out there.

I don't think welfare quite qualifies as this as well, although I don't want you to think that I'm a fan of welfare. As for the sit at home and collect welfare for a living, I remember I got about $500 a month when I was on welfare for a couple months, I'd rather go out and make something of myself, as would 99% of people out there I'm sure.

|1.14.08 @ 12:21PM|#

When I was going to Bizniss Skool, the cool kids all said, "Paying dividends is like an admission to the stockholders- that is, the people you work for- that they might be just as smart as you. This is unacceptable; if you cannot avoid paying a dividend, it should be as small as possible." I suspect this still is the case.

As much as I am in favor of eliminating the corporate income tax, this is a problem. Taxing earnings which are passed through to the owners only works if those earnings are actually passed through. But I'd be willing to give it a shot.

From The Keystrokes of John Q.|1.14.08 @ 12:24PM|#

Public higher education is a huge government subsidy to business,

Reinmoose,

I think this is a sweeping statement. Private entities on the national average educate children at around half the cost with much better results. So if you split the excessive cost 25% personal income tax and 25% corporate tax you still get the same result. While corp tax hurts profits, 25% increase in tax on the consumer shrinks potential markets.

Secondly the quality of the education is so poor that you have people routinely say the vowel o for the numeral 0. If you talk to the average people in your day to day life, some of them need a dictionary. Think about how much of Higher Education is spent in remedial studies. The Cost that adds to getting the degree. I would love to see what that number comes out to.

Since the government guarantees payment through various programs to universities you see something interesting. People are now getting degrees in things like Philosophy, so they can think deep thoughts about unemployment. Instead of say something in computer technology or some sort of engineering. Also if you compare what the government pays federally to a university to what say a Trust does when they offer a grant to the university, you can see anywhere from 300 to 500% differences in charges. Which again is a cost that nomatter who is passed onto hurts corporations.


So now corporations have to go to places like India, who has a much larger silicon valley than we do, and compete for human capital. Competing not only with corporations in the USA, but globally, to find someone to write that computer code required to be written overnight.

Looking forward to your reply..

|1.14.08 @ 12:25PM|#

And think of how much time, energy, and cash would be freed up by removing the perverse incentives currently embodied in the tax code for corporations.

I like efficiency.

|1.14.08 @ 12:45PM|#

And while we're at it, can someone explain why there is a cap on taxable wages at all?

The idea was that since there is a maximum SS yearly payout, then they should tax only the salaries up to a certain point to give the appearance of contributing to a retirement savings account (otherwise, it would appear too much like a redistribution of wealth).

It seems like there would be strong bipartisan consensus in doing away with them, even with things going smoothly: Liberals would be appalled at such blatant regressivity, and conservatives would be more than happy to give up the cap in exchange for a lower rate.

The rate would have to be a whole lot less for conservatives to be happy with it. Someone making $200K/year (in 2007) would effectively pay a rate of 6.1% (because of the cap at $97,500) instead of the current 12.4%. Someone making $1M/year has an effective SS tax rate of 1.2%

Raising the eligibility age for SS/Medicare would seem to be the most politically palatable solution, since you could "grandfather in" anyone who is already on the dole and make the age go up gradually to appease people who are counting on getting on the dole soon.

Personally, I think we're going continue to ride this train right over the broken tracks into the canyon. It will cause a collapse of the American financial system and it will be the 1930's all over again.

From The Keystrokes of John Q.|1.14.08 @ 1:18PM|#

Social Security- *blood red lettering* What you don't know can kill you!

We're never gonna pay that 35 trillion we promised for social security. I'm sure they'll raise the age. I'm sure they'll cut benefits. I think they'll lift that stupid income cap for those who receive SS. It basically discourages you from having a livable wage on the side. For instance: if you make over 12,000 a year, they begin to deduct specific percentages off your check. It's punishing people for being productive!!!

I don't see anything wrong with someone below 25 paying 6% to Social Security and 6% however they want. With the understanding that they wouldn't see the 6% contributed to Social Security. We could call it the: "Because Grandpa and Grandma are blood sucking parasites Fund." Once you hit 25 you could determine how you wanted to allocate the 6% you were contributing to SS.


The Idea that Medicare is going to go unmolested is also a joke. Soon Doctors will be allowed to perform free services to medicare patients without being charged with a felony. As stated before the Dr's Fees schedules will go down or become "Fixed." I think you're going to see Medicare Drug programs start to use generic drugs(a lil neo-mercantilism: no generic drugs can be used in that bill at this time).I think you're gonna see the government start to also look at the licensing of generic drugs more "broadly" so that pharmaceuticals can't buy them all.

Medicaid will start to fade away in my opinion. Most of the 300 Billion(7% growth annually at this moment) is going to "Acute Longterm Care(nursing homes)." Which is Baby Boomer code for "Cold Apathetic Discarding of the Greatest Generation." Of course the self centered baby boomers will never allow themselves to be herded into homes and forced to swallow meds while secretly wishing for the dignity to die with comfort. So you can expect a substantial drop in Medicaid.

Anonymoose.|1.14.08 @ 1:28PM|#

Personally, I think we're going continue to ride this train right over the broken tracks into the canyon. It will cause a collapse of the American financial system and it will be the 1930's all over again.

Hooray! I can put my Y2K supplies to good use.

|1.14.08 @ 2:06PM|#

From The Keystrokes of John Q. Public -
All excellent points. It was perhaps a sweeping statement, but I still stand behind it to a degree. Also please note that I put forward that the education subsidy was not universal and in-fact hurt at least some companies.

A subsidy doesn't have to be efficient in order to be a subsidy, does it? The quality of the resulting work-force decreases as state involvement in education increases - agreed. Should (especially) higher education have been left purely to private entities, we would not have this ridiculous spike in college attendance and sense of urgency that *everyone* needs to go to college to have a decent life. This push leads to a lot of uninspiring people obtaining degrees that certify them as inspired, eventually perverting the private economy after a couple of generations.

Think about how much of Higher Education is spent in remedial studies

Worse! Higher Education spends a lot of time ignoring that they have remedial students.

So ultimately, the whole system is screwed. It would be interesting to actually see some numbers on the effect of government-run schools on corporate profits, but with so many levels of interference and subsidy, it's almost impossible to calculate.

Incompetent people hire incompetent people, because they can relate to each other. Incompetent teachers teach incompetently to create incompetent people, who can hire other people based on the same incompetent criteria they were held to. This cycle of egos will ultimately lead to the downfall of the economy. It's really a wonder how anything gets successfully invented at all, and it must be a function of sheer volume of attempts.

To try to stay on topic, there is an entire government-aided industry for everyone to pay for poor-quality training of the work force. Additionally, the trend is such that the employee him/herself subsidizes their eventual employer by taking on the costs of training, except that the training isn't specific to their eventual employer's needs, so there is a lot of waste. This does not mean, however, that the corporation is not subsidized. It simply means that, given your choice between paying 100% of your employee's training costs even though you're already paying taxes for 90% of their necessary training or paying only the remaining 10% of your employee's training (to clean up the specifics that public education missed) in addition to your existing taxes, you take the subsidy whether it's optimal or not.

Did that make sense?

R C Dean|1.14.08 @ 2:53PM|#

It is the only way to guarantee that as profits go up, the income is distributed back into the consumer market.

I'm not sure it makes any difference. If profits are distributed to rich people, they are either spent (in the consumer market, good for the economy) or invested (in the capital markets, also good for the economy in a different way).

Taxing those profits, though, is worse for the economy than either cycling them through rich people or working people. Surely we can all agree on that.

|1.14.08 @ 3:57PM|#

There is one canidate who is sending the message of reducing government spending by reducing government.

You can't effectively reduce government spending without reducing the size of the government.
Look and you shall find..

John

From The Keystrokes of John Q.|1.14.08 @ 4:14PM|#

Did that make sense?

Dear Reinmoose,

*hits buzzer*

Yes? haha

Elemenope|1.14.08 @ 7:37PM|#

R C Dean-

I'm not sure it makes any difference. If profits are distributed to rich people, they are either spent (in the consumer market, good for the economy) or invested (in the capital markets, also good for the economy in a different way).

The first is guaranteed to stimulate the economy, and actual consumption stimulates capital investment that is inherently stable (compared to others, at least.)

The problem with direct capital investment is that the article of faith that all capital investments stimulate the economy is flatly wrong. Capital investment in proportion to total demand for product is healthy (but naturally follows from increasing consumer dollars), but the essentially surplus capital that enters the coffers of the "rich" dur to corporate investment is not restrained by the need to match production demand when it is reinvested.

Hence, there are many ways to invest money that are either unproductive economically or actually destructive, like currency arbitrage and hedge funding. These inherently unstable investments encourage inflation of currencies (since even the most robust fractional reserve system is vulnerable to a run that it cannot cover) and destruction of markets, harming existing productivity of capital and driving consumption downwards.

I agree with your statement that taxing this surplus is not helpful directly, as government is excessively wasteful in redistribution; however, coupled with incentives in the form of tax breaks for redistributing the surplus capital to the direct consumers to spend, a high corporate tax can encourage a steady growth of consumer demand and encourage more stable (read: sane) investment patterns.

Sam Grove|1.14.08 @ 11:47PM|#

Much as I'm sure I'll be flamed for saying this, health care costs would drop a lot if we repealed the federal laws prohibiting ERs from turning patients away.

Kaiser Hospital near me remodeled their ER to be vehicle accessible only. An urgent care facility was opened next door.

|1.15.08 @ 12:32AM|#

The cochtopus and his cosmotarians have abandoned Ron once again. Heres a budget saver you assholes. STOP INVADING OTHER COUNTRIES!

|1.15.08 @ 10:32AM|#

Someone said it above: "Corporations don't pay taxes, they collect taxes."

I'm just amazed that there are still people who believe that "corporations" actually pay taxes. It's (sadly) hilarious that so many have so little idea of how businesses run...as if they had a big, secret vault into which they can be grudgingly arm-twisted into dipping to pay "their fair share."

If you haven't learned by now how corporate taxes get paid, then I suppose it's too late for you--unless you're a high school student reading Reason in order to add to your term paper's bibliography. Here's how corporations 'pay' taxes:

1. They spend less on capital re-investments, which lowers productivity, lowers the U.S. GDP, and puts employees out of a job, or reduces the hiring of entry level employees
2. They spend less on benefits and employee programs, which makes employees either go without, or pay for them out of their own earnings
3. They pay employees lower wages than they would otherwise
4. They make lower returns on invested capital, giving investors incentives to move their investments to higher return (lower taxed) locales (overseas)
5. They charge higher prices for their goods and services, reducing demand and, again, lowering U.S. GDP

So, next time do not ask for whom the corporate taxman's bell tolls: it tolls for thee.

|1.15.08 @ 10:44AM|#

The difference between a 'tax and spend' Democrat and a 'borrow and spend' Republican is lost on me. Either way it is spending and, by any standard, spending way too much. Is decreasing current resources that could remain in productive use (tax-spend)really worse than borrow-spend where you pay later + interest?

Vowing to tax the 'rich' is a joke if by rich you mean high income earners. Wealth does not equal wealth. Income is earned, wealth is invested. Taxing and spending current income, whether for 'programs' or debt service simply destroys what could have been investable wealth.

The revenue side of federal, state and local spending is not the problem. It is expenditures that are ruing this nation and its citizens. Do not look to either Democrats or Republicans to understand. They are co-opted via vote buying. How to solve this and remain free?

|1.15.08 @ 10:10PM|#

I was going to mention a candidate whose initials are R.P., but he's evidently not a "contender." And what does one have to do in order to be considered a contender? Why, he/she has to be Santa Claus! Presents under the tree for everyone. Don't ask how they get there.

We could dismantle the American empire and phase out the welfare state over the next 10-20 years, but that doesn't win presidential elections. So I guess we will follow in the path of all previous imperial powers and implode from within.

Or you could vote for Ron Paul before it's too late.

|1.16.08 @ 10:06AM|#

"And everyone running for president seems to agree it should never happen again."

Not 'everyone' agrees with that, Ron Paul vehemently disagrees with that.