Brooks writes a funny article:
http://www.nytimes.com/2009/05/26/opinion/26brooks.html
Gay marriage may not lead to men consorting with animals, but it has led to Republicans laying down with Democrats:
http://www.nytimes.com/2009/05/28/us/28marriage.html?_r=1&ref=politics
Thursday, May 28, 2009
Tuesday, May 26, 2009
How taxes are suppose to work:
A Progressive Flat Tax by Justeconomics
All income you receive will be taxed at a single rate (~25%?) subject to the following two adjustments only:
1. Deduct $10,000 from your household's income for every living breathing human being
2. Deduct/Add your net deposits/withdrawals to/from any saving or investment account.
Repeal:
Corporate taxes
Capital gains taxes
Payroll taxes
Property taxes
Estate taxes
Sales taxes (except when applied to control externalities such as cigarette taxes or gas taxes)
If you support a family of 4 with a $40k income, you will pay no taxes. If you have an income of lots and lots of money, you will pay about 25% in taxes.
If you want to raise more revenue, increase the tax rate (on everyone). If you want to make the tax more progressive, increase the personal deduction.
All income you receive will be taxed at a single rate (~25%?) subject to the following two adjustments only:
1. Deduct $10,000 from your household's income for every living breathing human being
2. Deduct/Add your net deposits/withdrawals to/from any saving or investment account.
Repeal:
Corporate taxes
Capital gains taxes
Payroll taxes
Property taxes
Estate taxes
Sales taxes (except when applied to control externalities such as cigarette taxes or gas taxes)
If you support a family of 4 with a $40k income, you will pay no taxes. If you have an income of lots and lots of money, you will pay about 25% in taxes.
If you want to raise more revenue, increase the tax rate (on everyone). If you want to make the tax more progressive, increase the personal deduction.
Monday, May 25, 2009
Would you lend money to Chrysler?
President Obama's interference in the Chrysler bankruptcy is disgusting.
1. Disregard for bankruptcy law
When investors invest their money in a company, the agree beforehand who gets what and when if something goes wrong. In the Chrysler capital structure, everyone, including the Unions, agreed that the 1st Lien Lenders would get paid first and so long as they did not get everything back, no one would get anything else.
President Obama has now decided to build an economy based on politics and popularity rather than on property rights and contracts.
The restructuring plan gives the Unions far more recovered value than the 1st Lien Lenders or other creditors in the same position as the Unions would be getting.
Why? There is no question of fairness. The Unions agreed to their subordinate position beforehand. Daimler, the previous German owner of Chrysler, even offered $1 billion to get them to agree and the Unions accepted. Suddenly, the Unions are allowed "backsies" and take that money out of the hands of the 1st Lien Lenders and the US taxpayer.
If President Obama wants to use taxpayer money to subsidize the Unions that's one thing. A waste of taxmoney, but within the bounds of democracy. If President Obama wants use investor money to subsidize the Unions, that's kleptocracy.
2. The use of death threats to enforce his will
President Obama used the bully pulpit without regard to the safety of human life. Investors who disagreed with him became targets of a lynch mob that he stirred. Safety and security were the reasons that these dissenting investors dropped their court case.
The courts of the United States exist to protected us from the tyranny of the majority. When the President himself is at the head of the mob and is directing its anger to prevent the court case from even being heard, then we are losing our individual freedom.
This is mobster behavior, not Presidential behavior.
1. Disregard for bankruptcy law
When investors invest their money in a company, the agree beforehand who gets what and when if something goes wrong. In the Chrysler capital structure, everyone, including the Unions, agreed that the 1st Lien Lenders would get paid first and so long as they did not get everything back, no one would get anything else.
President Obama has now decided to build an economy based on politics and popularity rather than on property rights and contracts.
The restructuring plan gives the Unions far more recovered value than the 1st Lien Lenders or other creditors in the same position as the Unions would be getting.
Why? There is no question of fairness. The Unions agreed to their subordinate position beforehand. Daimler, the previous German owner of Chrysler, even offered $1 billion to get them to agree and the Unions accepted. Suddenly, the Unions are allowed "backsies" and take that money out of the hands of the 1st Lien Lenders and the US taxpayer.
If President Obama wants to use taxpayer money to subsidize the Unions that's one thing. A waste of taxmoney, but within the bounds of democracy. If President Obama wants use investor money to subsidize the Unions, that's kleptocracy.
2. The use of death threats to enforce his will
President Obama used the bully pulpit without regard to the safety of human life. Investors who disagreed with him became targets of a lynch mob that he stirred. Safety and security were the reasons that these dissenting investors dropped their court case.
The courts of the United States exist to protected us from the tyranny of the majority. When the President himself is at the head of the mob and is directing its anger to prevent the court case from even being heard, then we are losing our individual freedom.
This is mobster behavior, not Presidential behavior.
Saturday, February 28, 2009
Obama Budget 2009
The full budget:
http://www.whitehouse.gov/omb/assets/fy2010_new_era/A_New_Era_of_Responsibility2.pdf
Very Readable, though heavily padded. Lots of repetition and cut and paste of the same rhetoric. I wonder if anyone read the whole thing (besides me).
The difference between the Obama budget proposal and the Bush budgets is wonderous. There are actually charts and graphs that show economic data to support the proposals rather than propaganda pictures of Bush and Cheney and other high party officials.
The budget demonstrates increased transparency and realism. It shows dramatically high deficits but only because it does not assume it will be saved by the AMT or by sunset provisions as was the practice under previous administrations. Further, it creates many allocations for emergency spending based on the likelihood that they will occur rather than pretending that nothing will ever happen. Included in this budget is war funding which the Bush administration routinely financed in a separate "emergency" bill.
The highlights below come from the first 42 pages of the budget request, which contain the President's message and summary. In future weeks, time permitting, I'll review the individual department budgets.
The Good
1. Investment in education and research:
Some studies show that for every dollar invested, there is a $4 to $9 return to society in higher earnings, higher graduation and employment rates, less crime, and decreased need for special education services, less use of the public welfare system, and better health.
Unfortunately the "studies" are not cited, but the sentiment is true. Education is one area where it is difficult to spend too much money (but like all areas important to spend the money properly). Education is the single most important factor in ensuring American liberty and prosperity in the decades to come.
The budget rightly does not intend to take action to "cut costs" in education. While college education expense has risen dramatically over the last 20 years (figure 8 on page 10), so have the rewards (figure 9 on page 11). We do have the best education system in the world, despite its faults and costs. We now merely have to ensure that our children have access.
The budget statement specifically encourages stem-cell research.
1a. $5 billion for key science program such as the DoE Office of Science and DoC National Institute of Standards and Technology
1b. Increased funding for Head Start and double enrollment in Early Head Start
1c. Encouragement of individual performace by teachers... more details?
1d. Double support for Charter Schools. I have been ambivalent on charter schools in the past. A large portion of the superior performance of these schools can be attributed to the selection of students and parents. Parenting is the first and most important contibuter to a child's successful education. If we can't make all parents good, then let's at least give the good parents a chance.
1e. Stable funding for Pell Grants. Now indexed to inflation + 1% and automatically funded.
1f. Huzzah! An end to government-guaranteed student loans, which served only as handouts to financial institutions, and a switch to direct lending.
1g. $2.5 billion to support low income students through college with the Access and Completion Incentive Fund
1h. Triple the number of graduate fellowships in science. This is how we grow the economy.
2. Culture of Life - more health care for children and workers
2a. Nurse-Home Visitation program to provide pre and post natal care for at-risk children and families
2b. Authorization of the Childrens' Health Insurance Program (CHIP) with a jab at Pres. Bush for vetoing it twice. It is retarded that we have free and subsidized healthcare for retirees who will never again be productive members of society while allowing our children to be hobbled preventable conditions through inadequate healthcare.
2c. More money for medical research on comparative effectiveness so that decisions can be made based on cost-effectiveness rather than simply cost.
2d. Pre-funding health care reform. He doesn't know what he's doing yet, but he's responsibly setting aide $630 billion because he knows it will be expensive.
2e. The budget strikes a balance between innovation and access. Inventors of new drugs retain their exclusivity period, but the process for access to generics is streamlined. (Not clear if the exclusivity period remains the same as before.)
2f. "Pay for Performance" Medicare will link a portion of the medical fee to quality standards. This is a step in the right direction. Should this "quality" be measured be impartial bureaucrats or untrained patients?
2g. 8 principles of the new health care system! (Page 27)
3. Tax increases for rich people
3a. Itemized deductions for families earning more than $250k/year will be deducted at 28% rather than 33-35% (and eventually 36-39.6%). Why should we be subsidizing mortgages and charities for the rich?
The Bad
1. Continuing subsidies based on geography rather than income or population
1a. $1.3 billion in USDA loans and grants for "expanded broadband ... in rural areas". What does broadband have to do with Agriculture?
1b. Susidies for commerical flights to rural areas. People can live where they want to live, but they have no right to tax the rest of us to provide them more convenient transportation.
3a. $6.3 billion in subsidies for states to become more energy efficient. If energy efficiency were cost-effective, states already have an incentive to do this. If it's not cost effective, then why are we doing it?
4. Bury it! "The Energy Department will also scale up its demonstration projects for
geologic storage for carbon dioxide." Are you kidding?
5. Continuing subsidies for the low income nanny state. Wherever possible, subsidies should be in cash, not kind.
5a. Continued funding for the DoE "home weatherization" program. If people cannot afford to own and maintain their own homes, they should consider renting. We need to stop subsidizing homeownership in favor of other poverty-fighting priorities.
2. The budget focuses too much on job losses as a problem. The macro problem is a loss of economic production. If the economy can produce more without higher employment, that means we can consume more without working as hard. The micro problem is greater inequality due to loss of jobs and therefore income at the lower strata of our economy, but if growth is achieved, this can be solved by additional efforts at wealth redistribution. The budget addresses this issue in part with a more progressive tax code. (Figure 9 on page 11 is interesting.)
3. Health care. The budget notes that healthcare costs are rising faster than wages, as illustrated by Figure 11 on page 13, but this is a misleading statistic. As incomes rise and medical technology advances, individual choose to spend more money on healthcare because they like it better than spending their money on other things.
That there are more uninsured now than there were previously is a consequence of this choice not to spend on healthcare and the requirement that premiums remain the same regardless of health. If premiums are set by the average cost of care, healthy individuals will self-insure while individuals with chronic illnesses will seek insurance. This is exactly what is happening. We cannot fault the healthy for choosing not to pay for the healthcare of the sick when given that choice. What we can do is use the power of the state to tax and provide a minimum level of health insurance for all.
4. "... still preserving the important principle of a dedicated revenue source for Social Security." Why does Social Security need a "dedicated revenue source"? Does that make it any more or less important or stable? The Social Security Tax is regressive. The extra 12.4% places a highe marginal tax rate on those making less than $106k per year than those in the top tax bracket! The cost of this dedicated revenue source is the prevention of any meaningful reform. As inequality increases in society, the tax code must become more progressive, but the separate Social Security tax remains a special burden for lower income families. The "Making Work Pay" refundable tax credit that applies against payroll taxes further illustrates that this is stupid.
I hope you enjoyed it as much as I did!
http://www.whitehouse.gov/omb/assets/fy2010_new_era/A_New_Era_of_Responsibility2.pdf
Very Readable, though heavily padded. Lots of repetition and cut and paste of the same rhetoric. I wonder if anyone read the whole thing (besides me).
The difference between the Obama budget proposal and the Bush budgets is wonderous. There are actually charts and graphs that show economic data to support the proposals rather than propaganda pictures of Bush and Cheney and other high party officials.
The budget demonstrates increased transparency and realism. It shows dramatically high deficits but only because it does not assume it will be saved by the AMT or by sunset provisions as was the practice under previous administrations. Further, it creates many allocations for emergency spending based on the likelihood that they will occur rather than pretending that nothing will ever happen. Included in this budget is war funding which the Bush administration routinely financed in a separate "emergency" bill.
The highlights below come from the first 42 pages of the budget request, which contain the President's message and summary. In future weeks, time permitting, I'll review the individual department budgets.
The Good
1. Investment in education and research:
Some studies show that for every dollar invested, there is a $4 to $9 return to society in higher earnings, higher graduation and employment rates, less crime, and decreased need for special education services, less use of the public welfare system, and better health.
Unfortunately the "studies" are not cited, but the sentiment is true. Education is one area where it is difficult to spend too much money (but like all areas important to spend the money properly). Education is the single most important factor in ensuring American liberty and prosperity in the decades to come.
The budget rightly does not intend to take action to "cut costs" in education. While college education expense has risen dramatically over the last 20 years (figure 8 on page 10), so have the rewards (figure 9 on page 11). We do have the best education system in the world, despite its faults and costs. We now merely have to ensure that our children have access.
The budget statement specifically encourages stem-cell research.
1a. $5 billion for key science program such as the DoE Office of Science and DoC National Institute of Standards and Technology
1b. Increased funding for Head Start and double enrollment in Early Head Start
1c. Encouragement of individual performace by teachers... more details?
1d. Double support for Charter Schools. I have been ambivalent on charter schools in the past. A large portion of the superior performance of these schools can be attributed to the selection of students and parents. Parenting is the first and most important contibuter to a child's successful education. If we can't make all parents good, then let's at least give the good parents a chance.
1e. Stable funding for Pell Grants. Now indexed to inflation + 1% and automatically funded.
1f. Huzzah! An end to government-guaranteed student loans, which served only as handouts to financial institutions, and a switch to direct lending.
1g. $2.5 billion to support low income students through college with the Access and Completion Incentive Fund
1h. Triple the number of graduate fellowships in science. This is how we grow the economy.
2. Culture of Life - more health care for children and workers
2a. Nurse-Home Visitation program to provide pre and post natal care for at-risk children and families
2b. Authorization of the Childrens' Health Insurance Program (CHIP) with a jab at Pres. Bush for vetoing it twice. It is retarded that we have free and subsidized healthcare for retirees who will never again be productive members of society while allowing our children to be hobbled preventable conditions through inadequate healthcare.
2c. More money for medical research on comparative effectiveness so that decisions can be made based on cost-effectiveness rather than simply cost.
2d. Pre-funding health care reform. He doesn't know what he's doing yet, but he's responsibly setting aide $630 billion because he knows it will be expensive.
2e. The budget strikes a balance between innovation and access. Inventors of new drugs retain their exclusivity period, but the process for access to generics is streamlined. (Not clear if the exclusivity period remains the same as before.)
2f. "Pay for Performance" Medicare will link a portion of the medical fee to quality standards. This is a step in the right direction. Should this "quality" be measured be impartial bureaucrats or untrained patients?
2g. 8 principles of the new health care system! (Page 27)
3. Tax increases for rich people
3a. Itemized deductions for families earning more than $250k/year will be deducted at 28% rather than 33-35% (and eventually 36-39.6%). Why should we be subsidizing mortgages and charities for the rich?
4. Tax cuts / subsidies for poor people
4a. Making Work Pay tax credit. This tax credit refunds 6.2% of income taxes for 95% of American workers so that they can use the refund to pay for the 6.2% employee-share of payroll taxes. Good idea, but poor implementation. We should just eliminate payroll taxes altogether.
4b. Extended and expanded unemployment benefits. This is especially important so that skilled workers are not forced to enter unskilled jobs by necessity of eating and can instead focus on finding a job that is right for them. America benefits by making sure the resources we've spent training our workforce are employed as effectively as possible.
5. Increased financing for our efforts to change the world, ie Defense and State
6. Reduction of stupid spending
6a. Specifically cuts in farm producer subsidies
The Bad
1. Continuing subsidies based on geography rather than income or population
1a. $1.3 billion in USDA loans and grants for "expanded broadband ... in rural areas". What does broadband have to do with Agriculture?
1b. Susidies for commerical flights to rural areas. People can live where they want to live, but they have no right to tax the rest of us to provide them more convenient transportation.
2. $15 billion in additional cash payments to retirees and the disabled. "These vulnerable populations are the first ones to feel an economic downturn." Why? They're not working so they can't lose their jobs.
3. Continuing subsidies for producers of "renewable energy", defined based on politics rather than sciene. This policy should be implemented as a tax on pollution rather than a subsidy for specific kinds of non-pollution. The effect is similar but does not limit creativity in finding new methods of non-pollution.3a. $6.3 billion in subsidies for states to become more energy efficient. If energy efficiency were cost-effective, states already have an incentive to do this. If it's not cost effective, then why are we doing it?
4. Bury it! "The Energy Department will also scale up its demonstration projects for
geologic storage for carbon dioxide." Are you kidding?
5. Continuing subsidies for the low income nanny state. Wherever possible, subsidies should be in cash, not kind.
5a. Continued funding for the DoE "home weatherization" program. If people cannot afford to own and maintain their own homes, they should consider renting. We need to stop subsidizing homeownership in favor of other poverty-fighting priorities.
The Ugly - Ideological Errors
1. The budget correctly identifies that the illiquidity in the financial markets caused by a burst of the credit bubble is the proximal cause of the current economic turbulence. No provisions are made however to prevent such bubbles from occuring the in the future. Rather by endorising actions by the Federal Reserve and the TARP, the administration effectively "solves" this problem by encouraging a new bubble.
2. The budget focuses too much on job losses as a problem. The macro problem is a loss of economic production. If the economy can produce more without higher employment, that means we can consume more without working as hard. The micro problem is greater inequality due to loss of jobs and therefore income at the lower strata of our economy, but if growth is achieved, this can be solved by additional efforts at wealth redistribution. The budget addresses this issue in part with a more progressive tax code. (Figure 9 on page 11 is interesting.)
3. Health care. The budget notes that healthcare costs are rising faster than wages, as illustrated by Figure 11 on page 13, but this is a misleading statistic. As incomes rise and medical technology advances, individual choose to spend more money on healthcare because they like it better than spending their money on other things.
That there are more uninsured now than there were previously is a consequence of this choice not to spend on healthcare and the requirement that premiums remain the same regardless of health. If premiums are set by the average cost of care, healthy individuals will self-insure while individuals with chronic illnesses will seek insurance. This is exactly what is happening. We cannot fault the healthy for choosing not to pay for the healthcare of the sick when given that choice. What we can do is use the power of the state to tax and provide a minimum level of health insurance for all.
4. "... still preserving the important principle of a dedicated revenue source for Social Security." Why does Social Security need a "dedicated revenue source"? Does that make it any more or less important or stable? The Social Security Tax is regressive. The extra 12.4% places a highe marginal tax rate on those making less than $106k per year than those in the top tax bracket! The cost of this dedicated revenue source is the prevention of any meaningful reform. As inequality increases in society, the tax code must become more progressive, but the separate Social Security tax remains a special burden for lower income families. The "Making Work Pay" refundable tax credit that applies against payroll taxes further illustrates that this is stupid.
I hope you enjoyed it as much as I did!
Thursday, February 26, 2009
How would you invest? An interesting microeconomic scenario
http://www.knowingandmaking.com/2009/02/confiscated-savings-and-bank-runs.html
The problem is much deeper than that. The loss averse individual you describe makes two mistakes not one. The second, as you describe might be to withdraw his or her money, but the first was to invest the money in the first place.
Most people do not have the market knowledge to invest their money properly. If this individual was looking for principal protection, then he or she should not have invested the money in an account where it could be lost.
In the United States, many retirees or other investors with no risk appetite invested their money in bonds of Enron or other highly rated companies without understanding that highly rated does not mean risk-free, and that the rating agencies are not actually good at their jobs. Then these same investors were upset that they lost money that they thought was risk free.
As recently as 2004, President Bush advocating the conversion of Social Security into personal accounts where workers could invest in "a conservative mix of stocks and bonds". All of these people would be in a great deal of trouble today if this change had taken place.
Lastly, the individual you describe could have been cheated. Perhaps he was told that this was a deposit in a bank. The word "bank" for common people means "safe". In truth, the practice of fractional reserve banking means that the bank is not safe and depends on a Ponzi scheme for its liquidity. Fractional reserve banking is what makes a bank vulnerable to bank runs. Fractional reserve banking is what causes dramatic swings in liquidity during recession (and not individuals collectively saving).
The problem is much deeper than that. The loss averse individual you describe makes two mistakes not one. The second, as you describe might be to withdraw his or her money, but the first was to invest the money in the first place.
Most people do not have the market knowledge to invest their money properly. If this individual was looking for principal protection, then he or she should not have invested the money in an account where it could be lost.
In the United States, many retirees or other investors with no risk appetite invested their money in bonds of Enron or other highly rated companies without understanding that highly rated does not mean risk-free, and that the rating agencies are not actually good at their jobs. Then these same investors were upset that they lost money that they thought was risk free.
As recently as 2004, President Bush advocating the conversion of Social Security into personal accounts where workers could invest in "a conservative mix of stocks and bonds". All of these people would be in a great deal of trouble today if this change had taken place.
Lastly, the individual you describe could have been cheated. Perhaps he was told that this was a deposit in a bank. The word "bank" for common people means "safe". In truth, the practice of fractional reserve banking means that the bank is not safe and depends on a Ponzi scheme for its liquidity. Fractional reserve banking is what makes a bank vulnerable to bank runs. Fractional reserve banking is what causes dramatic swings in liquidity during recession (and not individuals collectively saving).
Sunday, February 22, 2009
I hate the stimulus
CBO Summary
1. Increased deficit spending hurts long-term wages and GDP
An interesting observation by the CBO:
To the extent that people hold their wealth as government bonds rather than in a form that can be used to finance private investment, the increased debt would tend to reduce the stock of productive private capital....
The reduction in GDP is therefore estimated to be reflected in lower wages rather than lower employment, as workers will be less productive because the capital stock is smaller.
http://www.cbo.gov/ftpdocs/99xx/doc9987/Gregg_Year-by-Year_Stimulus.pdf
2. Buy American
If two contractors make the same quality government product or service, but one can do it at a lower price, the government should chose the lower price. By restricting competition to only American contractors, the legislation allows contractor to charge higher prices for the same service. We will pay higher taxes all to promote greater inefficiency and lower productivity.
If the goal is to spread some cash around the US economy, we'd do better hiring the cheaper foreign contractor and dumping the savings out of a helicopter.
3. Wage restrictions
Further, the legislation requires that all workers on a project must be paid the same as any other worker in the same locality. We will pay higher taxes to pay for less productive workers.
Again, if the goal is to spread some cash, give it away and be honest about it.
4. A whole lot of dumb tax credits $200B +
For the most part, many of the tax credits serve simply to make the tax code more progressive. Specially stupid ones include increased "home-buyer" tax credits as if a new housing bubble would save us.
Then there are several tax credits awarding good behavior. Generally, policy should not be made in the tax code.
Lastly, taxes are cut on new automobile purchases. What happened to energy policy? Subsidizing the purchase of new cars won't save the US auto industry. This is clearly an example of a provision that was made for the benefit of the manufacturers (few) rather than the consumers (many).
5. Limits on Executive Compensation
This is stupid. Companies took or were pressured to take TARP funds and now find themselves under strong restrictions. The law includes an exception for employment contracts written before February 11, 2009. This type of legislation will only further encourage future employees to demand longer contracts in case further limits are placed in the future.
(This paragraph previously incorrectly stated that "It's probably unconstitutional, both in terms of its infringement on the freedom of contracts and its ex post facto nature." Corrected thanks to an observation by a devoted reader.)
The only good that can come out of this is that companies will seek to exit the TARP as fast as possible that that previous error can be corrected.
Excessive executive compensation is a principal/agent problem. Those that are best suited to correct this version of the problem are not seated in the Capitol but are in fact the shareholders of these Corporations. Already steps are being taken to form independent compensation committees or to require formal shareholder votes on CEO compensation. The government should not be involved either as a shareholder through the TARP or through random wage ceilings.
6. Quibbles on Education Spending
The legislation pours new money into Education, including $13B for the Elementary and Secondary Education Act of 1965, currently reauthorized as the No Child Left Behind Act of 2001, $11.3B for the Individuals with Disabilities Education Act, and $15.8B for the Higher Education Act of 1965.
I have no objection to the last and little objection to the first. The US economy, as a developed economy, grows primarily by increases in productivity technology and not by increases in capital stock per capita. In order to promote that growth the US needs as many highly educated individuals devising new ways to be productive as possible. We should invest heavily in ensuring that our best minds receive the best education possible.
Financing education at the elementary and secondary level provides a lower return for the national economy than financing graduate school, but it is also an effective way to break the cycle of poverty, and to reduce crime, both equally important economic targets. Families in poverty cannot afford to increase their human capital with further school or training, and property rights are fundamental to the competitive market model.
Spending on disabled children helps to soothe a bleeding heart, but does it do any more than that? Each dollar used to train a genius generates far more wealth for society than a dollar used to train a dullard. Families with disabled children deserve our sympathy, but can they be said to be a national priority?
7. A stupid way to build national infrastructure
The legislation appropriates $27.5B for highways, rails, and ports. Rather than spending the money on the most important roads and bridges, the law requires the money to be spent as fast as possible without regard to the usefulness of the infrastructure. Rather, it is to be spent only in "economically distressed" areas. The DoT only has 21 days to parcel out the cash and the States have only 120 to start using it. So much for time to think and do the right thing! A state failing to meet this timeline will have its funding redistributed to other states.
8. The end of state government
The legislation awards $53.6B to be distributed among the several states for the primary purpose (81.8%) of education. At $11k per kid (tied for highest among developed countries), that would fund the education of just under 4 million children, but so what?
As any economist knows, all this means is that states can cut education budgets and spend the money elsewhere. All that is happening is that we're saving incompetant state governments from having to raise taxes or borrow because the federals are doing it for them.
This is ok if you don't care for federalism at all. If states get into this habit, then the federal government will start attaching strings to the money it passes down.
One good thing though is that this money is apportioned based mostly on population (overall and schoolage) rather than political power.
9. Liberal Wish list
Much of the rest of the legislation, $1B here and another there, reads like a wish list of government programs that were starved during Republican rule and now are being funded.
It isn't big money, so it's not worth going through the details. I'm sure some of them, at least, are worth funding, but please, let's not pretend we're funding the projects to "create jobs" or revive the national economy.
10. It's not a stimulus
Government cannot bring the economy out of recession. It never has, and it never will.
And really, perhaps it shouldn't.
Saturday, February 7, 2009
Obama's pitch
http://my.barackobama.com/page/invite/recoveryvid
I agree with much of the spirit of what he says. There is much to be done increasing our educational and transportation infrastructure. Unemployment benefits and health insurance should be expanded.
Handing out $500-$1000 to people who are already employed would be a waste. Rather, as income inequality increases, we should enact permanant changes to the tax code that make it more progressive.
As our economy increases is its technological complexity, unskilled workers are the first to exerience a lower relativel livelihood. We should use government power to make sure our children, tomorrow's workers, are as skilled as possible.
Obama receives full points for increased transparency. Whether you construe his messages and his website as public service or propaganda, at least he is engaging with the People and encouraging continued interaction of the governed with the government.
I agree with much of the spirit of what he says. There is much to be done increasing our educational and transportation infrastructure. Unemployment benefits and health insurance should be expanded.
Handing out $500-$1000 to people who are already employed would be a waste. Rather, as income inequality increases, we should enact permanant changes to the tax code that make it more progressive.
As our economy increases is its technological complexity, unskilled workers are the first to exerience a lower relativel livelihood. We should use government power to make sure our children, tomorrow's workers, are as skilled as possible.
Obama receives full points for increased transparency. Whether you construe his messages and his website as public service or propaganda, at least he is engaging with the People and encouraging continued interaction of the governed with the government.
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