Monday, December 24, 2012

Taxation and Deadlock

On the night of July 14, 1789.
Louis XVI: "Why, it is a revolt."
Duc de la Rochefoucauld-Liancourt: "No, Sire, it is a revolution."

In 1789 the French monarchy was, to put it plainly, broke. The government of the richest country in Europe had no money. The costs of helping the Americans win their independence from England had been ruinous, but the intervention had been successful. However, the treasury was empty. In 1787 Louis XVI called a meeting of the nobility called the Assembly of Notables and asked them for help in solving the financial problem. The nobles at the assembly were so shocked at the extent of the debt that they rejected any attempts to solve it. In desperation the government of Louis XVI called a meeting of the Estates General, which had not met since 1614, to ask it to levy new taxes. Instead of voting by each member, the monarch allowed the Estates General to vote by Estate - the three estates being the nobility, the Church, and the lower classes. Since the Church was staffed by the younger sons of the nobility, any vote on increased taxes on the nobility, the richest class in France, would be two to one. The people of Paris, joined by the elements of the army, stormed the Bastille, a symbol of royal authority, on July 14, 1789.
I often think of this historical chain of events when I hear of the budget deadlock between the administration and the House of Representatives. We live in the richest country on Earth and yet our government cannot raise enough tax money to finance its programs. It must continually borrow. Yet attempts to raise taxes are met with unyielding resistance. The reason we have the deficit is that we didn't tax enough before 2012; the political resolve simply was not there. Now the only answer that one party will accept is cutting domestic programs antithetical to its ideology, which a majority of Americans will not agree to.
Me included.

Monday, December 17, 2012

George F. Will YET AGAIN

George F. Will - YET AGAIN

"When liberals' presidential nominees consistently fail to carry Kansas, liberals do not rush to read a book titled "What's the Matter with Liberals' Nominees?" No, the book they turned into a bestseller is titled "What's the Matter with Kansas?" Notice a pattern here?"

Perfect reasoning, George. Would you apply it to the losers of the 2012 presidential election? The lessons you will draw can be instructive.

Saturday, December 15, 2012

George F. Will AGAIN!

George F. Will AGAIN!

"In economics, rent-seeking is an attempt to obtain economic rent [for our purposes, profit. ed.] by manipulating the social and political environment in which economic activities occur, rather than by creating new wealth.

Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity.
--from Wikipedia

"The Michigan Watershed on Right to Work" by George F. Will

"By becoming the 24th right-to-work state, Michigan is belatedly becoming serious about what Daniel Boorstin, the late historian and Librarian of Congress, called entrepreneurial federalism. This is the wholesome competition among states to emulate others’ best practices and to avoid and exploit others’ follies."

Ah, that last sentence. On the surface, so reasonable, so just, so far-sighted. But then a reader must realize that what George Will is talking about is giving tax breaks, tax, incentives, tax forgiveness to companies that re-locate, the brashest, most blatant form of rent-seeking (see above). Their re-location dos not add wealth. It merely extracts value from the ordinary taxpayer to provide even more profit for the owners/stockholders ... with no addition to productivity.

Nice work, if you can get it.     

What a wonderful exemplar of capitalism is George Will.

George F. Will

Call it masochism. Yes, masochism. I can find no other explanation for reading George F. Will's columns. They are sometimes comical in their faux seriousness and simpleton logic i.e. "Most U.S. wars have been fought with military mass sustained by military might." Wow! You think? Sometimes even ribald i.e. "'Gosh!' Says Roosevelt on Death of Yamamoto." Amazing!! Maybe it's their formulaic quality: first a reference to ancient wisdom, then exercises in erudite vocabulary, then the an obvious moral conclusion. A great simplifier, this. We read quotations from Plato,Aristotle, Montaigne, Jonathan Swift, Churchill, , all in service of explaining conservative, or what passes for conservative, Republican truths: tax increases on the wealthy are always bad; government control of the economy is always bad except in the case of defense expenditures and in the case of subsidies to industry. Sometimes our armchair Feldherr even comments on our military i.e. "When you set out to take Baghdad, take Baghdad." (A paraphrase of Napoleon. No mention was ever made of what happened after Baghdad was taken.) Then the pretension to erudition - more nonsense: "although prostrate from its [the state of California] own profligacy..." Big words, small ideas. The state of California is broke not because of profligacy but because of the recession, brought on by the profligacy of banks, and an idiotic property tax law, which keeps rates, especially on commercial property, extremely low. Is it a surprise that the state treasury has no money? Only to jejune George and his cohorts. Now we come to the moralizing, the appeal to right, truth, justice and the American Way. The comment on the demise of Twinkies, "If, however, Twinkies and perhaps other Hostess brands retain value, the market will say so, and someone will produce them...Business moves to states that make them welcome." First, the appeal to sweet reason and then economic truths that only the "market" can demonstrate. Yet these arbiters of logic, the markets, do not operate unfettered unless in the service of industry and the wealthy. The recent New York Times article on state subsidies to industry...oops I meant tax rebates, tax incentives, property tax relief... is clear proof. The state of Texas alone underwrites its industries with a 19.2 billion dollar tax subsidy. Yes, markets are really not trusted to work, ah, ah, they have to have a little help from the taxpayer. And that is the subtext of George's remarks, "Business moves to states that make them welcome." Or, to put it into MBAese, "Subsidies, here we come."

Now gentle George comments ["A Case for Targeted Killing", December 9, 2012, the Washington Post] that targeted killings via drones is a valid and legal aspect of the new realities of war. He says that John Yoo, intellectual pimp of the W administration, has written a brilliant guide to targeted killings in "Assassination or Targeted Killings after 9/11." Yoo notes that these murders "further the goals of the laws of war by eliminating the enemy and reducing harm to innocent civilians." This contributes to the war effort in today's "undefined war with a limitless battlefield." Because the enemy "resembles a network, not a nation", they can hide among the civilian population and have no large and targetable command and control apparatus.

Do the above strictures apply to, say, the resistance movement in Poland in World War II? Certainly the structure of the Polish Home Army (Armia Krakowa, or AK) resembled "a network, not a nation". And it could and did hide among the civilian population while carrying out sabotage of German installations and railways. For the Nazis it was a "undefined war with a limitless battlefield" especially because they planned to annihilate 85% of the population of Poland to settle the empty land. Viewed from a German perspective the Poles were enemies; before the war even began, Hitler ordered that professors, intellectuals, church officials and other leaders be executed in order to, as Yoo notes, "demoraliz[e] the enemy, prevent...planning, sow...confusion and drain...the reservoir of experience." He wanted the Polish population to be a "leaderless mass of laborers." Sounds like Yoo to me.

Stalin also subscribed to Yoo theory for he murdered thousands of Polish officers and other Polish leaders in the Katyn Forest Massacre in 1940; thereafter the Soviet state would have little to fear from the Polish populace; their natural leaders would be dead.

("Of the total killed [22,000, est.] about 8000 were officers taken prisoner during the 1939 Soviet invasion of Poland, another 6000 were police officers with the rest being Polish intelligentsia arrested for allegedly being 'intelligence agents. gendarmes, landowners, saboteurs, factory owners, lawyers, officials, and priests." ) - from Wikipedia.

Indeed, this massacre "demoraliz[ed] enemy, prevent[ed] planning, sow[ed] confusion and drain[ed] the reservoir of experience. Yes, all this has John Yoo justified.

While George Will addresses both the implications and results of both Yoo's article and their applications, he ducks the most essential issue, the absolute center of this question. Put simply, DOES IT WORK?

Does assassination demoralize the enemy, does it prevent planning, does it sow confusion, does it drain the reservoir of experience? To some degree all of the latter are true, but the point that Yoo misses is that this does not win a war, other leaders will emerge, the questions that began the conflict have not been resolved - targeted killings, while militarily and technologically attractive, cannot and will not bring conflict to a close. What our country wants, George and John, is not a continuing low-level conflict, but instead a resolution of struggle and achievement of peace.

Thursday, December 6, 2012

Entitlements and All That Jazz

Entitlements and All That Jazz

"An entitlement is a guarantee of access to benefits based on established rights or by legislation."

--from Wikipedia

"In economics, rent-seeking is an attempt to obtain economic rent [for our purposes, profit. ed.] by manipulating the social and political environment in which economic activities occur, rather than by creating new wealth.

Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity.

--from Wikipedia

The United States of Subsidies, a New York Times state-by-state report, December 1, 2012


Wisconsin spends at least 1.53 billion per year on incentive programs, according to the most recent data available. That is, roughly: $268 per capita; 10¢ per dollar of the state budget.

Top incentives by type

1. $957 million in Sales tax refund, exemptions, and other sales tax


2. $416 million in Property tax abatement.

3. $107 million in Corporate income tax credit, rebate, or reduction.

Grants to Wisconsin Companies [Top Three of over 600. Ed.]

Mercury Marine Fond du Lac 2011 $65 million in Corporate

tax credit, rebate, or


Kohesion Fond du Lac 2012 $62.5 million in Corporate

tax credit, rebate, or


Quad Graphics Sussex 2011 $46 million in Corporate

tax credit, rebate, or


Tax credits, rebates, incentives, abatements, discounts, all sound like subsidies to me. And they fall under the definition of entitlements (see above) We have a semantics problem here. If money is given to needy individuals, it is an entitlement and thus a subsidy. Something to feared and loathed for it does not produce wealth and promotes indolence and waste. However, if money is given to corporations and companies [corporations and companies are individuals under the law, vide Supreme Court decision, 1879] through our tax system, then it is tax credit, rebate, incentive, abatement, discount, take your pick. Ahh, then do the latter produce wealth and production? Do they foster hard work, diligence, innovation? Could corporations be rent-seekers via the tax codes?

It has been argued that these tax subsidies are necessary to keep corporations and companies in a particular state, else they would move elsewhere. But then this is the crassest form of rent-seeking (see above), a blatant example of taking advantage of political arrangements to extract wealth without investment, growth, or increased production. The question needs to be asked: who is the "maker" and who is the "taker" here?

Texas, that home of Republican orthodoxy and old-fashioned free enterprise, subsidizes its corporations to the tune of 19.1 billion dollars. Capitalism in Wisconsin only costs 1.53 billion.

This problem might be addressed by making the tax credits temporary loans. Each year a tax credit from a previous tax year, ten years ago, would be forgiven. If the corporation wished to move out of state, it would have to re-pay f the subsidies for the previous ten years. If it wished to declare bankruptcy and then move, the law of limited liability would not apply.

Wednesday, December 5, 2012

Am I Missing Something?

Am I Missing Something?     

On December 5, 2012, Jack Shakely wrote in the L.A. Times:

       "In February 2003, 450 economists, including 10 of the 24 living Nobel laureates in economics, made a public plea to President George W. Bush not to enact the recent tax cuts passed by Congress. These tax cuts, officially called the Jobs and Growth Tax Relief Reconciliation Act of 2003 but forever known as the Bush-era tax cuts, would not do what they promised, the economists argued. Instead, they said, the cuts would "worsen the budget deficit, increase inequality, decrease the ability of the U.S. government to fund essential services, while failing to produce economic growth."
        In the nearly 10 years that have elapsed since that plea, the budget deficit has ballooned, the gap between the wealthy and the middle class has expanded, and the American economy has spiraled into the greatest decline since the Depression. History has proved that the 450 economists were correct. On Dec. 31, these same Bush-era tax cuts are set to expire. This, we are told in hushed or hysterical tones, could push the American economy off a "fiscal cliff.""

After reading these paragraphs I have to ask myself: am I missing something here? Is there a hidden meaning, a subtle sub-text, an encoded message that only the chosen few, all Republicans, can successfully interpret?

I think not.

A tax policy that has failed so egregiously deserves to die.

Sunday, December 2, 2012

Big Government et al

December 2, 2012

It has been about three weeks since I wrote anything in this blog. I keep thinking about topics to explore but never seem to get around to them. Well, today, a rainy, windy Sunday in early December, I decided to write.

I have noted that George F. Will and the Republican Party think that government is too big, that it stifles innovation, and taxes too much. Its very size is the problem, that is, if it shrank and left the public space it now occupies, entrepreneurs would flood in, produce wealth from their hard work and ideas, and thus increase tax revenues. However, this fear of bigness qua bigness is confined only to government. These men don't fear large corporations and large banks which would occupy the public space vacated by government. In order for these behemoths to exist, they too must stifle innovation for not all innovation is profitable. They would settle on one model which maximized profits and keep to that model - as have all large U.S. corporations and banks. As to stifling freedom, yes, governments must regulate large, populated communities and must continue to do so. We have to have restrictions on stock sales and trading as well as stop signs. Governments regulate what can and can't be sold to an unsuspecting public - we don't want batteries that blow up, tires that shred, rotted wood sold as new. But large corporations like the concept of the "market" which presumably would force shoddy merchandise off the shelves. But would it?

Besides, as John Kenneth Galbraith showed in 1967, no longer do corporate behemoths obey the buy-and-sell rules of markets. They create their own markets and pretty much set prices without regard to the public.

What I think these men want is for corporate America to run the economy, a corporate America that would protect itself first from any downturns or recessions. This means that the rhetoric about big government is really about power, who will control, who will set the rules, who will mete out justice, in our economy and in our polity.