May the data allay your fears. From 2000 to 2010, the UK’s government spending boomed from 36.6 percent of GDP to 51.0 percent. France’s spending went from 51.6 percent to 56.2 percent. Even sober Germany grew its government from 45.1 percent of GDP to 46.7 percent.
When Bill Clinton left office, total U.S. government spending was 33.9 percent of GDP. It has blossomed to 42.3 percent under Presidents Bush and Obama.
If the rich world is indeed austerity-obsessed, it is no more than talk. That’s why this writer is afraid.
RYAN YOUNG Fellow in Regulatory Studies Competitive Enterprise Institute Washington
My colleague Greg Conko pointed out that the letter might be more persuasive if it used data from 2008-2010, to isolate government growth since the Great Recession’s start.
It’s a good point, so I looked it up. And the song remains the same. France’s government grew from 52.9 to 56.2 percent; Germany’s grew from 43.8 to 46.7 percent; the UK’s grew from 47.4 to 51.0 percent; and the U.S. grew from 39.0 to 42.3 percent. All that in three short years.
Despite the recent demonization of corporations, corporations pay lots of taxes, including most of the nation’s property taxes, notes Josh Barro. They often pay higher sales and property taxes than individuals due to structural biases in the tax code. In 2010,
businesses paid about $280 billion in federal corporate income taxes. But over that same period, they paid $619 billion in taxes to state and local governments. The largest components of that tax bill were property tax ($250 billion) and sales tax on purchases by businesses ($124 billion). . . total property tax collections in the United States were $425 billion in fiscal 2010. That means businesses paid 59 percent of all property taxes, even though they only own about 40 percent of the country’s taxable real property. This happens because most jurisdictions tax business property at an unfavorable rate compared to owner-occupied housing. . .The structure of state sales taxes, which often exempt many consumer services while taxing intermediate purchases of goods . . . shifts the tax burden toward certain business activities.
Contrary to left-wing talking points, the legal rights of corporations, which are essentially associations of persons, are nothing new, make perfect sense, and are not a right-wing invention. As Wikipedia notes,
In 1818, the United States Supreme Court heard the case Dartmouth College v. Woodward, 17 U.S. 518 (1819), making the following statement in their decision: “The opinion of the Court, after mature deliberation, is that this corporate charter is a contract, the obligation of which cannot be impaired without violating the Constitution of the United States. This opinion appears to us to be equally supported by reason, and by the former decisions of this Court.” . . .Seven years after the Dartmouth College opinion, the Supreme Court decided Society for the Propagation of the Gospel in Foreign Parts v. Town of Pawlet, (1823) in which an English corporation dedicated to missionary work, with land in the U.S., sought to protect its rights to that land under colonial-era grants against an effort by the state of Vermont to revoke the grants. Justice Joseph Story, writing for the court, explicitly extended the same protections to corporate-owned property as it would have to property owned by natural persons. Seven years later, Chief Justice Marshall stated that, “The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men.”
A couple of days ago, Talking Points Memo’s Jim Kozubek reported that the Food and Drug Administration had finally decided to approve AquaBounty’s genetically engineered salmon for human consumption, and that the “evaluation is now under review at the White House’s Office of Management and Budget.” I’d seen the TPM article, but didn’t write about it at the time because premature reports of FDA being on the brink of approval have been filtering out through the media for several years now. (I filmed a TV interview for Fox News’s “Your World With Neil Cavuto” way back in 2005, when it looked like an approval was right around the corner, for example. And I talked about it again on John Stossel’s show last year.) But a friend of mine asked today why an FDA approval decision would have to get a second look from the White House, so I thought that would be worth discussing.
As the TPM article mentions, the AquaBounty salmon has been hugely controversial. Wild Atlantic salmon grow to full adult size in about three years, in part because they only grow six or seven months per year. As water temperatures decline in the late autumn months, a genetic switch turns turns off the gene that produces growth hormone, so the salmon can conserve energy through the winter. Energy conservation isn’t as big a problem for farmed fish, though, because they have easy access to food all year and little exposure to predators. So, AquaBounty engineered Atlantic salmon with a promoter (the genetic switch) from an Arctic fish called the ocean pout, attached to the growth hormone gene from Pacific Chinook salmon. And, voila! The engineered salmon grows year round and reaches normal adult size in about 18 months, lowering the cost of raising them and lowering the price of fish in grocery stores. Here’s the packet of scientific information FDA prepared for its scientific advisory committee last year.
Environmentalists don’t like it, of course. In part because ocean pen-raised farmed fish are known to occasionally escape into the wild, meaning the AquaBounty salmon could theoretically interbreed with wild salmon, with potential impacts on the wild gene pool. And in part because they just don’t like biotechnology. To address the arguably legitimate concerns, the AquaBounty salmon will only be raised in contained, inland pools, not open water pens, and they”ll be farmed only in Panama, where, if they do escape, the ambient water temperatures will be too high for them to survive. AquaBounty also uses two other breeding techniques that, with a 98 percent degree of certainty, produces only female fish that have been rendered infertile. So, even if they were to escape and survive, nearly all of them would be incapable of successfully mating with wild fish. Also, because the AquaBounty fish will be searching for food during the early spring months when wild Atlantic salmon are breeding, it turns out that the engineered fish have an extraordinarily low mating instinct. (Insert ribald, ex-wife joke here.)
CEI Founder and President Fred Smith compares the Occupy Wall Street movement with the Tea Party movement and finds similarities as well as differences. Both oppose bailouts and other forms of corporate welfare. But, as he points out in a recent USA Today op-ed, he fears the Occupiers are confusing such crony capitalism with the real thing. If corporations have undue influence over government, making that government bigger and more powerful will only worsen the problem. The solution is separation of corporation and state.
VIRGINIA POSTREL: “Web Bone-Marrow Bounty Takes on Paid-Donor Ban” “Amit Gupta is in a terrible situation, but he’s also lucky. He’s got lots of friends who not only want to help him but also have the connections and financial resources to change the odds of a match — potentially saving not only him but other, less fortunate patients as well. Too bad the law only hinders such efforts.”
MEGAN MCARDLE: “No More Servants” “The other day, Arnold Kling asked a sort of interesting question: why hasn’t rising inequality resulted in in the much-predicted oligarchy? Or to put it as he does: with so many unemployed, and income increasing faster among the affluent, why aren’t people hiring more servants?”
LIBBY COPELAND: “Are Americans Secretly Homesick?” “We like to think of Americans as restless westward wanderers, forever striking out for new territories. We don’t look back; we squint into the sun. We imagine the immigrants who built this nation as optimistic, rugged folk, shaking off old ways to hustle in a land of inventors and entrepreneurs. If these people missed home in their relentless drive to conquer, they didn’t dwell on it. Except they did. It was all they talked about. In her new book, Homesickness: An American History, historian Susan J. Matt documents all the ways in which restless Americans have missed home—and how they’ve gradually learned to suppress their declarations of homesickness. It’s only over the last 100 years or so, Matt writes, that we’ve come to idealize leaving home, to see it not just as a necessity but as proof of real adulthood.”
[Cicero, Illinois] Town President Larry Dominick’s administration has also spent nearly $600,000 on promotional items, including mouse pads and ice cream scoops, from You & Me.
Hanania said he expects proceeds from the Houby Day festival to pay the bill for the chickens.
“It is what it is. We’re not hiding it. We’re trying to be aboveboard,” he said.
His transparency is laudable. But he forgets about opportunity costs. Rubber chickens aren’t exactly revenue magnets. They are unlikely to add more than their cost t0 Cicero, Illinois’s town coffers. Meanwhile, those thousand dollars could have to some better use — schools, police or fire protection, fixing potholes, you name it. Surely those things are more desirable than 250 rubber chickens.
GLEN WHITMAN: “Pan Am and the Economics of Hot Flight Attendants” “For an economist, the most fascinating aspect of Pan Am is the highly attractive flight attendants — or rather, stewardesses, since the show is set in the early 1960s. If you’re young enough, you might think that’s just TV. But I’m just old enough to remember flying in the 1970s, and I recall stewardesses who really were, in fact, hot. Okay, I was too young to understand the concept of “hot” — but I was definitely aware that I was being attended by some very pretty young women. Not so anymore. Flight attendants aren’t necessarily unattractive now, but they’re no more fetching than people in any other service profession that doesn’t get tips. And what’s changed? In a word, deregulation. ”
PETER WALLISON: “Wall Street’s Gullible Occupiers” “There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.”
JOHN STOSSEL: “Government the Job Killer” “We need infrastructure, but the beauty of leaving most of these things to the private sector — without subsidies, bailouts and other privileges — is that they would have to be justified by the profit-and-loss test. In a truly free market, when private companies make bad choices, investors lose their own money. This tends to make them careful. By contrast, when government loses money, it just spends more and raises your taxes, or borrows more, or inflates. Building giant government projects is no way to create jobs. When government spends on infrastructure, it takes money away from projects that consumers might think are more important.”
This video is a quick primer on trade from George Mason University economics professor (and CEI adjunct) Don Boudreaux, who literally wrote the book about it. Well, a book about it; see also here and here for quality reading on trade, not to mention Fran Smith and Nick DeLong’s new CEI study, “Free Trade without Apology.” Click here if the embedded video doesn’t work.
This morning, the House Transportation and Infrastructure Committee’s Subcommittee on Highways and Transit held a hearing on the President Obama’s infrastructure bank proposal. In September, the president announced this solution as part of his plan to get America’s economy back on track.
Though not an entirely novel concept, the idea is that by funding massive projects to improve our national highways, water systems and energy infrastructure, jobs will be created and the economy will rebound. This $10 billion project would be overseen by a new bureaucratic entity, the American Infrastructure Financing Authority (AIFA).
Defenders of the proposal claim the bank is necessary to put Americans back to work. The president, in calling for Congress to pass his American Jobs Act and the infrastructure bank plan included within it, proclaimed it is time to “build an economy that lasts.”
But as my colleague Wayne Crews observed, the infrastructure bank idea is fruitless idea:
Government money is a trap, with labor and environmental strings attached. It promises to crowd out, reduce and degrade American infrastructure.
America does desperately need “infrastructure wealth”; we need it just as we need financial wealth, real estate wealth, manufacturing and service wealth, and health-care wealth. But like all wealth creation, the root is enterprise and property rights.
It was reported on Tuesday that Senate Democrats intent on creating a National Infrastructure Bank (NIB) have quietly thrown Republicans a bone on the corporate tax repatriation issue. Led by Sen. Charles Schumer (D-N.Y.), senior Democrats in “the world’s greatest deliberative body” are dropping hints that they will back Republicans’ wishes on repatriating foreign corporate earnings to be subjected to reduced tax rates for one year, provided Republicans support some form of NIB.
Boosters of a repatriation tax holiday, including Sen. John McCain (R-Ariz.) and the U.S. Chamber of Commerce, are claiming that this will spur much-needed investment in our economy. While it is likely there will be some temporary benefit to the one-year holiday, it isn’t likely to greatly increase private investment across the economy or result in many new hires. The problem facing investment does not appear to be a lack of access to capital. Banks’ willingness to lend has been increasing. Corporate profits are recovering [PDF] (even non-bank profits). Yet investment has plateaued [PDF]. Why might this be the case?
Some on the left have offered the absurd explanation that corporations are sitting on profits just to mock the many unemployed Americans. This relies on the insane premise that businesses do not make decisions based on perceived exploitable market opportunities; rather, they make decisions as irrational jerks. Therefore, say the lefties, businesses must be subjected to even more regulation and taxation, as if this is a good way to drive private investment. This is more than 99 percent wrong.
A better explanation: the private sector isn’t investing because it is nervous about the future of the American economy. They are concerned that there is too much regulation, too little genuine consumer demand, and that it is only going to get worse under the present administration and its allies in Congress. Investment is sluggish because the private sector is extremely wary of assuming new debt, while households, many of which found themselves underwater with the housing market collapse, are still deleveraging.
I for one find the economic uncertainty explanation for soft investment more plausible than the one that assumes that Robber Barrons in monocles and top hats are being mean for meanness’ sake.
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