"Thoroughly Modern Do-Gooders" op-ed in the NYTimes by David Brooks:
"Earlier generations of benefactors thought that social service should be like sainthood or socialism. But this one thinks it should be like venture capital...
[T]hey are not that interested in working for big, sluggish bureaucracies. They are not hostile to the alphabet-soup agencies that grew out of the New Deal and the Great Society; they just aren’t inspired by them...
The older do-gooders had a certain policy model: government identifies a problem. Really smart people design a program. A cabinet department in a big building administers it.
But the new do-gooders have absorbed the disappointments of the past decades. They have a much more decentralized worldview. They don’t believe government on its own can be innovative. A thousand different private groups have to try new things. Then we measure to see that works."
He goes on to talk about how a group of these social entrepreneurs want the government to set up a "network of semipublic investemnt funds" admininistered in local communities. These funds, seemingly, would distribute money to the programs that produce results. The author admits the allowing government agencies into the decision-making process can be hazerdous due to their tedency to interfere, though they would ideally give the freedom to the entreprenuers themselves to meet required standards.
If the implementation of funds like this would reduce the overall government payroll, I'm for it as a first step. In other words, if this cuts down on government spending in redundant programs and we're spending the same amount of money, only in more efficient ways, I think it's ok.
However, I really doubt this will be the case. What will happen is that current programs and spending will remain in place. They will then put in place additional beauracracies to oversee these programs. Then, because there will be an increased supply of funding, there will also be an increased demand for that funding, recognized in a balloon of new social entrepreneurs. Because the beauracracies will have to choose between worthy projects, they will have to decide, due to the limited amount of funds, which programs are in the community's best interest. Because they can't decide, they'll ask for more money. And government spending continues to grow.
"Corporate Killing" by Quin Hillyer at The American Spectator. I liked all his points, but I didn't quite see how it would be revenue neutral, so I sent him this email:
"Mr. Hillyer,
I really enjoyed your editorial in The American Spectator. I must admit I’ve never read your publication before; I was linked to your piece from the Club for Growth.
I agree with all of the benefits of cutting the corporate tax, but I don’t understand one. I can’t see how cutting the tax would even be revenue neutral, let alone increase revenue. From your article:
“Third, the stronger economy will generate additional tax revenue -- not just indirectly, through overall economic growth, but in very specific ways. How? Because if there are no corporate income taxes and thus net profits are one-third higher, then the capital gains tax collections and dividend tax collections from every shareholder or trader will grow as well, even if the economy as a whole remains static. Think about that again: Even if there is no overall economic growth, the tax revenues from capital gains and dividends will grow -- and if there is growth in the overall economy, then tax revenues from all other sources will increase, too.”
I don’t believe the end result would be net profits higher by a third. I think that would be the case over the short term, but wouldn’t corporate profit margins likely fall to prior after-tax levels over the long term due to increased competition? Industry players will see they can lower prices to capture market share. Absent collusion, the prices will continue to fall until the prices yield margins that are close to what they were before. The result would be that the extra money that would have been paid for taxes and would presumably be available as extra cash flow to the firm (either to reinvest of distribute as dividends) wouldn’t be there. I do believe, however, there will be some long term revenue feedback as prices fall, leaving more money in people’s pockets to spend on other things or to save and invest.
Is there something I’m missing?
Don’t get me wrong, I’m all in favor of tax cuts. I once saw in interview with Milton Friedman where he said he never saw a tax cut he didn’t like because tax cuts constrain government spending. Unfortunately, I don’t see government constraining spending in any meaningful way at any time in the near future.
Thanks again for the enlightening article."
I really enjoyed your editorial in The American Spectator. I must admit I’ve never read your publication before; I was linked to your piece from the Club for Growth.
I agree with all of the benefits of cutting the corporate tax, but I don’t understand one. I can’t see how cutting the tax would even be revenue neutral, let alone increase revenue. From your article:
“Third, the stronger economy will generate additional tax revenue -- not just indirectly, through overall economic growth, but in very specific ways. How? Because if there are no corporate income taxes and thus net profits are one-third higher, then the capital gains tax collections and dividend tax collections from every shareholder or trader will grow as well, even if the economy as a whole remains static. Think about that again: Even if there is no overall economic growth, the tax revenues from capital gains and dividends will grow -- and if there is growth in the overall economy, then tax revenues from all other sources will increase, too.”
I don’t believe the end result would be net profits higher by a third. I think that would be the case over the short term, but wouldn’t corporate profit margins likely fall to prior after-tax levels over the long term due to increased competition? Industry players will see they can lower prices to capture market share. Absent collusion, the prices will continue to fall until the prices yield margins that are close to what they were before. The result would be that the extra money that would have been paid for taxes and would presumably be available as extra cash flow to the firm (either to reinvest of distribute as dividends) wouldn’t be there. I do believe, however, there will be some long term revenue feedback as prices fall, leaving more money in people’s pockets to spend on other things or to save and invest.
Is there something I’m missing?
Don’t get me wrong, I’m all in favor of tax cuts. I once saw in interview with Milton Friedman where he said he never saw a tax cut he didn’t like because tax cuts constrain government spending. Unfortunately, I don’t see government constraining spending in any meaningful way at any time in the near future.
Thanks again for the enlightening article."
He actually responded with this email:
"Dear Mr. Hutchinson,
Thank you for your very thoughtful letter. You raise some good points. I agree that over time the benefits to/profits for/tax revenue from proceeds of EXISTING corporations would decline back to something approaching stasis, due to competition. But I also believe that MORE companies would be making MORE money because of the generative effects of the tax cut.But here's the thing: The most interesting part of this is that the person who convinced me that this particular tax cut would, for ALL the reasons I cited, pay for itself, is a left-leaning federal-budget columnist for a major publication who formerly worked as a Democratic aide for the Budget COmmittee in the House. He laid it all out for me. And he is definitely NOT a suppluy-sider. Considering the source, I felt like I was on pretty solid ground.
Either way, I truly appreciate your letter -- constructive, informed, thought-provoking. Thanks again for writing.
Best wishes,
Quin Hillyer"
He seems to be saying that this would be one of those tax cuts that pays for itself due to revenue feedback coming from the additional companies created to compete with existing companies etc. I see his point. I don't think it will be revenue neutral, but also I don't think that's a big deal. Tax cuts enhance our tax competition, increasing employment as more companies do business here and fewer jobs are outsourced (because the cost of providing the work is lower).
"Farm Bill Feeds Greed" Los Angeles Times Editorial (HT: Club for Growth):
"For what it's worth, Bush is dead right [about threatening a veto]. Congress is relying on accounting shenanigans to make the farm bill's numbers pencil out, and the bill continues to give outrageous handouts to millionaire farmers at a time when farm income is skyrocketing."
As you know, I'm against farm subsidies in any form to any person. If they can't run a profitable farm, for any reason, I don't think they should be farmers. However, I don't think it matters whether or not the farmers are wealthy or they are "corporate farms". The subsidies distort the market. That's all that matters.
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