The Economics of Mass Destruction - Part II (Final)

Econophile's picture

From The Daily Capitalist

This is the final part of two parts of "The Economics of Mass Destruction." For Part I, go here.

The Fallout of Economic Conformity

The logical conclusion of these failed policies is economic stagnation. Here is what massive government spending and taxation has done to our economy:

  1. Total government (federal, state, and local) share of the economy has exceeded the tipping point, estimated to be between 15% and 20%, which is the point when it hinders economic growth. Presently total government spending for 2010 is estimated to be about 47% of the economy.
  2. Taxation must rise substantially in order to pay for government debt, health and welfare entitlements, and other fixed government costs. The 2010 estimate of federal, state, and local taxes amount to about 30.4% of GDP (about $4.480 trillion).
  3. Our total government debt (federal, state, and local) is estimated to be $16.635 trillion for 2010, approximately at 114% of our GDP (2010 E$14.623 trillion). Of total government debt, federal debt is estimated to be $13.787 trillion in 2010.

f=federal govt.; s=state govt.; l=local govt.

The larger the share of governments’ take of capital out the economy, the less money there is available for businesses and consumers. The less capital available for the private economy, the less it will expand, and the result will be a decline in GDP.

While progressive utopians believe that taxation of the “rich” is acceptable to fund social benefits, mathematics, demographics, and the laws of economics prove them wrong. Progressives have yet to understand that government produces nothing.

The table, below, shows tax rates of many major economies as a share of their GDP. The welfare states have taxes approaching 50% of their economies, with the median in the high 30th percentile. The U.S.’s tax burden on the economy of 30.4% is less than most of these countries. While we ramp up our welfare state which assures higher taxes, Europe’s welfare state services are crumbling and face drastic shortfalls as their GDP falls, as their populations age, and as their companies find better conditions abroad.

The Economics of Mass Destruction

The Organisation For Economic Co-Operation And Development (OECD) is an economic think tank put together by 33 countries of which the U.S. is a member (see above chart for members). Most members are economic powers. China and India are not members. It generates a lot of data, but very little useful research. It is located in Paris and has 2,500 international staff members. They take a rather hard Keynesian line. One need only look at their logo to see where they stand:

The OECD just came out with their Interim Economic Assessment, “Recovery slowing amid increased uncertainty said the headline. They, like the Obama Administration are realizing that their Keynesian policies are failing.

The world economic recovery may be slowing faster than previously anticipated, according the OECD’s latest Interim Economic Assessment. Growth in the Group of Seven countries is expected to be around 1½ per cent on an annualized basis in the second half of 2010 compared with the previous estimate of around 2½ per cent in the OECD’s May Economic Outlook.

 

The OECD says the loss of momentum in the recovery is temporary although uncertainty has increased. …


If the slowdown reflects longer-lasting forces bearing down on activity, additional monetary stimulus might be warranted in the form of quantitative easing and commitment to close-to-zero policy interest rates for a long period," the OECD said. "Where public finances permit, planned fiscal consolidation could be delayed. [my emphasis]

It is clear that the OECD does not understand what is happening. Otherwise they wouldn’t need to suggest more fiscal and monetary stimulus if they really believed the “loss of momentum in the recovery” was only “temporary.”

Its announcement sounds almost as if the Fed had written it. Here’s what Chairman Bernanke said on August 27, 2010:

Overall, the incoming data suggest that the recovery of output and employment in the United States has slowed in recent months, to a pace somewhat weaker than most FOMC participants projected earlier this year.  …

 

We will continue to monitor economic developments closely and to evaluate whether additional monetary easing would be beneficial. In particular, the Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.

The Obama Administration is proposing more government fiscal stimulus spending to boost the economy.

The only thing these policies have achieved is the destruction of capital.

The Fed and other central banks have been printing money to pump liquidity into their economies. These policies aren’t working. Credit is declining, money supply is declining, and the creation of fiat money is destroying capital by devaluing currencies.

Massive government spending on politically favored projects adds nothing to the economy and destroys more capital. One need only look at U.S. stimulus spending at Recovery.gov to see where the billions are going. If it worked the economy would be growing and unemployment would be declining. The opposite is happening.

How does repairing a highway in Ohio lead to economic growth? The answer is that it won’t; once the money is spent, the repair jobs go away and the capital is gone.

Is it possible that the private economy would find better things to do with that capital? We need to ask what the person whose capital was taxed away by the government was going to do with it. I am sure that the answer would be that it would be preserved or used for new economically viable businesses. Only savings, not spending, creates capital for renewed growth by private enterprise.

Eventually governments run out of capital if they dominate their economies long enough. High taxes and a welfare state lead to lower incentives to produce and lower incentives to save. Most of these countries are still spending the capital earned in former, freer market economic times. If they destroy enough capital they will go bankrupt and plunge their economies into serious depressions.

The outcomes of policies that destroy capital will vary from country to country, but none of them will be good. In the U.S. we can look forward to stagflation: years of high unemployment, low productivity, and rising inflation. Japan will continue its 20-years of low productivity and deflation. China will experience capital destructive boom-bust cycles. Germany may be the sanest of all by ignoring the conventional Keynesian wisdom by cutting government spending.

A sobering thought is that these capital destroying policies are being exported to developing countries as well. As these economies emerge from controlled economies to freer systems, they need time to amass capital to drive their growth. Most advanced economies experienced a century or more of rather hands-off capitalism before they turned into welfare states and regulated economies. China cannot morph into a dynamic capitalistic economy by burning up capital of its entrepreneurs through graft, wasteful spending, and harsh regulations.

There is no refuge from the world’s plunge into massive capital destruction. At one time in history you could flee to countries with freedom and free markets, such as America. With the globalization of Neo-Keynesian economics, there is no refuge. Watch out for EMDs: the economics of mass destruction is here.

* * * * *

For those who wish a printable PDF of the entire article, go here.

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Econophile's picture

Chrisina:

We just have fundamental differences about the role of government and ideas about economic theory. I understand you disagree. I also understand your desire to be critical on an open forum like this and that you appear to be able to argue effectively. But your world view and mine are pretty far apart. As you know I am a student of Austrian theory economics and I have gone fairly deeply into it. As well I have read Keynes and Friedman. We have had this argument before and while you say you have read Austrians, I still don't believe you understand basic theory. In my opinion, it is the most rigorous intellectual branch of economics. And it isn't easy to "get" which is why people tend to follow less intellectual traditions such as with Keynes. 

But in order to have some basis for a conversation, it would be nice if you believed that I was not an idiot and actually have thought through all of the issues that you and others bring up. I believe my reputation here, at least for those who have been reading my stuff for a while, is that I can back up everything I say. I usually link to my sources or data. Sometimes I don't do that so much when I editorialize as in this article series. But I could; I just don't always have the time. 

For the benefit of this audience, there are several papers and research that support the Rahn Curve which you and others criticize. To me it is axiomatic that since  government isn't very efficient that capital left in private hands will be more productive and beneficial to society. But here is a start: http://www.house.gov./jec/growth/function/function.pdf. No doubt you will criticize the piece as being out of date, but so be it. I don't have the time right now to update the numbers. The idea is that government hinders growth, and at some point (it varies from economy to economy because of structural differences) it actually retards growth.

I can't convince everyone, I know that. But I try to present well thought out pieces that are controversial which I believe make people think and challenge the conventional wisdom. I research them diligently and usually present the evidence. My goal is to bring complex theory alive in the context of contemporary economic events. Many of my articles demonstrate either the failure of conventional wisdom or the benefits of freer markets and capitalism. I have stuck my neck out in my forecasts, and so far they have been pretty accurate and I hope that helps people with their investments or bring clarity to contemporary events.

I very much appreciate all of the comments, even those, like you, who disagree with me. 

Millennial's picture

I love seeing all these people complain. 

Govt does not produce anything. They don't build cars or trains or subways. Govt takes from the private sector and pays other private entities to build and often manage these govt issued societal benefits. 

Police do not really provide protection. 1 cop for how many thousands of people? That's protection? I'd rather have my guns. One lawyer to pass and review laws for how many thousands of people? I'd rather live alone. A military of 2 million to defend 350 million? That's .5% of the population defending the other 99.5%. I'd rather have my guns and lots of ammo. 1 banker for 350 million people? I'd rather use gold and save my money.

The only thing govt provides is service of "protection" and enforcement of law and contracts (debatable). But it foolish to say it produces cops. Trust me I can hire someone to protect me without the govt. 

That said, govt's only purpose really is to protect us and enforce contracts. But when that protection oversteps our ability to live happily (with/without privacy) and enter whatever contract we feel like then it has become troublesome. Further if it interrupts our contracts it has entered our privacy without our consent.  

As far as socialism is concerned it has failed consistently. If you would like to analogize capitalism to something similar look at evolution because the principles are the same and market corrections are the same and idea of self interest in rooted in both. To call call capitalism a failure is the same as calling evolution a failure, which as far as I can tell is not.

However if you look at the history of govt, govts through history have failed consistently. 

That said the day we have good govt is the day machines run our govt using logic and harsh reality of life.

Djirk's picture

"Presently total government spending for 2010 is estimated to be about 47% of the economy"

uggg that is one ugly stat!

Escapeclaws's picture

We don't have a capitalist economy or a socialist economy. We have a sauve qui peut economy.

Bob's picture

Sauve qui peut: Literally, "every man for himself."   Agreed. 

But is that not capitalism??

Escapeclaws's picture

Literally, it's "let everyone save himself who can" and figuratively, it denotes a disorderly rout. I would argue that capitalism, for all it's latter day abuses, thrives on cooperation, where people work together with a common goal in an enterprise. Somehow that's gotten corrupted into the finance capitalism that Marx predicted. I view this as a natural development, like arteriosclerosis in the body. I think Marx was very astute with his analysis of capitalist society, but he fell down on the job in thinking that his pie in the sky communism could work, which is why buccaneers like Lenin were able to twist his ideas for their own ends.

Bob's picture

Too bad for Marx, but some things just can't seem to be fit to human nature, at least as we have come to know it. 

That would seem to me to be the problem with capitalism as well, with the adoption of the Corporate legal construct being the point of departure from a story with a happy ending. 

 

Escapeclaws's picture

I agree about the corporate legal construct, making corporations "persons" before the law--a real disaster.

Kali's picture

It is impossible to have good government, or a fair market, or reputable businesses if the people who man these institutions are not honest people with integrity.  The constructs are amoral, it is the people who inhabit the constructs that make them immoral.

Bob's picture

Would eliminating the Artificial Person With Eternal Life element and imposing actual--egads!--personal liability for the inhabitants help things out, I wonder? 

Kali's picture

The Artificial Person is a human construct also.  "Laws" or "constructs" are formed because humans have proven they tend not to do the "right" thing.  Otherwise, we would not need to have the laws.  Nothing will change until humans do.

Bob's picture

I would guess that a nationwide referendum on the issue would result in a severe cutting back on the superhuman powers and advantages of the corporate construct as currently configured.  We may be humans, but that doesn't make us perpetual suckers. 

Superhuman powers and subhuman moral responsibilities (in practice) don't make for a level playing field between corps and consumers, corps and workers, corps and sole proprietors, corps and taxpayers, or corps and voters.  Not to mention the burden of externalities born by society as a whole.  Humanity per se is not the problem, it's the use of power by the elite and their toadies, regardless of their actual species, to structure the game in a way that provides them with the most advantages possible while managing the illusion of fair play and that their existence as currently defined is somehow necessary and serves the common good. 

If that hasn't become clear in recent history, perhaps it will be indelibly so after the corps have bought the next presidential election outright now that they've been set free of previous restrictions on their "constitutional right" of "free speech" . . . not that they really needed it, considering how it already was.   

I don't think we need to collectively reach enlightenment as a species to intelligently modify the laws defining corporations. 

Just my opinion, of course. 

hidingfromhelis's picture

The basic premise of the article has some merit, but when the argument is made that US corporations will relocate abroad due to the increasing tax burden here, I call BS.  Most of them are already gone anyway, or they've lobbied for so many loopholes that they pay virtually nothing (or nothing) already.  "Free Trade" is anything but.  Crony capitalism in a Ponzi empire is more like it.

I'd love to know which large US corporation pays their published tax rate referenced in tables.  With the 2010 tax code at 71,684 pages per Wikipedia, you can be sure that anyone with the means and connections isn't paying the published rate, or likely anything at all.

We keep voting for people that tell us what we want to hear...in both parties.  Anyone that tries to claim that 1+1 can't equal 23 is simply unelectable.  Spending is out of control, yes, but there are many vested interests that will keep it that way.  Cutting taxes won't decrease spending in itself.  Remember that printing press thingy and the whirlybird delivery method?  If we choose to occupy multiple countries and support other oppressive regimes around the world (and at home) then somehow funds need to be raised to pay for it.  If we decide that maybe choosing to not subsidize corporations, especially the MIC, then we can reduce taxes. 

Paul Bogdanich's picture

The whole flaw in the argument is the incusion of the costs of the military industrial complex or Empire under the rubric of "government."  If we wern't the World hedgemon there would be plenty of money available for domestic concerns.  So all the bull aside what this is really all about is maintaining Empire and history indicates that they savage everything else first.  So get ready for your higher taxes and bigger "government" providing reduced services.  

gookempucky's picture

Governments have become the symbol—for the destructive power of Low Road globalization.

Will Interrogation and forced confessions become commonplace??

AFTER AN HOUR OF BEATINGS

Govnmt Pig: Sign zee papeerzz old man !!!!

Old man: I cannot sign zee papeerzz  ???

Govnmt Pig: WHY CANNOT YOU SIGN ZEE PAPEERZZ GOG DAMMIT !!

Old man: Because you have broken booths of my handzz

rwe2late's picture

“Government produces nothing” ????

That monomaniacal and mistaken claim is repeatedly made despite its obvious falsity. Unfortunately, those who make that claim then typically promote counterproductive solutions based on their misunderstanding of the problem.

Nothing?:

  • Privately built subway line or airport real, but government built subway line or airport unreal?               
  • Privately built hospital real, but government built hospital unreal?           
  • Privately built energy generation facility real, but government built energy generation facility unreal?

And for the less tangible services:

  • UPS mail delivery real, USPS mail delivery unreal?                    
  • Private teachers real, public teachers unreal?                                               
  • Private firefighters real, public firefighters unreal?

Based on the false claim government “produces nothing", the wrong-headed conclusion is then made that government can give back nothing for what it takes. That anarchist position denies the possibility of collectively pooling resources for the common good. Thus, taxes should not be levied for public schools, firefighters, parks, or any public welfare. Nor allegedly should businesses be taxed for the social costs incurred from their operations, even when it may benefit business, such as public infrastructure, education, policing.

Does the foregoing imply we should applaud whatever government does? Absolutely not.

Generally, most of the scathing criticisms of the US government are on target.

But the problem is not that government exists, but that government has been captured by a cabal of global corporations and their lobbyists.

Wealth and power have overwhelmingly been transferred upwards, not downwards.

The government backed financial swindles have been promoted by, and done for, the benefit of bankster finances.

The empire building is done to protect the petrodollar racket and enrich the war industry. And yes, the global Pentagon bureaucracy is a self-serving accomplice and servant.

Obamacare and Medicare are underfunded because they are deliberately designed to overfund the health insurance industry and big pharma.

If you believe the problem is government alone, the global EXXONs, GoldSachs, and Halliburtons will ally with you to cut their taxes and cut whatever services do not directly benefit them. But they will retain their control of government by pitting you against those harmed by service cutbacks, and those harmed against one another in a contest for scraps.

If you believe the problem is government capture by global corporate powers, then only by first dismantling that power will it be possible to transparently determine what government can afford for the common good.

Abolish the Fed, and stop the war machine first.

Escapeclaws's picture

These are the same conclusions Marx reached 150 years ago. I guess that means you must be a marxist. Wait, there's more. Perhaps you think reform should come through the voting process and not by violence. So did Marx. Violent bolshevism was due to Lenin/Trotsky. See Jacque Attali's biography of Marx.

Oquities's picture

the question should be, is the privately built and owned subway, hospital and utilty more likely to excel in performance than that of government?  yes. this is why we want to divest government intrusion, except to properly regulate those semi-monopolistic functions.

 

likewise, would private enterprise have better odds of performance excellence with teachers, mail delivery and fire protection?  the existence of UPS, Fed-ex, growing charter schools, and public-owed retirement benefits suggests so.

 

we should always resist government largeness and largess.

doolittlegeorge's picture

war machines don't stop.  that's why it's called a machine.  i'd love to see the Fed abolished!  better yet...replace it with something ridiculous like Barney Frank.  i agree "the government's role in the service sector is quite large."  this has not stopped same government from attacking for private education systems "out of fear they might provide an education."  there's a reason those stock prices were up...and few of them are good ones.  the problem with all your arguments (both right and left) vis a vis government is none of you "define the benefit." (and believe me good government does provide a benefit.)  until then you're just chasing your tails.  that's why the percentage argument misses the point.  it's called a "cost/benefit analysis."  what do i get for 1 trillion?  and the answer as we all know is "less and less and less and less."  in short "this is a dynamic process"--both going forward and terrifyingly "when in reverse."  this is "the message of gold."  it's telling you "your government policies and maybe even your government itself is failing."  you will not hear me argue that "a failing government is a good thing."  it is undeniably and factually true however...whatever the rhetoric or statistics.

RockyRacoon's picture

Damn good stuff there.  But, in deference to your user-name, I'm afraid to report we are too late.

Hulk's picture

Was spot on. wer2late. See everyone on the other side, the rebuilding from scratch side...

lamont cranston's picture

There are lies and then there are statistics. I'd like to see what the tax burden % was in the late 1800s for the OECD countries.

Better yet, a comparative tax burden of nations without a central bank vs 75 years after the institution of a central bank.

 

chrisina's picture

The UK has had a central bank since 1684. What was the tax burden in the UK 75 years after, in 1759? Much smaller than it was in the US in 1988, 75 years after the institution of the Fed.

 

As to the tax burden in the OECD late 1800s, it was much smaller than it is now. But the people of the OECD were also much poorer than they are now.

 

So what's your point?

Snidley Whipsnae's picture

"Gee, Net income per capita in constant dollars grew by 139% in that period (see calculation in my previous comment #589351)."

Gee...all our production capacity did not reside in China and SE Asia back then...What a coincidence!

chrisina's picture

And what was the cause of production capacity moving to China?

Why did Apple move all its production to China? Was it the Govt that forced Apple to do so? Or was it because of the dominant mantra of free trade and free markets Govt did nothing to prevent Apple to search for the cheapest labour it could find?

chrisina's picture

Total government (federal, state, and local) share of the economy has exceeded the tipping point, estimated to be between 15% and 20%, which is the point when it hinders economic growth.

Tipping point estimated by whom? You? Based on what?

Did the US Govt share of the economy rising from 23% to 33% between 1950 and 1980 (well above your "estimated tipping point") hinder growth?

Gee, Net income per capita in constant dollars grew by 139% in that period (see calculation in my previous comment #589351).

doolittlegeorge's picture

some measure "tipping points" as "millions in Washington DC actually making the change."  just a thought.

spankerfc's picture

I find this article to be typical of MBA drivel,  black and white data that is found to fit the the author's rented out fit any bidder's hypothesis. Economics for the data monkey. Economics is about people ffs, not 1's and 0's.

I'll give you a black and white hypothesis, if one person surrounded by his cronies has 99.9% of the planets wealth with the rest being more or less evenly distributed between the remaining populous, would that person automatically invest in things such as a car plant knowingly all the while nobody has any resources of wealth to pay for this mass produced item. There is no doubt that lower people on the wealth ladder are more likely to buy things that are needed to make their lives more comfortable. Whilst the lone rich man will not invest in losing bets, and prefer to watch the people starve. Trickle down capital through tax cuts for the rich at the expense of the rest have never worked because it's based on the assumption that the rich will give away capital incentives in the market place. The rich have always looked after their own as there is never a quicker way to make your kids rich than by giving the estate directly to them. Old money if acquired long enough will kill any ability to for any new economy to emerge.

The TBTF have shown us what these people do when they are driven to fear, they have no justification to lend to anybody in their view. What's  the point when they can just milk the taxpayer until they are totally enslaved to welfare?

 

chrisina's picture

Thing is the data published by Econophile here doesn't even support his claims.

How on earth does showing a growing curve of % of Govt spending and revenues support the claim that Govt hampers growth and private capital?

How on earth does showing a table of various countries % of Govt revenues support his claims?

Snidley Whipsnae's picture

"How on earth does showing a growing curve of % of Govt spending and revenues support the claim that Govt hampers growth and private capital?"

The pie is only so large. If the gov eats more pie then there is less for private enterprise. How can you not see that?

...and, as long as the gov is taking more of the pie there is no chance of growing the economy...so don't tell me that the pie will magically enlarge when the gov is being a glutton!

The gov can tax, cut spending, or they can print. What do you not understand about this?

chrisina's picture

first there is no evidence that there can be a pie without any sort of government.

 

The pie is only so large. If the gov eats more pie then there is less for private enterprise. How can you not see that?

Who says the pie is only so large? Did it stay only so large between 1900 and today?

 

...and, as long as the gov is taking more of the pie there is no chance of growing the economy...so don't tell me that the pie will magically enlarge when the gov is being a glutton!

 

 

No chance to grow the economy you say? So how on earth did the economy grow between 1900 and today while the Govt was taking more of the pie?

 

How on earth did Net income per capita grow 140% from 1950 to 1980 while Govt share of the pie was growing from 23% to 33%?

 

How on earth does Europe manage to get any sort of pie at all with Govt share being more than 40%?

 

spankerfc's picture

Well yeah of course you are right Christina. The thing is with these data monkeys is that any data will do for the sake of fit. No matter how much it doesn't fit with their hypothesis the less tangible the better. Any juxtaposition will do.

How good is a country's eyesight?  I don't know lets find out the data for the volume of carrots they consume,,, what a great idea! Wait a minute shouldn't be volume per population? No! No! NO! Because the answer has to be China that fits with my hypothesis that the reason China wins all gold medals in the archery is because to consumes 100,000 Tonnes of carrots annually get it?  Of course, of course,,,,,,I get it now !

chrisina's picture

The larger the share of governments’ take of capital out the economy, the less money there is available for businesses and consumers. The less capital available for the private economy, the less it will expand, and the result will be a decline in GDP.

More evidence to the contrary:

USA

from 1950 to 1980 Govt revenues and spending grew on a more or less balanced budget from 23% to 33% of GDP (datad from the graph you showed in your article)

Did Americans have less money to spend in 1980 or in 1950? Did we see a decline in GDP? Did we see less capital for the private economy?

http://research.stlouisfed.org/fred2/graph/?graph_id=29368&category_id=0

GDP grew by a factor 10, inflation factor 3.3, population factor 1.1

so GDP per capita net of inflation grew by a factor 2.75

GDP p.capita 1950 constant $ : Index 100, Net of taxes 23% = 77

GDP p.capita 1980 constant $ : Index 275, Net of taxes 33% =  184

184/77 = 2.39, Net income growth of 139% in constant $ !

 

Conclusion, despite taxes increasing by almost 50%, Net income grew by close to 140% between 1950 and 1980, and on a balanced Govt budget.

 

doolittlegeorge's picture

hmmm.  tis true:  we had a balanced budget of sorts in 1980.  is that the type of balancde budget you are advocating now?  believe me i pine for that time now.  this hard money stuff is b.s. in my book so let's get it on.

chrisina's picture

Yes, balanced budgets and making sure the level of credit the private bankers stuff to households and businesses doesn't grow faster than the economy should be the #1 rules of sound government.

It's really not that difficult to manage but is impossible as long as the entire flow of credit is controlled by a bunch of private financial parasites who profit from the highest credit possible.

Snidley Whipsnae's picture

...yes...and then came trickle-down Reganomics.

People have felt wealthy for the last 30 years because they had a safety net under them and they had lots of credit available to them.

All the time the people's wages were stagnant...they only felt wealthy because their access to credit was easy...thanks to Greenspan and his pals.

The damn gov does not create wealth...it can only redistribute wealth...and, it does a poor job of it.

chrisina's picture

As a matter of fact the colusion between Govt and a small elite group of financial parasites made sure they redistribute to themselves a big chunk of the wealth the American middle class had obtained from WWII to 1980.

That's what happens when you let a centralised Govt become a tool of private interests. Facism is the right word for it.

This fascistic looting of the middle class could only be achieved because as Huxley wrote, those who are always on the alert to oppose tyranny systematically fail to take into account man's almost infinite appetite for distraction.

mrdenis's picture

Well, its official, the Republicans are against Social Justice. ...http://blogs.abcnews.com/thenote/2010/09/sen-gregg-elizabeth-warren-will...

doolittlegeorge's picture

when the federal government prefers losing then justice, if there is such a thing, can only be attained locally if at all.  look at your actual healthcare:  here's a trillion spent, but you still have no doctor. i'm on the public plan(the  VA--thank God for folks in uniform)  but have access to "an air force doctor who's in his 70's and has thanks to Obama over a 1000 patients."  gee, think they could hire a single one?  where's the rubber hit the road on this boondoggle? in short "define the benefit first before you spend the money."  at least with social security there was a plan to "put money in people's pockets" which of course it has done.  just listen to those "rail against its effectiveness."  no one will argue about this vis a vis healthcare.

chrisina's picture

This is again one of those articles that makes a serie of claims and provides zero evidence to support them, nothing more than a worthless quasi religious pamphlet.

 

The larger the share of governments’ take of capital out the economy, the less money there is available for businesses and consumers.

Where is the evidence please?

Do Mexican consumers and businesses have less money available than Danish ones?

Answer :

Mexico GDP per capita PPP 2008= $14,000 - 20% tax = Net $11,200

Denmark GDP per capita PPP 2008= $36,000 - 48% tax = Net $18,700

(and obviously there are many things Danes don't have to pay from their Net income as it is paid from taxes that Mexican have to)

Did Mexican consumers have less money available in 2008 when Govt revenues were 20% than in 2001 when Govt revenues were 17%?

Answer:

Mexico GDP per capita PPP 2008= $14,000 - 20% tax = Net $11,200

Mexico GDP per capita PPP 2001= $9,000 - 17% tax = Net $7,470

 

(all data from http://www.tradingeconomics.com/Economics/GDP-Per-Capita-PPP.aspx?Symbol=mxn)

The less capital available for the private economy, the less it will expand, and the result will be a decline in GDP.

Where is the evidence please?

Do countries with a larger share of Govt revenues have less capital available for the private economy than those with a smaller share? Did they see lower growth rates ?

Which country has more capital per capita in real terms? Norway (42% Govt spending), Denmark (48%), Mexico (20%) or Turkey (23%)?

While progressive utopians believe that taxation of the “rich” is acceptable to fund social benefits, mathematics, demographics, and the laws of economics prove them wrong.

Be specific, what mathematics, what demographics and what laws of economics "proves" this is wrong?

Show the maths please, we'll have fun.

Progressives have yet to understand that government produces nothing.

So when Govt builds roads or lighthouses it produces nothing?

This is such a moronic claim. The question isn't whether it produces something, it obviously does, but whether it is more or less efficient at doing so than private competing businesses.

And before you answer that Govt is always less efficient than private competing businesses here are two questions for you :

why are the french railway and electricity companies, Govt owned monopolies, better run and more efficient at producing and delivering their goods and services than their british, privately owned counterparts?

how would a privately owned lighthouse get any revenues and how would you solve the free rider problem in this case?

 

For you Econophile, who is religiously anti government, it would seem Denmark is hell and Somalia a paradise.

 

Greenhead's picture

I don't know how you can include Mexico in your analysis.  Are you counting the massive GDP in Mexico wihich comes from the drug, kidnapping, extortion and mordida businesses?  They pay no tax so the statistics are so distorted as to be unusable.

doolittlegeorge's picture

just win baby.  as long as you're top dog your "percentage" can be whatever you want it to be.

nmewn's picture

"So when Govt builds roads or lighthouses it produces nothing?"

Where did the capital & labor come from to build the roads & lighthouses? Name these senators, representatives, governors, clerks etc. who withdrew from  their savings accounts to purchase the materials, who then picked up the shovels and built them. Thanks.

"This is such a moronic claim. The question isn't whether it produces something, it obviously does, but whether it is more or less efficient at doing so than private competing businesses.

And before you answer that Govt is always less efficient than private competing businesses here are two questions for you :

why are the french railway and electricity companies, Govt owned monopolies, better run and more efficient at producing and delivering their goods and services than their british, privately owned counterparts?"

So your argument, apparently, is that a government monopoly is preferable to a private monopoly because it's off balance sheet costs of operation are INFINITE, theoretically.

Perfect, why didn't someone else think of that. Oh...wait...someone did already.

Why is it whenever discussing economics, society or anything else with progressives & socialists the issue must always come down to a discussion of which apple is less rotten?

Most people prefer fresh apples.

chrisina's picture

Why is it whenever discussing economics, society or anything else with anarcho-capitalists the issue must always come down to them assuming their logic and their absolutist axiomatic principles have any sort of relevance to the real world? 

Why is it they never dare answer the questions asked but rather ask  irrelevant rethorical questions that suit their logic and axiomatic principles?

nmewn's picture

So, it was Senator Junk and his proteges who built them with their own hands funded with private taxpayer capital ;-)

Thanks, that's all the vindication I need from a "progressive"...LOL.

SeeYa

chrisina's picture

Show me an example of anarcho-capitalist society that has ever functionned in reality (not in your dreams) ?

Oh, I know one, the closest example I can think of is Somalia, anarcho-capitalist's dystopia.

 

And I noticed you didn't answer the question about lighthouses. That's all the vindication I need from an "anarcho-capitalist".

 

And explain how your "fresh apple", a railway system operated along anarcho-capitalist principles, could have any chance of not becoming rotten.

 

In fact I wish you guys will get the chance to build an anarcho-capitalist society somewhere in America. It seems that only then will you finally understand that anarchism and capitalism are fundamentally incompatible.

nmewn's picture

Ok...last time with you my little statist marxist idealogue. You see, this is how you set up a proper Alinsky strawman argument ;-)

Yours is here; "Show me an example of anarcho-capitalist society that has ever functionned in reality (not in your dreams) ?"

I never said I was an anarcho-capitalist...you imply I did. Which is false. Or a lie, however you wish to phrase it. I'll call it a lie if it's all right with you.

I believe as most rational people do that the growth of government has/is pushing aside real investment capital due to it's printing of debt instruments.

Your approach seems to be to create even more government growth & indebtedness...beggaring the taxpayer's idea's of useful capital investments...through government spending on unwanted or unproductive or unprofitable things like windmills, solar panels, health insurance (you are fined for not exercising a right? really now...LOL), CO2 taxes (CO2 is what you breathe out by the way), repairing existing roads which have had taxes collected for them already &...building more lighthouses apparently.

You also tried the strawman of comparing a private British & a government run French operations. The choice of two rotting apples as it were.

Are the British workers unionized? This is not a question of the merit or the value of unions. It's a question of accounting for labor costs. The private company must show the labor costs in toto. The French government operation would pass these to the taxpayer I would imagine. Clearly Amtrac needs to discuss this with the French...LOL. Also, the true cost of regulatory compliance with the British company is carried on it's ledger. What is the true cost of a French railroad operation when a portion or all of the energy used to actually run it is borne by yet another tax funded, state operation,  known as the French electric "company" that you cite?

A government operation is under no constraints that it does not impose on itself, it can change the rules as it pleases and defray costs of operation to any other taxpayer funded department it pleases. It is in fact highly dubious that it would impose any limits on itself...afterall it makes the rules so it's profit or loss can be whatever it wishes it to be until the shell cracks.

Another thing...this stalking of Jeff is getting a little tedious don't you think? I assume he's pretty much written you off as a basket case...as have I, but you will have the last word here between you and I, so make it good.

SeeYa...this time for real.

 

chrisina's picture

1. I'm not a Marxist. Call me a statist or a progressive if that pleases you.

I believe in capitalism but I understand its limits. For instance capitalism does a terrible job at managing public goods and taking into account externalities of all sorts.

2. My approach is certainly not to create even more growth of government and indebtedness. Where did I write anything of the sort?

I disputed, witrh evidence, Econophile's claims. Read what I wrote.

I believe the #1 rule of a sound Government should be to balance its budget. Zero deficits.

3. you claim not to be an anarcho-capitalist yet you believe Govts produce nothing. If Govt produces nothing we should get rid of Govt entirely. You believe free market capitalism without any sort of Govt intervention can work. That's anarcho-capitalism.

 

4. you repeat again the baseless claim that the growth of government has/is pushing aside realinvestment capital . That's an absolutist claim which I have already shown doesn't hold.  The growth of Govt  in the USA from 1900 to 1980 didn't push aside real investment capital from this country.

Do you understand the difference between disputing this claim, which I did as it is evidently false, and supporting the opposite, which I didn't.

You seem to have a problem with understanding that saying a claim is false (growth of government hinders private capital) doesn't necessarily mean the opposite is true (growth of government helps private capital). Both are absolutist claims that are evidently false.

Logic : you are doing it wrong.

Asto your assumptions about the SNCF (French railway system) and EDF ( French Electricity company), they are wrong. Go and study them first, then come back and discuss something you have actually studied before you make more assertions based on ignorance.

Bob's picture

Having stuck my neck out, as it were, in complimenting chrisina above, your damning argument here forced me to go back to her original commentary on the article under discussion. 

You assert "Your approach seems to be to create even more government growth & indebtedness...beggaring the taxpayer's idea's of useful capital investments...through government spending on unwanted or unproductive or unprofitable things like windmills, solar panels, health insurance (you are fined for not exercising a right? really now . . . "

I see no reasonable evidence in this thread that this is her position or argument.  What I have seen is that she rejects what she regards as econophile's simple-minded damnation of the inherently evil hand of government and that, more globally, she seems to believe that those who adhere to such an "idealistic" perspective are espousing more or less a religious belief system, given that no examples of successful capitalisim without a strong government role can be found in the "real world."  Such people she has characterized--quite fairly, within the normal bounds of language, it seems to me--as "anarcho-capitalists." 

Although she in turn can be called any names anyone cares to hurl, I'm not hearing her promoting Marxism.  Rather, she seems to be rejecting absolutism

So I find your characterization perplexing (though I admire your arguments regarding full cost-accounting.) Is there a history here that I've missed?