In my last article, I described ways in which government and business have similarities, and how one could apply the business principle of “good debt” to government. Today, let’s peek inside theAmerican Recovery and Reinvestment Act of 2009 (ARRA), which is often referred to as the “stimulus bill.”
The bill was sold to the public as a means of jump starting the economy, primarily through the application of the counter-cyclical Keynesian economics principle. I’m not going to say more about it here, because it’s not the primary point of this article. Rather, my focus here is the degree to which the ARRA represents a good investment on its corresponding debt load. If there’s interest, I can expand on counter-cyclical Keynesian economics in a future article.
The timing of taking on debt is often overlooked, but very important. With interest rates at historic lows, this is actually a pretty good time totake on debt, assuming you have a choice over when to do so. Long-term debt (such as 30-year notes) is good to issue when rates are especially low, and right now it’s sitting in the mid-2% range.
In examining the categories of ARRA expenditures, I did a few things. First, I looked at the categories as defined in the bill itself. Then I looked at the more specific descriptions of the targets of the funds. In some cases, I moved funds to other categories. For example, funding for low-income housing was spread across a few categories, so I consolidated those. After that, I put the money into broad categories of my own creation that quickly became apparent to me when looking at the targets of the money. Those categories (in decreasing order of size), along with their definitions, are as follows:
- Long-term Investment (27%): These funds go toward areas that are likely to generate minimal economic benefit for several years, but are in areas that are good bets for significant economic benefit over the long haul.
- Tax Breaks (23%): This is the representation of tax revenues that otherwise would have been collected.
- Gap Closure (20%):This is money that goes to states to close budget gaps arising from the combination of lower tax receipts and a greater burden on government services, both of which arose from the recession.
- Safety Net (13%): This includes welfare, unemployment benefits, and the like. It appears from what I can gather that nearly all of this money, other than the extended unemployment benefits, is intended to address the larger burden on government services caused by the recession.
- Maintenance (12%): This is money that covers maintenance on existing government infrastructure.
- Cash Infusions (5%): 60% of this is a one-time Social Security payout. It is, in essence, the Social Security equivalent to the individual tax credit in the same bill. The remaining 40% consists of things like the homebuyer credit and car sales tax deductiion.
While this adds up to 100%, there’s an additional 1% (due to rounding errors) that went to what looked like pure pork.
I’ll sidebar a little bit here about the 73% of the bill that is not devoted to long-term investments, and then return to the long-term investments.The overall breakdown of the bill is representative of the typical sausage-making that happens in Congress. Almost all of these expenditures are defensible in stand-alone spending bills, for various reasons.
The 23% devoted to tax breaks, plus the 5% of cash infusions, was “sweetener,” mostly about marketing. Obama campaigned on the promise to cut taxes to 95% of the population as part of his economic plan, and a full 18% of the bill (79% of the tax reduction) is devoted to this. Because the money comes with no strings attached, its impact on the economy is unfocused. The upshot is that the bulk of the $140B spent here (according to several reports I read) went to individuals’ debt reduction. While individual debt reduction is probably good for the economy in the long run, its impact in the short run is minimal at best.
Much the same can be said for the pork, which thankfully was a very small percentage of the bill. It’s expenditure, and typically pork goes to paying somebody to perform some sort of work, which has a small stimulative impact on the economy. This, plus the tax breaks, are essentially the cost overhead of getting support for the bill.
Then 12% for maintenance is a stretch for this bill. Maintenance, as a rule, should come from general fund expenditures, and should have been properly covered by current tax revenues. In that respect, this is “bad debt.” On the other hand, these are maintenance expenditures that have been put off for a number of years, and a sudden infusion of cash for these projects will have stimulative effects. Also, depending on the level of deterioration being corrected, the impact can be similar to that of new infrastructure. Finally, the excess construction capacity in the US today presents an opportunity for good value in performing this maintenance now. Ultimately, the greatest benefit that arises from these maintenance expenditures is marketing. Most of these projects get to have big signs in front of them, telling the public that the project is being paid for out of ARRA funds, “putting Americans to work.” In other words, this is largely the marketing that appears after the bill has been signed, while the tax breaks and pork are the marketing that gets the bill passed in the first place.
The 20% slated for gap closure, plus the 13% in safety net, is essentially spending from a defensive posture. That is, this money is intended to stop the death spiral of people getting mired in poverty, who no longer can afford to buy basic necessities, and therefore essentially exit the economy altogether. It is this death spiral that led to shantytowns in the 1930s, so the defensive spending to stop this is essential. It’s much harder to tell whether this is the correct amount of money needed to stop it. Hopefully, the answer came from people with far more data and time than I have. The death spiral did stop shortly after these funds began to flow and the economy stabilized, which suggests that it was successful, though in the absence of a true control the causal relationship cannot be proven.
Back to the primary point, there’s 27% of the bill devoted to long-term investments, the most interesting part of ARRA from the perspective of the “good debt” principle. Let’s look at those expenditures more closely.
31% of the long-term investments go to what I call transportation. Unlike the traditional notion of transportation as movement of physical goods, I am including the movement of electricity and data as well, since they are all roughly equivalent today, insofar as they are all directly involved in the movement of valuable “stuff” as part of commerce. Historically, transportation infrastructure investments by government are typically in areas where private investment would shy away, for various reasons. Where a single private industry is the primary beneficiary of a particular transportation mechanism, government investment is less needed, as in the case of fuel pipelines and some parts of the electrical transmission system. But in cross-industry transportation, government expenditures have a well-established track record of substantial positive long-term impact on the economy. Witness, for example, the railroads, interstate highway system, and the Internet.
The next largest investment category, at 22%, is education. I excluded the money that is slated for gap closure from this category. What’s left is basically college subsidies (in the form of grants and tax credits), job training, and education targeted at those with disabilities. The firstt wo are good areas for economic improvement, as they have a high correlation with income growth and/or protection from income erosion. I don’t know enough about the third to comment on its effectiveness. What is most important in the first two is the extent to which these dollars are spent on people who otherwise would not have received this education. Higher education subsidies that are targeted to low-income people are going to have a better correlation than those that are not. Both of the college subsidies meet this criterion by having income caps. The job training is targeted at those who are recently unemployed, which is far from a bad choice, though its return is not likely to be as good as the college subsidies.
19% of investments goes to oil dependency reduction. It’s about a 40/60 split between subsidizing energy efficiency and subsidizing non-petroleum energy technology investments. The former has easily-understood, but modest, returns on the investment. The latter is made up of bigger bets with unknown degree and time of payoff. It’s certainly worth doing, because the petroleum path is unsustainable, but it’s hard to tell which are the right bets to make, and Congress is lacking in the expertise necessary to intelligently make those determinations. Something like the Ansari X Prize would be a great way of combining government funding with the Darwinistic power of free enterprise to achieve the goals quickly and efficiently. I find this approach appealing, though unlikely.
Another 13% targets reduction in healthcare costs, through investments in information technology. As with the technology investments in alternative energy, the payoff on the bets is uncertain, and it’s hard to draw a connection between this investment and an improved economy, at least when compared to the transportation or oil dependency investments.
The last significant investment category is natural resources, at 8% of investment dollars. Nearly of this is either directly or indirectly about making more water available for home and farm use. In many ways, this is a similar investment to transportation. Shortages of water are resulting in pressures on commerce, whether fishing, farming, or technology, all of which are water-intensive. This investment, therefore, is aimed at reducing growing frictions in commerce, and should pay off handsomely.
The remaining 7% of investment goes mostly to building safety-net government facilities. This might have some pork in it; it’s hard to tell. If so, then the bill has a total of 2% pork, rather than the 1% I outlined above. If it’s not pork, then it has a value that’s marginally greater than pork. That is, it is in the worst category of investments in that it probably has little or no return on the investment.
So over three quarters of the investment money is almost certain to have a good rate of return, based on historical evidence. Not too shabby, especially for a bill as large as this one.
In summary, the bill is divided into four primary categories: sweeteners to get the public and members of Congress to like the bill, infrastructure maintenance that had been deferred, defense against a death spiral of devaluation as people exit the economy, and long-term investment in infrastructure to stimulate the economy.
Is this a good use of the money? For about 60% of it, I believe the answer is “yes.” But I’m not pleased that so much of this bill was devoted to a series of one-time tax credits and deferred maintenance. As I mentioned in my previous article, these expenditures are not good places to spend the proceeds from debt. Obviously, politics drove this 40% ($316 B dollars!) of the bill. Could the bill have been passed with less expensive marketing? It’s easy for me to sit here as an armchair quarterback and say that it could, but I’m much more an economist than a politician. What do you think?
And, now that I’ve broken the bill down in various ways, I have a couple of questions for you. First, assuming that we are going to add $790B to the national debt, where would you have spent the proceeds, and why? Second, assuming you could choose how much debt to add, as well as where to spend it, how much debt would you have added, where would you have spent it, and why?
Michael,I’ll have to think about your questions for a while. They’re great questions. But more importantly — we’re lucky to have you here. Your no-nonsense style, and the breadth of your knowledge and your analytical skill, is truly impressive. Thank you for another great article.
Yeah, spent way too much time trying to format Michael’s graphs. Sometimes it worked, other times not. It’ll be good to make the change. Let’s hope it’s the right one.
Greetings from Roma. Pompeii was fascinating and the Vatican breathtaking. Off to Florence tomorrow.
As to the subject at hand…There were no tax rate reductions, simply micro welfare payments that will end soon. Giving away money to claim to have satisfied a campaign promise of the purest form of pork.Taxing non college tax payers to relieve college students of their need to pay back their college debt is the worst kind of regressive pork. College graduates have the ability to pay back their own debts.Subsidizing electronic medical records is classic corporate welfare. My wife implements EMR transitions. She tells me that the medical providers will save almost no money, but her company is making a lot from the subsidies.The greatest waste of money is subsidizing expensive green energy projest for which there is little or no demand and is rife with corruption. DOE has yet to even define a green job, but has been shovelling out the pork by the billions for such nonsense as factories making $30,000 batteries for $100,000 electric cars for wealthy status seekers.Then there were the bailouts for state governments to keep them from firing or cutting the pay of SEIU workers or cutting back on the Medicaid program bankrupting them. In fact, it simply delayed the inevitable for two years.The only half worthwhile spending was for unemployment benefits.
Greetings from Roma. Pompeii was fascinating and the Vatican breathtaking. Off to Florence tomorrow.I hope you’re having a great time! Sounds like a wonderful trip.…pork … regressive pork … corporate welfare … shovelling out the pork … bailouts …Emotionally loaded political cuss words are a poor substitute for rational argument. Provide some evidence and logic, please, perhaps even a position statement, rather than merely making rude noises.My wife … tells me that … Anecdote is not evidence.In brief, your comment contained no coherent argument.
Bart,I do question your reading comprehension skills at times. This is at least the third time that you have responded to one of my posts in a fashion that suggests I made a claim that was, in fact, quite contrary to what I actually said. For example, you said:”There were no tax rate reductions”Please show me where I said that there were.”Giving away money to claim to have satisfied a campaign promise of the purest form of pork.”Not too far from what I said.”Subsidizing electronic medical records is classic corporate welfare.”Maybe, and maybe not. Either way, I pointed out that its impact to the economy is uncertain at best. It represents about 3.5% of the total bill.”The greatest waste of money is subsidizing expensive green energy projest for which there is little or no demand and is rife with corruption”That’s quite the assertion. How about some quantitative data to back it up?”such nonsense as factories making $30,000 batteries for $100,000 electric cars for wealthy status seekers.”Are you familiar with the concept of amortization? Statements like the one you made above suggest that you are not.”Then there were the bailouts for state governments to keep them from firing or cutting the pay of SEIU workers…”So is your issue that the state government employees are unionized? Or something else?”…or cutting back on the Medicaid program bankrupting them.”So I assume you don’t like Medicaid. How do you believe healthcare should be handled for low-income people?”In fact, it simply delayed the inevitable for two years.”So your assertion is that state governments will never again be solvent?Oh, while I’m thinking about it, there’s a comment from me to you back on the “Business of Government” discussion.
Bart,I forgot one other thing:”Taxing non college tax payers to relieve college students of their need to pay back their college debt is the worst kind of regressive pork.”You make an interesting assumption here, namely that it’s your taxes going to pay for someone else’s education. But what if the net increase in income from that person results in an income tax increase that more than offsets the cost of the grant? In that case, your taxes didn’t go to pay for that person’s education. Instead, (ceteris paribus) that person’s education ends up paying some of your taxes!
Michael noted:Instead, (ceteris paribus) that person’s education ends up paying some of your taxes!That is, of course, the point. Subsidizing education helps the entire country. It raises the earning potential of the persons so educated, thus improving the economy as a whole. Putting humanitarian considerations aside (we don’t want to be accused of actually caring about our fellow citizens, do we?) this is the entire economic justification for public education of any sort.Attendance at state colleges should be free to the attendees, and should be paid for out of the general tax revenue. If you want to go to a private school, you can pay the difference yourself between that and state tuition — or get scholarships or other assistance. Anything less is simply stupid, from a practical and economic standpoint.The argument that you shouldn’t have to pay for someone else’s education makes as much sense as fee-based fire departments or paying for the meals of only the soldiers you personally hire. The entire country benefits from having a well-educated workforce.
I knew even in Firenze, Italia, Bart Would not be able to resist this article. Nice article, Michael. I think I finally got the graphs to work.
I don’t see any graphs. There is a nice bulleted list, though.
@DC,You’re making the assumption that everyone who enrolls in college is going to finish and get a high paying job.What about those who will flunk out after the first year? Or second year? Or the third year? Am I supposed to pay for them, too?What about the students who do graduate but barely get passing grades because they partied all through college and are lucky to get a job at all after college? Am I supposed to pay for them, too?Does a kid getting a free ride from the gubmint have the same incentive to complete school and get good grades as a kid who saved for college, or whose parents saved for their college, or who works to put themselves through college, or who has to go into debt for years and years?You have to be careful about the goverment giving away free stuff all in the name of “the social good”.
Mr. U.,The source for the page contains a malformed URL where there should be an image. It’s so mangled I can’t see how to access the images at all from where I am.
Apparently, GROG has a crystal ball which enables him to tell ahead of time which students will succeed and pay back the investment, and which will fail ahead of time.Or maybe he’s advocating using the failures for target practice, as a source of protein, I don’t know. He’s not exactly clear about that, all we know is that he doesn’t like investing in things that won’t provide a guaranteed return.If you’ve got a crystal ball, GROG, use it to become wealthier than Warren Buffet. After all, he’s lost money a few times on investments.If it’s the other thing, it’s a really interesting monetary plan: make the people who can’t get a job pay it back. Let the people who get wealthy pay lower taxes.Having taught for many, many years, I can tell you that students (especially engineering students) do, precisely, get college degrees and then go out and get good-paying jobs — and this is what they planned to do.
GROG,There are certainly more direct ways of making the education model work. For example, a government-provided loan, with the payments are tax-deductible without being subject to standard deduction or 2% floor limitations, would result in a clearly-defined connection.That said, you’re talking about anecdotal cases. Do you have any data to tell us how often these loans go to deadbeats?
@Michael Weiss,I was responding to DC who said:“Attendance at state colleges should be free to the attendees, and should be paid for out of the general tax revenue.“He made no mention of loans.
“The argument that you shouldn’t have to pay for someone else’s education makes as much sense as fee-based fire departments”You obviously have no clue how rural services are provided and paid for.
Lonely Wolf says:”You obviously have no clue how rural services are provided and paid for.”This is related to the last response I made to Bart in the “Business of Government” comments. The benefit in urban environments to a universal fire service was established long ago. In rural areas, where the damage to adjacent properties is of much less concern, the need for universal fire service is also reduced.This, incidentally, is probably one of the reasons behind the urban=liberal, rural=conservative meme.
GROG said:”He [DC] made no mention of loans.”No, he didn’t, and I apologize for confusing the issue. Does this mean that you’re in favor of the loans I outlined? Are you for or against Pell grants? Are you for or against state colleges and universities?
On the contrary some of us know exactly how rural servies are paid for in areas that not ruled by Nehendrathals.I live in a county that has such a low population density that one would have to go out to N Dakota or Montana to get its equal and just for good measure we are poor as freaking church mice but our local taxes pay for all of our protection as well as law enforcement. Now interestingly enough we have stout mutual aid agreements where even the poorest of the poor communities have some level of fire prtection from their neighbors. Still not a perfect situation but I have yet to see a house burn down with fire fighters sitting there.There was a time when ambulance service was provided by the local under takers. There came a time when the under takers saw that there was much moe money pulling the dead from a car wreck than working to save the living. So local communities started their own services and that is where our present community or local hospital based services cme from but it was a sense of shared responsibility and need that it sprang from.As far as investing in education, well we can either do it or resign ourselves to permenant 3rd world status. Anyone that can’t see that can not be made to realize the benefits that a society gains has and will gain from it.Those that keep demanding their country back are living in a time warp between their ears that I wish not to see again.
The source for the page contains a malformed URL where there should be an image. It’s so mangled I can’t see how to access the images at all from where I am.I’ve tried several times to get that graph to print. Sometimes it works; sometimes it doesn’t. I just want to run a political blog and not be a computer programmer. Is that too much to ask?
GROG commented:You’re making the assumption that everyone who enrolls in college is going to finish and get a high paying job.No, I’m not. Not everyone who goes to kindergarten will graduate from High School, yet we still have public education. Instead, my assumption is as I stated: a better-educated workforce is good for the country. Someone who attends even one class is better-educated than someone who has attended none.What about those who will flunk out after the first year? Or second year? Or the third year? Am I supposed to pay for them, too?Yes. Just as yo pay for the kindergarten student who dies before he or she has graduated from High School. Why would you not?
@Lonely Wolf You obviously have no clue how rural services are provided and paid for.Actually, yes I do. I’m saying it makes no sense.
Mr. U.,Hmmm, I’m having a bit of translation trouble with your plea. My reply is going to be a bit uncertain as a result.By “print” I assume you mean “display”. My suggestions here are going to be very general. What you appear to be doing is creating links that begin like this: “webkit-fake-url:”. Firefox refuses to even recognize such a thing as a link (links have to have something like “http://” on the front end).I don’t know if this helps.In answer to your question, though, you either have to have blogging software that allows you to construct a logically valid HTML structure that allows the remote browsers to find all the stuff to display, or you are going to have to learn to write in HTML. Which is, after all, a programming language, of a sort.I’m not familiar with blogging software, but I do regularly create and maintain web sites which have similar behavior. I do it using moodle, which is designed for course web site operation. (I’ve also done apache programming, and created simple web sites for people by just writing them in HTML.) Which means I’m very much an amateur, but a knowledgeable (as in I have an idea how much I don’t know) one.
@DC,Are you really comparing a kindergartner to a 20 year old college student on a free ride from the government, dropping out of school?A kindergartner is forced to go to school. We have truancy laws.You cannot force anyone to go to college even if they received thousands of taxpayer dollars to do so. Terrible analogy. Someone who attends even one class is better-educated than someone who has attended none.I completely disagree. Any teacher or professor who pays any attention the their students can tell you that is not true. Education does not come from just sitting in a classroom.
GROG,If a student merely sits in a classroom, then they will flunk the class. And that will teach them something (namely, you have to work or you won’t pass).You apparently know even less about education, and students, than you know about investment.
GROG, the point is that the cost of providing education is far exceeded by the societal benefits gained. That is true regardless of the level of education under discussion, from preschool through to post-graduate work. There is no point along that line at which the return on the investment does not justify the expense, even with the expected and observed loss ratios.That is, even though some percentage of students to not succeed to your satisfaction, the sum total practical benefit to society far outweighs the cost in taxpayer dollars.So yes, I do mean to compare kindergarten students who are forced to go to school with college students who are there by choice. You could always ask your Congressperson to propose a bill to make elementary school elective rather than compulsory, and to bill the parents directly.
Great column.Overall I think you’ve probably hit the nail on the head. However, I think you’ve highlighted (perhaps unintentionally) a major problem.You say:”So over three quarters of the investment money is almost certain to have a good rate of return, based on historical evidence. Is this a good use of the money? For about 60% of it, I believe the answer is “yes.” ==========In other words, 60% of the money is being well-spent, so 40% isn’t. That alone is very troubling. Let’s narrow our focus and look at the investment component. You estimate 75% is “well-spent.” In order to make “investment” a good idea in the first place, you need to believe you’re going to have a positive rate of return. If 25% of your investment is wasted, you need a 33% positive ROI on the remainder, just to break even. Of course, it’s rare that you lose all your money on bad investments (when you buy a stock, it may go down but you still have some remaining value in your investment). Let’s suppose that on balance, the “bad” investments produce a 50% negative return, ie. you bought the investment at $25 and it goes to $12.50. That means that the $75 invested in “good” projects have to generate $75 PLUS $12.50 to get you back your $100 starting stake, a 16.7% return on investment. But since you’re also doing this with borrowed money, you also need to add the present value of the interest payment on the debt. The current 30-year Treasury rate is about 3.75%. In this example, if you borrowed the $100 today, and “cashed in” your investments in after 1 year, you’d actually have to earn a 21.7% return. ($12.50 + $3.75 = $16.25/$75 = 21.7%) Of course, the real numbers are far more complex. Your “investments” are phased over time, as are your returns (and your returns are very difficult to calculate). Furthermore, nobody really believes we’re ever going to pay off the national debt, so your cost of capital (interest rate) is going to vary over time and go on forever. We have historically low rates today — that won’t continue forever.So, what rate of return can we expect from our investments?Corporate America focuses on making money (ie., producing a good return on investment). Their investment decisions are made by people who know their industry and are relatively immune from political pressures. In 2006 (the last of the boom years) the S&P 500 made a 6.7% return on investment (profit divided by debt + equity). That’s a one-year ROI. Over 2 years (at that rate) they make 13.4%, over 5 years they make a 33% return, After 11 years they’ve gotten their money back. If you want to make back $100 on a $87.50 investment over 30 years, you must earn 3.8% per year AFTER interest expense. That’s 60% of the S&P 500 return — in a banner year. Does anybody really think that government investment is going to be that productive? How long — if it ever happens — until we get our money back?So why spend it to begin with?
No DC, I’m in favor of truancy laws. It’s our responsibility to educate kindergarten age children and mold them into well educated citizens wether they want to go to school or not. We don’t give up on them at 6 years old.But we cannot afford as a society to spend billions of dollars to send adults to college who have no business being there.
GROG,So how do you tell who “has no business” being in college?
Yes but when the concept is that “Every man IS an island” then this is acceptable. Guess my limited time in church as a youth yielded more than many of todays self professed religious conservatives have been able to get from the experience. Some how screw your neighbor didn’t seem to jump out at me when I have taken time to read the bible.
shortchain wrote:GROG,If a student merely sits in a classroom, then they will flunk the class. And that will teach them something (namely, you have to work or you won’t pass).You apparently know even less about education, and students, than you know about investment.=============I agree that you SHOULD flunk the class if you just sit passively in the classroom. However, that doesn’t always happen. Public schools have had a policy called “social promotion” which means that even if you didn’t learn anything in 4th grade, you still go on with your peer group to 5th. (parenthetically, by the time that kid gets to middle and HS, school is so incredibly frustrating that they act out and become disciplinary problems, which hurts every other kid in the room).How many times do we have to hear and read about the massive numbers of people getting HS diplomas who are functionally illiterate — cannot read simple instructions or a bus schedule?Grog is right — sometimes it’s a waste of money to try to educate somebody (at least the way we do it in many of our public schools).
Jeff,Do try to keep up. The discussion was about college/university.Speaking of secondary education, obviously, it is of public utility to keep the youth off the streets. Not ideal, but hardly a waste of money. Local governments all over have long ago settled that question.Oh, and GROG? Speaking of the waste of money sending adults to places where they have no business — a lot of us feel that way about idiotic foreign wars.
@shortchain,1 in 3 college freshman flunk out. I don’t feel that I should pay for that freshman year experience. Call me a right wing radical.
GROG,Sure. I didn’t ask whether you felt bad or not, though. I asked you how you would determine, beforehand, who “has no business” going to college?This was the third time I asked, BTW, and have received no response to this simple question.
Grog you are a right wing radical…..there feel better. Now go and read some Horace Mann and then come back when you prove to the rest of us the money we spent on your damned education wasn’t entirely wasted.
Jeff, you said:”In other words, 60% of the money is being well-spent, so 40% isn’t. That alone is very troubling.”Indeed it is, and highlighting that fact was far from unintentional. It points to some flaws in how our nations laws are written, passed, and enacted. In this case, the bulk of the “bad” 40% came from one-time tax credits and covering deferred maintenance. I don’t believe for a minute that the tax credits will justify the ~2.5% APR on additional debt. Covering the deferred maintenance might, but that’s less due to it being deferred maintenance than due to a more complex calculus involving the low cost of debt, coupled with substantial idle construction capacity.”Let’s suppose that on balance, the “bad” investments produce a 50% negative return…”Hmmm…I wouldn’t go that far. As bad as these “bad” investments are, their rate of return is probably much better than -50%.”Furthermore, nobody really believes we’re ever going to pay off the national debt…”I believe that we will reduce the national debt, in part because ultimately we won’t have a choice. But elimination of the national debt is not necessarily a noble goal. Carrying debt in perpetuity is acceptable, as long as it is rolling debt. That is, pay off the old debt on the proceeds of the capital that benefited from the debt, and issue new debt for new capital that will be similarly paid off.Your S&P 500 example is not very useful for several reasons. First, you cherry-picked a good year and assumed that this sort of rate of return was perpetually sustainable. Obviously that’s false.But, in answer to your other question:”Does anybody really think that government investment is going to be that productive?”…have you looked at the examples I provided of some of the better investments government has made in the past century or so?
@shortchainSpeaking of secondary education, obviously, it is of public utility to keep the youth off the streets.What’s sad is that we seem to be doing little more than that with our existing primary and secondary education. Perhaps it’s an unintended consequence of tenure. Maybe the politics of ideology is contributing as well (witness what happened with Texas public education recently). Certainly the demonization of educated people as “ivory tower elites” doesn’t help, nor the inner-city counterparts glorified in gangsta rap. And I’m sure we could point the finger at dozens of other places.I just hate the notion pushed by many conservatives that the solution to an education system that is working less well than the one we had half a century ago is to dismantle the whole thing and leave it to churches to educate our children.
GROG:But we cannot afford as a society to spend billions of dollars to send adults to college who have no business being there.I agree with this. As I said, state college tuition should be paid for, 100%, though general tax revenue. However, there should be entrance exams to qualify for this subsidy. The total societal benefit, in purely practical dollar terms, would far exceed the about spent.Anyone who does not pass the entrance exams, but wishes to attend college anyway, should have access to low-interest federal loans.In addition, there should be trade schools, again, 100% paid for though general tax revenue.
@shortchainYeah, I’ve been at this for all of two months. Sorry to drag all of you through my learning curve. Particularly those of you who are already smart enough to know about it. Michael gave me some links to a share site so thats the best I can do for now.
Realist,I’m with you. I’ve flunked so many students in my academic career that my karma is probably a nasty shade of yellow, and it’s been, all too often, the result of being handed a student who thinks that, because they were coddled all the way through high school, that college ought to be easy.Hey, closing the public schools as Zia did and leaving it to the churches has saved Pakistan untold millions in education costs over the last thirty years. A real model to emulate, no?
shortchain said:”This was the third time I asked, BTW, and have received no response to this simple question.”The answer is, you don’t. That’s why you don’t send any HS graduate to college any pay 100% of the tuition with tax dollars. It’s a complete waste of money. That’s my point.
GROG,Presumably, except for the GI Bill? Oh, and by the way, the GI Bill amounted to sending generations of young men to college on tax dollars, from 1945 – 1975, and that wasn’t exactly a period of decline in American science, technology, or any other area.In passing we should note that your theory that this is a complete waste of money is clearly not shared by colleges and universities all across this country (and in many other countries as well, who send their young people to our colleges and universities fully paid by their tax dollars).If we refuse to pay for any HS graduates’ college, then we revert to, not merely the early twentieth century, not merely to the 19th century, but well back into the 18th century. In a word, to monarchy and feudalism.Mainer is wrong. You aren’t a right-winger, you are a throwback to the dark ages.
@GROGyou don’t send any HS graduate to college any pay 100% of the tuition with tax dollars. It’s a complete waste of money. That’s my point.You don’t send any HS grad to college and pay 100% of the tuition with tax dollars because some of them will squander it? That’s your point???
I am intrigued by the conversation going on here. A few thoughts come to mind:First, nobody has answered the questions I posed at the end of the article. shrinkers at least acknowledged them. :)Second, the easy targets of the bill are the ones being attacked. Does this mean we are all in agreement that the money for transportation and improved energy efficiency is well spent?Bart doesn’t like the tax credits, presumably because it’s not a rate reduction. Do the other conservatives here agree that it should have been a rate reduction instead of a tax credit? Or should the tax credit have been dispensed with altogether? Likewise, do the liberal (or should I say progressive) members here think the tax credits were good to have in this bill?
GROGThe answer is, you don’t. That’s why you don’t send any HS graduate to college any pay 100% of the tuition with tax dollars. It’s a complete waste of money. That’s my point.You have this precisely backwards.Let’s say you paid 100% of all college tuition at state colleges for anyone who wants to go.The country would come out ahead, financially.At every step, in every grade, and at every point in college education — on average, the people who got X years earn less through their lifetime than the people who go X + 1.And furthermore, in the course of their lifetime, the people who go to school (or college) for X+1 years pay more than enough in taxes, above what the people who went only X years pay, to more than reimburse the costs of that extra year. By enormous amounts.This is true at every point. At every grade. It is true if a person completes college or not. It is even true if you include the people who flunk out during the X+1th year when you calculate the averages.There is no downside for the nation. None whatever. There is no way to paint it as not worth the investment. It is simply a good idea. There is no valid or sensible or rational argument against it, other than, “I got mine, so screw you.”
To Michael WeissGood answer to my post — I’m sure you’ll appreciate that 3000 characters isn’t very much, and that making a lot of simplifying assumptions were necessary.To answer some of your comments:I used 2006 exactly because that was a very good year (and said so). I was only trying to show the kind of result we would need from government investment and, since most people don’t aren’t financial analysts, gave a comparative. I agree that government can make good investments, but most of those have been long-term national policies, such as 30+ years of building interstate highways. Railroads didn’t take much government money — the transcontinental railroad was “build it and you’ll get a lot of land we’re not using.” An opportunity cost, not a huge cash outlay. And the internet as we know it was not a government investment. They did the basic research through DARPA, and it grew incrementally, then exponentially. The tech boom of the late 90’s created huge amounts of “dark” fiber, which created the capacity for modern broadband, and that was private money. A bunch of smaller, scattered projects is far different than a long-term commitment (which I’m no longer sure we’re able to make). If the money had gone to a 10-year program to support NASA, fusion research, medical research, etc, I would have been delighted. You commented that “Something like the Ansari X Prize would be a great way of combining government funding with the Darwinistic power of free enterprise to achieve the goals quickly and efficiently. I find this approach appealing, though unlikely.” I agree 100%, and the mind boggles at what might have happened with 25 Ansari-type prizes of $100 million each, instead of $10 million.I’d argue that by and large, your examples show that when government establishes the preconditions for successful investment (and sometimes incentives and targets), then gets out of the way, that’s when investment has major positive impacts. I’m not sure you can cite many cases of direct government spending on “investment” that has been outstandingly successful. (Japan’s 20-year “investment binge and their 5th generation computer intelligence project, California’s $40 billion “train to nowhere” now barreling down the track) I also agree with you that we will have to reduce the debt because we ultimately won’t have a choice, and go further and say that some level of debt is not only acceptable, but desirable. Whether that be 40% or 60% of GDP can be argued, but the current trajectory CANNOT continue. And very few people actually consider the total debt — Federal, State, and local governments, plus unfunded liabilities (social security, medicare, pensions). I believe we’ve long since passed the sustainability level and we’re going to see repudiation (politely through inflation; impolitely through default).To rephrase my conclusion, I’m not sure the type of investments we’re making now are going to be economic game-changers.
Michael, I’m generally considered liberal (especially by my dittohead family members), and I think the tax credits were good to include in the stimulus bill.I see them as having been part of the “stop the bleeding” aspect by providing immediate relief for folks who were hurting and encouraging consumer spending, if only marginally. Sometimes the benefits/costs aren’t as tangible or easily measured, but I think an important benefit of the tax credits was the boost to the morale of the consumer sector, which isn’t easy to measure. It’s not always easy to say that X dollars spent on boosting consumer morale resulted in Y dollars of consumer spending that led to Z dollars in increased GDP and tax revenues, but sometimes it’s enough to just make things hurt a little less when times are tough.There’s a balance point where taxes are neither too high nor too low, and when the economy is struggling, giving temporary tax breaks — especially to low-to-middle income consumers — is often a good way to infuse a little cash at the bottom end that may reap rewards in terms of slowing or reversing the decline.Now, I do not think tax cuts are a panacea, and I think there are times when higher taxes are called for. But in this case, I think the tax credits served useful purposes, both in terms of “selling” the bill and in terms of boosting general consumer morale.
Michael,I have no clear answers to your questions. Sorry I couldn’t help there.I don’t care much for the tax credits, myself, but I understand the operation of our political system well enough to know that we have to pay off the plutocrats or things won’t get done.
Mcclever,re: Now, I do not think tax cuts are a panacea, and I think there are times when higher taxes are called for. But in this case, I think the tax credits served useful purposes, both in terms of “selling” the bill and in terms of boosting general consumer morale.Perhaps I’m mistaken, but weren’t the tax cuts/tax credits included in the ARRA partly at the request of and in an effort to obtain Republican votes, therefore making it a bi-partisan effort?
Gee, Jean. Bi-partisanship in Congress??:-)
Michael,Your 13% targeted reduction in health care costs through investments in information technology is a welcome development and should pay-off in a shorter timeframe than you’d suspect. This change is already occuring very rapidly.In my recent foray into the hospital and orthpaedic environment – after having broken my leg last winter – it was a pleasant surprise to learn that test results (CT scan, MRI, x-rays, prescriptions, dr. orders, future scheduled appointments), as well as my entire medical records, are all now computerized – and no longer require photocopying and sending records by courier to a different clinic, hospital or having to schlep copies of my own medical records across town to my new clinic. All information is available to medical personnel instantaneously, and I can log in online from home to view any of my records, test results, etc. Although I don’t know the specific cost-savings figures, it should be a significant savings, not only to the clinics, hospitals and doctors, but also to the insurance companies.
shortchain wrote (concerning ARRA, also known as the 2009 stimulus program):Michael,I don’t care much for the tax credits, myself, but I understand the operation of our political system well enough to know that we have to pay off the plutocrats or things won’t get done.===============I’m curious which of the tax credits in ARRA “paid off the plutocrats.” The largest credit category started phasing out at $75,000 per year, and I’m sure you don’t think many “plutocrats” profited from an increase in the earned income credit. Of course, even the plutocrats might benefit from the home energy upgrade credit (30% of cost), but the $1500 maximum credit won’t do much to help pay Al Gore to reduce his (rather large) energy footprint.Let me help. You might want to go to: http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009.Read it, then let me know what in ARRA went to “pay off the plutocrats.”You know, letting people keep more of their money through tax cuts and tax credits isn’t just to “pay off the plutocrats,” although I do understand that thinking is so much less burdensome when you can resort to left-wing talking points instead.And Jean, I’m absolutely sure that the Republicans were delighted that Pelosi and Reid reached across the aisle to give the rich people better access to the child tax credit.
Jeff,re: (concerning ARRA, also known as the 2009 stimulus program)And TARP should also be known as Bush’s 2008 stimulus program.
Jean wrote:Jeff,And TARP should also be known as Bush’s 2008 stimulus program.”================I agree 100% with you. TARP may not be popular today with conservatives (it’s one reason why Bennett lost in Utah), but it was a bipartisan bill. I would never criticize anybody, of either party, who voted for it. Most economists agreed that TARP saved the global financial system from collapse (which is what triggered the Great Depression, and why FDR declared his bank holiday).Based on what Tim Geithner — and others — have said, it appears that the Feds will either make a small profit or a small loss on TARP. Almost all the bank money is back, with a very generous profit. AIG ($180 billion TARP) seems likely to be able to repay. The issue as to profit or loss for the entire program seems to hinge on how much or how little the Feds lose on the auto industry bailout.You may recall that the current Administration, not the Bush Administration, did the auto industry TARP bailout. The auto industry bailout involved giving the secured bondholders a major haircut, while allowing the UAW, an unsecured creditor, to be made whole. If traditional bankruptcy law had been followed, the haircuts would have been reversed and the Feds would not be out billions.Although there are good arguments to be made that Detroit shouldn’t have been rescued, on balance I think it made good sense. I disagree with the concept of bailing out the UAW and abrogating basic bankruptcy principles.
Michael Weiss said: First, nobody has answered the questions I posed at the end of the article. Second, the easy targets of the bill are the ones being attacked. Does this mean we are all in agreement that the money for transportation and improved energy efficiency is well spent?Bart doesn’t like the tax credits, presumably because it’s not a rate reduction. Do the other conservatives here agree that it should have been a rate reduction instead of a tax credit? Or should the tax credit have been dispensed with altogether? Likewise, do the liberal (or should I say progressive) members here think the tax credits were good to have in this bill?=========I’m no economist, but to answer the questions in your post:1. If I wanted to jump-start the economy, I wouldn’t have passed a multi-year stimulus. As of this point I believe only a bit more than half the $790 billion has been committed, and somewhat less than half actually spent. I would instead have kick-started consumer spending with some sort of FICA tax suspension (that disproportionately benefits lower-income people), given business a boost through the FICA suspension plus first-year expensing of capital purchases, and put in a 1-year suspension on taxation on the repatriation of overseas/offshore corporate profits. I also would have immediately passed an extension of the 2009 tax code (Bush tax cuts and other items, like the annual AMT fix) through at least 2012, so as to reduce economic uncertainty.2. I can’t answer this part (how much more or less to spend) because I don’t know the costs and impacts of part 1.Concerning your more recent questions: Energy-saving rebates are OK ways to get money to consumers, although there is a fair amount of overhead and there’s a question as to how much marginal effect they really have.Transportation spending is mostly pork and it takes a long time to hit the economy. It doesn’t have the same impact it did 80 years, when it meant hiring 2000 guys with shovels. Now it means 20 guys driving expensive machinery and 20 expensive consultants behind them (I used to be on the Board of an agency that distributed transportation grants — I know). I am positively horrified by all the money that went into high speed rail or, as I call it, “Railroads to Nowhere.”In general, I think targeted tax credits and creating big pots of money for certain types of projects is economically inefficient, but it is beloved by politicians and lobbyists.It’s like the Ansari prize concept you support. Pick something major you want that would be a game-changer, for example, a solar panel with twice the efficiency of current technology that can be produced at half the cost. Put up a $1 billion prize. My guess is that government-directed research would cost many times more and take many times longer than the prize solution, because governments are not risk-takers.I don’t mind stimulus, but I want it to be cost effective.
@JeffAlthough there are good arguments to be made that Detroit shouldn’t have been rescued, on balance I think it made good sense. I disagree with the concept of bailing out the UAW and abrogating basic bankruptcy principles.And this, I think, is the basic difference between liberals and conservatives. The “UAW” was not “bailed out” — the workers, the actual people who build our cars, were protected. As you note, “traditional bankruptcy law” would have protected investors and banks rather than individual workers. It’s a classic question of whether you give the benefit to the people on the high end or the lower end.The “traditional bankruptcy law” was, of course, written by and for the people on the high end. Had there been no assistance given to the auto industry, a major portion of the American economy would have collapsed, immediately throwing around 100,000 people out of work. The ripple effect of that would have caused the loss of perhaps a million more jobs, as suppliers lost orders, transportation people had less to transport, and all those people who no longer had jobs stopped buying things from other producers. The way the assistance was structured, it provided the maximum help to the maximum number of workers. And that was precisely what the American economy needed it to do.As you say, the government will either make a small profit from this move, or a small loss. A profit would be great; even the small loss is clearly worth it, for the immense amount of help it gave the economy and the American people.
Jeff, I’m going to respond to your post backwards, because it will make more sense that way.”I don’t mind stimulus, but I want it to be cost effective.”So do I. I hope your conservative brethren here share that belief, though I’d like to hear directly from GROG and Bart on this. I’d also like to hear from Rudy (the conservative San Franciscan), but I guess nobody’s managed to convince him to come by this place.If we are in agreement that a government-funded Ansari-like contest is a good thing, then what we’re really left with in difference of opinion is whether what we have, while not as good as the Ansari contest, is better than having no stimulus bill at all. Or, to put it differently, once the bill is written, do we vote “yea” or “nay” on the one option in front of us?”In general, I think targeted tax credits and creating big pots of money for certain types of projects is economically inefficient, but it is beloved by politicians and lobbyists.”I agree that it is not the optimal approach. It’s a 20th century solution to 21st century issues, and it’d be worth changing. I’ve been mulling over writing an article around this notion.I fail to see how “Transportation spending is mostly pork,” given that its economic benefits are broad and significant. Sure, “it takes a long time to hit the economy,” but that’s the nature of investment spending. This article was about the investment angle, not the Keynesian countercyclical angle. Not that it’s not a worthy topic, but one can put too much in a single article.I agree that fewer people get employed in building this stuff. Is that a bad thing? I’d expect you to be pleased that we can get more transportation infrastructure for less money. I certainly am.I’m surprised that you feel the high-speed rail is but “Railroads to Nowhere.” The California high-speed train will serve the second highest demand passenger travel corridors in the country, and will relieve pressure on the airspace covering San Diego, Orange County, Long Beach, Los Angeles, Burbank, San Jose, San Francisco, Oakland, and (to a lesser extent) Sacramento airports. The economic impact will be huge.Finally, to your first point, I believe the reason a multi-year stimulus was necessary is that long-term projects need a long-term commitment. If you budget those year by year, you end up with a lot of incomplete projects like the superconducting supercollider in Texas.Regarding the tax credits you suggested, I would expect that the same issues we had with the existing tax credits would apply here, namely that it would go primarily to reducing personal debt. As I said in the article, I think this is a good thing for the country in the long term for various reasons, it actually has a cooling effect on the economy in the short term.
@shrinkersYou say “And this, I think, is the basic difference between liberals and conservatives. The “UAW” was not “bailed out” — the workers, the actual people who build our cars, were protected.”==========Finally, we agree!Capitalism only works when there are clear rules and consistency. The bankruptcy laws are designed to give that. There is a hierarchy of creditors, with, I believe, government at the top (taxes due). I have no problem with discussing changing the hierarchy, but there needs to be one clear path. If the UAW bailout becomes more than a unique event, then “secured” creditors will demand a risk premium against arbitrary government action. Instead of relatively clean proceedings in bankruptcy law, in major cases we’ll see the action shift to lobbying and political influence on a case-by-case basis. Do you REALLY want to see that happen?In the case of the UAW bailout, the pension fund could have been taken over by the Pension Guarantee Board, the way other underfunded pensions at other companies are taken over. UAW retirees would have received the same treatment as others in their position. Perhaps the treatment should be better, but that’s a different issue. The UAW has had MUCH better retirement benefits than 95% of private sector retirees, and they did better.I’m not arguing that they should not do well, I’m arguing that it’s incredibly dangerous to give them special treatment that other, less well situated people don’t get.And I also wonder whether this extra-legal, extraordinary benefit was possibly due to the fact that the UAW spent tens of millions for Obama and is always a Democratic party stalwart.Do you think that politics should decide winners and losers on a case-by-case basis?
Michael said: I fail to see how “Transportation spending is mostly pork,” given that its economic benefits are broad and significant. Sure, “it takes a long time to hit the economy,” but that’s the nature of investment spending.”==========I agree with you in the abstract, and it always drives me nuts that politicians prefer to build new rather than maintain old….My comment that transportation infrastructure spending is mostly pork relates to how decisions are made as to which projects get funded. I’m an elected official, and I used to sit on a regional commission that allocated transportation funding. The degree of politicization is huge. Of course, one can also argue that transportation funding SHOULD be allocated politically, and part of me agrees — we’re elected to respond to public demands (although we should also balance with what’s best). However, ARRA was sold as a stimulus program (and one was needed), so I would have designed it on the basis of an immediate, short-term kick. I think we totally agree on the need for long-term investments.As for the California High Speed Rail… the State is currently looking at spending $40 billion bond to pay for this project — and I doubt if you think the price is going to go down (I watched the new SF Bay Bridge price tag double and double and double again). There are also very significant questions as to whether the project will ever pay for itself, or if operating costs will always exceed revenues. Certainly Amtrak is in that position, and I believe even the Metroliner, in a far more densely populated population corridor, is a money-loser. I also believe that in Europe — also much more densely populated — both the high speed and conventional train systems are subsidized (and didn’t the Chunnel go broke a few years ago?). If it’s not economically viable in areas of higher population density, where there are very clear, compact, urban cores, will it be viable where there’s lower density and a much more diffuse urban geography?Even before the bust, California had a structural budget deficit. Services were going to hell, infrastructure was falling apart, school funding was inadequate, and the unfunded pension liabilities were increasing. California is already one of the higher-taxing states, and I don’t believe it can tax its way out of its problems.Given the State’s financial problems, is it wise to invest $40 billion of borrowed money (or more) on something that when complete will probably run substantial operating losses? Should high speed trains take priority over police protection and failing schools?Perhaps the capacity added by the high speed rail will be less expensive than alternative solutions, but I really doubt it. It’s not that I don’t like the idea, it’s that I question whether it’s the best use of VERY limited resources.
I agree that ARRA was sold as a stimulus program. I’ll hit that notion in a different article, because it’s pretty involved, too.I doubt that the California High Speed Rail will pay for itself. The California highway system doesn’t pay for itself. Neither does the air travel system. Transportation has always been subsidized in the United States. To suggest that CHSR should be singled out as a consumer of subsidies suggests to me that you don’t know how much the rest of the transportation infrastructure gets. The question isn’t whether or not to spend the money at all, but rather whether it has better marginal utility being spent on rail than on airport expansions and loss of productivity arising from increased air traffic congestion induced delays.Yes, before the bust California had a structural budget deficit. But, contrary to popular belief, California is not that highly taxing. It’s at the bottom of the top quintile. What creates the illusion is the absurd property tax structure resulting from Proposition 13 in 1978. You’d probably be surprised to learn that Wyoming has a much higher per-capita tax than does California.”Should high speed trains take priority over police protection and failing schools?”It’s hard to answer that, without understanding the marginal utility of those dollars in the three buckets (police, education, high-speed rail). At least education is a similar long-term investment, so it’s a more apples-to-apples comparison than the police vs. rail question. Even then, the marginal social utility on each side of the equation depends on which elements are more valuable to you.
Jeff,On what basis do you justify the statement that this country, still the richest one in the world, has “VERY limited resources.”?Seems to me the only truly limited resource is the willingness of the conservatives like yourself to invest in the future of this country.
Michael,I realize that I never answered your basic question: all caveats aside, if I had been a Republican in Congress in spring of 2009, would I have voted for the final version of the stimulus plan?============Honestly, I’m not sure. I think the plan was nowhere near optimally designed, and we’re going to be paying for it for a very long time. If the final vote was up to me alone, I probably would have voted yes. SOMETHING was needed, even if this wasn’t very good.But it wouldn’t have been up to me alone, so if I had been a Republican in Congress, I would absolutely have voted no. This was a perfect example of a “free” vote. The bill was going to pass, once Reid and Pelosi came to agreement on the details, and no matter how I voted, my vote wouldn’t make a difference.This was not a bi-partisan vote (like TARP), and the outcome was never in doubt. Why would I alienate my base and antagonize my leadership by voting for something neither would like? Politicians don’t commit political suicide willingly, and shouldn’t do so unless it’s a fundamental moral issue or a case where their sacrifice will make a difference in the outcome (Johnson in 1865-68, Ford in pardoning Nixon, etc). This was not a “Profiles in Courage” moment….=============Finally, I want to say how much I’ve enjoyed this thread. It’s about how to make policy choices in an imperfect, politicized world where there are no easy answers, where talking points prove nothing, and where you can never know whether you made the “right” decision or not.You can’t seriously engage in a conversation on this post without recognizing that the other side does have valid points and concerns.Thanks for putting this up, and I hope you’ll have many more.
shortchain wrote:Jeff,On what basis do you justify the statement that this country, still the richest one in the world, has “VERY limited resources.”?Seems to me the only truly limited resource is the willingness of the conservatives like yourself to invest in the future of this country.================I said that California is structurally broke. The great majority of the funds for HS rail will come out of the California budget. Do a little research on California’s budget, liabilities, and tax levels. I live here — I know.The amount of assets is largely irrelevant — net worth is assets less liabilities. Lehman Brothers was one of the richest firms in the world — until they collapsed.I don’t think we have “the wealth” to pay for all the promises we’ve made. There is general consensus that we cannot continue on our current trajectory. It is absolutely certain that we cannot buy everything we might like to have.
Jeff,”…if I had been a Republican in Congress, I would absolutely have voted no. This was a perfect example of a “free” vote.”This is one of the things that bothers me most about the whole thing. In the end, it’s more important to focus on being against whatever the Democrats are doing than to work seriously toward improving the country. I’m not damning you personally with that statement, but I am damning the degradation of bipartisanship that has led to this.I think it was in Whistling Past Dixie that I read how this degradation was an unintended side effect of Gingrich’s philosophies that he put into practice in 1995. In that sense, I guess we can blame Newtie for it, but I don’t think that was what he was aiming for.”Finally, I want to say how much I’ve enjoyed this thread.”I’m glad. I’m trying to move the needle away from pure partisanship. While the cheerleading can be fun at times, in a watching-football kind of way, it’s not very helpful to any of us. I’d like to think that, in some small way, I can help to encourage real dialog. We can all benefit from it.
Jeff,Thanks for the laugh. The “It is absolutely certain that we cannot buy everything we might like to have.”Who said we could?And yet, Meg Whitman is spending 60 million of her own money to buy high office in your broke state. And yet, the energy companies are spending untold (because they won’t tell us how much) millions to try and overturn the California rules on energy efficiency. Then there’s Carly Fiorino, whose career I’ve watched from afar as she gutted one of the premier American technology companies and now spends the money on getting elected.The problem with California isn’t a lack of money. It’s a failure of the California model of legislation. To pretend otherwise is to prove that you aren’t paying attention.If your priorities put giving people who arguably only have interest in their own aggrandizement millions of dollars — and are willing to sell hundreds of thousands of jobs down the river to do so — over building infrastructure, including high-speed trains, then fine. Don’t expect me to stand by and cheer.
shortchain said: Thanks for the laugh. The “It is absolutely certain that we cannot buy everything we might like to have.” Who said we could?And yet, Meg Whitman is spending 60 million of her own money to buy high office in your broke state. The problem with California isn’t a lack of money. It’s a failure of the California model of legislation. To pretend otherwise is to prove that you aren’t paying attention.=============Ummm, paying attention? If you lived in California, or paid attention to California, you might know that Whitman has spent $120 million, not $60 million.And you might know something about the California budget as well….Fact: California has one of the highest tax burdens of any state.Fact: California has one of the most unfriendly business environments in the country (which is why no major company has expanded production in California in years).Fact: California has not had a balanced budget (other than “smoke & mirrors) in the last 8 years.Fact: The Legislature, to even make a fudged budget work, has resorted to directly taking money from cities and counties that they need.Fact: The pension system for government employees is hundreds of billions in deficit.Fact: Education budgets are being slashed. State university students have been hit for the last several years with double-digit tuition increases.And you want to blame this on Carly Fiorina and Meg Whitman, and you think that the solution is to build a $40 billion train system that will never break even (and will likely cost more than the $40 billion estimate).Where do you think the money is going to come from?
Jeff,Excuse me, but where did I even hint that either Fiorina or Whitman were to blame for California’s insane legislative process?That’s right, nowhere. Don’t speak to me of reading comprehension.I deliberately under-estimated Whitman’s spending. That she spent more hardly weakens my point.While there may be a relationship between why no major company has expanded in California in years and its tax rates, oddly, the same exact thing can be said for South Dakota — and the tax rates there are among the lowest in the country. I think you have failed to prove the point.Since the train system would be build largely with federal funds, and your didactic statement that it “will never break even” could be said about virtually all public expenditures, this means precisely zilch.
Jeff,I appreciate your desire to have open and honest dialog, but you need to check your sources.”Fact: California has one of the highest tax burdens of any state.”As I said, California’s per-capita tax burden puts it at the bottom of the top quintile, and is well below Wyoming, that awful liberal state.”Fact: California has one of the most unfriendly business environments in the country (which is why no major company has expanded production in California in years).”Source?”Fact: California has not had a balanced budget (other than “smoke & mirrors) in the last 8 years.Fact: The Legislature, to even make a fudged budget work, has resorted to directly taking money from cities and counties that they need.Fact: Education budgets are being slashed. State university students have been hit for the last several years with double-digit tuition increases.”Thank Howard Jarvis for these. What other state has a 2/3 supermajority requirement for the annual budget?”Fact: The pension system for government employees is hundreds of billions in deficit.”Ironically, this is because CalPERS put into practice what Bush was trying to get Social Security to do. It worked well for them in the 90s, but it’s really bad when the economy tanks. And very little of CalPERS money comes from taxpayers, unless you consider payroll deductions of state workers to be taxpayer money.I don’t think anyone here is blaming these things on Fiorina or Whitman. Personally, I blame them both for some very bad business decisions, and, in Firorina’s case, some that may well be illegal.I don’t think that “the solution” is to build a train system. But I do think that it’s probably better spent there than on air transport infrastructure that has a lower marginal benefit due to airspace saturation.