feuervogel (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
feuervogel) wrote2011-05-01 08:17 pm
feuervogel) wrote2011-05-01 08:17 pm
"Central planning"
Comments on a friend's annual tax day rant led to her explaining her definition of central planning to include anything the government does to incentivize one technology/industry over another (for example, tax incentives for citizens buying more energy efficient appliances, or for companies to invest in alternative energy research).
Are the massive tax breaks to oil companies and the seriously messed-up formulas that govern road money (from fuel taxes) distribution also central planning, or does that not count?
From the Economist article linked in my previous post:
Also, In 2006 German road fees brought in 2.6 times the money spent building and maintaining roads. American road taxes collected at the federal, state and local level covered just 72% of the money spent on highways that year, according to the Brookings Institution, a think-tank. So, yes, kids, roads and driving are heavily subsidized, moreso than Amtrak, even. Other things that are subsidized: airlines.
Are the massive tax breaks to oil companies and the seriously messed-up formulas that govern road money (from fuel taxes) distribution also central planning, or does that not count?
From the Economist article linked in my previous post:
The federal government is responsible for only a quarter of total transport spending, but the way it allocates funding shapes the way things are done at the state and local levels. Unfortunately, it tends not to reward the prudent, thanks to formulas that govern over 70% of federal investment. Petrol-tax revenues, for instance, are returned to the states according to the miles of highway they contain, the distances their residents drive, and the fuel they burn. The system is awash with perverse incentives. A state using road-pricing to limit travel and congestion would be punished for its efforts with reduced funding, whereas one that built highways it could not afford to maintain would receive a larger allocation.
Also, In 2006 German road fees brought in 2.6 times the money spent building and maintaining roads. American road taxes collected at the federal, state and local level covered just 72% of the money spent on highways that year, according to the Brookings Institution, a think-tank. So, yes, kids, roads and driving are heavily subsidized, moreso than Amtrak, even. Other things that are subsidized: airlines.
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--Beth
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Hell, providing federal loans, grants, and tax writeoffs for higher education could be considered "central planning"- if the purpose of government isn't just to compensate for negative market externalities, but also to encourage positive ones, then there are a whole lot of things that make plenty of sense to have done centrally. I think funding/incentivizing certain research will actually help many large businesses because it lets the government foot the bill for things that a business will not want to fund on its own(in cases where it's more cost-effective to piggyback onto existing research than it is to potentially hit a few blind alleys before making a breakthrough).
If someone really wants to take it to ludicrous ends, I suppose that even national defense constitutes central planning of a sort.
The funny thing, in a black comedic way, is that once people get a clue about the oil issue, we have the choices of either getting a solution in place faster and fouling up the environment more, or taking more time and fouling up the economy and peoples' immediate lives more.
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Central planning
They had far more lathes than we did, but we didn't need that many lathes in order to produce useful things that people actually wanted and needed. The market for lathes here decreased, and the lathe-makers started building something else instead. Over there, they just kept right on building lathes, in order to increase their country's industrial capacity.
In the US, instead of saying to Joe the plumber, "Thou shalt make lathes now." Our government gives a slightly softer touch, "Dearest Joe, if you make a lathe this year, you'll get $1000 back on your taxes. Your customers will also get $1000 back on their taxes too. We recommend you advertise this to them." (Cash for clunkers anyone?)
While I can certainly appreciate the softer touch to the forced labor, central planning still doesn't work for increasing overall economic activity, growth, and average standard of living of the citizens. I think our governments (state and federal) should do as little of it as possible.
I believe anything the government does, it has the potential to screw up and not notice. The incentives are not there for government employees to get the best value for their dollar when making purchasing decisions the same way they exist for private individuals and corporations. Perhaps it is important to give incentives to oil companies to produce more domestic oil, or farmers to produce more corn, but when to we discontinue those incentives? The way our political system works, once a class receives a privilege, they have lots of incentives to keep it. The farmers still want their ethanol subsidies, the oil companies want their refinery and exploration tax breaks, GE wants it's solar discount, and none of it makes any sense to someone who isn't a farmer, oil worker, or solar installer.
Even home ownership tax breaks, in my book, shouldn't exist. When the economists look at the actual effects, all they do is increase the price of housing. They don't actually result in a higher percentage of homeowners, more stable neighborhoods, or any of the other good deeds a tax break for interest on your mortgage is supposed to do for you. Ending those subsidies however, is extremely painful, and nearly everyone (except the renters) rails against it and calls their congress person with their own personal tale of woe if the tax break for mortgages is ended.
Why is someone like me, who is fairly wealthy, given a tax break for borrowing money against my house to gamble it in the stock market? Why is our government centrally planning and encouraging that? They did have a theory that there was some positive externality they were encouraging, but they were wrong about it. Now what? How do they test what actually works before they pass a law?
I'd really rather that the federal government stay out of all of it -- roads, home building/ownership, energy, and education. Let local areas decide what they really need, and build it. It made my stomach turn when I heard the local politician crow about how he got us$5M from the feds for a pedistrian bridge. If it's all local, with our local property taxes, then fine, build the bridge, but don't force taxpayers in Georgia to pay for this monstrosity.
With respect to oil, pollution is a true negative externality that can be influenced by the federal government, but the way they've gone about it so far is not the most efficient way to solve the problem. Cash for clunkers is not nearly as effective as a stiff gas tax, all cash for clunkers did was raise the price of used cars -- the value of my minivan according to kbb.com has gone UP in each of the last two years. That really did hurt poor people, the cash for clunkers money just went to wealthy people who could afford to buy a new car in the first place.
--Beth
Re: Central planning
Would you also like to see federal funding for road building and maintenance cut? Because people in North Carolina ought not to be funding the monstrosities of California freeways, either.
Re: Central planning
Yes I would. I'd also like to see the federal government stop telling states what their legal drinking age must be, how fast people may legally drive, and numerous other strings which are attached to receiving federal funds. It doesn't mean that I want no highways or that I want 12 year olds to legally be drunk in public, it means that I want to reserve those things for the states and local cultures.
With many partially-federally-funded projects, such as the big dig, it wasn't a good idea to do in the first place, but if someone offers you a really good deal it's hard to turn down.
For example, I have no need for another pinball game in my house. Pinball games cost around $700 used and cost $100 to maintain annually. If someone offers me a good pinball game for only $350 though, I'd be sorely tempted to take it because it's a really good deal and I love pinball. I shouldn't. I know I shouldn't. But if I don't take the free $350, someone else will and my family might vote me out of the office of mistress of the stuff.
The federal government does that to localities all the time. Lately they've been doing it with the Build America Bonds, saddling local governments with debt they can't pay back, but don't feel they can afford to turn down. Sometimes the proper thing for a shrinking community is to downsize responsibly, not to re-pave main street with 4 lanes in order to keep local people employed. If the community next door accepts the money and yours does not however, it may hurt them come bond repayment time, but your community will suffer in the short term in comparison to what would have happened if the government hadn't offered that deal.
The federal government distorts rational decision making on the local level, and the feds can't possibly have all the information to make the correct decisions for every municipality. At the federal level they get swayed by who has more charisma or who has been in office longer. The wrong projects get funded.
--Beth
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