"Central planning"

[feuervogel]

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:

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.

Comments

Re: Central planning

[beth_leonard]

Would you also like to see federal funding for road building and maintenance cut?

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