January 12th, 2009

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Back Safe From GaFilk

Well, that was fun. But I will confess that after a week away, I am very happy to be home and sleeping in my own bed tonight.

I will hopefully give a full report on GaFilk later. Briefly: we could not have been treated more wonderfully as Interfilk guest & family. The singing was absolutely first rate. I hope someone got a video of the Roper/Sutton performance at the dead dog! I really want a CD of the GaFilk Banquet Band. Emma Bull was amazing in concert. I will not even begin to list all the friends I saw for fear of missing someone.

Best piece at the filk was Deborah (can't remember last name -- English and plays violin) reading about sweet potatoes.

For those who care, I think my set list was:

Hymn of the Grayson Farmer
Dark Lord Rising
Feast of My Kind
Iowa (my version)
March on Zhahaduhm
Ho for the Death of Time -- Narf
You're Group's Name Here
At The Battle of Malden (by Mistress Rosalind)
Welcome Home (by Mistress Dorigen of the Grey Gate)
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Link Harvest: 538.com on Mankiw's Tax Cut Piece

So Harvard Economist Gregory Mankiw wrote this piece in the NYT taking the conservative line on why tax cuts are better than spending to boost the economy.

Nate Silver at 538.com, who it turns out is a U of C trained economist, notes that Mankiw has indulged in some intellectual dishonesty by misrepresenting an economic paper by Roemer & Roemer, Mankiw responds to this criticism here, and Silver responds to the response here.

As I have observed before, the biggest problem with tax cuts as stimulus is that they are pretty damned useless at this point to motivate behavior because the corporate tax rate is fairly low and most major corporations have accumulated pools of paper loses they can carry forward 19 years to offset in profitable years. Combined with certain sorts of stock and debt transfer tricks, major corporations can already avoid most tax liability. Indeed, as the GAO recently reported, 75% of U.S. corporations already pay no taxes in any given year.

Tax cuts as an incentive work by subsidizing behavior, essentially trying to make something not profitable profitable. This is fine in theory. But when a company is already not paying taxes, offering to reduce their tax burden does not impact behavior because it does not impact their bottom line.

So why do companies lobby for them so ardently? A number of reasons. First is that it is always better to have tax breaks than not have tax breaks. But more importantly, there is an old rule in Washington that you cannot beat something with nothing. Let us pretend I am a telecommunications company and I know that the administration will want to make broadband deployment a priority. There are several ways the government might do this. Some of them I like, such as efforts to bribe me. Some I do not like, such as the government providing service itself or requiring me to actually earn subsidy money. So lobbying for corporate tax breaks -- such as the current proposal to give a 60% deduction for laying fiber to high-cost areas -- is much better than doing nothing and having the government give technology opportunity grants to local start-ups. Besides, if I as a company already find it profitable to do some of these projects, the additional tax breaks for stuff I'm already going to do is nice to have.

But for most projects, I use the following analogy. Imagine I need you for some reason to eat a glass of your favorite beverage. While you would be happy to drink the beverage, you have no interest whatsoever in actually eating the glass.

Me: I'll pay you five dollars to eat that glass.

You: How about you leave the five dollars on the table and I will only take it if I eat the glass?

Me: O.K.

Worse, half the time, I come back to discover the $5 gone and the glass empty. When I ask you what happened, you explain that "eat the glass" can actually mean "drink what's in the glass."
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Addendum to last post

I should note that, according to this Washington Post piece, the Bush Administration presided over the period of weakest economic growth in modern history.

In other words, the period in which radical deregulation and radical tax cuts were adopted for the express purpose of promoting economic growth has proven the most catastrophic economically for the nation, with the modest gains in the middle of the period proving not merely unsustainable over anything approaching a long haul -- but actually catastrophic for lng term economic development.

Happily for the conservatives and the U of C School, they are impervious to empirical evidence. There is always some perfectly good reason -- usually because we did not deregulate enough -- to explain why we should go on making cakes for the Queen of Heaven and the other Gods of the Marketplace.

Yummy, yummy, yummy cassandrafruede. While the rest of the world was distracted by such foolish sideshows as same sex marriage and the war on terror in the 2004 election, I was writing:
It appears that a small but sizeable majority don't care about economic issues nearly as much as keeping gay people from marrying. Not sure how we survive the next four years economically, but right now, I'm off to get some sleep.