Tax Code That Encourages Manufacturing and Savings

[Politico]

No government can determine what consumers want and what firms have a comparative advantage in, especially within the context of the global economy. As a result, the best policy, the one that promotes the greatest level of economic freedom and growth prospects, is to allow consumers/firms to pursue their separate self-interests without excessive state interference. This implies having the state completely embrace free trade, and to be concerned in good times with collecting roughly enough tax revenue to ensure law/order, national defense and basic infrastructure (i.e., "public goods" with positive spillover effects such as interstate highways, certain types of R&D that are not prevalent in the private sector, etc.). Deficit spending is a fine policy only during downturns in the business cycle, but only if the deficit spending focuses on these three spheres and does not descend into areas the government has no business being involved in. Furthermore, whenever possible government responsibilities should be transferred from the federal level to the state level, and from the state level to the local level.

This broad philosophy will ensure the highest level of economic freedom and growth prospects, not to mention the greatest degree of government of the people, by the people, and for the people.

[Politico]

I personally would couple the replacement of private health insurance by Medicare(since health insurance significantly increases the cost of employment) with the replacement of all taxes with a VAT(since income taxes increase the cost of employment to an even greater extent).

Sounds like Europe.

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How could you start off with such a bad idea and end with such a good idea? A negative income tax would not eliminate poverty, but it would help alleviate it. I am not sure it would have much of an impact upon stimulating the economy, though.

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You don't really believe politicians would do away with income taxes forever, do you? I cannot think of a single place on the planet that has VAT but no income taxes. It's always VAT and income taxes.

[Politico]

Nobody is railing against public funding of basic infrastructure such as bridges/highways at the state level, firefighters/police officers at the local level, and the military at the national level. Even Adam Smith spoke out in favor of public funding of basic infrastructure.

Put aside the improper allocation of resources (e.g., getting government into realms it has no business being in) and perverse incentives, as noted by Wonk, and here's the biggest problem with Keynesiansim: The deficit spending never seems to go away even after the business cycle is on the upswing again. You can look at the data of many nations, and from a strictly Keynesian, theoretical point-of-view you would think these nations have been in the midst of 30+ consecutive years of recessionary conditions! Eventually the enormous, non-stop deficit spending adds up to a situation like Japan where debt-to-GDP is over 200%, which is obviously a figure that can only end in default.

[Politico]

The deficit spending never seems to go away even after the business cycle is on the upswing again. You can look at the data of many nations, and from a strictly Keynesian, theoretical point-of-view you would think these nations have been in the midst of 30+ consecutive years of recessionary conditions!

I hear you dude...

Where's 2009-2012? Oh yeah...we would need Al Gore's forklift for those years.

FYI: I am registered Democrat. What the hell are you doing trying to turn this into a partisan issue, anyway? Both sides are guilty of deficit spending to no end. At least the Republicans do it to "starve the beast" in hopes it will lead to a smaller government down the road. Democrats in power do it because they don't care about the future. Well, at least Obama doesn't. Give him four more years, and we'll be lucky not to default by 2025.

[Politico]

Nobody is railing against public funding of basic infrastructure such as bridges/highways at the state level, firefighters/police officers at the local level, and the military at the national level. Even Adam Smith spoke out in favor of public funding of basic infrastructure.

I swear it's like listening to the Rush Limbaugh show around here.  READ the paper dude.

When did Governor Rick "Let's Re-invade Iraq and Then It's on to Turkey" Perry matter again? Why is it August 2011 in Link's world right now?

[Politico]

The deficit spending never seems to go away even after the business cycle is on the upswing again. You can look at the data of many nations, and from a strictly Keynesian, theoretical point-of-view you would think these nations have been in the midst of 30+ consecutive years of recessionary conditions!

I hear you dude...

Where's 2009-2012? Oh yeah...we would need Al Gore's forklift for those years.

FYI: I am registered Democrat. What the hell are you doing trying to turn this into a partisan issue, anyway? Both sides are guilty of deficit spending to no end. At least the Republicans do it to "starve the beast" in hopes it will lead to a smaller government down the road. Democrats in power do it because they don't care about the future. Well, at least Obama doesn't. Give him four more years, and we'll be lucky not to default by 2025.

This isn't about Democrats and Republicans.  This is about people that believe in absolutes and people like me who use logic and facts.  Like I have said multiple times before there are certain things government should be involved in and there are certain things the private sector should take the lead in.  

Whenever feasible, the free market should take the lead. I agree that there should be some fiscal spending to help counteract downturns in the business cycle with regards to spending on building/fixing highways/bridges and other basic infrastructure projects with positive spillover effects that the market will not provide adequately. That does not mean throwing $500 million of taxpayers money at a pie-in-the-sky company that nobody else will lend to, to give an obvious example.

Let's not forget that the private sector ultimately funds the public sector.

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Romney will eliminate the deficit via spending cuts, and all future spending will not occur unless it makes sense from the standpoint of contributing to economic growth rather than being parasitic waste. We do not have a taxation problem; we have a spending problem. We are not only spending too much, we are not spending funds properly.

[Politico]

Excellent post, Wonk. Easily the best post of 2012 so far.

I would also throw in Milton Friedman's "four ways to spend money" to complement your second point:

http://www.youtube.com/watch?v=5RDMdc5r5z8

[Politico]

Link,

Can you at least admit that the federal government is generally less accountable and efficient than state/local governments? To take it a step further, and maybe this is a bridge too far for you, can you admit that centralized governments, given their ability to effectively raise more and more revenue via coercion, are able to consistently continue performing activities that the "consumers" (i.e., taxpayers) of the government would rather not pay for?

By the way, you quite frequently speak of the post office. There was once a time, not too long ago, when USPS insisted that only they should deliver expedited mail because they believed that only USPS could properly serve consumers. Well, guess what: UPS, FedEx and many other companies can do it more efficiently than USPS does today, never mind decades ago. It's better for the American consumer that private companies were able to enter that market, creating a competitive atmosphere that benefits consumers, as opposed to leaving the market as a government-protected/controlled monopoly (which inevitably leads to higher prices and usually lower quality service).

[Politico]

And if you want to talk about taking things for granted the private sector provides products, services, etc. for about 20,000 things in your life before you even get into your car to work. And the number is so high because as something as simple as your toothbrush has about dozens of component industries and companies and thousands of workers that contribute to it. The fact that you could be blind to things that surround you all day is a much greater example of taking things for granted and in general being blind than any of the stuff you mentioned possibly could.

Eloquently put, as always. A video to complement this powerful notion:

http://www.youtube.com/watch?v=R5Gppi-O3a8