Kids, Government And Climate

David French at NRO alerted us to this article by Roy Scranton, a professor at Notre Dame, in the NYT.  Roy’s title is Raising My Child In A Doomed World.  Really, we are not making this up.  David does a nice job calming folks down and reminding us that suicide is not the proper reaction to climate change.  You should read all both David, to see a reasonable response, and Roy to see what at least some of the climate folks seem to believe.

In case you don’t we will give you a taste.  Roy has just had a daughter and he is worried about climate change although his book mentioned in his introduction, we haven’t read it, is essays on war and climate change.  The section we found most interesting was this:

To stop emitting waste carbon completely within the next five or 10 years, we would need to radically reorient almost all human economic and social production, a task that’s scarcely imaginable, much less feasible. It would demand centralized control of key economic sectors [why just limit yourself to key sectors], enormous state investment in carbon capture and sequestration and global coordination on a scale never before seen,

Again, you should really read the whole thing to see that the above quote is not unusual.  Roy appears to believe that the only possible solution is 1984.  Roy is worried that he has doomed his daughter to live on a dystopian planet and his plan is to ensure that she does.

We hope that Roy’s daughter will never endure the government he suggests.

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Government Versus Private

George Leef at NRO Corner is trying to get you to read an article at at the Martin Center.  He starts out with this:

It isn’t easy for any private institution to survive when it has to compete with government-funded institutions. That’s very much the case when it comes to private schools.

We suppose we could give George extra credit for the word easy.  It isn’t easy to compete with other private institutions either.  As we see it, it is easier to compete with government-funded institutions.  Federal Express and UPS seem to be doing fine.  Yale, Stanford, and Hillsdale seem to be doing just fine.

The difference between private institutions and government-funded ones is that the former can go bankrupt while the latter get many more chances to survive.  Jim Geraghty’s The Weed Agency is a wonderful fictional account of how a government agency survives.  It is easier to compete with government-funded institutions because they don’t have an incentive to change.  Their centralized decision making process also makes it difficult for them to change.

What is true is that a poorly run government-funded school is more likely to survive than a poorly run or underfunded private school.  We think that is the advantage of private institutions.  We think George should appreciate that.

Corporate Welfare

Jimmy Quinn at NRO is upset about corporate welfare.  We are too but he doesn’t do much to convince us that the Foxconn deal is a bad deal for Wisconsin.  We would prefer that he gave us the details on Foxconn before discussing Amazon’s search and other issues.  Here is what he says about the Wisconsin deal:

Here’s the bottom line: If the jobs target of 13,000 is met, Wisconsin taxpayers will pay $219,000 per job. If only 3,000 jobs are created, they will pay $587,000 per job in the form of a $1.7 billion tax credit. And these are conservative estimates, leaving out the additional tens of millions of dollars that will go toward the infrastructure improvements necessary to accommodate Foxconn’s new plant.

The second part of the paragraph is a distraction because infrastructure is going to be the responsibility of governments.  We are supportive of the first part of the paragraph because we support what Jimmy identifies as the New Hampshire model: low taxes for every organization and no special privileges.  There are two problems with Jimmy’s analysis.

First, what is the nature of the tax credit?  Presumably, it is a special purpose tax credit that we would likely oppose.  We want to know the details.  Don’t worry, we will be doing some research in the future.

Second, there is a problem with the time frame.  Jimmy says that the deal lasts until 2043 or 25 years.  Thus, the large sum is over 25 years and the cost per job is for 25 years of jobs.  A cost of $9,000 (roughly) per job year is much less scary.

Much more interesting is the possibility of federal tax reform.  Jimmy says that the next push for tax reform will treat state incentives as income.  It makes sense as the backbone of taxable income is all income from whatever source.  We’re supportive of Jimmy’s opposition to corporate welfare but he needs to give us details and alternatives to evaluate Foxconn.

Corporations, sates, and municipalities should be free to act but they should do so in the sunshine.  Voters should know what the deal is and if the corporate income should be properly accounted for.

Sidebar: For example, if the corporation was exempt from income tax on the state level there would be no need to adjust.  The corporation would not get that deduction and pay federal taxes as appropriate.  End Sidebar.

We are against corporate welfare but it is up to the voters.  Educating those voters about the problems is tricky but if New Hampshire can do it then we can hold out hope.  We need to do a better job than Jimmy.

 

 

 

 

ECONOMY & BUSINESS

The Foxconn Plant Is a Bad Deal for Wisconsin Taxpayers

Wisconsin Governor Scott Walker (left), President Donald Trump, and Foxconn chairman Terry Gou at a groundbreaking ceremony in Mount Pleasant, Wisc., June 28, 2018. (Kevin Lamarque/Reuters)

State and local governments genuflect before the corporate altar.It was a nice photo-op: the president of the United States, the speaker of the House, the governor of Wisconsin, and the CEO of Foxconn, a Taiwanese manufacturing company, breaking ground on a new plant that could potentially bring some 13,000 jobs to Wisconsin. President Trump used the ceremony last Thursday to celebrate what he hails as an American manufacturing renaissance: “So we’re open for business. Made in the USA. It’s all happening, and it’s happening very, very quickly. We’ve created 3.4 million jobs since the election, including over 300,000 manufacturing jobs.”

But the Foxconn deal is a condemnable example of corporate welfare in its most egregious form.

A look at the numbers is illustrative. All told, Wisconsin could end up delivering $3 billion in tax credits to Foxconn. Even if Foxconn’s arrival results in thousands of new jobs over the next several years, it will open a gaping fiscal hole that will be filled only in 2043, when the state recoups the money spent on these tax breaks.

Here’s the bottom line: If the jobs target of 13,000 is met, Wisconsin taxpayers will pay $219,000 per job. If only 3,000 jobs are created, they will pay $587,000 per job in the form of a $1.7 billion tax credit. And these are conservative estimates, leaving out the additional tens of millions of dollars that will go toward the infrastructure improvements necessary to accommodate Foxconn’s new plant. The ill-conceived incentives are the core of an all-around terrible arrangement. Who wins? The politicians. Who loses? Fiscal sanity and those footing the bill for political pet projects.

Unfortunately, Foxconn is one among many cases of state and local governments making massive concessions to corporations in exchange for benefits that are easily outweighed by the costs. States and cities dole out billions of dollars every year to attract businesses through cash grants, tax breaks, and new infrastructure.

The search for Amazon’s second headquarters (HQ2), for instance, has left around 230 state and local governments genuflecting before the altar of the Seattle-based tech deity, offering tributes amounting, in several cases, to billions of dollars. The offers are truly extravagant. Various proposals include land giveaways (Stonecrest, Ga.), Amazon input in city-planning initiatives (Fresno, Calif.), and municipal funding for employees to expedite Amazon projects (Boston).

States and municipalities want the jobs and prestige that come with hosting these companies; politicians want the votes that accompany the credit for attracting these companies. It’s a simple function of the wrong incentives run amok.

Aaron Renn, a senior fellow at the Manhattan Institute, explains: “Like Amazon HQ2, whenever there is a major facility like [the Foxconn plant] . . . it is really difficult for states to resist playing the game.” According to Renn, the incentive structure is such that decision makers will either face criticism for aggressively pursuing contracts at great cost, or for failing to secure them. Wisconsin governor Scott Walker would have faced criticism regardless of the decision he made, Renn says.

Economic-development agencies of state governments exacerbate the problem. By using certain metrics to measure success — such as jobs created by government programs — these agencies incentivize state officials to pursue low-benefit, high-cost deals at great expense to the state and its taxpayers.

Nathan Jensen, a professor at the University of Texas and the co-author of Incentives to Pander, makes a version of this argument based on research spanning the United States and several other countries. Astonishingly, he says, most studies find that approximately three-fourths of companies benefitting from special incentives make their decisions before securing tax breaks. Most of the time, these packages aim to influence a decision that has already been made.

Asked about Amazon’s country-wide search for a new headquarters, Jensen sticks to his thesis. “I think they already have a pretty good idea of what they’re doing,” he says. The company has a need for highly-educated workers, and will therefore already prefer a city where many already live or to where they would be willing to move. The whole thing is “a bit of theater,” according to Jensen: “I would have been shocked if they didn’t have one to two places” at the top of their list “from the get-go.”

Most of the time, these benefit packages aim to influence a decision that has already been made.

For skeptics of these mega-deals, the Amazon HQ2 search marked a turning point. The blatant and reflexive rush to offer Amazon carve-outs proves just how willing many state and local governments are to trade tax dollars for job creation. New Jersey and Maryland are prepared to lavish Amazon with more than $7 billion in corporate goodies.

The cost of these kind of incentives is astoundingly high — there is little research that points to their success. And competition among states to lure in large companies can yield absurd results. Jensen writes about an ongoing bidding war between Kansas City, Mo., and Kansas City, Kan., that sees firms regularly cross the Missouri River to secure better benefits. In a recent episode, reinsurance firm Swiss Re moved from Kansas to Missouri — a journey of four miles. Last year Kansas state senator Tom Holland complained that state policies amount merely to “rearranging chairs on the patio.”

But there’s hope for reform. Included in the recent tax-reform law is a provision that treats some state incentives — such as infrastructure improvements and cash grants — as taxable corporate income. The next tax-reform push, which Trump says might come in October, should prioritize a measure treating state and local tax credits the same way. By taxing corporate incentives as income, the federal government can limit their abuse.

Suicide Of The West

Jonah Goldberg’s Suicide Of The West is a book everybody should read.  It is not a great book but it has parts that are absolutely awesome and is full of thought provoking moments.

The best part is the discussion of what Jonah calls The Miracle and Deirdre McCloskey calls the Great Enrichment.  On titles, we’re with Deirdre but we will use Jonah’s here.  Jonah does a great job of explaining the extent of The Miracle.  We love his “most important “hockey stick” chart in all of human history” on page eight.  It shows actual global GDP over the last two thousand years and we get a hockey stick.  He doesn’t limit himself to one method of teaching so everyone should get it.

Sidebar: We thought of saying that everyone should be required to read Jonah’s introduction and appendix but we can’t count on everyone’s sense of humor.  Everyone should read it but we are not into coercion.  End Sidebar

Jonah’s book’s appendix has a nice summary of his four core arguments which we have abridged even more here:

The Miracle has caused us to be unnaturally prosperous
We stumbled into The Miracle and we can stumble out
Human nature is fundamentally unchanging
Human nature can overpower the institutions that make prosperity possible

We agree.  We are fans of the growth fairy so we would add (and think that Jonah agrees based on the last argument) that we now have the knowledge to make prosperity more likely.  We think that Jonah would say that our romantic side, the feelings of human nature, cause the conflict that might end prosperity.

Part of his stumble out argument is that we got The Miracle by argument and rhetoric and we can lose it the same way.  Here Jonah cites Deirdre’s article above.  We love both of them and especially Deirdre’s Rhetoric of Economics.  It was a light from above in our understanding the intellectual differences between economics and accounting.  When Deirdre finds rhetoric for the second time it is less convincing to us.

The conflict of the book is the the rationality of the discussion of economics and human nature and Jonah’s feelings towards The Donald.  Jonah despises The Donald because he has brought tribalism to the right.  With an already tribal left then there is little to do but despair for The Miracle because corruption will set in and capitalism will become ineffective.

In summary, we were beyond delighted that somebody made such a beautiful and sincere argument for capitalism.  Jonah hasn’t convinced us to share his pessimism but we are concerned.  It is an important book that you should read but it is not a great book.

 

Competitiveness in MLB

Ben Fredericton at the St. Louis Post-Dispatch brings a big baseball issue back into the limelight.  Every sport requires that teams be competitive.  Fans will lose interest if one baseball team wins 130 games.  Local fans will lose interest if the local team loses 130 games.  Ben is fired up and says:

Pointing fingers at the media coverage won’t help. Fans have better ways to spend their money than by watching bad baseball. Even if their team tanks right, like the Cubs and Astros, the empty seats will be waiting when the momentum turns.

Until baseball finds a way to reward competitive teams, or punish the ones that don’t mind losing, there will be clubs that repel fans at home and on the road.

We are not convinced of Ben’s assertion that “tanking right” is a bad idea.  His example of the Cubs and the Astros seem to be doing fine.
Competition has been an issue for some time.  It was a big concern of the Commissioner’s Blue Ribbon Panel on Baseball Economics.  Because of revenue sharing teams can be profitable without drawing many fans at home.  As many teams have shown, like the Astros, Cubs, and Pirates, it is a reasonable strategy to sell off established players and build for the future.  Tanking can and does work.  Tanking can also be very profitable for owners even if it doesn’t produce winning teams in the future.  The problem for Ben and everyone else is that it is hard to identify good tanking (creating a better team in the future) and bad tanking (just doing it for the money).
The problem for Ben and MLB is that there aren’t any good options.  You could hire MWG at exorbitant rates and we could decide who to penalize and who to absolve but baseball prospects are notoriously hard to evaluate.  Relegation is a great idea but where are the teams to promote?  The farm system in baseball where the MLB teams control almost all minor league teams means there are no real opportunities for promotion to MLB within the US.
One relegation solution would be to allow international teams into MLB.  We create a league with, say, ten teams in various cities outside the US.  The top three go into MLB and the bottom three MLB teams go into the international league.  It is unlikely to come about because the small market teams will stop it but it is a real solution.

 

Good News On Venezuela

What happens in Venezuela is largely up to its citizens.  But the WSJ editors report that the Organization of American States (OAS) and The Donald are trying to make it easier for those folks.  First the OAS:

The Organization of American States voted 19-4 on Tuesday for a resolution to suspend Venezuela as a member for its violations of democracy and human rights. The vote reflects shared horror over Venezuelan atrocities against its own people, fear of an exploding migration crisis and a notable shift in the region toward center-right governments willing to defend liberty.

And then The Donald:

The U.S. is also playing an important role in building regional consensus on Venezuela after eight years of abdication under Barack Obama. Venezuela bullies its neighbors, and many countries haven’t been willing to oppose Caracas and its handlers in Havana without assurances that the U.S. would back them up.

We agree that the previous administration harmed Venezuela but no US administration can fix Venezuela.  What it can do is increase the probability that Venezuela can fix itself.

It doesn’t mean that the hell that is Venezuela is going to end soon.  It doesn’t mean that it will be easy.  It doesn’t mean that Venezuela will ever recover its freedom.  But it does mean that Venezuela has a chance to escape socialism.  We hope it does.

 

 

 

Reagan Was Wrong

OK, the title is overwrought.  We are talking about a specific quote.  It is from Jonah’s new book.  He starts his second chapter with quotes from Horace and Ronald Reagan.  Ron’s quote ends with:

[F]or [freedom] only comes once to a people.  Those who have known freedom and then lost it have never know it again.

Of course, Ron was in part responsible for falsifying himself.  Eastern Europe lost its freedom but got it back.  We could argue about Russia or China but clearly countries like Poland lost their freedom and got it back.  We have spent some time in Poland and know how aware Poles of our age are about losing and regaining freedom.  Younger folks, like our students, who have always known freedom are not as aware of what can happen.

Two interesting questions are: whether it is harder to get freedom back or get freedom for the first time and does freedom wax and wane?

In answering the first question we are sure that both situations are difficult but we think that Venezuela has a better chance to become free again than those countries that have never known freedom.  It is a chance for research.

In answering the second question, we are sure that freedom waxes and wanes.  We left out the part of Ron’s quote about the necessity of defending freedom.  Surely, almost everyone would agree that Ron had a positive impact on freedom in the US and elsewhere.  Thanks Ron for your spirited defense of freedom.  You were right in the larger sense even if you proved yourself wrong.