Semi-Daily Journal

Are the services provided by the federal government worth twice what the services paid for by the state are worth?

The feds provide mostly national defense with some subsidies for services provided primarly by the states.

The state provides basic and higher education, roads, transit, public order, police, emergency services, property registries, corporation charters and regulation, food safety, zoning and planning, and a health system for the rich and lower quality access to that system for the poor.

In real life your local government provides most everything you need, your state provides most of the rest, and the feds are a waste of public resources. The rate at which you are required to make payments goes in exact reverse.

The reason for that is worth discussing.

I don't see you listing any "use taxes," Prof. DeLong.
For those of you who don't know, California
makes up for lost sales taxes on purchases from other states
by asking taxpayers to self-report those
purchases, figure 8.25%, and send off a check to
the State Board of Equalization. A little hacky,
but I need to learn the origins of the hack.
That's always the fascination of tax history.
(Say, have you read any of Robin Einhorn's work on taxes
and slavery?)

I knew I should have been an economics professor. Damn you chemistry and math degrees!
BTW, how meticulous must one be to keep track of sales tax to the dollar over an entire year?

My household's comparable numbers would be not much more than half of yours -- which makes me very fortunate and you even more so. I'll second that "Hell yes".

Brian,
I am curious. Under an ideal system, would it be municipal governments or local school boards that would fund cancer research?

Your property taxes seem fairly high there. Is it levied on the Unimproved Capital Value (UCV) of the land - the Henry George idea - or on the total value with improvements?

One of our (Australian) states used to have an unusual property tax. The tax was 1% of the property value, as decided by the taxpayer. You could put down on your return whatever assessable value you liked. There was only one catch - the state reserved the right to buy the property at that valuation!

Your property taxes seem fairly high there. Is it levied on the Unimproved Capital Value (UCV) of the land - the Henry George idea - or on the total value with improvements?

One of our (Australian) states used to have an unusual property tax. The tax was 1% of the property value, as decided by the taxpayer. You could put down on your return whatever assessable value you liked. There was only one catch - the state reserved the right to buy the property at that valuation!

derrida, this property tax idea is brilliant. My weeks would go so much better if I didn't have to hear anyone at work moaning about their property valuation. Of course, we also pay much more than 1% of the value.

You would probably agree with the EJ Dionne column in the Washington Post today. Many people resent what the government does for other people but applaud only what it does for them.

Brad,

You are paying way too much in Social Security taxes! My retirement thanks you.

That property tax self assessment method was actually thought up by the eponymous Henry George. It suffers from the defect "winner's curse", which he couldn't have known at the time.

I could tolerate paying $80 grand in taxes - if I were making $400 grand per year.

Think I'll stay in Texas.

Is winner's curse really a "defect" in this situation? I mean, honestly, what is your property worth? Your mortgage company has one idea, your insurance company another. Is it really so odd to value your house at that amount of money you would accept in trade for it. Since property taxes are only a few percent isn't the extra money you may pay by overvaluing your house purchasing valuable peace-of-mind. I really think this situation is slightly more nuanced than overpaying for a John Rocker rookie card on Ebay.

You mean Russia's "flat tax" anarchy isn't the wave of the future? :D

So somebody out there might know what the latest and best work on the question of whether people "vote with their feet", at least as far as taxes and services are concerned, and if they do so, what they vote for. My gut feeling is that it's neither Massachusetts nor Missouri, but something that gets the whole job done (which Missouri doesn't do) with a system that is less likely to provoke rage or revolt (unlike California or Massachusetts). Actually, it strikes me that California really does enjoy a special status in that life there is so universally appealing that people will pay what it takes rather than pay what is strictly required. If that's the way things work, than I guess most Missourians really do dislike the place; certainly nobody else is clamoring to move here...

"Since property taxes are only a few percent isn't the extra money you may pay by overvaluing your house purchasing valuable peace-of-mind."

No, in this context the winner's curse afflicts those who sincerely but wrongly pick a value that is too low - people who pick the wrong "insurance" coverage, the equivalent of people who underinsure by mistake. I suppose the name is misleading.

One interesting thing is the principle behind "rates". There isn't a proportion due, precisely, but rather the budgeted burden is spread among the ratepayers pro rata to their valuations. After the fact you can calculate a proportion retrospectively, but there isn't one supplied as an explicit taxing parameter.

That really seems more like "seller's remorse", than winner's curse.

Umm, say brudder can ya spare a dime? ;>

Interestingly, Massachusetts didn't lose population from 1990 to 2000; minorities and immigrants moved in to the state in far larger numbers than whites left the state.

http://www.census.gov/Press-Release/www/2001/tables/ma_tab_4.PDF

Oops, link. .7% drop in white population, massive growth (60%!) in minority populations.

I love blogging - you learn so much. I did read "Poverty and Progress" many years ago, but didn't realise that the self-assessment idea came from him.

I might have guessed though - Australia's early C20 tax system was heavily influenced by George, per medium of a colourful Australian politician called King O'Malley (who hailed from California - in fact his citizenship status and hence eligibility for office was the subject of a particularly colourful controversy).

On 'sellers remorse', doesn't winner's curse depend on there being competitive buyers (or in this case sellers) for the same good - with different private valuations amongst buyers (sellers), so the most optimistic (pessimistic) person wins. It is not driven by different valuations between buyer and seller (that may bring a different asymmetric information problem - one which favours the taxpayer). I can't see how winner's curse or seller's remorse arises with only one seller and one buyer of each unique good. Any auction theorists out there who can confirm or disprove the intuition?

Since you think this is such a great deal, (???), do I assume that higher taxes and more government is the answer to all our problems?

If you answer yes, please remember there's no rule against sending in more than it says you owe.

Brian,

There are some "big picture" items that the states cannot provide. One is a national debt (thank you, Mr Hamilton). Even if most states didn't maintain nominally balanced budgets, none of them is large enough alone to provide the depth and liquidity of the US Treasury market. Some part of that big federal tax burden is collected to make interest payments (and for a brief while, principal payments) on Treasury debt. It is well worth arguing what level of debt is optimal, but some level of debt held by the public is useful. I recall (correct me, anybody, if you have the facts) that a couple of Asian governments issued debt while in budget surplus, to maintain the virtues of a sovereign debt market (was it HK and Singapore?).

OK, now for the confession. I would have to find other work if there were no Treasury debt.

Now let's play the same game for a European country... ;-)

If *I* worked for the State Government, I'd rah-rah paying taxes too.

OK, I'm going to take this opportunity to marvel at my idiot co-worker, who 2 days ago complained about Pittsburgh's $10 Employment Tax. He lives in the 'burbs and commutes - meaning that his only contribution to public services in the City is that $10 a year - and he's outraged! As you may have guessed, he's a Rush listener, and so, although in many ways intelligent, he's incapable of thinking even semi-rationally about taxes (it's worth noting that his little rant mentioned that "the City pays people who stay home and have babies, while charging me for the right to work." Ah, yes, Pittsburgh's world-famous Municipal Welfare Program). A few month ago, he suggested that it's ridiculous to charge higher vehicle registration fees for trucks than for cars (because, of course, they impact the highway system equally). I mean, forget Brian's or Bucky's questions about overall taxation - this guy has a problem with simple, virtually fee-for-service, taxes.

This comports with my ongoing theory that people are, literally, irrational in decision-making about taxes. The perfect example being people who relocate to reduce property taxes - often saving a few hundred a year, at a cost of thousands in increased commuting time & fuel costs, to say nothing increased exposure to accident risks. But that's not a single bill that comes in March, nor is it a topic that talk radio rants about for hours every day (which you get to listen to longer on your longer commute!). I know that equation actually does work for some people - save me your anecdotes - but the general trend doesn't pay. Yet it goes on.

"Since you think this is such a great deal, (???), do I assume that higher taxes and more government is the answer to all our problems?"

Taxes are the price we pay for civilization. If you don't like taxes, tell me what you would do without. Paved streets? Sewers? Cancer research? An army?

You guys usually talk about social welfare programs as being what you would like to eliminate, but consider, please, what society might look like without them. People dying for lack of medical care? Kids growing up malnourished in the midst of riches? We have social welfare programs because thye make our society more stable . . .

>We have social welfare programs because thye make our society more stable . . .

Social welfare spending was curbed -- and crime fell -- in NYC during the 90s.

What is Massachusetts being held up as an example of? Our state income tax is middle-of-the-road at 5.3% with a reasonable exemption and no progressivity, groceries and clothes are exempt from sales tax, and I know that my property taxes are proportionately quite low.

The high cost of living is a far bigger differentiator than any thing the taxman could do. I would bet that most of the Massachusetts residents moving to N.H. are drawn by the lower cost of real estate than the absence of a state income tax--their property taxes are so much higher than ours in the long run.

But could any other social group provide comparable services for less?

Even among government jurisdictions? One, probably true, claim about the U.S. federal income tax is that it is an extremely efficient tax. It brings in more dollars in tax per dollar of (gov't and private) administrative expense than other taxes such as state personal property tax.

If your perceived value of aggregate government services is, say, $100,000 (even $300,000!) and your aggregate tax is only $86,000, then, "hell yes!" you're getting a good deal. But isn't it possible that you might get the same value of services for only $80,000 if a single jurisdiction, with a more efficient tax authority, held sway. Wouldn't you be interested to buy that level of service for $50,000, or even less -- if the efficient IRS collected all taxes and disbursed it as needed to California and Lafyette et al, as needed? Are you not the least bit interesting in getting a BETTER deal?

Speaking only for myself, I'd say "Hell, yes!"

We might, less hypothetically, begin by considering the problem of funding Social Security via FICA. I have no data at hand, but it would seem to me likely that FICA has roughly the same administrative costs as the income tax (since it is based on collection and audit of payroll records via the "W-2" system) -- and yet it collects much less tax for that same expense (since the rate is both lower, and capped.)

So, I pay FICA taxes as if buying a pension contract. If somebody offered me the exact same pension plan, for less annual expense -- why wouldn't I want it?

And tell me again how knee-jerk admiration for the current (or prior to GFY 2000) tax system came to be denoted a "liberal" or "progressive" posture; while the thoughtless need to experiment with, and hopefully lower, taxes is termed, somehow, "conservative" ?

Re: Federal vs. State vs. Local taxes:

One of the reasons the federal tax bite is higher are the transfers to state and local programs. We have, in this country, a system (much attenuated over the last 30 years) of broad-based tax collection, as a way to redistribute income from richer metropolitan regions to poorer rural districts. While you may think this is unwarrented socialistic nonsense, I, for one, enjoy being able to drive from city to city without having to pass through a "Mad Max"-ian wasteland...

"HELL YES!"

Well, that's some stunning argumentation their. No, no, please don't go to any greater lengths to convince me. Although you have been extremely erudite, verbose, and well-reasoned, your eloquence has made it go down easily.

"Just try doing without one"

Can you say "fallacy of the undistributed middle?"
I knew you could, Professor DeLong. After all, they don't let just anybody work in the Clinton administration.

I'd be wary of the property tax policy of letting people set their own valuation, with government reserving right to buy property at that value. It has been known to fail dramatically.

They did it in Guatemala in the early 1950s, if I'm not mistaken, and of course landowners radically undervalued their property. When the government confiscated the land and paid the declared value, the landowners (United Fruit Company, Chiquita) just hired an army (US army, actually) and invaded, dissolved the government, and massacred the peasants who had occupied their plantations.

So, beware of clever tax plans. It'd be a lot more effective, IMHO, in the long run, to get an assessor to determine the value of the property for both insurance and taxation, and make sure those values are the same.

Bucky (notice the stern, motherly tone ...),

You're trying to slip one in on us, and I very strongly suspect you know it. Social spending was "curbed" (do you mean it fell, or stopped growing so fast?) and crime fell simultaneously. OK. Unemployment fell, too. Now, what cause-effect relationship would you suggest to explain these various facts? Let's not forget that the mayor of NYC through much of that period was on record saying that if his policies made it harder for the homeless to live in the city, they could just move elsewhere.

I wouldn't describe this round of tax reform as an experiment with lower taxes. If the government doesn't cut spending (as it is clearly not doing) then the debt accrued still needs to be paid. The relative portion assigned to each earning group has changed.

With a name like Bucky Dent, how could he have left out the obvious cause-effect relationship: crime has gone down because the Yankees are winning.

I was responding to the fallacy that social spending engenders social stability.

*I know* the crime rate here fell because of aggressive police work, not because of changes in the social safety net.

> the obvious cause-effect relationship: crime has gone down because the Yankees are winning.

You have it reversed.

The decline in crime meant more people felt safe coming to the Bronx for games, so gate revenue at Yankee Stadium rose, allowing Steinbrenner to further bid up prices for star talent...:)

Having just done our household's taxes last Monday night (thanks again to my wife's timely procrastination regarding her small business accounting), the most interesting thing I discovered is that what we pay to our HMO for health care coverage is more than we pay in federal and state income taxes (Wisconsin) combined.

Anyone else here have a similar story?

The appropriate question isn't whether or not we are getting government goods and services that are greater in value than our tax burden. We almost certainly are! I'd certainly rather have paved roads, an army defending me, and no old people begging on the streets for scraps of food than have back the 40-50% of my income that the tax man taketh. Not to mention that I wouldn't even have my current level of income without a slew of government sponsorship of my education (public middle and high school, federally subsidized stafford loans for business school, the fact that almost every one of my college professors got his or her Ph.D. on the public dime, etc.).

But could we get comparable government goods and services at a lower overall tax burden (or, more government goods and services at an equal overall tax burden)? Those of us who rail against the tax burden strongly suspect that the answer is yes, if the way that governments spent money was made more rational.

Take our public high schools. Now, I certainly would rather pay the current taxes associated with maintaining our system of public high schools than live in a world where we shut down those schools and lowered taxes. But does that mean I think the public high schools in this country deliver value commensurate with their cost? Hell no. The nation's high schools spend money per pupil that outpaces most of the industrialized world while delivering an education that lags behind in almost every meaningful measurable category. The only reason our high schools haven't slowly destroyed our economy is that our colleges and universities are so damn good that people who go on to further schooling beyond high school make up for the wasted time during their teenage years (I'd bet that if you made a list fo the 25 best universities in the world between 15 and 20 would be in the U.S.). But how much better off we'd be if we had high schools as good as those in Europe and Japan AND retained our excellence in higher education.

Sure if you put forward a binary choice between our current levels of taxation and government services and a world in which there was little or no tax burden and little or no government services then most people would choose the former. Just as if my only choices for transportation were buying a Yugo for $50,000 or walking everywhere I go I'd suck it up and buy the car. But that doesn't mean we shouldn't keep striving for the $20,000 Honda.

SD -- thank God. A rational conservative. We don't see enough of people such as you these days.

As a liberal, I tend to believe that the way government is spending money right now is pretty efficient (fairly low overhead and waste), but I'm always open to suggestions, as I believe all of us should be.

SD -- thank God. A rational conservative. We don't see enough of people such as you these days.

As a liberal, I tend to believe that the way government is spending money right now is pretty efficient (fairly low overhead and waste), but I'm always open to suggestions, as I believe all of us should be.

My apologies for the double post.

Bucky,
Unfortunately, your post didn't address the issue.

Social spending (e.g. welfare, education, social safety nets) and the distribution of individual incomes such spending influences impact a number of social ills, including morality rates. I suppose it depends upon what you see as "social stability", but to me, that qualifies.

"*I know* the crime rate here fell because of aggressive police"

How do you explain drops in crime rate in other cites that did not have such aggressive police?

Demographics and rising economy are much more plausible explanations.

>morality rates.

Indeed.

>drops in crime rate in other cites

NYC's crime rate fell RELATIVE to its urban peers, as well as in absolute terms.

No doubt demographics played a role in the nation-wide crime drop. And, at least here, a generation of ghetto kids grew up "scared straight" after seeing how crack ravaged their neighborhoods.

Ok smarties -- the first one to figure out how much Brad & the wife make and how much they saved gets a big hearty cheer. Go.

The guess-estimate here at my office is in the region of 150-200k...which is really scary. It has effectively killed any desire to pursue a PhD in economics considering we'd all give our right arm to be an economist of Dr. DeLong's caliber. Lawyers make this much starting out.

So the real question is, do academic economists actually 'pay' to be in their profession?

I vote YES.

About $150,000 for a stimulating job with tenure seems like an appealing lifestyle to me.

SD,

I second Jonathan/Jonathan, with one reservation. He thinks you are a "conservative" (whatver that may be) but I have no idea what you might consider yourself. You didn't even mention waste, fraud and abuse, but that doesn't absolutely disqualify you from being a conservative. As Jonathan suggests, you could be a bright one. Doing a better job is a great prescription.

Anyone without an axe to grind recognizes that there are some things the public sector does better than the private sector, and vice versa. I would guess that there is a class of activities in which there is strong competition, and that the mix changes over time for a variety of reasons. The real point is to keep nudging things forward and to do what we can to see that good results come from all sectors.

>The real point is to keep nudging things forward and to do what we can to see that good results come from all sectors.

Alas, different folks have conflicting ideas as to which direction is "forward".

The most obvious example: School choice vouchers? Or higher taxes and more cash for existing public schools?

Brad, you didn't mention that if it weren't for taxes, you would not be paid any salary. So for you, the issue of whether the social benefits of taxes exceed their costs is irrelevant.

Actually, it seemed easy to make a first pass: Medicare is 1.45% no ceiling, so 4669/.0145 gives you 322K.

I can go further: assuming that they don't do consultant work (a really bad assumption for academics) you've got a maximum of $5394/person=10788 matched by employer to get 21576 for Social Security. Since they paid less, then one of them doesn't make the 87K max limit. Instead, they+employer paid 7378 which gives the slacker member of the household (a family joke that my wife never seems amused by) an income of 59,500 USD.

Doesn't is seem ridiculous to you conservatroids that Delong A had a quarter-million dollar income and paid $5394 in SS whlst Delong B had less than 60K of income and yet had to cough up $3689?

The interesting elephant in the room is, if they made 322K, then their total Fed tax rate was 36.8/322 which is a hardly crushing burden of <12 percent.

Stick that in your pipe and smoke it.

>then their total Fed tax rate was 36.8/322 which is a hardly crushing burden of <12 percent

You are assuming that one payment represented the full year's federal income tax obligation. It could be a quarterly or topping off after estimated taxes were paid.

Thanks for your kind words, Jonathan and K.

A useful way to think about goods and services that are a "public good" is to categorize them into three baskets:

1) Things that are properly the responsibility of government (and thus should be supported by tax money), and that are best done by the government itself.

2) Things that are properly the responsibility of government (and thus supported by tax money), but that are best done by private sector contractors and vendors hired by the government.

3) Things that are not properly the responsibility of government (and thus that should not be supported by tax money), but rather, are properly the responsibility of private sector charities or even the for-profit sector.

Now, liberals and conservatives will differ about which basket many things should be put in (And if they didn't, how boring politics would be!), but I think that we can avoid much of the unproductive conflict in our political culture if we realize that these decisions really are decisions about which basket to put these public goods and services into, not whether or not they are public goods and services in the first place.

Further, I think we can have much more constructive conversations if we always remember that basket #2 is an option, and try to think creatively about ways that basket #2 can be expanded. Too often liberal/conservative arguments break down because, for example, conservatives are unwilling to admit that subsidized day care for low income working mothers is a public good that benfits society in the long run and that everyone ought to contribute to, while liberals are unwilling to admit that private sector day care providers, responding in a competitive market to the unique needs of individual mothers at the community level, are much better able to deliver quality service than state-run day care centers.

Or, for a fuller example of how the three baskets can work in harmony, consider medical research. Say a new infectious disease pops up (SARS, anyone?). The first line of epidemiological research, where we try to figure out what the hell is going on and what we can do to fight the disease in the short run, is probably best performed by government agencies like the CDC and NIH, that can quickly deploy massive specialized resources in a command-and-control framework under intense time pressure. Once the initial epidemic is under control, we'll need broad, basic-science level knowledge of the biochemical and physiological mechanisms of the disease. This is much more of a generalist problem than figuring out how to implement an effective quarantine strategy, and is probably best handled by university labs filled with super-bright research scientisists, grad students and post-docs, which are essentially government contractors, competing for grant money based on expertise. Then, once the disease mechanisms are well understood, we'll need to develop, test, and distribute effective drug therapy. This is probably best done by pharma companies in the private sector, that have a lot of experience in refining new theraputic compounds (work that is much too boring to attract the best minds in academic science), and then guiding them through the clinical trials process before eventually manufacturing them and distributing them to front line physicians.

Historically, the government has been terrible at developing new drugs, but is very good at managing public health problems and handing out money to the best basic scientists . Private industry isn't particulalrly good at basic science, and really has no incentive to get involved in new disease epidemics at the outbreak stage because there's no near-term profit opportunity, but does a great job of turning theoretical treatment options into practical medical realities. Its really gets down to a question of core competence. Any organization does some things well, and other things not so well.

One problem: the population's economic contribution to government isn't limited to personal taxation. Contributions include taxes on corporations one has invested in and works for and the cost of regulations imposed by the government. In fact, the average economic contribution of private sector workers in Brad's salary range is probably higher than 50%. So let's rephrase the question:

Does government really provide 50% of the value of the services and goods you consume?

In any case, these taxes need to be evaluated individually, as well. Does the paltry % return that Brad is likely to realize from his social security contribution make him think it is a bargain?

SD - What I've gathered from reading about education funding is that if you take out extra money spent on special education, per-pupil spending drops dramatically. For instance, out here on Long Island, NY; the average cost of educating a special needs child is at least double the cost of a child not in special ed depending on the school district. Usually it is more like 3 or 4 times the cost.

Unfortunately I don't have any numbers handy. If anybody knows where some are, I'd be interested. Regardless of whether or not they support my assertion. I like knowing if I'm wrong, that way I can find another way to embarrass myself.

Bucky,
I'm glad we agree on something. Clearly, social spending influences "morality rates" positively, since it sets an example of how people should treat each other. Demonstrating responsibility towards one's fellow human beings, society and nation is a great way to teach good morals.

However, I was, of course, referring to *mortality* rates in my prior post.

$86K in taxes?

The book must be selling well, then.

sd writes, "A useful way to think about goods and services that are a "public good" is to categorize them into three baskets:

1) Things that are properly the responsibility of government (and thus should be supported by tax money), and that are best done by the government itself."

This neglects an important consideration:

1) Those properly done by the *federal* government, versus those properly done by state and local governments (or The People themselves).

Only a very small minority of the things currently done by the federal government are "properly" done by the federal government (i.e., under The Law, as it is currently written).

This very small minority includes: 1) national defense (but not national offense, or defense of other nations), 2) interest payments on the national debt (which would basically be zero, if the federal government weren't involved in so many improper activities), and 3) running the Postal Service (but not TVA, Amtrak, or anything else).

The Founding Fathers weren't economists, let alone computer designers. But the federal system they designed (which, unfortunately, is not even close to being followed) had distinct economic advantages over the massive centralization we currently have. They understood that 13 (now 50) powerful parallel processors worked better than one huge, power-sucking central processor.

$86K in taxes?

The book must be selling well, then.

$86K in taxes?

The book must be selling well, then.

For a Canadian perspective on taxes and state spending, John Richards' book "Retooling the Welfare State: What's Right, What's Wrong, What's to Be Done" is pretty good. (Blurb on the back cover: "Deals out cuffs and blows to both the mindless left and the mindless right.") The first two chapters is available here:
http://www.cdhowe.org/pdf/Rich-1.pdf

Mark Bahner:

What do you propose to cut from the federal budget? Be specific.

"Taxes are the price we pay for civilization." A common fallacy. Actually, civilisation and paying for it are often the excuse offered for taking the taxes - the other way round. You can see the break in causality by seeing that taxes often do NOT deliver civilisation, and that many of the most important parts of civilisation aren't supported directly or indirectly on the back of government effort anyway. (Being defended by governments doesn't count, since they prevent alternatives and impose a monopoly of force - understandable, but destructive of any basis for testing.)

As for the horrors of having the unsupported poor around, these are real. But the proper solution is promoting people out of poverty, not helping them survive in it on a drip feed. Don't get me wrong - I do NOT recommend cut first, improve later but rather use what we've got (I like Professor Kim Swales' ideas). The last time this sort of policy objective was tried successfully, as far as I know, was under the cumulative range of reforms in ancient Athens from Solon, through the Pisistratid tyrants, to Pericles.

If you look at Henry George's full blown version, it is easier to see how winner's curse works with land tax self assessment. He had in mind that anyone could buy anyone else out at the assessed values; when the dust settled, all the new acquirers would have been the accursed ones.

Clearly this even applies with taxing authorities as sole buyers, even if the suffering of the dispossessed (a hidden agenda of George's) isn't the winners' experience but the losers'. It's the same winner's curse mechanism going on - and of course the burden of it will only get passed back to the taxpayers, so there's even less corrective feedback.

"What do you propose to cut from the federal budget? Be specific."

Everything. (That specific enough? ;-))

In rough order of importance of cutting:

1) All U.S. troops on foreign soils, starting with Saudi Arabia and Kuwait...and quickly followed by Germany, South Korea, and everywhere else.

2) Every single drug statute, and all drug enforcement activities.

3) Medicare, Medicaid, Social Security.

4) The Department of Education.

5) Department of Energy, Agriculture, Interior, etc. etc. etc.

In short, everything that wasn't there in the 1880s, when the federal government was actually following the Constitution. Which is essentially everything.

That would add 2 to 4+% per year to our GDP. We'd establish ourselves far and away the front-runners in liberty for the 21st century.

"I, for one, enjoy being able to drive from city to city without having to pass through a "Mad Max"-ian wasteland..."

:-) Heh, heh, heh! Where do you think the transfer of money is going? It's going from rural areas to cities! It's the cities that would be "Mad Max" areas, unless they could suck money from the rural areas:

http://www.esri.com/news/arcnews/spring01articles/usatoday.html#thearticle

Democratic voters are in the big cities. They vote to suck money out of the surrounding rural areas, in order to make their cities liveable.

That's why Democrats love democracy. It allows them to vote to take other people's money. (And somehow they think that makes them *more* moral than other people.)

"Is it worth it? Are the services the federal goverment, the California state government, the Contra Costa county government, and the Lafyette city government provides worth the $86,882 that they charge the DeLong-Marciarille household?

HELL, YES!!

Democratic government: just try doing without one."

Actually, the country managed quite well as a constitutional republic, for the first ~150 years of its existence.

But I can't imagine anyone here who begrudges the DeLong-Marciarille household their happiness in sending $86,882 to various levels of government. In fact, I'd expect those of us not around Berkeley wouldn't mind if the DL-M household *chose* to double their income tax payments to the federal government. (Though, from my experience, the federal government might not take it. But that's another long story. ;-))

The thing is, if the DL-M household has a jolly good time sending their money to Archer Daniels Midland (ADM)...why doesn't the DL-M household simply avoid the middleperson, and send the money directly? Or for paying for lead evaluation and mitigation in Durham, NC...why not simply send a check to us, rather than going through the middlepeople?

Why would the DL-M household want to impose their idea of happiness on the rest of us? ;-)

Professor DeLong's satisfaction with living in California raise yet another question: how in the bloody heck do you make that state financially solvent? The state is already one of the most expensive states to live in, with regard to both taxes and consumer prices. It's got to either raise taxes even more, or get its spending under control. If the latter, then what needs to be cut?

I think anyone who seriously proposes to roll the government back to the 1880's should be willing to commit suicide at the point of their 1880's life expectancy. My rough estimate is that it would cost about the last 15 years of your life. Anyone not willing to make this deal should just sit quietly and watch FoxNews.

Uhm... I'm confused. How do cities suck money out of surrounding rural areas? I thought that normally, rural areas were subsidized by urban areas.

http://www.taxfoundation.org/taxingspending.html

States are a bit of a rough estimate, because no state is fully urban or fully rural, but the general trend is clear. That's not to say I think it's a moral weakness of (predominantly Republican) rural states that they receive more from the feds than they send. They're poorer, as inland regions without access to oceanic shipping are and always have been, from France to Peru, and a government that tries to create oppurtunities for the least advantaged members of society will end up spending more money on the poorest than the richest, and poorer people live in poorer states, by definition.

As for the election map, I must say I've been a bit confused about that for several years: both urban and rural regions seem, from the election map, to be voting against their self-interest. I suppose it's partly because cities cultivate different values than rural regions, self-interest aside (and attract people with different values).

Partly, I think it's because politics is tribal, even in the U.S. (though perhaps less so than many countries). Liberals from the city don't say "let's build a model of revenues/expenditures to see which candidate financially improves our condition the most relative to the others." They say "we have to vote for liberal candidates so those damn, evil, racist, religious-fundamentalist rednecks don't get into power!" I suspect many rural Republicans, rather than looking at a cost/benefit analysis of taxation vis-à-vis agriculture subsidies, similarly think "We've got to fight the elitest, east coast liberal establishment that wants to impose their multiculturalist, anti-Western values on us!"

Julian Elson

Oh, and BTW, a clarification question for Mark Bahner: do you mean that implementing your five-step government reduction program would raise the LEVEL of GDP by 2-4% (i.e. raise it from $10.1 trillion to $10.3-$10.5 trillion, and it would continue growing at 2.5-3% a year from that new, higher base), or raise the growth rate of GDP by 2-4% (i.e. raise the growth rate from about 2.5-3% a year to 4.5-6% a year, permenantly)?

"Democratic voters are in the big cities. They vote to suck money out of the surrounding rural areas, in order to make their cities liveable."

http://www.pkarchive.org/column/050702.html

As Paul Krugman has mentioned, rural states get enormous subsidies from rural states. It's sheer nonsense that the rural areas subsidize cities; it's wildly the other way.

I suppose you could create a suburban/urban distinction, but I'll be damned if I can find the numbers for that (and the suburbs are split 50/50 between the political parties anyway, so I'm not sure what it'd prove). I can't find numbers for this, though - anyone?

Uh, that should be "rural states get enormous subsidies from urban states." Oops.

Not sure who that closing slogan is directed against; have those wicked right-wing think tanks been overrun with anarchists since last I looked? Still, it's a handy slogan which can easily be adapted to the needs of other organizations which stand accused of price-gouging. "Electricity: just try doing without it."

Mr. Bahner seems unaware that there was a mini-Depression very close to his magical 1880 mark (I can never remember if it was late 1870's or late 1880's???).

As for the rest of his spew, it's worth less than we paid for it as usual. You can see why fundamentalists burn libraries (or allow them to be burnt), they really don't want anything to contradict their completely invented historical narrative.

JT, the fed budget is approximately 18.5% of GDP. Through in another 5% for the states and lemme know how you come up with 50%. Did you work for Enron, maybe?

And don't give me that "onerous regulations" BS. Does a requirement to have traffic lights at busy intersections help or hurt productivity? Does keeping lead out of children's brains cost or save society money? (Hint: John Monahan is on-target here).

The most amazing thing is that, every damn time any of these threads turn to SPECIFICS on taxes and what government actually does, the trolls either disappear entirely or worse, totally expose their cluelessness.

PS: but our agriculture policies do have to go. Unfortunately, they only account for like <2% of the fed budget, and we'd pay slightly higher food prices so it wouldn't be a great positive economic effect, mostly a victory for sense. Those 70 billion numbers you hear all the time are over a five year so-called plan. Funny, 5 year plan is pretty old-school communist but those farmer keep voting for Rethugs.

"I think anyone who seriously proposes to roll the government back to the 1880's should be willing to commit suicide at the point of their 1880's life expectancy."

Another example of the irrational thought that, because people didn't live very long in the 1880's, it was because there wasn't enough government!

People in the United States in the 1880's didn't live very long, because: 1) they were much farther back on the the learning curve of all technologies, especially regarding understanding of the microbiological causes of disease, and 2) they were much poorer in the 1880s. (But not because there was too little government...simply because there hadn't been enough time since the Enlightenment to accumulate wealth.)

If one truly wanted to observe the effects of government interference on life expectancy, without normalizing for a point in time, one could look at the Index of Economic Freedom versus life expectancy, on page 9 of this document:

http://www2.montana.edu/mbrown/101-2002/pdf%20notes/Web%20Ch.%2020a.pdf

That shows that countries which are least free (quintile #1, "repressed") have a average life expectancy of approximately 51 years, whereas the upper quintile (#5, "free") has an average lifespan of 74 years.

By the way, though...since when have "liberals" been interested in people living long lives? Certainly, Bill McKibben (whose granola-munching "liberal" credentials are beyond reproach! ;-)) doesn't seem too happy about that prospect:

http://www.reason.com/rb/rb040203.shtml

Not to mention the filthy bile "liberals" heaped on Julian Simon (may he rest in peace), for Dr. Simon's modest proposition that having a large number of human beings around might actually be a *good* thing.

"Not sure who that closing slogan is directed against; have those wicked right-wing think tanks been overrun with anarchists since last I looked?"

The only logical way that *I* can see, of defining political thought as a spectrum, from right to left, would be to have left mean 100% government, and right 0% government.

Therefore, the extreme right wing WOULD be anarchy (0% government). (By that measure, by the way, the Cato Institute would certainly be to the right of the Heritage Foundation.)

I wouldn't be very surprised if Dr. DeLong had trouble seeing the space between the Cato Institute and anarchism (more specifically, anarchocapitalism). When one is far away from an object, one has trouble resolving the spaces between the object and nearby objects.

:-)

P.S. If someone else cares to offer an logical method of defining left-to-right that doesn't go from 100% government to 0% government, I'd like to see it.

"Oh, and BTW, a clarification question for Mark Bahner: do you mean that implementing your five-step government reduction program would raise the LEVEL of GDP by 2-4% (i.e. raise it from $10.1 trillion to $10.3-$10.5 trillion, and it would continue growing at 2.5-3% a year from that new, higher base), or raise the growth rate of GDP by 2-4% (i.e. raise the growth rate from about 2.5-3% a year to 4.5-6% a year, permenantly)?"

The latter. If the size of the U.S. federal government were cut by 70-90%, I think the U.S. GDP growth rate would average 4.5% to 7+% per year.

"And don't give me that "onerous regulations" BS. Does a requirement to have traffic lights at busy intersections help or hurt productivity? Does keeping lead out of children's brains cost or save society money? (Hint: John Monahan is on-target here)."

1. Excessive land use regulations. Limiting development and jacking up real estate prices, especially around major economic centers, is a good way to degrade peoples' material well-being.

2. Medical and drug regulation. Because we've bought the notion that our fellow citizens are essentially overgrown children that are liable to put harmful things in their mouths without adult supervision, we've got impediments at every stage of the process that brings us the drugs we need. Drug companies must get permission to sell us drugs; that permission takes years and a hell of a lot of money to get. Individuals need to shell out money for a doctor visit to get permission to buy drugs, and drugstores must employ people to check for a permission slip to sell drugs.

3. Drug prohibition funnels money to the most vicious criminals and sucks up valuable police resources. People are forced to buy more expensive housing than they otherwise would in order to separate themselves from predators.

4. Licensing requirements for several professions act as a barrier to entry, limit competition, and artificially raise prices. Again, there's an assumption there that the people are too stupid to be allowed to buy certain services without adult supervision.

"Take our public high schools."

Please.

"Now, I certainly would rather pay the current taxes associated with maintaining our system of public high schools than live in a world where we shut down those schools and lowered taxes."

You're assuming that, in that world, the private sector would utterly fail to meet the demand for high schools at a higher quality and lower price than the government currently offers.

I find that difficult to believe.

Ken wrote, in response to my comment:

>>>"Take our public high schools."

>Please.

>>>"Now, I certainly would rather pay the current >>>taxes associated with maintaining our system >>>of public high schools than live in a world >>>where we shut down those schools and lowered >>>taxes."

>You're assuming that, in that world, the private >sector would utterly fail to meet the demand for >high schools at a higher quality and lower price >than the government currently offers.

>I find that difficult to believe.

Certainly if there were no public high schools then many teenagers would continue to receive at least an adequate, if not an improved, education through private schooling.

But if government washed its hands of support for secondary education altogether, many teenagers would recieve no such schooling at all, because their parents would either lack the means to pay for private school tuition, or would be so myopic in their attitude toward education that they would choose not to spend the money, even if they had it.

Note again that I'm not arguing for a perpetuation of the status quo. I'd very much like to see our current approach to public education replaced by a voucher system, where the government collected tax money and then distributed those funds to individual parents to spend on the public-run or private-run school of their choice (which is, effectively, how we run government support for higher education, which works quite well). But the current system, warts and all, is still preferable to a system under which the government did not collect tax money for education, but rather lowered taxes and expected parents to use the tax savings to pay for schooling on their own.

In a free market economy we generally trust people to be grown-ups who can make the best use of their own wealth for the betterment of their lives. But that only works if the people involved are, in fact, grown-ups. Its rank foolishness to hold children accountable on a grand scale for the outcomes of their lives, because they have no way of controlling whether they are conceived in a rich womb or a poor womb, and no way of controlling whether their parents are wise and forward-looking, or foolish and myopic. Not to mention the fact that before a certain age childrens' brains are simply not developed enough, in a cognitive sense, to be trusted with big picture cause-and-effect decisions.

It is altogether right ro provide some government-mandated leveling of the playing field to compensate for the massive differences in life prospects faced by children born into different circumstances. A child born to a drug-addicted single mother in the inner city is, after all, a citizen of the polity, entitled to a fighting chance at success.

Now, we can certainly disagree on how much leveling of the playing field the government ought to concern itself with. As a more-or-less conservative guy I tend to say that the government shouldn't be too aggresive in these efforts, because past a certain point the additional help given to the small percentage of children born into truly wretched situations is balanced by the harm that's done when well-meaning government interventions crowd out the much more effective and natural help that the vast majority of good parents give to their kids when growing up.

But surely public-funded formal schooling through the end of high school, which is the bare minimum amount of preparation for most roles in society and which is completed at about the time that kids reach the age of emotional and intellectual maturity commensurate with being trusted with the consequences of their decisions thereafter, is well on the acceptable side of that line.

That's some funny correlatin', Mark. See you dropped the rural/city thing, though. :D

On the rural-urban thing. I live in NYC now, but grew up in Central New York, where it's an article of faith that the decent, largely rural folk of upstate NY send their money down that rathole in Gotham.
In fact, leaving aside an occasional minuscule net tax outflow from the (urban) Rochester metropolitan area, it has been the other way around for as long as I've seen figures on it. Tax money collected in NYC goes to Albany and flows out to pay for public spending in the rest of the state.
But try getting anyone to believe it.

"But if government washed its hands of support for secondary education altogether, many teenagers would recieve no such schooling at all, because their parents would either lack the means to pay for private school tuition, or would be so myopic in their attitude toward education that they would choose not to spend the money, even if they had it. "

Unfortunately, children cursed with such parents tend to fail in public schools. Public school employees come right out and admit that their students do not do will unless they have proper parental support.

"Not to mention the fact that before a certain age childrens' brains are simply not developed enough, in a cognitive sense, to be trusted with big picture cause-and-effect decisions."

That age is significantly less than 18. The extra time they spend being children is due in large part to the shortcomings of their schools, which feature unreasonably long breaks and slow progression of instruction, leaving them scarcely able to support themselves, much less support families, even after graduation. Those wasted years are enough reason, all by themselves, to seriously consider replacing the public school system.

Consider first the extra years that all of our offspring have tacked on to their own sentences. Consider all the people giving birth out of wedlock while serving that extra time, completely unprepared to support families. (The rate of parenthood among teenagers has dropped over the years, but much less than the rate of marriage among them. It's not a "teen pregnancy" problem, it's a "teen childhood" problem). Then consider the extra years we spend supporting our own children. That's a hell of a lot of deadweight loss.

"Now, we can certainly disagree on how much leveling of the playing field the government ought to concern itself with. As a more-or-less conservative guy I tend to say that the government shouldn't be too aggresive in these efforts, because past a certain point the additional help given to the small percentage of children born into truly wretched situations is balanced by the harm that's done when well-meaning government interventions crowd out the much more effective and natural help that the vast majority of good parents give to their kids when growing up. "

I'd say we've already passed that point long ago, and that getting rid of the public school system is a step back toward the optimum. I'd support a plan where the poor get education vouchers (so that poor parents that actually give a damn aren't stymied by lack of funds), while the middle class is left on their own (they've got the resources, and it's kind of stupid to tax them so that we can turn around and give them education vouchers). Even if it doesn't save any money in the short term, the benefits of competition among schools will increase the return on educational investment over time, and leave us all better off.

"But surely public-funded formal schooling through the end of high school, which is the bare minimum amount of preparation for most roles in society and which is completed at about the time that kids reach the age of emotional and intellectual maturity commensurate with being trusted with the consequences of their decisions thereafter, is well on the acceptable side of that line."

But they reach the age of emotional and intellectual maturity so late these days precisely because they are subject to a public high school that doesn't give them that bare minimum amount of preparation in a more timely manner.

Ken Wrote:

"Unfortunately, children cursed with such parents tend to fail in public schools. Public school employees come right out and admit that their students do not do will unless they have proper parental support."

In the aggregate this may be true, but there are many children from sub-optimal backgrounds who would indeed benefit from formal schooling, despite their chaotic home lives. To decide not to fund public schooling for those kids because the majority of kids in similar situations would not benefit from formal schooling would be to punish them for the sins of their demographic groups, hardly an American attitude.

Then Ken Wrote:

"I'd say we've already passed that point long ago, and that getting rid of the public school system is a step back toward the optimum. I'd support a plan where the poor get education vouchers (so that poor parents that actually give a damn aren't stymied by lack of funds), while the middle class is left on their own (they've got the resources, and it's kind of stupid to tax them so that we can turn around and give them education vouchers). Even if it doesn't save any money in the short term, the benefits of competition among schools will increase the return on educational investment over time, and leave us all better off."

Two points: First, its not neccesarily the case the we simply tax middle income people and then turn around and give the money right back to them in the form of schooling for their children (with, one assumes, some waste, fraud and abuse on the round trip making the whole system less efficient). In fact, what we do is tax all middle income people, regardless of whether or not they have young children at home, and then use that money to fund schooling. This is beneficial for two reasons, the first being that it allows families to spread their contribution toward schooling out over a longer period of time (most 55 year olds have much more money than most 30 year olds, but do not have children at home), the second being that it forces childless families to contribute to the education of children, an important and proper feature of the system, since childless people enjoy tremendous benefits from living in a society where literacy is widespread, where the supply of educated workers is big enough to meet the demands of businesses, etc.

Second, it is not neccesarily the case that moving to an all-voucher system would be optimal. While I heartily support voucher plans, I would like to see the government stay in the business of running public high schools. This is the system we have for higher education, and it works quite well. The vast majority of public universities are excellent (sure, the Michigans and Berkeleys are vastly better than the Ball States and Cal State Sacramentos of the world, but even the Ball States and Cal State Sacramentos would qualify as first rate universities in most parts of the world, even the industrialized world.). But they are excellent because they compete for students and faculty with private universities, which even middle class families can afford to send their children to because of government sponsored loan and grant programs (as well as tons of indirect support). The problem with the public high schools is not that they are public per se. The experience of our excellent public universities shows that the government can run outstanding educational institutions. The problem is that our public high schools face no real competition. Establish voucher programs and the public schools would get enough competition to shape up and stay on their toes, but I suspect eventually most people would settle in to sending their kids to public high schools (just as most people attend public universities), because they would no longer be so bad.

Finally, I synpathize with your arguments about how we coddle and infantilize teenagers, and that maybe we should give them a little more freedom, and responsibility, earlier in life. But I can't help but thinking, even though correlation does not prove causality, that the countries where kids assume adulthood earlier in life tend be poorer, less orderly, more prone to violence and authoritarian government, less productive, less educated overall, and generally pretty shitty. There are exceptions on both sides of the divide, true. But teenager-coddling America, Europe, and Japan are pretty nice places to live. The middle east, sub Saharan Africa, Central America, on the other hand...

>I think anyone who seriously proposes to roll the government back to the 1880's should be willing to commit suicide at the point of their 1880's life expectancy.

No. Clearly lengthened life expectancy is correlated with heightened carbon emissions and global warming. It is ENVIROS who should kill themselves at their expected 1880s life expectancy.

/sarcasm

Hmmm. It appears you've got quite a bit of consumer surplus here. Perhaps your taxes should be raised? :)