Bacon's Rebellion

Pork You Can Believe In

—

by

James A. Bacon
in

Conservative sources are suddenly abuzz with the story of “phantom” congressional districts in the Recovery.gov website that tracks where the 2009 stimulus money (more properly known as the American Recovery and Reinvestment Act) goes. Embarrassingly, the website lists way too many congressional districts. Virginia, for instance, supposedly has a 36th, 26th and 79th districts. Those entries are obviously due to sloppy data entry. Conservatives are getting a good belly laugh, but the stories I’ve read are missing the real scandal.

Of the $159 billion in funds awarded so far, an overwhelming majority is going to Democrat districts. What a surprise. In the hands of a Democrat-controlled Congress, a program sold as a national economic stimulus functions in practice as a Democrat incumbent-reelection program.

You can see the numbers for Virginia (excluding phantom districts) in the chart above. All told, Virginia’s six Democrat congressmen have raked in $2,574 million for their districts, for an average of $429 million per Dem district. The five Republicans pulled in only $863 million, for an average of $173 million per district. In the basement, the 7th district, represented by leading Obama critic and House Minority Whip Eric Cantor, garnered a meager $73 million — less than 6% of Bobby Scott’s 3rd district. Can you say, “Punish thine enemies?”

Taking the job-creation numbers at face value (ignoring reporting from reputable media sources that the numbers could be inflated by 10% or more), we can calculate the average cost per job created in Virginia: $440,000. Is that a good return on investment or a poor one?

Well, let’s see. The president’s own Council of Economic Advisors estimated in May that one job would be created for every $92,000 in government spending — in theory, far superior to $142,000 cost per job that could be expected from tax cuts. Unfortunately, Porkulus turned out to be only one-fifth as efficient as advertised. Indeed, using the Virginia numbers as a benchmark, Porkulus has generated one-third of the jobs that would have been created through tax cuts.

Of course, as I noted above, Porkulus is only incidentally about job creation. It’s really about job preservation — as in, the jobs of Democrat Congresspersons.

Yessiree! A new kind of politics. Change you can believe in. I’m feeling all warm and fuzzy — aren’t you?

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41 responses to “Pork You Can Believe In”

  1. Anonymous Avatar
    Anonymous

    dingszysupbo"Of the $159 billion in funds awarded so far, an overwhelming majority is going to Democrat districts. "

    What's the problem? The Republicans have been saying all along, "We don't need this stimulus."

    RH

  2. James A. Bacon Avatar
    James A. Bacon

    No, Larry, Republicans didn't say that a stimulus wasn't needed. They said that a $787 billion package larded with pork would not deliver the jobs the Dems anticipated. Turns out they were right. Turns out that tax cuts would have generated a lot more jobs.

  3. Anonymous Avatar
    Anonymous

    Maybe both. The way I recall it Republicans were saying the stimulus spending was a fiasco and unnecessary. The market would fix itself faster if left alone than if given sugar pills.

    I don't think there is any doubt that the jobs creation aspect was overblown. Same goes for green jobs.

    —————————–

    We only have one economy to experiment with, so it is hard to know which antidote would have cured faster, better, and longer.

    We do know that China had a giant stimulus that worked very well, and Europe had a lesser stimulus that worked less well. I don't see there is any more argument that stimulus works or doesn't.

    As you correctly point out the argument then devolves to whether it is efficient.

    We could have done nothing and kept hands off, which is what Hoover did.

    But even the Republicans wanted stimulus, they just wanted it in tax cuts (tax expenditures) rather than cash spending.

    What's the difference, either way it is money spent?

    With stimulus you borrow the money and the pain comes later when it has to be paid back.

    Tax cuts combined with a faltering economy means the government runs out of money right now, and that surely can't be good. With tax cuts the pain continues as long as the cuts are in effect, so the pain starts now and lingers into the future.

    Maybe you get lucky and supply side economics and trickle down kicks in, but I don't see the electorate as buying that song and dance again, not with real wages stagnant for the last decades.

    So if tax custs and fiscal stimuls are tow sides of the same coin (ours), then we have to look someplace else for the tie breaker.

    How long do these new jobs last, and how well do they pay?

    My guess is that analysis won't go well for the Dems, and the Republicans will beat them mercilessly once the truth surfaces.

    —————————–

    "Turns out tax cuts would have generated a lot more jobs."

    I'm not convinced. Theoretically stimulus should have worked better and sooner, but that didn't happen.

    It might just as well be the case that we went the other way and government did an equally bad or ineffcient job of it. It seems to me we would have to postulate equal conditions, not that we allow the government to fail in one cas and assume it is perfect in the other.

    Under equal management tax cuts would have been managed badly as well, sot hey would still come off worse than stimulus spending, and a lot slower as well.

    —————————-

    Which states recovered sooner, the ones with a lot of stimulus or those with none?

    RH

  4. Groveton Avatar
    Groveton

    "What's the difference, either way it is money spent?".

    The difference is how the decision is made regarding the jobs to create. Tax cuts more or less allow the market to determine the number and cost of the jobs created. Stimulus spending allows government employees to determine the number and cost of the jobs created.

    You may find it hard to believe that I don't think either approach is necessarily better than the other. At least in theory. Free markets exist only in textbooks. America's markets are a far cry from the theoretical market described in The Wealth of Nations. There are an almost endless set of subsidies, tax breaks, regulations, etc that all serve to put cuffs on the invisible hand. Meanwhile, this admisitration is proving to be pretty seriously incompetent. Worse yet, I am smelling a rising whiff of corruption coming from both the White House and Congress. From Geitner's "only the little people pay taxes" philosophy to ACORN to what seems to be partisan politics at play in the distribution of our own money back to us, Obama's "change you can believe in" is more like "scams you have gotten used to". However, given the choice between corrupt markets and corrupt politicians, I'd pick the markets. Tax cuts would have been a better plan.

    Every generation has to flirt with unbridled liberalism. My generation elected Jimmy Carter. This generation elected Barack Obama. The lesson is always the same … liberalism just doesn't work.

    I've heard it said that it takes a Carter to create a Reagan. Are you listening Mitt?

  5. Larry G Avatar
    Larry G

    I guess I am less than thrilled to see how the stimulus was allocated out and if Virginia is representative of other states then it stinks.

    but I'll never understand how a tax cut creates a job.

    A stimulus creates a job when there is no money, no demand for that job.

    For instance, you put some money on a road project and it provides direct jobs.

    but if you give a tax cut to a business.. they're not going to go hire someone to build a widget that there is no demand for because the economy is sour.

    You can't create jobs when there is no demand for the stuff those jobs will make – right?

    And if you give tax cuts to the wealthy, they're going to as likely invest in some overseas investment with a good return than say.. or even some derivatives or something else that is more a wealth-generating monetary transaction that a job creating action.

    Jobs come from demand for products and services.

    Jobs go away when other folks loses their jobs and no longer buy goods & services.

    Giving the owner of a plant a tax refund is not going to get him to hire more people if he's already overstocked on what he's trying to sell.

    If this theory were true – you'd just give the stockholders of GM a bunch of money and GM would hire a bunch of new workers to build a bunch of cars – that would then sit in a storage lot somewhere.

    anyone got a more convincing argument?

  6. Darrell -- Chesapeake Avatar
    Darrell -- Chesapeake

    They could have cut out the middleman and just gave me the money 😉

  7. Groveton Avatar
    Groveton

    Larry:

    In theory at least tax cuts lower the ROI hurdle for investment. Let's take an admittedly absurd argument. Taxes are 99% of business income. Nobody invests in building additional productive capacity ahead of demand because the investor would only keep 1% of the return (which itself assumes that the investment has a return). There is no upside except for the government. Nobody invests and no new jobs are created except, perhaps, by the government. Of course, even the govenment is screwed since nobody is investing and, logically, corporate profits are dwindling. 99% of nothing is nothing.

    Now, lower the business tax rate to 0%. Investments soar as entrepreneurs seek profits from new businesses. Some investments succeed and others fail. All create new jobs (the companies that fail just don't preserve the jobs for long).

    Tax cuts create jobs. JFK understood this when he designed the largest tax cut (as a percentage of GDP) in American history (he still holds the record). Jobs create disposable income which fuels consumer spending which creates more demand for productive capacity which, in turn, spurs more investment. Henry Ford understood this as he sought to make the Model T cheap enough that his own factory workers would be able to afford one.

    Few people would argue that lower taxes encourage higher investment.

    Government can create jobs too. Fidel Castro's government pretty much creates all the jobs in Cuba. More seriously, recruiting more soldiers, building more dams, constructing more roads will all create jobs. The question is whether market forces or government edict create jobs more efficiently. The British ruled India with a stunningly small bureaucracy. Without commenting on the morality of colonialism, one must wonder at the efficiency of British government employees in that situation. The former Soviet Union's 5 year plans are a counter example. One can only marvel at how poorly they worked. Mao tried to turn small farms into small steel plants.

    So, I say again, both the free markets and governments can create jobs. Free market job creation is catalyzed by lower taxes. Government job creation is catalyzed by higher taxes or higher defecits.

    Which is better?

    It depends on the quality of the bureaucrats and the freedom of the markets. Right now I have more faith in the markets than the government. During the British Raj I would have felt differently.

    Speaking of jobs, the Fredricksburg Chamber of Commerce seems to have missed a trick recently:

    http://www.washingtonpost.com/wp-dyn/content/article/2009/11/16/AR2009111601969.html

  8. Anonymous Avatar
    Anonymous

    I think Groveton makes some good arguments in favor of tax cuts. But I'll agree that direct spending through infrastructure investments could also generate some jobs.

    However, the ARRA doesn't seem to have funded much infrastructure development. A lot of what has been spent has gone to keep state and local employees on the payroll, even ignoring the ACRON and ACORN-like funding fiascoes. With all due respect, I don't see the overwhelming public benefit for protecting bureaucracies. The political benefits are clear.

    But what about "hope and change"? Same old, same old. Just a substitution of one set of crooks and hangers-on for another. Not quite the change that was promoted.

    I never liked George Wallace at all, but maybe he was correct when he said that there wasn't a dimes worth of difference between Republicans and Democrats.

    TMT

  9. Groveton Avatar
    Groveton

    Political trivia:

    Who was the last non-Republican, non-Democratic candidate for president to win at least one electoral vote? (Note: so-called faithless electors who are pledged to one candidate but vote for another as a sign of protest don't count).

    George Wallace. Segregationist. 1968.

    Before Wallace, who was the last non-Democrat, non-Republican candidate for president to win a least one (non faithless) electoral vote?

    Harry F. Byrd. Segregationist. 1960.

  10. RBV Avatar
    RBV

    The fact of the matter is most of the money hasn't been spent. It's too early to tell whether or not it's been effective.

    FYI….;

    http://www.recovery.gov/Pages/home.aspx

    "…we can calculate the average cost per job created in Virginia: $440,000. Is that a good return on investment or a poor one?"

    It depends on a lot of variables….what did a company have to invest in so the job could be created?

    If a CEO buys two pieces of heavy equipment at 100K each and and hires four guys to run them at a salary of 50K that changes the equation, IMO.

    If VA is not getting any of the $$$ it basically comes down to the fact that they haven't tried to seek any of it out.

    "You can lead a horse to water……

  11. Anonymous Avatar
    Anonymous

    interesting that if we built 100 new nuclear reactors by 2030 we would create 3 times the amount of jobs that we would if we built the 180 000 wind turbines needed to create 20% of our enery from wind. Nuclear is the way to go. Sen. Alexander and Sen. Webb are on to something.
    http://envirogy.wordpress.com/2009/11/17/putting-the-eggs-in-the-nuclear-basket/

  12. Anonymous Avatar
    Anonymous

    "The difference is how the decision is made regarding the jobs to create. Tax cuts more or less allow the market to determine the number and cost of the jobs created. Stimulus spending allows government employees to determine the number and cost of the jobs created."

    Touche.

    I Still maintain that tax cuts take a lot longer to create results and cause more pain short term.

    RH

  13. Anonymous Avatar
    Anonymous

    " I don't think either approach is necessarily better than the other. At least in theory."

    Me either.

    RH

  14. Anonymous Avatar
    Anonymous

    "I've heard it said that it takes a Carter to create a Reagan. Are you listening Mitt?"

    Priceless.

    RH

  15. Anonymous Avatar
    Anonymous

    "They could have cut out the middleman and just gave me the money ;)"

    If Bacon is right, that would have been more cost effective.

    I think they call that a tax cut.

    RH

  16. Anonymous Avatar
    Anonymous

    "a dimes worth of difference between Republicans and Democrats."

    Democrats want bigger government now.

    Republicans want bigger government later.

    RH

  17. Larry G Avatar
    Larry G

    to believe that a tax cut would create a job – one would have to believe that there is some unfulfilled demand for something and it has yet to be made – for a lack of manpower.

    If tax cuts "work", then what happened to George Bush's economy which was premised on tax cuts?

    I'm not arguing in favor of stimulus for jobs as a standard policy – only in the situation that we have just seen.

    And whether you think the particular job that was created/saved was/is legitimate/useful is not the point either as long as you create the job and that person then spends money – that's the purpose of the stimulus…

    I would argue that taxes create jobs.

    When we collect taxes and spend them on a million new humvees – we create jobs.

    when we pass a new law that requires cattle to be tracked with RFID and/or inspected for disease – we create new jobs.

    I'm again not arguing in favor of these kinds of jobs but I'm pointing out that they are, in fact, real jobs.

    If you don't think so, I invite you to take a look at the economy of NoVa which is predicated in large part on the spending of tax dollars that results in not only real jobs but a LOT of real jobs.

    Every Congressman and Senator and Gov knows this also – that's why they fight for military bases…

  18. Gooze Views Avatar
    Gooze Views

    Jim,
    No doubt there are lots of issues, problems and inequities with the stimulus program which was rushed into life with the same sense of urgency, if not hysteria, that the Bush Administration raced TARP into life as Porkulus for the Wall Street limousine crowd.
    My problem with your analysis is that are connecting dots that don't necessarily connect — that Obama's people are rewarding Dems and punishing Reps.
    This is your guess based on one recovery.com chart. But in reality, there seems to be no relationship between need and how and where the Obama Administration is spending its $787 billion in stimulus money.
    "Stimulus spending is literally all over the map," according to the investigative group ProPublica which analyzed government stimulus contracts, grants and loans shows.
    The report follows similar ones by FOXnews.com and the Wall Street Journal suggesting that some of the areas hardest hit by the recession are receiving the least amount of stimulus money.
    The Journal found that high unemployment states such as Florida, North Carolina and Oregon are among those with the lowest per capita stimulus fund payouts while well-off states such as North Dakota and South Dakota are receiving stimulus money at higher per capita rates.
    ProPublica found similar patterns. It noted that Trigg County, Ky., for instance, has an unemployment rate of 15.8 percent and gets about $2,419 per resident in stimulus funds. One state over in Indiana, LaGrange County has an identical unemployment rate, but gets only $33 per resident in stimulus funds.
    In some cases, stimulus money is the cavalry riding to the rescue. Last week, for instance, I participated in a teleconference on the crisis in California's budget. This is brought on by conservatives in the south demanding rigid anti-tax programs while liberals in the north entitle everything they can see.
    As a result, the public colleges are a mess. Faculty are being fired or fuurloughed, schools are refusing to accept new students and students face layer upon layer of new tuition hikes. The chancellor of the California State University system, in response to my question, said that they would have been real toast if it hadn't been for stimulus money.
    In all of these cases, I can't see the favoritism for Democrats and punishment for Republicans that you seem to see. Maybe you should look beyond the parochial little world of Central Virginia and Bobby Scott and Eric Cantor to get the bigger picture and a better perspective.

    Peter Galuszka

  19. Anonymous Avatar
    Anonymous

    If you want less of something, just tax it.

    Tax cuts work, they just take longer.

    RH

  20. Anonymous Avatar
    Anonymous

    "…when we pass a new law that requires cattle to be tracked with RFID and/or inspected for disease – we create new jobs."

    But now the question is whther the benefits exceed the costs of the additional inspections. If not, then those "new jobs" cost more than they are worth and they are a drag on the economy just as if you passed a new tax.

    RH

  21. Anonymous Avatar
    Anonymous

    "…suggesting that some of the areas hardest hit by the recession are receiving the least amount of stimulus money."

    I think it is called triage. Wy throw good money after bad? Instead, spend it where you arelikely to get the highest multiplier.

    RH

  22. Larry G Avatar
    Larry G

    any more or less than if you produce a product that makes people fat or ruins their health in other ways and they buy lots of it?

    or even if they spend their money on something that is a non-productive, depreciating asset?

  23. Larry G Avatar
    Larry G

    giving tax cuts on the premise that they will be used to create more jobs in THIS country is less than smart IMHO.

    money is fungible and investments are not restricted to national borders…

    We can (and should) hammer the flaws associated with the stimulus and bank and auto bailouts but anyone who thinks giving the wealthy more money so they will create more American jobs – needs their head examined.

    that might have been true 50 years ago but not today.

    the money that is most likely to stay in this country is unemployment payments that will primarily go for food and shelter and utilities.

    supply-side "trickle-down" in a flat earth economy is is about as random as one could get in WHERE the trickle-down actually occurs.

  24. Anonymous Avatar
    Anonymous

    " or even if they spend their money on something that is a non-productive, depreciating asset?"

    In that case it is their money, not ours. (So far) We can't tell them how to spend it unless we are willing to have them tell us how to spend ours. Equal property rights for all.

    You seem to have a problem distinguishing when something is yours, when it is partly yours, and when it is someone else's.

    ——————————-

    any more or less than if you produce a product that makes people fat (if they eat too much of it).

    Any product has some kind of external costs, and some of these can be controlled by the manufacturor, some cannot. I think it is a stretch to blame the manufacturor because someone over uses his product.

    If you want less fat, then put a tax on obesity, not on the products that (you think) causes it. Why should I pay an extra tax on chocolate bars because someone else eats too many?

    (Isn't that your own road use argument?)

    If you tax obesity, I expectyou will hear about it from people with thyroid dysfunction or genetic predisposition.

    ——————————

    The comment about them ruining their health goes to the issue of who pays for health care. Whether that is a nationalized system, an insurance system, or a charity system,the answer is that we all do. Now the question is how do we incentivize people to keep our health care costs low (doctors and patients included.)

    I dislike the idea of penalizing other people for doing things we disapprove of. It is too easy because no scrifice is needed on the part of the complainer. I think that other people having children costs me money, but I'm not about to propose a tax on them just because I disapprove.

    Instead, I prefer to see positive incentives, which require people to be more honest about what they want and what they are willing to pay for. Failing that, I think incentives should be performance based. Say everyone pays the same basic(and maximum) rate for health insurance, but then you start earning a discount for every month you stay well and don't use the insurance.

    The difference between that and charging people with bad health haits more is subtle but important.

    RH

  25. Larry G Avatar
    Larry G

    all I was pointing out is that giving tax rebates on the premise that it will produce more jobs – is problematical.

    You can give the owner of the coca plant a tax rebate but he's not going to hire more workers if they are not going to sell more cola.

    instead of a tax rebate for the coca cola plant owner, you could require RFID tags on beef cattle –

    the later WOULD provide jobs for sure

    but in either case – whether you talking about more cola or RFID – the "benefits" and "costs" are a separate issue.

    If I had a million dollars and I wanted to create jobs with it, I'd not give it to a plant owner for a product of which there is no increased demand for.

    but I would not even need a million dollars to create RFID jobs.

    All I'd need is a law that says each cow needs to have an RFID tag on it.. and I create jobs.

    whether or not there is a "cost-benefit" to those jobs is no more or no less than the "cost-benefit" to encouraging people to drink more coke.

  26. Anonymous Avatar
    Anonymous

    "…all I was pointing out is that giving tax rebates on the premise that it will produce more jobs – is problematical."

    I tend to agree, but, if you do not take as much money from people they will do something with it. If they already have basic needs covered, it will be saved and invested (or spent on non-necessities).

    Either way it creates jobs, eventually, somewhere.

    It might be in a clothespin plant in Borneo, but so be it. An unemployed person is probably better off buying 25 clothespins for a dollar than he is working minimum US wage to make clothespins that are offered for sale for a dollar apiece.

    That worker is soon to be unemployed.

    RH

  27. Anonymous Avatar
    Anonymous

    "owner, you could require RFID tags on beef cattle –

    the later WOULD provide jobs for sure"

    Yes, you can require this, but it DOES NOT MATTER unless the RFID's produce more benefit than they cost.

    If government regulations don;t produce a "profit" we should put them out of business just as surely as any other business doing the same thing would go bust.

    You would produce more jobs producing worthless RFIDs or RFID's that cost more than they are worth — but you would be better off just paying the unemployement plus the associated cattle related health costs.

    Only IF the RFIDs truly create a big savings are they worth the effort.

    RH

  28. Anonymous Avatar
    Anonymous

    "…but I would not even need a million dollars to create RFID jobs.

    All I'd need is a law that says each cow needs to have an RFID tag on it.. and I create jobs."

    Jesus, you really still don't get it. Of Course you still need that million dollars. Those jobs don;t happen for nothing.

    TC = PC + EC + GC.

    You are going to increase government costs by regualting and enforcing RFID's. You decrease external costs of Cattle borne illness and government costs assoctiated with that, and you increase production costs because the cattle farmers pay for the RFID's which they add to the meat cost.

    If total costs still goes down, then RFID's are a good deal, otherwise we are better off taking our chances with bad meat.

    RH

  29. Larry G Avatar
    Larry G

    in the case of the clothespins.. providing that guy a job making RFID tags for domestic cattle would be more beneficial to THIS Country.

    in that regard – taxes – get spent in THIS country and tax rebates may well not be spent in this country.

    A government job or a job required by government is a real job and a permanent stimulus whereas a textile job created by a tax rebate in Martinsville goes to India two years later.

    Basically – the US is subsidizing foreign investment when it uses tax rebates for stimulus.

  30. Larry G Avatar
    Larry G

    " otherwise we are better off taking our chances with bad meat."

    ever hear of mad cow disease or E. coli where millions of pounds of perfectly good meat is thrown away because we can't figure out where it came from?

    If you leave this to the cattle industry – none of them will implement it because it will result in a competitive disadvantage to the ones that do it and a competitive advantaged to the ones that do it.

    this is like one state outlawing Kepone and another one not.

    The companies will go to where they get a competitive advantage even though the harm to the public is more costly – but it's no cost to the company making a profit.

    Your equation does not work when there are profit-seeking entities involved along with consumers that can be harmed.

    Private industry will always shift the costs to the consumers if they are not required to do otherwise.

    we have a long history of this.

    we know what happens when industries are not regulated.

    we're paying the price right now for a lack of regulation.

  31. Anonymous Avatar
    Anonymous

    "If you leave this to the cattle industry – none of them will implement it because it will result in a competitive disadvantage to the ones that do it and a competitive advantaged to the ones that do it."

    Agreed.

    Look, I don't doubt that in this case the costs will be covered by the benefits, but that does not change the facts on the ground.

    1). If the costs are NOT covered by the benefits the government has no business getting involved, Mad Cow disease or not. We will be better off taking our chances if that is the case.

    2). Whether we know what the costs and benefits are or not, they still exist just the same. We are going to be affected by (pay for) the results, whatever they are, we might as well know what they are.

    We can find out pretty close what the costs are if we try, particularly AFTER a policiy is put in place. It is completely irrational to suggest that there is no way we can know, the cost or that it does not matter.

    3). We don't have a procedure for doing this that is sufficiently robust as to eliminate all but the hardest problems from political contention over the results.

    I don't have a problem with the meat thing. But after we put in all these RFID's and we still have meat scares and meat deaths, we can pretty easily figure out whether the reductions were worth the cost.

    Now go back to essentially the same problem with oysters. How much shoud we spend to prevent 15 people from dying after they choose to eat raw oysters?

    The daughter of one of those fifteen says it is worth any price.

    RH

  32. Accurate Avatar
    Accurate

    I've been reading Michael Medved's book 'The ten big lies about America'. In that book he discusses what turned our country around after each and every recession … it was the government cutting down on spending. A pity that Obama has no idea how to do that.

    Oh, as for 'trickle down' economics. Doesn't that basically happen no matter how you cut it? The people with the money, be it individuals, or companies, or the government do something – buy, spend, give away money and it goes to those who did something to receive the money. Republicans think you should earn the money in some way, democrats think that people should be given money based on the fact that those people exist (and hopefully they will vote democrat next election).

  33. Anonymous Avatar
    Anonymous

    "Your equation does not work when there are profit-seeking entities involved along with consumers that can be harmed."

    The equation ALWAYS works and it will always work untill the laws of addtion expire.

    TC = PC + EC + GC.

    Profit seeking entities are included in the first term on the left. A soap manufacturor makes soap which we buy and he sells at a profit. The soap keeps us clean and protects us from disesase. and the plant provides us with jobs. That is the production cost and production benefit.

    The external costs are that the plant creates some waste and pollution. Also when we use the soap that creats pollution.

    The government costs are the infrastructure it supplies to the plant and workers,and the costs of regulating/monitoring the external costs. The government benefits are the taxes it collects.

    Add them all up and if it is not a positve number then we have a Kepone situation and we should stop doing it – period.

    Make any change anywhere in the system and the total costs on the left will go up or down. If they go up we either should not do the change or we should undo it if already done.

    This is simple addition. The only hard part is figuring out what all the parts are, so that no one feels significantly left out. Some things will be nebulously or subjectivley priced. It does not matter as long as those same items are subjectively priced the same way in every case.

    It does not matter that they are subjectively priced, as long as they are uniformly priced, and here is why.

    Sooner or later, you will plug that subjective price into a project plan and it will produce a result that is obviously and totally wrong: no rational person can agree with the result.

    But if you change it, you have to go back and change it everywhere else it applies. So, if you spend 150 million washing, cleaning, and irradiating all the opyster in Louisiana to protect the lives of 15 oyster consumers, but you only actually protect 5 then suddenly the cost jumps from $10 million per person to $30 million per statistical life saved.

    That's four tmes what we typically spend to save other peoples lives, so somebody is getting ripped off.

    Or you can just spend the $150 million and ignore the results, and continue to do that for every potential risk anyone can invent and complain about.

    RH

  34. Larry G Avatar
    Larry G

    your equation works in theory but in practice the variables cannot easily be obtained or they will cost a lot to obtain and even then the quality of the data may not be what it needs to be to be able to make a simples yes/no answer.

    There are variables, things that change – dynamically affected by other things.

    there are things that end up being risk.

    there might be a slight change of something happening every year but over 40 years, it is LIKELY that it WILL happen.

    This is how things like mad cow disease or e-coli work.

    you can have a system where there are risks and over time, your costs seem low but then you have a catastrophe, a very expensive one and then you realize that even though your year to year risk seems low – that over time – you end up with a virtual certainty.

    and things change…

    this is why insurance companies for 80 years were willing to insure a home on a beach and now they will not.

    It took that long for your equation to "work".

    People built homes 80 years ago in California and never lost them to wildfire – then things changed… the climate got drier and now.. homes that don't have expensive roofs that won't burn – cost much, much more to insure.

    Your equation does as a simple calculation that can be applied at any point and time then walk away.. decision made…

  35. Larry G Avatar
    Larry G

    " Republicans think you should earn the money in some way, democrats think that people should be given money based on the fact that those people exist (and hopefully they will vote democrat next election)."

    I can see how some folks see the difference in these terms but to a certain extent it boils down to how we deal with people through no fault of their own cannot.

    or let's put it another way.

    what differentiates this country from a 3rd world country?

    There are a couple hundred countries in the world.

    Only a handful are industrialized modern Democracies.

    how does this play into the idea behind what you say Republicans are all about?

  36. Larry G Avatar
    Larry G

    here's a good current events example of government regulatory involvement in the market place.

    In two ways:

    1. – first to mandate MINIMUM Standards

    2. – then to TEST and Rate how well the products did in meeting the standards.

    Third more things to observe:

    1. – the standards are not static – they continue to evolve

    2. – they are not cheap – they add costs to the product

    3. No where in their description do they reference the infamous

    TC = PC + EC + GC

    If that equation were actually true – every year when the new ratings came out we'd know what changed – and how close we were getting to the "tipping point" of "over regulating" so that the equation tilts in the "wrong" direction.

    What am I talking about:

    This:

    "27 winners of 2010 TOP SAFETY PICK award;
    new requirement to win is good rating for protection in rollovers"

    http://www.iihs.org/ratings/default.aspx

    Now the The Insurance Institute for Highway Safety is an independent, nonprofit, scientific, and educational organization but many of the standards are govt standards:

    http://www.nhtsa.dot.gov/cars/rules/standards/FMVSS-Regs/pages/Part571.htm

    Even though the insurance institute is a non-govt organization – it is funded in essence by a "fee" on your auto insurance policy – really not different from a tax since you really don't have a choice in paying that fee or not. It's not even itemized on your policy.

    But you pay for it.

    It costs money to test.

    and again I do not see any mention of your equation… as to how much they test and how much they think is the right amount of money to charge you for testing.

  37. Anonymous Avatar
    Anonymous

    "…there might be a slight change of something happening every year but over 40 years, it is LIKELY that it WILL happen.

    This is how things like mad cow disease or e-coli work."

    —————————-

    The equation works, the equation always works, there is no way the equation can NOT work as long as the rulles of addition hold.

    The way you take into acount long term effects is to calculate their eventual costs or benefits in todys;s dollars using an appropriate discount rate.

    The discount rate uses is frequently a bone of contention in cost benefit analysis. Those that think we owe somwthing to future generations like to see a very low discount rate while other people feel that benefits they will never see should have a higher rate.

    This is part of what needs to be resolved before we have a uniform procedure that all can agree to in settling benefit cost studies.

    The answer is always the same. If you make some change in policy or regulation, then it will cause a shift among the three terms in the right side of the equation. The sum of those shifts may make the left side go down or up. The sum of those shifts WILL make the left side go down or up.

    If it goes up, then it is a bad policy, If it goes down, then it is a good policy. But it is not necessarily a good policy if the center term (external costs) goes down, just because environmentalists would have us believe so. Their position is that society should endure ANY costs that make external costs go down. The Republican/Fiscal conservative position seems to be that society should endure ANY costs that make the third term (government costs) go down.

    They are both wrong, and neither organization is going to convince me that their proposal is a good one until they can convince me that the left side goes down.

    Regardless of whether we know the answer, the sum of those shifts WILL make the left side go down or up. And that result will be independent of anything we believe about future risk, probability of catastrophic costs, otr the existence of a deity.

    The left side will go up or down in response to policies we make, it is as simple as that. The only ethical position we can take is to make the most honest assessment possible before we make a new policy, and to follow it up with more study after the policy to determine if it was worth while.

    And, you are exactly right, things DO change over time, so a policy that was once right may need to be changed. Or one we once thought was right may turn out to be flat wrong. We have as many examples of that as we have of DDT and Kepone.

    But that is why you need to do that analysis, and continue to do it, as long as the cost of the analysis doesn't exceed the benefit that might occur.

    Consider the environmental movement as a single entity or corporation that is trying to produce a product, which we can call sustainable conservation. That product will have production costs and benefits just like any other product, and it will have external costs and government costs, just like any other product.

    Environmentalists love to beat up everyone else about THEIR external costs but refuse to recognize their own. This is an assymetric positon in property rights, it is unethical, and it isn't even green.

    The equation always works, whether we are able to solve it or not. The equation always works, whether our policies work or not. Trying to beat up on the equation or denying that it works is wrong headed, and about as useful as denying the sky.

    RH

  38. Anonymous Avatar
    Anonymous

    "…the variables cannot easily be obtained or they will cost a lot to obtain and even then the quality of the data may not be what it needs to be to be able to make a simples yes/no answer."

    Strangely enough, an awful lot of numbers are invented beforehand to justify new policies. Without those numbers there is no way to justify the policy, unless you assume something, like infinite eventual catastrophic costs for mercury poisoning.

    Well, making a policy on that basis also costs a lot, and you can;t simply assume that it costs less than mercury poisnoning just because you have postulated some cataclysmically expensive event.

    But, even if you make a policy on that basis – especially if you make a policy on that basis – then you have an obligation to continually test your postulate.

    The bottom line is this – if you are wrong, then you are spending too much to save some lives, when many more might have been saved with the same amount of money doing something that is more cost effective.

    Therefore you have a moral imperative to do the best and most cost efficient job you can of resolving all of the subjective problems you mention.

    The more you do that, the more you set up brackets, and the easier it is to find the niche this particular cost belongs in, and the more concensus you have on the relative value of things.

    We can't very well argue that we need to change the standard on sulfur dioxide because it will save x number of lives and then refuse to even try to find out if we really saved them, because the data is too hard or too expensive to get.

    RH

  39. Anonymous Avatar
    Anonymous

    ". No where in their description do they reference the infamous

    TC = PC + EC + GC "

    ————————

    But gee, you just described ti perfectly.

    The government incurs costs in setting standards and in auditing, testing and otherwise enforcing that the stndards are met. That is the GC term.

    The PC term is the fact that as you mentioned product costs go up.

    And the EC term is covered in the contntion that better safety standards save lives.

    What is it that you think is missing?

    Now, the standards are not static, we continually and incrementally make them stricter. but we don't always go back and see if they generated the expected result. Yet every time we change the stnadrds the terms of the equaton shift a little.

    We know that there is a decreasing return on investment for each incremental investment in safety, or anything else. If I shift from an SUV to a Camry I save a lot of fuel and spend less money. But then if I incrementally shift from the Camry top a Prius I don't save any where near as much fuel, and now my capital costs go UP.

  40. Anonymous Avatar
    Anonymous

    "The tax rate on equity-financed corporate capital income is 36.1 percent and that on debt-financed corporate capital income is -6.4 percent."

    And you think the mortgage interest deduction is bad?

    RH

  41. Larry G Avatar
    Larry G

    Here's a tax-rebate jobs program I could sign on to:

    "The Case for a Job-Creation Tax Credit"

    "…. a job-creation tax credit, which would make it cheaper for employers to hire new workers."

    …

    " Based on Daniel Hamermesh’s thorough review of econometric research on labor demand, Dr. Bartik and I have estimated that this temporary credit would increase employment by 2.8 million by the end of 2010. We also estimate that it would cost the federal government less than $6,000 per full-time equivalent job."

    http://economix.blogs.nytimes.com/2009/11/19/the-case-for-a-job-creation-tax-credit/

    this is the problem that I have with the Conservative/Republican approach of just giving tax credits/rebates without regard to where the money actually ends up.

    If we want to create jobs – then lets do it specifically with targeted actions.

    Not all companies will be able to take advantage.

    Certainly not companies that are not American-based – unlike the generalized tax rebates favored by generalized tax cuts.

    and certainly not people who would use tax cuts for other fiscal activities that did not involve job creation but focused more on personal wealth creation.

    and certainly not even all American companies either.

    Only those that could actually see potential for growth of their products and services but are holding back because of uncertainty in the economy.

    here's the link:

    http://economix.blogs.nytimes.com/2009/11/19/the-case-for-a-job-creation-tax-credit/

    I'd be interested in hearing a rebuttal from those folks who favor generalized tax cuts and how they would be superior to targeted tax cuts.

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