The Distributist Review: Buy it Up--Break it Up--Fund it Right!.
John Medaille, who has posted some very interesting chapters of a forthcoming book at the Distributist Review (see, for example, these: Chapter XIV: The Cost of Government, whose sections include: So What's Wrong with Big Government?;Can We Cut the Budget?; National Defense; International Affairs; Natural Resources; Agriculture; Transportation; Education; Interest on the Federal Debt; Distributism and the Debt; and Chapter XV: Taxes, Economic Rent, and Externalities, whose sections include: What Should We Tax?; Ground Rent; But is it Enough?; Political Effects; The Land Tax and Distributism; Other Forms of Economic Rent; Externalities; But Should We Cut the Budget?) has posted
Buy it Up--Break it Up--Fund it Right!
I commend John's whole post to your attention, but I was particularly interested in the last section:
Fund it Right
In our industrial system, government is the consumer/employer of last resort. Government spending is $5 trillion of a $14 trillion economy, or more than one-third. Much of this spending constitutes a huge system of subsidies to large businesses, subsidies that are so in-grained that we no longer see them as such. For example, The “freeway” system is a huge subsidy to shippers and privileges global and national production over local and regional manufacturing. Indeed, without these subsidies, it would be difficult for global producers to compete with locally-made products, even with absurdly low-wages. But the transportation systems are the least in need of subsidies. It is easy to allocate these costs to the users through weight-based tolls. The “weight-based” portion is important because the greatest damage to the roadbeds comes from heavy trucks. With costs allocated to the cost-causers, subsidies disappear, and the dynamics of production change.
The most immediate result of tolls would not be a success, but a failure, namely the failure of the “big-box” retailers such as Wal-Mart. The distribution model of these companies depends on the current system of subsides and would not survive without them (see http://distributism.blogspot.com/2007/10/subsidizing-wal-mart.htm).
This huge system of subsidies also imposes high transaction costs on the economy. Even hiring a nanny requires a vast amount of paperwork and the payment of employment taxes. These transaction costs work against small businesses and in favor of giant ones. The transaction costs make it more difficult for start-ups to get started, but they are a mere nuisance to big corporations. The form an entry barrier which protect big businesses from competition. The greater part of the burden of taxation falls on labor and capital, when it should fall on the rentier (see http://distributism.blogspot.com/2009/01/chapter-xv-taxes-economic-rent-and.html)
This has all sorts of important implications. As we talk about investing in infrastructure as a way to stimulate the economy, we need to talk about
- how we fund that spending, and
- who should get to pocket the economic value we create.
Because if we don't talk about it, we're going to keep doing it the way we've been doing it, and that hasn't served most of us particularly well. In fact, it has served us rather badly.
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