Saturday, January 10, 2009

$375 Million Dollars for Town of 194

If you haven't heard, the town of Edwardsville, Alabama made a request for 374 million dollars in federal aid for their town of 194 residents in order to fund green technology and who knows what else.

Of course this ballsy move received national attention, especially from the Citizens Against Government Waste organization. If you read the news story a little further you'll see that this bad press caused the town to rescind the original request. A town representative had this to say (taken from US News):

"The public perception of us being full of greed and the tremendously ugly comments have disheartened and disappointed us to the point that we are withdrawing our projects from the U.S. Conference of Mayors survey."

Am I the only one who thinks this person was stretching their vocabulary just to get this statement out? I think we would all have been much more impressed with this improved version:

"The public perceptification of us being full of greediocity and the stupendously ugly commentifications have unfortunately exposed our dubious cash grab to the point that we can no longer get away with it. Screw all of you."

Sheesh, Edwardsville. How naive must your US Conference of Mayors representative be to try something like this? Did he/she really think that they should burden the rest of the nation with hugely expensive and disproportionatly expensive public works projects at a time when unemployment is at a 7% nationally and our GDP has shrank?

Those small town rubes should have known that only the federal government can do things like this!

Obama's stimuluous package, which Edwardsville was trying to get a piece of, is 800 BILLION dollars in government spending. That's a bit more ambitious than Edwardsville, being another order of magnitude higher in cash, but it's just as stupid and we should be just as appalled at this idea as we are at Edwardsville's. See, the problem with government spending is that the money must come from one of these sources.

1) The Treasury prints more money.
2) The Treasury sells more bonds to China.
3) A minority of tax payers get taxed into oblivion.

The first option devalues the currency because the money supply goes way up. Every asset you own becomes less valuable. This doesn't mean it won't happen.

The second option is on-going and comprises a large portion of the national debt. The Chinese and several other foreign investment entities already own us to a large degree. At some point we won't be able to even pay the interest on these bonds and our currency will collapse globally. It's worse than that even sounds.

The third option is the most attractive (not to me!) and is on going. We are now at the point in time where the vast majority of tax dollars are paid by way, way less than 50% of the tax payers. Since these tax payers are a minority of the population they are out-voted. The majority of the country has decided to confiscate the earnings of a minority. That sounds righteous ("Stick it to the rich!") but there are problems. Those high earners are the ones whose small and large businesses hire people. They are the ones who buy a lot of goods and services which keep us employed, like say 20,000-30,000 of us in Wichita who work for Cessna, Learjet, and Beechcraft who manufacture corporate jets and other aircraft. When we vote to tax them at crazy high rates they can do less of these things and the economy tanks. If you recall, dear reader, this is supply side economics, which was proven by Reagan.

When he set this policy in motion in the early 80's it created a 30 year economic boom whose momentum just petered out, largely due to someone's stupid idea to give mortgages to people who can't pay them. The simplest analogy I can come up with is low tax rates create a bigger pie of which the government takes a smaller portion. High tax rates mean the government is taking a large portion of what is a smaller pie. In each scenario the government gets their pie but our share of pie (the rest of the economy) is much smaller when tax rates are high. Get it?

So I don't have any confidence that a load of governement spending is going to work here. That very action is going to stifle the economy it's trying to save. I predict we're going to have a rocky year or two here while we're ignoring history and trying to spend our way out of debt. About 10% of Cessna is going to be sent home at the end of this month and it will probably get worse later this year. Remember this the next time you vote.


Annie said...

Nicely said, Honey. Letting the "evil rich" keep more of their "evil money" is what keeps my dear husband at his much needed job. Their spending keeps food on our table.

Melanie-Pearl said...


matt said...

actually, much more than 50% of people pay taxes--the lower/no bracket people just don't realize it. gasoline/cigarettes/etc./excise taxes, lotteries, corporate income tax pass-through, agriculture/corporate subsidiy-inflated pricing... our tax system is probably more regressive than most people think. tax policy is kept overly complicated to keep the ignorant in the dark--and make sure they make up close to a majority. (and then make reelection campaigns for congresspersons based on how much money they bring home to their state.)

Anonymous said...

Why take pot shots at people in small towns when you live in Wichita? Did you miss the porn industry bailout (for 5bil) or is that something too awkward to talk about?

According to Newsweeks "Big Bang of Bailouts" we are going to need to spend nearly 3 times what we did on WWII (in today's $ about 8 trillion). European nations have already spent in the trillions.

Personally, I'm not for bailouts and believe that most of the problems would work themselves out if we would just let some of these companies fail. I believe the problem is the over expansion of many of these companies betting on trends to continue rather than hedging some of their bets & operating more like those of us who have always operated under budgets without relying on credit to bail us out. Over extended credit is the issue that sees no race, no socio-economic level, and no political affliation. Sub-prime lending (spending) is the underlying issue, not taxation.

And stimulus checks for those of us in the working class or lower is the best way to put money back in the "evil rich" pockets since the majority of us have no clue how to save. We think more about instant gratification rather than long term goals.

Jason R said...

I think you mistook my satire, Anon. I wasn't taking a pot shot at smalltown America. I was using absurdity to illustrate the absurd. My point was that we are collectively astounded when a small group of people attempt a large cash grab. Yet we don't blink when our nation's leaders make a similar cash grab. In either case it's cash they don't have, didn't earn, and in the federal case, may have to borrow.

Jason R said...

Good point there, matt. I make a similar argument when discussing corporate taxes with my liberal friends when they go on and on about corporations not paying taxes or some foolishness along those lines. Those taxes all get paid by the customers which is everyone of us who buys goods made by a corporation, or work for a corporation (you may be out of a job if the corp isn't profitable), or own stock in a corporation (401k's).

Jason R said...

By the way, readers, I didn't necessarily mean to infer that this is some new idea unique to Obama. He just happened to have come out with a really stupid spending proposal when this was written. Many Republicans voted for T.A.R.P. (the big bailout) and Bush publicly supported it.

Jason R said...

matt: Higher income people also pay all those taxes you mentioned. About the only ones they're excluded from are probably lottery tickets and cigs, statistically speaking anyway. And I'm sure you'd agree that progressive income tax rates stifle growth, which is why I brought it up. High tax rates on a minority of people who will get out-voted is a cash grab as insidious as a town of 194 asking for $375M.

matt said...

yes, the upper pay the non-income taxes, too. i think, though, that when all is said and done, our tax code is not really very progressive or very regressive when taken as a percentage of income. i wish they would just do an income tax or just a sales tax. flat rates, no deductions, credits, etc. and. no withholding. each person would have to cut their own check to the gubbamint. that would be some serious accountability for politicians. i'm holding my breath now. never mind, i don't want to die just yet.

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