Public Finance

“Death Stars are overrated military investments”

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Via J. Scott Shipman and Grurray on Twitter:

Real-life performance data shows that the most important and high-impact technologies are not the gold-plated, over-engineered wonder weapons that turn majors into colonels, colonels into generals, and young Jedi apprentices into Sith Lords. Instead, data suggest the real winners are humble, simple, low-cost products made by small, rapid innovation teams — the type of projects that don’t attract much attention from the press or from the brass because all they do is get the mission done without any fuss.

Read the whole thing.

Income inequality: Social justice or crony capitalism?

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The political movement Occupy Wall Street has shaped the tax and spending proposals of the Obama administration’s budget and political debate on the premise that our capitalist economic system is rigged to favor the top-earning “one percenters.” But income inequality can result either from capitalism or politics, each for better or worse.

Historically, political elites focused on enriching themselves at the expense of the general public: In 1773 patriots threw the tea into Boston Harbor of the East India Tea Company, granted a “royal charter” in 1600. The U.S. system was founded not just on the principles of democracy but on limited government complementing private market capitalism that encouraged individuals to “pursue happiness” — accumulate wealth — on merit rather than political connections. Support for the less fortunate was provided by family members, religious and other charitable organizations.

Believing (wrongly) that class envy against the new economic elites — innovative entrepreneurs — would cause revolution, Karl Marx offered the socialist alternative “from each according to his ability, to each according to his need” with politics supplanting merit. Despite totalitarian methods universally employed by governments seriously pursuing the socialist model leading to the murder of tens of millions, one historian recently concluded that communism reduced workers “to shiftless, work-shy alcoholics.”

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“Occupy Pennsylvania Avenue”

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New from Kevin Villani: Occupy Pennsylvania Avenue: How Politicians Caused the Financial Crisis and Why their Reforms Failed, and the Kindle version: Occupy Pennsylvania Avenue

(Kevin has shared on this blog a couple of prior works on the same subject. You can find those essays, and reader comments in response, here.)

“THE DANGER OF BALANCING THE BUDGET”

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Henry Meers:

House Republicans have to learn and proclaim the basics of money and taxes because balancing the budget could be a disaster for the economy as even more money is pulled out of the productive economy to pay for their past sins. The best example of how to get out of debt remains what England did after Waterloo and the massive debt of the Napoleonic War. Parliament dumped the income tax immediately, returned to sound money in 1821 and went to free trade later. The economy exploded and led to a century of prosperity like none seen before. They didn’t pay off their wartime debts, a huge sum for the time, they froze it and paid interest. As time went by, that once inconceivable mountain of debt shrank to insignificance in the shadow of the world’s most powerful economy.

He gets it. Economic growth is the solution to most of our problems. Growth requires investment capital. The less investment capital that gets diverted from the private sector into unproductive govt spending and misguided debt paydowns, the more growth there will be.

Read the whole thing.

(Via Lex.)

Citizen Intelligence curious fact of the day

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During the process of putting together Citizen Intelligence, I sometimes run into some things that are quite simple, but are worth remarking on. I’ve decided to put them up here as an irregular series.

Out of the ~89,000 governments in the United States, ~55,000 of them bond, or borrow money, about 61% of the total. That means 34,000 do not. Which of your governments live within their means and spend all their tax money on providing services and which of them have an invisible drain installed siphoning off unnecessary interest payments to Wall Street? How many of them could, with minimal inconvenience, add a few more percent in services or cut a few percent off their tax bills simply by not bonding or reducing their bonding to large capital items instead of borrowing for operations?

Note: Updated to make it clear that this is not about the classic large capital expenditure items that most would agree are legitimate projects for bond financing but rather borrowing that could be foregone and where, in some jurisdictions, they manage their cash flow well enough to do without the borrowing.