Fiscal Cliff MEGATHREAD: Wile E. Economy falls off, lands in cloud at bottom

[Admiral Yi]

Massive economic inequalities between classes can over time evolve into massive political inequalities, for example in Republican Rome--and in early industrial America.  E.g. railroads, mining stakes, anti-union laws, and so forth.

It's true, of course, that they can run the other way, e.g. the Soviet Union, where political inequalities begat economic ones, but that's not germane here.

The danger of this kind of aggregration is not solely because of the likelihood of hard or soft corruption, that is monied interests directly buying favors from politicians or indirectly influencing the electorate via dominance of media, etc.--though such danger exists.  But it is also because this kind of aggregation creates structures that we rely on, that become too big to fail, and become increasingly above the law in their pursuit of profit--even though their reason for existence is not to provide to the commonwealth, but generate wealth for private interests.  Does any of this sound familiar?

You can also see it more subtly in things like tax breaks given to Wal-Marts and BMW plants (to name a few examples from my hometown) because they "create jobs."  Sure, it's true that jobs were created locally, and it was probably a net gain for the community, and as a practical matter I'm not opposed to those specific instances, but the "fair share" BMW should have paid in terms of property taxes was discounted because of their superior bargaining position, and the willingness of local government to except capital from the rules everyone else has to follow.

It is seen further in cries from business that they need X or Y to remain competitive, etc.  Like right-to-work laws or tort reform.

It's not impossible to imagine an America where political and economic power are identical.

Dude, the Roman Senate was from the very beginning a rich man's club.

All the other things you mentioned had legitimate public policy objectives, as you yourself admitted with the tax holidays.

And for the most part you've been talking about publicly traded companies.  I thought we were talking about inequality.

[Phillip V]

What's the worst-case scenario. We go off the fiscal cliff and then have another debt ceiling crisis in March?

[Admiral Yi]

Worst case scenario is both sides agree to boost the deficit by another 20% of GDP.  Repeal all taxes and more free money for everyone.

[CountDeMoney]

Meh, doesn't sound damaging enough to the President.

[merithyn]

Although it's also important to note that I support (what are currently considered) outrageous tax rates (including upon the middle class) because I want the government to do things that are (currently considered) outrageous, like build solar power satellites, anti-ballistic missiles, and wind farms, and fight wars, and fully nationalize whole sectors of the economy like health care and education, and create a Friedmanesque negative income tax, and upgrade our collapsing 1950s-vintage infrastructure.  So it's not merely about hurting rich people, although that is a bonus.  I want the government to take rich people's, and not-so-rich people's, money and do things with it that rich people won't do and can't do, but which benefit everybody.

I agree with this completely.

[derspiess]

Wow.

[Habbaku]

Yeah, they're both pretty bonkers. 

What wars are we not fighting now that need fighting?

[sbr]

What wars are we not fighting now that need fighting?

I assumed Ide meant actually funding the wars we had to be in instead of cutting taxes at the same time, not starting new ones.

[merithyn]

What wars are we not fighting now that need fighting?

I assumed Ide meant actually funding the wars we had to be in instead of cutting taxes at the same time, not starting new ones.

Not sure if that's what he meant, but that interpretation is what I agreed with.

Wow.

What part is objectionable to you? To me, it's pretty clear that private enterprise can't and won't rebuild the infrastructure like roads, ports, etc. The business model for health care isn't sustainable so long as our sick and old are such a large part of the population. I know that you and I disagree with the whole energy thing, so, I'm guessing that that's part of it.

Re-reading Ide's post, I would disagree with education being nationalized, but I do agree that it should be federally funded rather than relying entirely on neighborhood taxation. I would be okay with higher taxes to subsidize college tuition, too.

In a nation as large as ours, there are some things that just can't be covered by charities or local governments. I think education, healthcare, and the infrastructure are some of those things.

[Berkut]

I think education, healthcare, and the infrastructure are some of those things.

They already  are.

[Admiral Yi]

Meri, it seesm to me the words "do" and "completely" don't mean what you think they mean.

[merithyn]

I think education, healthcare, and the infrastructure are some of those things.

They already  are.

Yes, and I think that funding should be increased.

[grumbler]

They already  are.

Yes, but Ide is so desperate to sound like a radical that he declares that it is "currently considered... outrageous" that government should "fight wars" and "upgrade ... infrastructure." 

What he and Meri don't understand, because they don't understand how government works, is that it would be a disaster to have the government build the solar power satellites and wind farms.  Doing so would suck out of the economy money and incentive needed to create satellites and wind farms that actually worked and were efficient.  The USSR and Mao's China should have provided all the necessary evidence that we don't want government to do anything that it does not have to do, but some people aren't interested in evidence, it seems.

[The Minsky Moment]

Shelf has valiantly tried to sustain the argument that inequality is bad from a utilitarian point of view, but runs into the road block that the only empirical evidence on his side is that inequality rose before the Great Depression and before Teh Great Recession.  There's also a World Bank report that says inequality might or might not decrease growth.

How are you using the concept "utilitarian" in this context?
I think its pretty easy to come up with a utilitarian argument against economic inequality if one makes somewhat plausible assumptions about satiation and the shape of an income-utility or wealth-utility curve.   But you seem to be using "utility" here as a proxy for economic growth globally.  If the argument is that there is little evidence empirically to prove that inequality harms long run growth, I would agree that the case is not proven.

[mongers]

Would current corporations be capable of coming up with the equivalent of the 50s/60s interstate network ?