Free Markets and Good Beer
Free markets are like good beer: both are wonderful things when enjoyed responsibly and in moderation.
Saturday, March 19, 2011
A friend of mine who works for Koch Industries recently forwarded me some corporate propaganda from his boss, Charles Koch. First, I have to say that based on what has been forwarded to me over the years, Koch Industries has to be the most blatantly propagandist corporation I've ever seen. For anybody who sympathizes with Koch's Tea Party organization and libertarian views in general, any accusations of left-wing agendas on the part of NPR or any other organization would seem to be simply the pot calling the kettle black. I can tell you from observation that the Koch empire takes indoctrination to levels I've never witnessed in other organizations. It's really quite remarkable what tens of thousands of Koch employees put up with on a regular basis. But, then, I guess the old adage about how easy it is to make somebody believe something when his paycheck depends on it still applies.
Anyway, here's the article that was sent to all Koch employees and forwarded to me, and below is my response:
As somebody who used to be a registered Libertarian, I appreciate the emotional appeal of the platform. However, as somebody who regularly questions what I'm told and what I believe, and tries to confirm it with actual data whenever available, I'm also aware the libertarian position is buttressed by a broad array of "misrepresented" facts and "facts" based on nothing more than assertion.
For example, I'm not sure which category of "fact" to put this statement in:
"When Canada recently reduced its federal spending to 11.3% of GDP (...)"
I don't think the author simply made this number up (?), but I am very aware that this number is wildly inaccurate. A simple look at the official statistics from Canada during the last five years (http://www40.statcan.ca/l01/cst01/govt48b-eng.htm) shows that expenditures have run between $500 billion and $700 billion, while a look at something like the CIA World Fact Book will show the Canadian GDP in this period was between $1 and $1.5 trillion. It doesn't take a calculator to know that $500 billion divided by $1.5 trillion is nowhere close to 11%. Canadian government spending as a % of GDP is consistently around 35%.
In fact, in every single developed nation on earth, government spending accounts for between 25% and 50% of GDP. And here's something really odd to consider: The Heritage Foundation (a libertarian think tank which I believe receives considerable funding from the Kochs), on their very own list of "economic freedom", ranks the US only number 9 on the list (http://www.heritage.org/index/ranking). Of the eight countries ahead of the US, six of them have government spending as a percentage of GDP that exceeds the US...including Denmark with government spending of about 50%!
The "economic freedom" index has been regularly criticized for arbitrarily considering criteria in such a way as to boost rankings of nations most in-line with the ideology of the Heritage Foundation. And yet, despite these criticisms, the list shows that most of the 10 "free-est" nations have greater government spending than the US.
So this begs the question, are the Heritage Foundation, the CIA, and the Canadian Statistics Bureau all part of a vast liberal conspiracy?
I don't think they are. I think that there are many sources of raw, unbiased data, including organizations with a clear political agenda. Another popular organization with libertarians is the Tax Foundation. And once again, their own data does not support their position. Among many examples is this report which shows that the "high tax" states are overwhelmingly the richer, more economically productive states. Interestingly, the Tax Foundation has stopped publishing its annual report of tax burden by state, presumably because the results were so consistently unfriendly to their position that raising taxes always makes economies grow slower.
All this is not to say I think raising taxes is always better or that we need to turn into Cuba. (Hell, my wife and are both small business owners, so it's awfully hard to call us anti-capitalism.) But I am convinced that we need to consider actual data when deciding who to vote for and what policies to support. Lowering taxes, like eating ice cream, is easy to support, and it's easy to get elected by promising everybody free ice cream...er, tax cuts. But a diet of nothing but ice cream is not healthy. For most of the last 30 years, our nation has bought into the mantra that cutting taxes is always the solution, no matter the problem. During that time, we've experienced the most anemic growth of the last 80 years. In fact, if you take out the Clinton era which began with tax increases, you would have a little over two decades of barely more than 2% real annual GDP growth. By comparison, the awful 1970's, which supposedly proved that government spending kills economic growth, produced annual real GDP growth rates of about 3% (measuringworth.com/growth).
In the US, we have about 80 years of data on income tax rates and economic growth. It's not difficult at all to do a statistical analysis and find correlation between economic growth and taxes. In fact, it's been done. The results of numerous variations on this theme are regularly posted to a blog at www.presimetrics.com. Here's one of the best cut-to-the-point blogs he's done looking at top marginal tax rates & GDP growth: http://www.presimetrics.com/blog/?m=201012.
It's abundantly clear from looking at the data that the United States is much closer to Mexico than Canada in terms of our taxation and government spending policies. And I don't think many people would look at those two countries and argue that we should continue to become more like Mexico. However, there is one clear exception to this. If you're a billionaire, Mexico may indeed look more attractive. Mexico, after all, is home to the richest man in the world. So if you're a billionaire, then it makes all the sense in the world to support policies that will make us more like Mexico. But if you're part of the other 99% of the population, you should ask yourself: Should we really try to solve the illegal immigration problem by making our economy as poor as Mexico's?