CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Thursday, July 19, 2012
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
Previous Posts
- Quotation of the Day: Rearden Steel
- Schumer Calls for U.S.-Made Olympic Athletes
- The Top 20% Paid 94.1% of Income Taxes in 2009
- Coursera Expands to 16 Universities, 3 Int'l.
- Empowering Technology: Mobile Phone Access Reaches...
- Looking Forward to Sen. Reid's Bonfire
- Real Estate News
- Think of All the Businesses That Did NOT Happen, T...
- America's Revolutionary Energy Bonanza
- Sen. Schumer Wants to Ban Foreign-Produced Olympic...
35 Comments:
A very misleading cartoon for two reasons:
1. most businesses in the U.S. - especially the small ones as well as the large ones in most consumer-oriented industries - neither solicit nor receive subsidies from any level of government;
2. the cost of regulatory burdens and corporate taxes far, far exceeds the subsidies received by corporations in total in the U.S.
This comment has been removed by the author.
The states thought they had ratified a Constitution designed to prevent either of these panels from happening.
This is BS. It's true, subsidies to big business are a disgrace, but the motivation behind most of them isn't cronyism or profiteering, it's central planning and economic meddling by so-called "third-way" bureaucrats. Go down the list...energy subsidies, higher education, industry, etc. All of it is to "fix" some supposed shortcoming in free-market allocation.
Also, the cartoon is inaccurate even if you accept the premise. Wealth transfers FAR exceed any corporate subsidies.
You shouldn't play into this pathetic manufactured narrative, Mark. It's just one of those "stories" Obama says he needs to tell us.
if you give government the ability to pass out goodies, it will, to some extent, always be captured by those seeking free stuff.
this is true on every level and for every constituency.
the only way to take such influence out of government is to take the ability to hand out goodies away from government.
1. most businesses in the U.S. - especially the small ones as well as the large ones in most consumer-oriented industries - neither solicit nor receive subsidies from any level of government;
That may or may not be true, but it is very clear that the taxpayer and consumer are supporting both large and small businesses through tariffs, bailouts, subsidies, and mandates. What you have in the US is a mercantilist system that is being spun by both the big-government left and big-government right as free market capitalism.
vangeiv: " it is very clear that the taxpayer and consumer are supporting both large and small businesses through tariffs, bailouts, subsidies, and mandates."
True, but few of the million or more mom-and-pop businesses in America are recipients of tariffs, bailouts, subsidies, and mandates. Few retail businesses, including large chains, benefit from tariffs, bailouts, subsidies, and mandates. In fact, most businesses in the U.S. are, just like consumers, harmed by these government actions.
My objection is that the word "business" is just too broad a word to use in this cartoon.
I think the cartoon might be more accurate if the left panel depicted a liberal/socialist looking disgustedly at the subsidies and calling it "capitalism" or "free enterprise" because that's often what lay-folk think capitalism is: the government helping out greedy corporations.
Then the second panel could then show a conservative looking disgustedly at the subsidies going to the poor and calling it "socialism."
Although, my suggestions kind of alter the purpose of the cartoon, which I think was to show that businesses are hypocrites show approvingly accepting government handouts that benefit businesses while disapproving of handouts that benefit (poor) citizens.
JakeW: "my suggestions kind of alter the purpose of the cartoon, which I think was to show that businesses are hypocrites show approvingly accepting government handouts that benefit businesses while disapproving of handouts that benefit (poor) citizens."
The point I've been trying to get across is that few businesses - pecentagewise - actually benefit from government handouts. Furthermore, most businesses that do receive government handouts likely do not benefit on net from government policies.
But the problem with calling business leaders hypocrits is that the corporate executive is required by contract and by law to act in the best interests of the owners of the firms - the shareholders. Even if a business leader philosophically objects to a government subsidy, he is harming his shareholders (relative to those of other firms) if he does not pursue the subsidy.
The criminal in all crony capitalism is always the same: the elected representative who acts in the best interests of a political contributor rather than in the best interests of the people who elected him.
"Although, my suggestions kind of alter the purpose of the cartoon, which I think was to show that businesses are hypocrites show approvingly accepting government handouts that benefit businesses while disapproving of handouts that benefit (poor) citizens."
is that really true?
i see most of the pig pork trough businesses and industries (GE, solyndra, fisker, gm, etc, etc) making big donations to the dems who showered them with goodies.
surely they know that those same politicians plan to shower goodies into entitlement programs.
yet, we do not hear them complain, we see them back the guys who plan to do it.
This comment has been removed by the author.
morganovich: "i see most of the pig pork trough businesses and industries (GE, solyndra, fisker, gm, etc, etc) making big donations to the dems who showered them with goodies."
I think the defense contractors donate to both parties.
Because we have allowed Congress so much power, I think most industries have no choice but to try and get friends elected. It's not just through subsidies but through the the power of Congress and the Executive to regulate industry. With the stroke of a pen, government can turn an entire industry upside down.
"Because we have allowed Congress so much power, I think most industries have no choice but to try and get friends elected. It's not just through subsidies but through the the power of Congress and the Executive to regulate industry. With the stroke of a pen, government can turn an entire industry upside down."
oh, i agree completely.
that was my point above.
the only way to take influence out of government is to take influence away from government.
regulatory and legal capture is no a flaw in the business world, but a flaw in government.
as a business, you seek the easiest way to make profits. that's the motive that drives progress and wealth creation with a very important caveat: transaction must be voluntary.
that is what government capture subverts.
now you are just buying a license to pick pockets. while perhaps cheaper and more effective from the standpoint of the business owner, it diminishes instead of accelerates progress.
it's one of the more pernicious forces you can turn loose in an economy. (from the side of business or from the side of entitlements)
True, but few of the million or more mom-and-pop businesses in America are recipients of tariffs, bailouts, subsidies, and mandates. Few retail businesses, including large chains, benefit from tariffs, bailouts, subsidies, and mandates. In fact, most businesses in the U.S. are, just like consumers, harmed by these government actions.
My objection is that the word "business" is just too broad a word to use in this cartoon.
As I wrote before, you may or may not be right. But I still think that the evidence suggests that government is pushing too many buttons and pulling too many levers to support small businesses as well as large ones even as its regulations do their damage. Without the manipulation interest rates in the US would be over 10% and many businesses would have been closed a long time ago. The entire consumer spending based economy is a bad idea that has been supported by government and the big banks.
While I agree with you that small businesses have been hurt by regulations and do not seem to get as much protection from the federal government as large businesses I think that many of the problems that you may point to are local issues and that many of the small businesses would be bankrupt if government went all out in reducing regulations and eliminating protection for producers. Yes, there would be a boom from new business formation but that boom would come from activities that do not exist currently.
Republicans robbed our Treasury when they were running the show just like the Democrats are doing now.
It makes no difference who we have in office they steal from us with the same excuses.
Don't be fooled. They want us to treat this like WWE Smackdown so that they can enrich themselves at our expense.
Keep vilifying the other party and we all keep losing.
Republicans robbed our Treasury when they were running the show just like the Democrats are doing now.
It makes no difference who we have in office they steal from us with the same excuses.
Don't be fooled. They want us to treat this like WWE Smackdown so that they can enrich themselves at our expense.
Keep vilifying the other party and we all keep losing.
Jet Beagle,
Mark's point might be that there's plenty out there who decry government aid to the poor, even while they personally receive assistance - and hypocritically demonstrate no objection to it.
A good example is Texas, suppository America's free market/limited government mecca. Several years ago she had a budget hole that rivaled California's, and while Gov Perry was stirring anti-federal government animosity for a presidential run, he happily took federal stimulus dollars to plug most of the budget hole.
So while there's plenty of Dems who publicly deplore the US military-industrial complex, even while personally supporting it and the military adventures attached to it, there's plenty of so-called free marketers who take fistfuls of government dollars, even while they publicly deplore the vast apparatus of government spending and aid to the poor.
Oopppss...
Meant "supposedly," not suppository. That's what I get for relying on iMac's aggressive spell checker while multi-tasking at work.
Another time on a post about college sports on the same blog, the same thing happened and I accidentally got "bowel game" instead of bowl game in my response.
I gotta stop this or I'm going to get a bad reputation on this site!
StVis: "A good example is Texas"
The cartoon Mark posted labels the hypocrite as "Business", implying that corporate America is being hypocritical. "Texas" is definitely not an example of either "Business" or "Corporate America"
StVis: "there's plenty of so-called free marketers who take fistfuls of government dollars, even while they publicly deplore the vast apparatus of government spending and aid to the poor."
Again, as I stated earlier, a corporate leader may fervently desire that government stay out of all markets. because Congress will not stay out of those markets, the corporate leader has the choice of either:
a. refusing to play the game set up by Congress, and operating at a disadvantage relative to his competition; or
b. reluctantly playing the game Congress has set up and lobbying for favors from government.
By law and by contract, a corporate leader has to make decisions which are in the best interest of his shareholders. Because of the game Congress has set up, he is forced to go along and lobby for favors.
I'm not saying that all busininess leaders believe lobbying is wrong. But I am dead certain that many do - that many wish Congress would have far less power over their industries.
Very good point, Jet.
Most regulations, usually by accident, end up hurting the small businesses and helping the big guys. I bet many smaller businesses would like to see gov't influence reduced and why the SBA came about.
Jet,
a. refusing to play the game set up by Congress, and operating at a disadvantage relative to his competition; or
This is exactly what Microsoft did until Orin Hatch decided to shake down Microsoft. Apparently, Bill Gates wasn't sufficiently deferential. Hatch is a despicable parasite.
Ken: " ... until Orin Hatch decided to shake down Microsoft. Apparently, Bill Gates wasn't sufficiently deferential."
If I remember correctly, exactly the same thing happened to Hank Rearden in "Atlas Shrugged".
From Learn Liberty, a youtube clip: Who Exploits You More: Capitalists or Cronies?
Explains the 2010 crop of politicians entirely.
Jet Beagle,
My pet peeve is hypocrisy. I don't care if it's the so-called "dove Dems" who support the military-industrial-complex, pastors who preach morality but spend the congregation's money on frivolous affairs, the Al Gores of the world stuffing our noses with "green energy" while their lives are much more CO2-intensive, or self-proclaimed small government "conservatives" who are too happy to splurge the government's dime when no one's looking (and tempt government power when accessible to them).
It comes down to temptation: the temptation splurge the church's $$ on a marble commode, the temptation to go against one's hippie past for power and privilege in the military-industrial complex, or the temptation of executives to send a squad of lobbyists to DC to stifle competition - even while the CEO publicly clamors the importance of "free market" dynamics.
StVis,
As we have tried to point out to you, corporations no longer have the option to not lobby. Congress and the Executive branch are too powerful to be ignored. It's not hypocrisy. It's now survival.
I know several corporate leaders who do pay enormous sums for lobbying Washington. All of them would rather have Washington off their backs and out of their way. Yes, they have, privately or publicly, advocated free markets. But they have no choice but to play the game of the powerful in Washington.
Do you understand what Ken just said about Orrin Hatch shaking down Microsoft?
As we have tried to point out to you, corporations no longer have the option to not lobby. Congress and the Executive branch are too powerful to be ignored. It's not hypocrisy. It's now survival.
You are joking, right? Corporations write all of the laws and Congress passes them without reading the entire text. That makes the corporations more powerful than Congress and Congress knows it. If you don't cooperate the lobbyists fund the campaign of someone who will cooperate. This is why the only solution is smaller government with very limited powers.
vangeiv: "Corporations write all of the laws and Congress passes them without reading the entire text. That makes the corporations more powerful than Congress and Congress knows it."
Congressmen are definitely in the driver's seat. They have the power to fund competitors and the power to regulate whomever they wish.
If you've worked around corporate leaders, you've seen the power that Washington has. You've seen these leaders drop everything when a Congressman phones them. You've seen these leaders rush to Washington when summoned.
For some corporations, it is a symbiotic relationship. The Conressman and the corporation need each other. But the trillion dollar budget and the massive regulatory bureaucracy trumps all.
Jet Beagle,
"As we have tried to point out to you, corporations no longer have the option to not lobby. Congress and the Executive branch are too powerful to be ignored. It's not hypocrisy. It's now survival."
Should the Nazis tried through the Nuremberg Trials have been given full pardons because the Reich was too powerful, and they had no choice but to exterminate Jews, Catholics and homosexuals?
I agree with much of much of what's said in the Orin Hatch bit and have said for a long time, big government is a major driver behind big business abuse; but there's the flip side to the coin too. After all, IBM executives placed profit over human life when they leased the Hollerith punch card system to the Nazis, Ford & GM built trucks for the German war machine, Coca-Cola sold Fanta in Germany - even when the US was engage in war.
Touching on the subject, you may want to read this bit about GPOs (giant purchasing organizations) who rig the health care equipment and medicine markets for select players, resulting in higher costs, shortages and obstruction of new products to the market. Their monopolistic power was established through 1987 legislation - which they lobbied for.
Both Dems & Repubs are in the GPOs' pocket books. Even if Obamacare is abolished, GPOs' death-grip on markets will obstruct health care access for many in years ahead.
"Congressmen are definitely in the driver's seat. They have the power to fund competitors and the power to regulate whomever they wish."
I think Vange's point is there's also many Congressmen/women who salivate over serving corporate masters because (a) they'll continue to fund their election campaigns and, (b) they can land sweet seven-figure lobbying gigs after they're done serving. Therefore, they're happy to allow lobbyists to script laws they themselves don't read.
It appears we agree on quite a bit, with the exception of your devil's advocacy for corporate lobbying/subsidies. You're correct DC wields tremendous and whips executives in lockstep when desired, but the game works the other way too.
An example is Hillarycare vs. Obamacare (both terrible pieces of legislation). When Bill tried pushing health care "reform" down Americans' throats, the pharmaceutical & health insurance industries hated it and lobbied vehemently for defeat. When Obama cut a deal with the pharmaceutical industry & sold out to health insurance companies, they supported it and even advertised for the ACA's support.
"That makes the corporations more powerful than Congress and Congress knows it. If you don't cooperate the lobbyists fund the campaign of someone who will cooperate."
I remembered hearing on the radio a while back about a man who had served over 20 years in the Vermont Senate (why don't have term limits is beyond me, but that's another topic) who was gearing up for re-election, when one day, a man enters his office. He tells the State Senator, "I have a million dollars to drop in this race: I can spend it to get you re-elected, or I can use it to destroy you." The Senator dropped out.
Congressmen are definitely in the driver's seat. They have the power to fund competitors and the power to regulate whomever they wish.
This is not how things work. If you don't do what your sponsors want you don't even make it through the primary let alone the election. You be a good boy and play the game and when you are done you get a job with the industry that you just helped. Just look at Newt and the pharma industry.
"Just look at Newt and the pharma industry."
'Ol Newty supported the insurance mandate as recently as 2009. In the '90s, he loved the idea so much, he even advocated hefty fines (10s of thousands of dollars) and prison time for failure to purchase insurance. (And that's advocating smaller government/individual liberty?)
Based on how quickly Tea Party congressmen, such as Stephen Fincher, have switched tunes and happily accepted cash from the Wall Street banks they crusaded against, it ponders me to speculate how serious Republicans' efforts to abolish the ACA will be if they get the ball this fall. Insurance & pharma companies will be major beneficiaries of the ACA, and a lot of cash, vacations, wine & dines plus high-powered hookers can change Republicans' hearts real fast.
Sounds stupid? I hope so. But look no further than how quickly a self-proclaimed dove in Obama changed colors, and supported torture, an aggressive foreign policy and HSA eavesdropping when given access to power; or how quickly Alan Greenspan traded in his libertarian card for voodoo economic gimmickry when offered the same.
Based on how quickly Tea Party congressmen, such as Stephen Fincher, have switched tunes and happily accepted cash from the Wall Street banks they crusaded against, it ponders me to speculate how serious Republicans' efforts to abolish the ACA will be if they get the ball this fall. Insurance & pharma companies will be major beneficiaries of the ACA, and a lot of cash, vacations, wine & dines plus high-powered hookers can change Republicans' hearts real fast.
While there are some fine people in the GOP who mean well and try to be honest the number is very small and is clearly not representative of the party in general or of Romney's positions. Both parties are a waste of time and need to be sent packing as the Federalists and Whigs were.
Post a Comment
<< Home