[mike777]

In 2004,
federal, state, and local governments in the
United States spent $312 billion on just water
and transportation infrastructure, according to
the Congressional Budget Office.

-----------------------

In fiscal year 2007—the most recent year for which data on combined spending by the federal government and by state and local governments are available—total public spending for transportation and water infrastructure was $356 billion, or 2.4 percent of the nation’s economic output as measured by its gross domestic product. For the purposes of this study, transportation and water infrastructure encompasses infrastructure for all forms of surface transportation (highways, mass transit, rail, and waterways), aviation, water resources (such as dams and levees), and water distribution and wastewater treatment.

[Winstonm]

blackshoe, on 2011-October-15, 11:40, said:

Failing to make the improvements is foolish. Taxes aren't the only way of funding things.

I second the vote for slave labor if that is the case. If not, I second the vote for a repetition of Smoot-Hawley tariff increases because I am sure we are way overdue for a cleansing 1930s style depression.

And finally, I also support the idea of pillaging and looting the countries we invade - what good is being a superpower if there is no profit in it?

[blackshoe]

If we're already spending 300+ billion a year on these infrastructure improvements, then neither increasing taxes nor any of your suggested funding sources is necessary, is it, Winston?

[awm]

I have a question about Cain's 9-9-9 thing.

While I've never owned a business, it seems to me that there must be a lot of businesses which bring in large amounts of revenue, but also have large expenses such that their overall profits are relatively small. For example, it seems like this must apply to virtually every store or restaurant; it wouldn't surprise me if they bring in millions per year, but after paying to stock their wares, paying employees, paying electricity and rent on a building, etc. they are probably not clearing much.

The thing is, while current tax rates are a lot higher than Cain's 9%, that tax is on the profits. So a business that has huge revenues and huge expenses and makes only a small profit won't pay a whole lot of tax. However, Cain wants a 9% national sales tax. This would increase most (perhaps not all) business expenses by 9%. But for one of these businesses with huge revenues but also huge expenses, that 9% tax on the expenses could easily exceed their entire profits.

Am I missing something here?

[helene_t]

awm, on 2011-October-17, 02:36, said:

Am I missing something here?

Dunno how this particular tax is supposed to work, but VAT is (the name says it already) a tax on added value. I.e. wages and interests are not deductible but most other expenses are.

Even so, VAT (or this new sales tax or w/e) may be bigger than the profits. But stores add the VAT to the prices so in the end it is a tax on consumption.

[PassedOut]

blackshoe, on 2011-October-16, 19:10, said:

If we're already spending 300+ billion a year on these infrastructure improvements, then neither increasing taxes nor any of your suggested funding sources is necessary, is it, Winston?

I suspect you are kidding, but just in case...

Indeed, a lot of money is spent by states, counties, and local governments to patch bridges, fix potholes, repave roads, dredge shipping lanes, and so on. But returning to a 1940s style transportation system in the US will definitely hurt business and will speed the decline of the US compared with other countries.

‘Gargantuan large’ investment in infrastructure needed:

Quote

The American Society of Civil Engineers has estimated that an investment of $1.7 trillion is needed between now and 2020 to rebuild roads, bridges, water lines, sewage systems and dams that are reaching the ends of their planned life cycles. The Urban Institute puts the price tag at $2 trillion.

The longer we delay, the more costly the replacements will be. The US needs to invest $262 billion per year to do the work.

Quote

As Congress grapples with taming a massive deficit, just keeping transportation funding at current levels has been heralded as a triumph. Though neither house has made public a written proposal, the House has talked of allocating roughly $45 billion a year, while the Senate number is about $54 billion.

The US has work that needs doing and lots of people who need work. It's foolish not to raise taxes to get it done.

[phil_20686]

awm, on 2011-October-17, 02:36, said:

I have a question about Cain's 9-9-9 thing.

While I've never owned a business, it seems to me that there must be a lot of businesses which bring in large amounts of revenue, but also have large expenses such that their overall profits are relatively small. For example, it seems like this must apply to virtually every store or restaurant; it wouldn't surprise me if they bring in millions per year, but after paying to stock their wares, paying employees, paying electricity and rent on a building, etc. they are probably not clearing much.

The thing is, while current tax rates are a lot higher than Cain's 9%, that tax is on the profits. So a business that has huge revenues and huge expenses and makes only a small profit won't pay a whole lot of tax. However, Cain wants a 9% national sales tax. This would increase most (perhaps not all) business expenses by 9%. But for one of these businesses with huge revenues but also huge expenses, that 9% tax on the expenses could easily exceed their entire profits.

Am I missing something here?

No. You are not. High volume low profit businesses like, low level electronics or Utilities will be particularly hard hit. Restaurants will actually be ok as they actually have pretty good margins per Item, although the higher wage taxes will be a problem.

The most interesting thing is to look at what is the tax incidence for hermans plan. Obviously the income taxes are paid by the workers for most jobs (anywhere talent is not in high demand, which currently describes most jobs).

A revenue tax, like a sales tax, is paid for primarily by the consumers. Thus those who spend all their income will pay 9% on everything in a sales tax. Those who save will pay a 9% tax only on what they spend. Thus it is regressive.

The final 9%, the transaction tax, will, for most businesses, amount to a payroll tax. Again this is basically a tax on employees, as most businesses expenditure is dominated by staff. For those that aren't it is actually worse. Anytime you buy something along a supply chain you will effectively add an 18% cost - as the seller hikes their prices to cover the revenue tax, and the buyer pays 9% transaction tax. Without an exemption, this will compound, suppose I buy a car, it contains screws, which were made from iron, so now there is an 18% tax on the value of iron at every stage of the supply chain.

Large changes in the tax system like this can have large an undesirable effects. Here I predict that one effect would be that companies would start to buy out their suppliers to avoid the tax, which would lead to more economic inefficiency. Current wisdom (common sense) tells us that one should set up the tax system to encourage outsourcing production. This is because that puts the part of your company that makes screws in direct competition with other companies which make screws. Tax incentives here would mean that screws could be 10% more expensive than an external supplier, but it would still be more profitable to use them as there is an effective 18% tax on screws bought in. Since its clearly worse for the country as a whole if people are using more expensive screws (that are functionally identical save for the price) this type of a tax plan is a salient example of why its hard to have good taxes.

This tax regime would heap the burden upon the poor, notice that none of these taxes are paid primarily by the owners of capital. (Although taxes on employees and revenue/sales can be transferred onto the owner if the price cannot rise due to competition abroad - however, if this is the case it most likey just results in production being moved abroad).

More sensible policy for the US would include a VAT tax[1]. A rise in income tax for high earners, and a large estate tax with a very high bar. [2]

[1] The primary difference between a Value Added Tax and a sales tax is that VAT is reclaimed by a buisness on parts it buys in. If I make a car and I buy screws I can reclaim the tax I paid on the screws, but then I have to pay it on the item I sold, and the difference is the "value added" to the product, which is what the buisness pays tax on net. The avoids the compounding problem of a buisness transaction tax. A sales tax is paid only at the end point. These are differences about how the tax is spread along the supply tax. The VAT seems like the most efficient to me, as often much of the end product might be sold abroad and is effectively tax free. The names of the taxes are often used misleadingly, but I think this is how an economist would use these terms.

[2] I generally think that estate taxes are a very bad Idea, but there is a definite social cost of creating a class of people that are so rich that they are unlikely to have to work for the next eight or nine generations. If you set it at 50% above $20 million or something like that you would increase the social equality a lot in the long term, without discouraging prudent behavior in anyone who could be called middle class.

[PassedOut]

As I understand it, Cain proposes his 9-9-9 plan only as a short interim step on the way to replacing the whole federal tax system with the Fair Tax promoted by his fellow Atlanta talk-show host, Neal Boortz, and others.

[phil_20686]

PassedOut, on 2011-October-17, 08:10, said:

I suspect you are kidding, but just in case...

Indeed, a lot of money is spent by states, counties, and local governments to patch bridges, fix potholes, repave roads, dredge shipping lanes, and so on. But returning to a 1940s style transportation system in the US will definitely hurt business and will speed the decline of the US compared with other countries.

The US has work that needs doing and lots of people who need work. It's foolish not to raise taxes to get it done.

I think that people do not appreciate the total cost of transport in an economy. Most houses spend something close to 20% of their income on transport. Overall its something like 10% of GDP (although estimates vary), and the worst bit about transport is that it is a dead weight loss to the economy. Always, and with no exceptions, cheaper transport is better.

If investment in better transport saved 2% of gdp per year, that would save the economy 300bn a year or so.

I suspect that building an efficient rail network that moved more people onto trains rather than planes would do really quite a lot better than that. It would also spread the prosperity of urban centres into the surrounding landscape a bit more. I am a huge fan of high speed rail as an economic investment. Every time someone uses a train instead of a car your economy has saved quite a bit , and that gap will only increase with rising oil prices. As a country with plenty of cheap land the USA is ideally suited to high speed rail networks.

[PassedOut]

phil_20686, on 2011-October-17, 08:34, said:

I am a huge fan of high speed rail as an economic investment. Every time someone uses a train instead of a car your economy has saved quite a bit , and that gap will only increase with rising oil prices. As a country with plenty of cheap land the USA is ideally suited to high speed rail networks.

I would very much like to see the US move strongly in that direction.

[blackshoe]

PassedOut, on 2011-October-17, 08:10, said:

I suspect you are kidding, but just in case...

Indeed, a lot of money is spent by states, counties, and local governments to patch bridges, fix potholes, repave roads, dredge shipping lanes, and so on. But returning to a 1940s style transportation system in the US will definitely hurt business and will speed the decline of the US compared with other countries.

‘Gargantuan large’ investment in infrastructure needed:


The longer we delay, the more costly the replacements will be. The US needs to invest $262 billion per year to do the work.


The US has work that needs doing and lots of people who need work. It's foolish not to raise taxes to get it done.

You're missing the point. Which is not that we should "return to a 1940s style transportation system", but that according to what mike777 posted we are already spending more than what the ASCE recommended we spend. Or is it that the ASCE recommends we spend that much over and above what we're already spending?

Even if that's true, Winston's suggestions (all of them) are patently ridiculous hyperbole. On purpose, no doubt, to ridicule the suggestion that we fund anything via any method other than taxes. I suspect Winston is a fan of the "What did you make last year? Send it in" income tax form.

If we do have spend an additional quarter trillion a year or so on infrastructure, we can probably pay for it by withdrawing from all these "overseas adventures" we're currently pursuing, and downsizing the military. Of course, the military-industrial complex won't like that. Tough, I say.

I would add that "downsizing the military" need not be done across the board — it may be wise to downsize the Army and Air Force, and actually increase somewhat the Navy and Marine Corps. Again, that would be one Hell of a political battle, but if it turns out to be the right thing to do, it's a battle worth fighting. I would say, also, that the Navy needs to take a good long look at what kinds of ships it needs - I don't believe the Carrier Battle Group (CVBG) is the right tool for most of our current problems (e.g., piracy).

[PassedOut]

blackshoe, on 2011-October-17, 10:51, said:

You're missing the point. Which is not that we should "return to a 1940s style transportation system", but that according to what mike777 posted we are already spending more than what the ASCE recommended we spend. Or is it that the ASCE recommends we spend that much over and above what we're already spending?

Apples and oranges. Mike's figures lump together all public spending on transportation. The problem is the cost of rebuilding a national transportation system that is coming to the end of its useful life. Letting that happen would amount to returning to a 1940s transportation system, albeit with more people and more roads. It's sad to note that some local governments have had to stop repaving roads because of the financial squeeze, returning to gravel.

Current spending levels fall short by over $200 billion a year of the replacement amounts needed, despite the public funds already allocated for maintenance and repairs.

I do agree that military spending should be reduced substantially and the savings applied to nation-building here.

[phil_20686]

I have always wondered what is the "right" % of GDO for a mature state to spend on defense in relative peace time. I suspect it is more than most people think, with the provision that it should be strongly tilted towards research rather than over large personnel.

It should also be noted that many people who join the army are not what one would class as highly desirable workers. For whatever reason, the military employs a large number of people from difficult backgrounds who would struggle to fit into "normal" life. Its value as a social net should not be underestimated.

[mike777]

In the USA I believe non officer recruits read at one grade level higher than their age group. Of course they are also screened for medical/drug issues.

Over 93% of officers have a college degree or higher.


My guess is that almost all of these recruits would be highly desired workers compared to their age group.


I know both my brother and sister had college degrees before they joined as enlisted soldiers.

My grandfather had a law degree before he joined the Marines and my Uncles completed college while in the Marines.

My father in law had a law degree before he joined the airforce.

---


What the correct amount to be spent on my the USA is of course open to debate. We are fighting 2 wars, we have Korea, and we still have soldiers in Japan, Germany, Italy.

Of course if we pull them all home that will reduce the budget alot. If we can get rid of all of our transports, forward bases, etc as much of Europe has we can reduce it even more.

Of course that will create a vacuum that others will rush to fill as we pull out.

[blackshoe]

When I enlisted in the Army in 1967, I had two years of college. When I enlisted in the Navy in 1976 I had a BS in Physics and an MS in Nuclear Engineering. During my Army service, "Project 100,000" was in effect. What was that?

Quote

From Wikipedia: Project 100,000 was initiated by Defense Secretary Robert McNamara in October 1966 during American involvement in the Vietnam War and ended in December 1971. Considered part of Johnson's Great Society by giving training and opportunity to the uneducated and poor, the recruited men were classified as "New Standards Men" (or pejoratively the Moron Corps) and had scored in Category IV of the Armed Forces Qualification Test, which placed them in the 10-30 percentile range. The number of soldiers reportedly recruited through the program varies, from more than 320,000[3] to 354,000, which included both volunteers and conscripts (54% to 46%). Although entrance requirements were loosened, all the Project 100,000 men were sent through the normal training processes with other recruits, and performance standards were thus the same for everyone.[4]

The men recruited or drafted under this program did not receive the same training as other recruits and draftees after Basic Training was completed. Mr. McNamara and his "Whiz Kids" insisted that these men had to be put into virtually all fields, and this was a disaster.

Also

Quote

Regarding the consequences of the program, a 1989 study sponsored by the DoD concluded that:[3]

Comparisons between Project 100,000 participants and their nonveteran peers showed that, in terms of employment status, educational achievement, and income, nonveterans appeared better off. Veterans were more likely to be unemployed and to have a significantly lower level of education. Income differences ranged from $5,000-$7,000, in favor of nonveterans. Veterans were more likely to have been divorced.

If you want the footnotes, read the original article.

Of course, that was then, this is now. Project 100,000 is, AFAIK, dead. And the military does (and did then) turn around some lives.

[Winstonm]

I wonder what the over/under in years is for feudal America?

[blackshoe]

That might be an interesting question, if there were such a place.

[kenberg]

Comparing education, earning power, etc for vets and non-vets is one of the many things that needs to be taken with a lot of salt and probably some tequila. My own history of choices should make the point:

In 1956 I graduated from high school. As the day approached I was contemplating joining the Navy or going to college. Mostly I wanted to study mathematics but finances were a problem. I got a scholarship. I went to college. That sort of thing, repeated many times, tilts the scales. I went on to graduate school. In 1960 it was easy to get a deferment. In 1966, as I was finishing up, I and most other young men got reclassified 1-A. I never got drafted (I was then 27 and in my area they were drawing the line at 26), but I suppose the military suddenly had a lot of Ph.D.s in the ranks.

Anyway, project 100,000, which I had not heard of, sounds like a really stupid idea pushed by people who should know better.

[luke warm]

with obama's announcement today of a total iraq withdrawal by year's end, i don't see things getting better here any time soon (unless they stay in the service for awhile)

[blackshoe]

Obama will bring all the troops back from Iraq by Christmas. The day after New Year's, he'll send them all somewhere else. So they won't beef up the unemployment stats.