subsidies

In principle, the decision by House Republicans to strip the food stamp program out of the current farm bill is not a bad thing. In practice, it may not be so bad either.

For the past 40 years or so, agricultural subsidies and supplemental nutrition programs (food stamps) for poor people have been joined at the hip, the idea being that combining the two, otherwise unrelated, initiatives could help win bipartisan support for an omnibus bill that contained something for every constituency: farmers, agribusiness, advocates for the poor, etc. The problem with such an approach is that it embodied the worst of interest-group politics, legislative back scratching, and pork barrel giveaways. No liberal legislator would vote against subsidies for rich sugar or cotton or tobacco farmers for example, if it meant cuts to the food stamp program. No Florida conservative would vote to cut food stamps if it also meant cuts to subsidies for his or her rich, sugar-growing constituents. Everyone got pretty much everything they wanted, and no serious policy debate ever occurred. So separating the two makes profound sense. But encouraging a serious policy debate is the last thing on House Republicans’ minds.

In drafting and voting on a pure farm bill, House Republicans have laid bare their hypocrisy by showing, in black and white, the hollowness of their claims to budget-cutting rigor. It turns out that it’s not government spending per se they object to: as long as it benefits the wealthy, they are quite okay with it. Indeed, in drafting the new farm bill the House Republicans rejected all calls to cap or eliminate subsidies to wealthy individuals and corporations. [click to continue…]

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Marco Rubio, the Tea Party-leaning freshman Senator from Florida, recently said something remarkably intelligent, if self-evident, which appears to elude most Washington policy makers. “We don’t need more taxes,” he said, “We need more taxpayers.”

This is axiomatic for anyone trying to reform tax systems and increase government revenue, which I have done in a number of countries in Africa and Asia. In most of these countries, as well as in places like Greece and Italy, most people (and companies) do not pay taxes, at least not officially. Tax administrations are both inefficient and corrupt; if you’re lucky you will never attract the attention of the taxman, and if you’re not, a bribe – possibly significant, but almost certainly less than your true tax liability – will do the trick. And when garbage piles up in the streets and public money vanishes into the pockets of corrupt politicians and bureaucrats, it is natural for citizens to decide government is not worth whatever taxes they are supposed to pay.  In most of these countries, it is foreign individuals and corporations, who lack the proper connections, who are not steeped in the arcane rules of the game, and who try to obey the law, who shoulder much of the tax burden. The cell phone company, the brewery, and the oil and mining companies – and their foreign employees – are easy and highly visible targets, and governments never tire of trying to change the rules, imposing new taxes or demanding a share of the company.

The United States, of course, is not Nigeria or Greece. As hard as it may be to follow the letter of the law when the tax code runs to 10,000 pages, most people and companies try their best, exploiting whatever advantages they and their accountants can find, but rarely committing any deliberate infractions, cash payments to the guys who help carry your furniture up to the second floor apartment notwithstanding. The IRS is too effective, and the penalties too great, for most of us to chance it. And, at least until now, most Americans have thought that paying taxes is one’s duty as a citizen. [click to continue…]

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Even as unemployment in the United States stubbornly remains above nine percent, many companies struggle to find qualified workers. In its 2011 Talent Shortage Survey, Manpower, Inc., the staffing agency, reports that 52% of U.S. companies are having trouble recruiting essential employees, up from 14% in 2010. On the one hand, this could be a sign of a real recovery – economic growth and renewed confidence creating a surge in employer demand – but on the other hand, it could be a sign that the United States is losing its competitive edge, failing to produce graduates and school leavers who possess the attributes employers need: chiefly, literacy, numeracy, and a work ethic.  The United States is hardly the only country to face such problems. Saudi Arabia, which differs from the United States in just about every way that matters, is trying to resolve its twin problems of unemployment and a lack of skills in ways that could be instructive for U.S. policy makers. [click to continue…]

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The media have been full in recent weeks of articles and commentary about Barack Obama’s view of business. Is the President pro- or anti-business? Have his actions improved or worsened conditions for American businesses? The Economist 10 days ago ran a cover story on the topic – “No love lost: Corporate America’s complaints about the president keep getting louder” – and also just concluded one of its online debates on the motion “This house believes that the Obama administration has been good for business.” The pro side won, 59% to 41%. [click to continue…]

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Benjamin Franklin said, “Of two things you can be certain: death and taxes.” What was true in the 18th century is somewhat less so in 21st century America, at least where taxes are concerned. On this day, April 15, when most Americans are either submitting their annual tax returns or struggling to request extensions of the deadline, it is appropriate to consider the current state of taxation. It is widely reported that 47 percent of Americans pay no federal income tax, a number that has increased dramatically under the Bush and Obama presidencies. Yes, the members of this 47 percent remain subject to withholding for Social Security (pension) and Medicare (post-retirement health care) contributions, but they are exempt from personal income taxes. This obviously increases the burden on those who do pay taxes, but a far more important consequence is the establishment of a more or less permanent class of people who feel free to demand ever-more generous services from government knowing that someone else will pick up the tab. As a people we have already grown used to fighting wars in which other people will serve and die in our place, and we now have a society in which the demand for services is increasingly disconnected from any notion of responsibility to pay for them. This can’t help but erode the notion of what it means to be a citizen. [click to continue…]

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