The Inefficiencies Of Government Economic Intervention

Happened to turn on the boob tube at lunch and see what it was on Cspan. State of the State Address by Ohio State Governor (D) Ted Strickland. He was talking about the State Government’s Initiative to save and create jobs. By those statements alone, I knew that it should be an entertaining show as last time I remember from Economics 101, state involvement by spending taxpayer money is usually the least inefficient method to create jobs known to man.

I was not disappointed. He proceeded to tout a multi-million dollar road rebuilding project that supposedly kept 100 jobs in a certain area. I made a request for exact figures from the state but after seven phone calls no one seems to know for sure but using a rough estimate of 7 million dollars for the project; it cost the taxpayers of Ohio about $70,000 per employee.

Whereas if they had loaned that same amount in $100,000 increments to virtually any small businesses out there, they could have probably created 200 to 500 jobs and gotten the money back to do it all over again.

With Ohio being one of the highest overall taxed states, it is no wonder why employers are leaving in droves. The best thing that states can do is to make their states user friendly from a tax stand point for all businesses rather than dolling out million dollar favors to just a few select companies.

This is why states like Tennessee and Wyoming that don’t have income tax nor an overall burdensome tax base are attracting businesses and people in droves. Why the basic fact that lower taxes always increase overall revenues is lost on the vast majority of politicians is hard for many people to understand.

While in this day and age all politicians know this, the only reason to ignore it is about having power to redistribute this money in order to gain favor with a certain group or individual at your expense and the overall expense of the economy at large.

Here is something you are not going to see in the mainstream media.

This is from First Trust Portfolios in 2007. “The U.S. Treasury Department reported a gusher of tax revenue last week. Tuesday alone, the Treasury received $48.7 billion from individual taxpayers as their final tax payment for 2006, an all-time single-day record, and one-third higher than the same day last year.” “Based on information available through Friday, we estimate federal receipts at about $390 billion in April. This would be the largest tax take for any month in American history, up 25% versus last April, and up 18% versus the previous record high in April 2001. With incomes and profits growing rapidly, the U.S. budget deficit will fall to about $145 billion during the twelve months ending in April. To put this in perspective, the deficit was $455 billion as recently as three years ago (the twelve months through April 2004),” and they are projecting it to be $145 billion at the end of this year.

Just another reason to keep the Tax Cuts permanent and to remind you that whoever says we can’t afford tax cuts is lying through their teeth to you and probably smiling at the same time.

Using this same logic, all of the Business out there that lower prices and have “Sales” do it to reduce their profits and sales , not increase them.

This entry was posted on Friday, February 15th, 2008 at 1:32 pm and is filed under Economics, Opinion. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.