OT: A good concept with a really bad initial approach

See this. The concept, review programs for something potentially wasteful, is great. Thats wonderful. Looks like @GOPWhip was busy getting concepts together. Whats really bad about this? It starts out targetting the NSF, which is a miniscule … tiny … fraction of the federal budget, and one of the only aspects of the federal budget that has a net ROI. We get positive impact from this investment. Which apart from the NIH and a few other programs, we don’t get in general from government expenditure. Here is my first bit of significant “activism”. Lets let Mr. Cantor know that there are much larger fish to fry, with no actual ROI for us. Having a public who doesn’t quite understand what the NSF or NIH does review and downselect grants for elimination, at a small agency with a (relatively) tiny budget, isn’t quite meeting the rhetoric we’ve seen about tackling the big and hard issues. Yeah, some of them are political third rails here in the US. But you won’t effect change until they are dealt with.

We have to stop spending on things that aren’t of real value. On entitlement programs (which are mixtures of wealth transfer and ponzi scheme). I did see this linked from Scott Aaronson’s blog post. I had tried to post a reply, but his system was having a database issue. So my reply is below. Basically, no matter who is in charge of the government, we (collectively) need to make sure that those with votes are well informed as to the choices in front of them, their real meanings, etc. We need to make sure ideology takes a back seat to reality, which sadly, hasn’t happened for a while in Washington. Here is my response to Scott’s post. In infer from his post that he isn’t … er … sympathetic to republicans or those economically right of center.

_ Of multiple minds on the post (this is a long response), but let me state the bloody obvious first.

The NSF is not the place to be looking to cut money. Its budget is minuscule in comparison with other elements of expenditure, and it has a definable ROI. There are many MANY other examples of extremely wasteful spending that completely dwarf the NSF in size. Thats where fire should be concentrated upon.

Now onto the other bits.

Second, we have some harsh and hard economic realities to face. The harshest/hardest is that we cannot afford the massive entitlement programs, or defense programs going forward. Our debt is about to be downgraded, which will increase our government’s borrowing costs. Which means that the government will have to pay a larger fraction of our tax revenue for debt service. Which means less money for programs.

This effectively puts the brakes on any new spending. It forces you to look carefully and closely at existing spending. China won’t loan us money forever, and they are making significant noises about being disappointed that we have elected to devalue our currency via quantitative easing (and version 2 of this), which reduces the value of their investment in our treasury bonds.

So now we have a situation where, what we have to do is to cut spending, hard and fast, or risk this being imposed upon us by external financial agencies (due to a much higher borrowing cost thanks to a credit downgrade) increasing the cost of our debt service … the interest we pay which represents the cost of a risk to some degree, increasing rapidly.

The budget is a zero sum game. A larger fraction taken for debt service means less for everything else.

One of the two major political parties seems to get this. The other keeps foisting spending infested bills upon us, which is rapidly hastening the day of reckoning.

Another approach is to raise taxes. Increase the amount taken from everyone so that you can fund the spending you want to do. Or, if you prefer, only raise takes on the “rich”. Those whose IRS tax returns show $250k or more. Sounds good, right?

Except for the fact that this hits every single LLC, LLP, S-corp, and any other flow through entity. That is, this hits small business very hard. By raising taxes on “the rich” you are, with this definition, actually raising taxes on small business. I could likely start citing the myriad of scholarly articles why raising taxes during the great depression only managed to lengthen it by effectively destroying wealth creation and the incentive to create wealth … but instead of this, I’ll point out something rather grim.

Small business has been not just the growth engine for the economy, it has been the only effective engine that actually hires people. Small business has pulled us out of most of the recessions/depressions in the last century, save the time that war preparation did in the late 1930s early 1940s). Government expenditure often masked the problem for a while, but when the government stops spending, the underlying problem still hasn’t been solved.

Small business also tends to operate out of smaller budgets. So tax increases have rapid and profound effect upon employment. If I have a budget of $200k to pay people (after taxes), I can keep N people. If I have to give, say $20k of that $200k to the government because my top line taxes just increased 5%, without a corresponding increase in revenue … with revenue under pressure … what impact does this have on the number of people I can pay? The options are either let people go or pay them less. Because as a business owner I get paid last (I make payroll first), and I don’t have infinite resources upon which to draw, I have some very hard decisions to make. Courtesy of a tax increase that impacts “the rich”. Which I am most definitely not.

Most people pushing the “raise taxes on the rich bastards” line don’t seem to grasp this. As a small business owner, all these nice little mandates coming from on high are serving only to increase my cost of doing business. When they get high enough that working harder winds up being a negative incentive … that is, the harder I work, the less I earn … then I’d have to throw in the towel.

And what impact would this have upon employment? Get enough of us small business owners together, and pull these same sort of idiotic concepts out, drive our costs through the roof, and decrease our ability to create wealth … and lots will close up shop. Many already have.

Notice that I haven’t brought political parties into this yet, apart from a backhanded slap in once sentence.

Politics in the US, and political choices here, are about minimizing evil, not selecting good. Every party comes with baggage. Some of that baggage is really bad, and it outweighs any potential good that could be done.

As the voters indicated in this past election, there is something profoundly broken in the US government right now, and we need to throw many bums out to force the government to reign in its spending. The bums that accelerated our spending fast and hard were predominantly democrats, though some republicans were implicated as well. Sadly not all of the most egregious bums were thrown out. This is why the tea party (again, thoroughly and sarcastically demeaned, without valid cause, by many/most on the left of the political spectrum) gained prominence, though there were a few nutjobs in that movement (there always are in any movement).

We have really no choice left. We have to cut programs.

Cutting the NSF makes no sense. Increasing NSF makes lots of sense. Cutting NIH makes no sense. Increasing it makes lots of sense.

Cutting ethanol subsidies makes sense. Cutting other entitlements, makes sense. Yes, these will have a profound impact. Upon me as well with multiple relatives using these programs now. But if we use something we can’t afford, eventually either we have to pay more, or the service would get scaled back/turned off anyway. So lets take control of that process and figure out what we need to do.

FWIW, the next time any congress critter from any party, gets up and challenges “crop stress” and other “wasteful” item, it might help to organize both a private education (letter writing, email, etc.) as well as a public repudiation of said critter’s position. Give them a way to walk back to a path of sanity, and make it painful for them if they don’t.

But please … lets drop the backhanded slaps at republicans, conservatives and people right of center. I disagree with my colleagues without the need to convert their affiliations to a pejorative. _