Sinking funds used by government are generally misused. That the funds are generally not used for emergency purposes or the purpose originally intended. Rather the fund is used to cover up extravagant expenditures or failed government endeavors. - Book Five, An Inquiry Into Nature and Causes of the Wealth of Nations, Adam Smith, 1776 (1)
How does a political taxing authority accumulate $280 million? What is the mechanism? How can they do it?
To figure out the process one’s first stop is at the proposition of: Government produces nothing. One should consider that government produces nothing that would not have otherwise been produced in the private sector, absent tax. Meaning, with tax, the basket of goods and services produced is made up government and private. Absent tax, the basket of goods and services is all private. Hence the government produces nothing, merely the privately produced revenue is “taxed” with the resulting tax moved from private to public.
One’s next consideration is that somebody or some entity produced income that was then coercively taken away, as tax. Since the tax was extracted from somebody or some entity that produced and owned the income at some point in the process, then such extracted income (tax levied) is being set aside unspent. Meaning the basket of goods and services morphs into: government - government unspent + private. (2)
Consider the process another way. Political taxing authority G taxes James and Jane Goodfellow at tax rate T + PPA, with T being taxes spent on services provided by G, PPA being a premium paid above T that renders no services from G, yet produces a rainy day fund for G. -Or- political taxing authority G taxes James and Jane at tax rate T - SF with SF representing services forgone that otherwise would have been produced at tax rate T.
The rainy day fund, in essence, comes into existence due to a premium paid above services rendered, services provided below taxes rendered or a combination of both phenomena.
Ponder for a moment that the stratagem of premium paid above services rendered, services provided below taxes rendered or a combination of both phenomena, the mechanism thereof, is not being deployed to pay down deficits or debt. Nay, nay! The process is rendered to build a fund for G. Meaning G now possesses a fund that represents a premium paid above services rendered, services provided below taxes rendered and/or a combination of both phenomena.
The next step is to put the process into an action phase. G now buys a basket of government services. The basket is either over priced (premium paid) and/or the basket is shorted (services not rendered). The result being G ends (Eureka!) with a “shirking partner fund”. Very nice indeed!
In the first case of premium paid above services rendered, one would then consider that all taxpayers to G, of all the varying taxes paid to G, need reimbursed. In the second case of services provided below taxes rendered, then all citizens are due services paid for, but not rendered.
A question to ponder is exactly who’s money is the $280 million? Who has claim? Can’t be society’s claim as society is an abstract entity. Is it the past, current and future politicos of G’s claim, due to some mumbo-jumbo legislation (legislation by and for politicos)enacted by another set of politicos representing a greater political taxing authority bestowing authority, the very, very fuzzy concept of political authority, upon G and its ilk? Is it bureaucrats claim so they can increase scope and authority? Or is the claim of the many? The many, many that are not being served?
Beyond the likely misguided consequentialist account of political authority and its coercive nature, even this view of political authority and coercion takes the view of: “It [state] may not take a little extra to buy itself something nice”. (3)
Notes
(1) An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith, 1776
http://www.amazon.com/Inquiry-Nature-Causes-Wealth-Nations/dp/0226763749/ref=sr_1_8?s=books&ie=UTF8&qid=1424529660&sr=1-8&keywords=the+wealth+of+nations
(2) Applied Economics, Thinking Beyond Stage One, pgs. 11-14, Thomas Sowell, 2004
http://www.amazon.com/Applied-Economics-Thinking-Beyond-Stage/dp/0465003451/ref=sr_1_1?s=books&ie=UTF8&qid=1424531460&sr=1-1&keywords=applied+economics+thinking+beyond+stage+one
(3) The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey, pg. 95, Michael Huemer, 2012
http://www.amazon.com/Problem-Political-Authority-Examination-Coerce/dp/1137281650/ref=sr_1_1?s=books&ie=UTF8&qid=1424529805&sr=1-1&keywords=the+problem+of+political+authority
Buying locally via voluntary decisions
Consider the following question: If one buys local is that somehow inherently virtuous?
Buying local, as when the local harvest of local farmers comes to market, that would seem rather economical. Very fresh and lowest price.
Buying local because the locally produced item, of any variety, is of the greatest value among comparative items produced elsewhere, that too, would be economical. One wants the best value.
Maybe one wants to buy locally because particular time and circumstance regarding the resource time, is greater than, the resource money, that too is economical. Time can be extremely important.
Further, some people may very well enjoy buying locally and find great satisfaction thereof. Individual maximum utility is important as well.
The afore mentioned example decisions to buy locally, are voluntary decisions. No particular inherent virtue appears, rather, decisions are made to exchange locally based on an attempt to exchange at the point of mutual satisfaction, of both parties, to an exchange. Keep this in mind for a moment.
Mercantilism
The advent of private property rights, which was a main driver of the agricultural revolution, spawned the new private property agricultural owners to begin a long string of agricultural innovation. These innovations required artisans to bring the innovative ideas to fruition. With more and more innovation, and those innovations being demanded by a wider and wider group, more artisans were needed. Hence the advent of the industrial revolution.
Kings, queens, emperors and despots of many kinds were very unsure of how to handle the advent of the industrial revolution. However these same kings, queens, emperors and despots did realize they wanted to capture tax revenue from this new phenomena. In a nutshell, the result was a highly regulated industrial sector with only those with political connections awarded the right to manufacturer. The extreme level of regulation was perceived as a way for the kings, queens, emperors and despots to organize, keep an eye on, measure and consequently extract their tax revenue.
The state sanctioned manufactures with political connections then lobbied for as much export of their goods as possible and as little import of goods as possible. Their idea appealed to the kings, queens, emperors and despots as this meant more tax revenue. Hence the advent of mercantilism.
Mercantilism means consumers are forbidden from buying from an exogenous supplier that produces at a lower price and are forced to buy a higher priced item made within the local political authority of the kings, queens, emperors and despots. Meaning, manufactures and their authorizing kings, queens, emperors and despots extracted from consumers a higher price and hence tax. Had the consumer purchased elsewhere by a foreign supplier at a lower price, benefits would have flowed to the consumer rather than the manufactures and their authorizing kings, queens, emperors and despots.
One might argue that mercantilism was the original “buy local”.
Enter Adam Smith and the Book The Wealth of Nations
The butcher, baker and candlestick maker may well be guided by an invisible hand. Yet Smith knew: "People of the same trade seldom meet together....but the conversation ends in a conspiracy against the public...".
Smith advocated free markets to evolve in which the butcher, baker and candlestick maker participate. However, at the same time Smith knew the self-interest of the butcher, baker and candlestick maker cause them to devolve back toward mercantilism.
"...it always is, and must be, the interest of the great body of the people, to buy whatever they want of those who sell it cheapest". The consumer in a free market then offsets the ability of the butcher, baker and candlestick maker to devolve back toward mercantilism. (1)
If the butcher, baker and candlestick maker frame an argument that their self-interest i.e. to devolve back toward mercantilism is really the self-interest of the great body of the people, such argument would be along the lines of "buy local". That is, the argument implicitly is the reverse of Smith's argument and would appear as: ...it always is, and must be, the interest of the great body of the people, to buy local of those who sell it the least cheapest.
Today’s “Buy Local”
If one examines today’s version of “buy local” [mercantilism] one needs to examine if the phenomena is spontaneous/emergent order of the many or is it a phenomena orchestrated by the few? Is buy local emergent order or is it orchestrated by local merchants and local politicos? Are billboards, radio/TV ads, and bumper stickers produced by the many or produced by the few? Do such billboards, radio/TV ads, and bumper stickers attempt to implicitly, if not explicitly, persuade the audience that buying local is somehow inherently virtuous?
Returning to Adam Smith and free people, functioning in free markets, making free decisions with the result being: "...it always is, and must be, the interest of the great body of the people, to buy whatever they want of those who sell it cheapest". Meaning, consumers capture benefit by trading over the widest geographic area possible. If the maker of brand X is in foreign area Y, and brand X is the best value, then the consumer should capture the value -not- local firms and their political authorizers.
Buy Loco
In the end, consumers should purchase based on mutual satisfaction at the point of exchange regardless of supplier origin. If a local supplier is the most efficient then buying from a local supplier makes grand economic sense. However, to buy from a inefficient higher priced local supplier merely because they are local, as in one is virtuous in buying local, is to transfer consumer benefit (your benefit) to the inefficient higher priced local supplier. It is also a way to perpetuate an inefficient supplier. The inefficient supplier, capturing consumer benefit based on some virtue of buying local grows fat and happy at the consumer’s expense.
Notes:
(1) An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith
http://www.amazon.com/Inquiry-Nature-Causes-Wealth-Nations/dp/0226763749/ref=sr_1_10?s=books&ie=UTF8&qid=1422109756&sr=1-10&keywords=the+wealth+of+nations&pebp=1422109803557&peasin=226763749
“So it’s no surprise that governments with vast powers routinely behave stupidly: they are attempting to do the impossible while being overseen by the ill-informed.” - Don Boudreaux
-Cronyland-
Apparently Greensboro, NC does not rank highly as a place individuals or individual firms would desire as a relocation destination. Could it be that Greensboro is viewed as an economy that is not chronically and indigenously innovative? With an economy lacking in chronic and indigenous innovation the economy at large will lack dynamism and hence lack in jobs in which people feel vital. Would one want to relocate to such a non-innovative and non-vital environment? (1)
If an economy is not innovative and hence not a dynamic economy in which people feel vital, then what sort of economy is one viewing? Likely one is viewing an economy of the few and not an economy of the many. An economy based on the plans of the few and not the plans of the many. A politically directed economy where what little growth that does occur flows to the few and not the many. One might say an economy with a focus on the few at the expense of the many. (2)
An economy that is chronically and indigenously innovative that produces vitality, such economies are in the main, products of spontaneous/emergent order or what some people refer to as “bottom-up”. The economy is a product of the many. (3)
-Back to the Future-
Most economies that existed prior to the year seventeen hundred were economies of the few. Kings, queens, despots and the like were common. However, after the year seventeen hundred spontaneous/emergent order had produced an overwhelming and unstoppable force of the many. The many wanted to act as free individuals and freely pursue their individualistic needs, wants, talents and desires. The result, the ensuing growth, on a global scale was and still is astounding. (4)
Some two hundred and thirty years into the “bottom-up” revolution a small secondary group emerged known as the predator class which some refer to as the political class. A predator class in that their existence depends to one degree or another, consequent to, preying upon other people’s money:
“The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves" - Milton Friedman (5)
-Political Slight of Hand-
The predator class depends greatly on political slight of hand as they cloak their activities as being directed toward the many. But in essence their activities, in the main, boil down to the plans of the few superseding the plans of the many. James and Jane Goodfellow have been superseded. One ends this exercise with an economy that moves back toward the direction of kings, queens and despots, with political solutions as the only solutions, as political solutions are the predator class bread and butter:
Perhaps the greatest achievement of market economies is in economizing on the amount of knowledge needed to produce a given economic result. That is also their greatest political vulnerability. The public can get the economic benefits of such systems by judging results without understanding processes. But in their political behavior, the public must judge processes - including economic processes of which they may be ignorant or misinformed. Public misunderstandings can lead not only to misinterpretations of economic benefit as harm, but to actual harm resulting from policies designed to “correct” perceived problems. Once the process is underway, every perceived problem - whatever its reality or origin - calls for political solution, and these “solutions” tend to create a never-ending supply of new problems to be “solved”. - Thomas Sowell (6)
-Welcome to Cronyland-
Returning to Greensboro: Welcome to Cronyland where the only room available is for the plans of the few, and not so incidentally, plans that benefit the few. In Greensboro’s particular case, from coliseum to music hall and all the empty industrial parks in-between, to the use of taxpayer dollars to attempt to attract or retain firms that have grown to depend on crony handouts, the many pay and the few receive.
Cronyland is a bust for the many and a boom for the few.
Politicos and their ilk come up with master plans (more succinctly notional propositions), financed by the many and their associated tax dollars. The supposed master plan, which generally are far outside their field of expertise of the sponsoring politicos, are then advertised as a panacea. When that plan fails, and the known-known cascading unintended consequence mount related to the notional proposition playing out, a new master plan appears. Yes, the new plan will cause things to be different this time. Alas, same result. Then yet another master plan appears and so on it goes with an unending chain of master plan failure. And when the failure occurs, yet again, the excuse is: You can't make mistakes if
it's everybody else's fault. (7) (8) (9)
“The plans differ; the planners are all alike…” - Frédéric Bastiat
"That illustrates a general rule: If a private enterprise is a failure, it closes down - unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find an exception." - Milton Friedman, from the essay Why Government is the Problem
“Government is the only enterprise on earth, that when it fails, it merely does the same thing over again, just bigger” - Don Luskin
Notes:
(1) Mass Flourishing, Edmond Phelps
http://www.amazon.com/Mass-Flourishing-Grassroots-Innovation-Challenge/dp/0691158983/ref=sr_1_1?s=books&ie=UTF8&qid=1419451306&sr=1-1&keywords=mass+flourishing+how+grassroots+innovation+created+jobs+challenge+and+change
(2) F.A. Hayek, The Constitution of Liberty. Chicago: University of Chicago Press
http://www.amazon.com/Constitution-Liberty-Definitive-Collected-Works/dp/0226315398/ref=sr_1_1?s=books&ie=UTF8&qid=1419451353&sr=1-1&keywords=The+Constitution+of+Liberty
(3) Mass Flourishing, Edmond Phelps
(4) Why Does 1% of History Have 99% of the Wealth? McCloskey
https://www.youtube.com/watch?v=a0nsKBx77EQ
(5) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11
http://www.amazon.com/invisible-economics-politics-Inaugural-Singapore/dp/9971902222/ref=sr_1_7?s=books&ie=UTF8&qid=1419451445&sr=1-7&keywords=The+Invisible+Hand+in+Economics+and+Politics
(6) Knowledge and Decisions, Thomas Sowell, p. 69
http://www.amazon.com/Knowledge-Decisions-Thomas-Sowell/dp/0465037380/ref=sr_1_1?s=books&ie=UTF8&qid=1419451538&sr=1-1&keywords=Knowledge+and+Decisions
(7) This Time is Different, Eight Centuries of Financial Folly, Reinhart and Rogoff
http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?s=books&ie=UTF8&qid=1419461465&sr=1-1&keywords=This+Time+is+Different%2C+Eight+Centuries+of+Financial+Folly%2C+Reinhart+and+Rogoff
(8) The Vision of the Anointed, Self-Congratulation as a Basis for Social Policy, Thomas Sowell
http://www.amazon.com/Vision-Anointed-Self-Congratulation-Social-Policy/dp/046508995X/ref=sr_1_1?s=books&ie=UTF8&qid=1419475448&sr=1-1&keywords=The+Vision+of+the+Anointed
(9) No, They Can’t, Why Government Fails but Individuals Succeed, John Stossel
http://www.amazon.com/They-Cant-Government-Fails-But-Individuals/dp/1451640943/ref=sr_1_2?s=books&ie=UTF8&qid=1419475565&sr=1-2&keywords=No%2C+They+Can%E2%80%99t%2C+Why+Government+Fails+but+Individuals+Succeed
