Saturday, September 1, 2012

Economics at the Republican Convention

Well…there wasn’t much, really.  I mean, not much that we didn’t know up front, before the convention started.   But the GOP platform is worth a read, and it has a few surprises.   

It’s full of phrases like: “Prosperity provides the means by which individuals and families can maintain their independence from government.” 

Wow.  Ok.  Is that what prosperity does?  It’s not at the top of my list of things I need to do with my next bit of income.  The top of my list right now is to buy a new(er) car so I can maintain my independence from having to walk 15 miles to work every day.  But whatever.

And it blames taxes and regulations and the Democrats, and supports small business, approves of free enterprise and does not approve of unions.   It calls the Inflation Expectations Imp from the vasty deep, and flirts with the idea of returning to the gold standard. 

And it states that “Unless we take dramatic action now, young Americans and their children will inherit an unprecedented legacy of enormous and unsustainable debt… these levels of spending and debt are already harming job creation and growth, projections of future spending growth are nothing short of catastrophic…”

Sigh.  Ok, I guess I will have to write one more post on the dreaded burden of debt, to try to get some kind of clarity in my own mind at least. 

But I’ll do that tomorrow, because that’s not what I meant to write about today.  Today I want to write in praise of Rand Paul.   Small praise, but still praise. 

I admit that I didn’t---couldn’t---stay up on work nights to watch the whole of the convention proceedings, and I missed all of the really important speeches.  That means that I missed Paul Ryan, Mitt Romney and Clint Eastwood. 

But I did catch Rand Paul, and his speech contained a snippet that actually engaged a few of my brain cells.

He said this in his speech:

“I was saddened that anyone in our country, much less the president of the United States, believes that roads create business success and not the other way around.”

At first I was just surprised that in all the silliness, the unreasoning, obsessive and endless focus on the convention’s central deceptive Obama quote (“you didn’t build that”), his was the only speech that recognized that Obama was talking about roads, bridges and schools rather than about the businesses that benefit from them, which is to say that his very brief comment took on the Obama statement in a surprisingly honest way that made it worth hearing. 

Then I thought: Ok, it’s true that if there is a business, or a cluster of businesses---say, a city---that people want to get to, then that fact may motivate people, through their government, to build a road to make that location accessible.  And the businesses pay taxes to help build the road; the employees of the businesses also pay taxes, and their customers, and the suppliers of the inputs to the businesses, and so on, all pay taxes that help to build that road. 

And it’s also true that once that road is built, new businesses cluster along it like ants to sugar, trying to take advantage of the opportunity that this government-built road creates.  That’s something small businesses do amazingly well: see an opportunity and take it.  And the businesses along this new road will be supported and uplifted by the easy access available to customers and suppliers to this business that was created only because a road-induced opportunity presented itself. 

So there is a kind of chicken-and-eggness about the process, isn’t there?  Transportation to a city, or to a roadside mall, or a roadside fruit stand, improves the profit opportunities available to it, and also to every other point along the road.  And the city or the fruit stand grows bigger or faster than it would have without the road.  And then more people want or need transportation to this growing fruit stand, which may convince the government to widen the road.  This is a symbiosis between business and government, and both sides of that contribution are useful.

And in the GOP platform, we also find recognition of that fact:

“America’s infrastructure networks are critical for economic growth, international competitiveness, and national security. Infrastructure programs have traditionally been non-partisan; everyone recognized that we all need clean water and safe roads, rail, bridges, ports, and airports.”

A statement like that will almost surely appear in the Democratic platform too; the parties generally don’t disagree on the desirability of infrastructure, only on what kind and how we pay for it. 

We have to ask, then: how do we build those things, if we don’t raise the funding through taxes, and don’t borrow, and (since the platform supports “sound money” and the gold standard) don’t just create the money out of thin air?   Aren’t those our only three options?

So we’re back to the issue of debt, and the burden of debt.  As I said, I’ll try to get back to that tomorrow.

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