State Spending On Higher Education Since The Recession

State spending on higher education is down 28% since the beginning of the recession.  That represents over $2,000 per student.  The cuts in spending vary considerably by state.  Arizona and New Hampshire have cut spending by more than 50%.  There is a graph which shows the percent change in spending by state.  Some of the belt tightening by states is due to recession related drops in tax revenue.  On the other hand, some states are cutting income taxes and also cutting spending on education.  There seems to be a disconnect between our need for a better educated workforce in the brave new high tech economic world,  and public funding for higher education.  I guess we can import the necessary labor from poorer countries that have increased access to higher education.

Paul Ryan Admits That GOP Will Not Negotiate A Budget Deal Without The Leverage It Gets From Debt Ceiling

Paul Ryan admits that the GOP will not negotiate with the democrats on the budget until the fall.  If they negotiate now they will not be able to get the agreement that they want, and the democrats can blame the failure on them.  If they wait until the fall, when the debt ceiling must be raised in order to avoid a government default on its debt, they will be able to use the leverage from the risk of government default to get a better deal.  This puts the democrats in a bad position.  They must either give the GOP what it wants, or they will get blamed for letting the GOP kill the economy that it has taken as a hostage in the budget negotiations.  This is American democracy at work in our modern age.  The political party that has the majority in the Senate, and holds the presidency, is unable to govern.

Another View On How To Reduce Corporate Tax Avoidance

Joe Stiglitz suggested that raising the taxes on capital gains and dividends would be one way to compensate for the taxes lost by the growth in corporate tax avoidance.  They are the ones who benefit from lower after tax profits so it makes good sense to raise those taxes.  We could also do what is suggested in this article.  We could tax corporate revenues instead of profits.  That would be complicated but it would end the use of tax havens in which corporate profits escape taxation.

The exploitation of tax havens by global corporations, however, is only one of many problems that accompany the rapid pace of economic globalization.  The nation state is becoming less relevant in a global economy.  Unfortunately, the nation state is the only democratic form of government that we have to manage the global economy and it is not up to the task.  Corporate control over the nation states has never been stronger.  They are faced with a difficult choice.  The can team up with their corporate clients, and do what they can to serve their interests, but eventually that will lead to political reaction.  We are seeing much of that today in many countries. The alternative is to strengthen international organizations which might do a better job of managing the global economy.  That will not be easy to do, especially when most nation states have adopted the strategy of teaming up with their domestic corporate interest groups.  It would also put technocratic institutions, that are removed from democratic control, into very powerful positions.  We are at a very dangerous point in which our existing institutions have become less able to serve the interests of their body politic, and in which there are no good alternatives to the nation states.  Without a good plan to deal with these problems we are likely to get political chaos and government system that develop in response to chaos.

Why Has Growth in Income Inquality Led To Lower Taxes For The Wealthy In The US?

Everyone knows by now that the share of income going to the top 1% in US has grown significantly since 1975.  The US has experienced more growth in equality than that experienced by most large economies.  It is unique, however, in another respect.  Growth in income inequality is also correlated with lower taxes paid by the top 1%.  That has not been true in many other rich countries.  That raises a question about how to explain that result.  Conservative economists use supply side arguments to explain that result.  Lower taxes on the rich increase their productivity, which leads to an increase in their income.  Apparently, they refuse to work hard when taxes are high.  Its also possible that their higher incomes and lower taxes are better explained by greater influence over government tax policies and the effects of deregulation.  Changes in executive compensation are also an important factor.  Corporate executives and many money managers receive much of their income in the form of capital gains or dividends which are taxed well below the rates on ordinary income.  The US political system and the corporate governance have been redesigned to serve the interests of the elite.  The links between Wall Street and our large corporations is much more like it was in the "Gilded Age".  Both groups have also increased their influence over government through their lobbying efforts and by funding US election campaigns which become more costly to finance every year.  This does not surprise most of us.  The more interesting question is to explain why elites in many other countries have not achieved a similar result.  The American system is probably the model to which elites in other countries aspire.

There Is No Problem With The American Republic

The basic message in this article is that the basic structure of government still exists.  The question is whether the machine will be directed by an elite or whether citizens will be active in the operation of government.  Both systems work. Most of us have decided to let the elite operate the machine of government.   History is full of examples of what happens to republics when its citizens take the easy way out.  Disintegration takes time but the direction of change may have been already set in motion.  The elite get even more aggressive when they sense passivity on the part of its citizens.  Unfortunately, the groups most actively pursuing more citizen control of government are unwitting tools of the elite.

The Real IRS Scandal

The GOP has making lots of noise about the IRS targeting of right wing groups that were seeking tax exempt status.  It looks as if the IRS was correct in targeting those groups.  They were primarily engaged in political activity.  The IRS was doing what it typically does to detect tax evasion.  They were using key words to target those who had a higher probability of cheating.  We would probably be much better off if we did more to limit tax exemption for organizations that are primarily in the business of advancing ideological and political interest groups.

Portugal's Struggle To Recover

The Financial Times provides an excellent analysis of the economic problems in Portugal.  Its economy expanded when it joined the eurozone by gaining access to cheap credit.  Private citizens and the government used cheap credit for their purposes.  Consumption grew rapidly by the use of credit cards and government programs were also stimulated by access to cheap credit.  The credit bubble is over and the economy is shrinking.  Small businesses have been hit hard by limited access to credit and by decreasing consumer demand.  Government has increased taxes and cut spending as well.  Exports have picked up, but not as fast as the decline in consumer demand and fiscal contraction.  Structural adjustments are necessary but there are many obstacles that will limit  economic in Portugal.  The situation in Portugal is worse than it was in the US during the Great Depression.  Portugal has few of the advantages, however, that were available to the US to expand its economy.  Several countries in the eurozone face similar problems.