Kvetch

Self-serving nonsense of the day, via the WSJ:

[discussing lowering US corporate tax rates]
“But that approach, some lawmakers contend, faced a basic mathematical problem, particularly on the business side: The US corporate tax rate is the highest in the developed world, and lowering it substantially would require eliminating a large number of tax breaks to avoid adding to budget deficits. That could offset any economic benefit of lower rates.”

Translation: That would cut back on those same lawmaker’s ability to favor one constituency or another, and thereby reduce their power and the utility of lobbying by special interest, which is their actual bread-and-butter. The economic benefit is not just lower rates (and certainly not lower tax revenues) – the economic benefit is efficiency, regularity, predictability, and the reduction in the value of /lobbying/. Yes, self-serving lawmakers – the benefit here is a reduction in the value of special interests paying you guys off.

Unfortunately, the media is likely going to look at any such improvements in our tax system as “ooh — lower rates for evil corporations!” so any such rational improvement in our tax code faces TWO huge obstacles – the lawmakers and the media. The only ones likely to be cheering for it are pretty much every single economist. And businesses too small to have an army of lobbyists.

Note that it’s not the WSJ coming up with the nonsense. It’s the unidentified lawmakers they are quoting. WSJ could, however, help clarify that it’s nonsense by simply publishing, next to the article, the definition of “rent-seeking” from any basic econ textbook.

I’ve posted before about Carol Dweck’s work in growth-vs-fixed mindsets and how we can get our kids (and selves) to do better. And I highly recommend her book, “Mindset” (of course). Apparently, she gave a TED talk a few months ago. (Yes, there are, what, about 10zillion TED talks now). And it may not dig deep into the growth-vs-fixed issue as I’d have liked, but it’s still worth watching, if for no other reason than to remind us to pay attention to the rest of Dr. Dweck’s incredibly important work. So, here, if you have 10 min, take a look:

<http://www.ted.com/talks/carol_dweck_the_power_of_believing_that_you_can_improve>

Just to be clear, when you read in the media that the Social Security Trust Fund is projected to run out of money in 2033, and that after that, SS revenues in would be only enough to pay 77% of projected promised benefits — just to be clear — that’s only half the story.

The other half is that the “Trust Fund” is (currently) $2.8 trillion dollars of (non-marketable, but that’s not relevant) US Treasury securities. When we say that the trust fund is going to “run out of money” — that means that all those treasury securities will mature and/or be cashed out.

And that means that (currently) $2.8 trillion dollars that the rest of the federal government has borrowed from the trust fund will have to be paid *back*. Plus interest. And guess where all that money to pay it back will have to come from? You got it. Either taxes or borrowing from the public rather than from SS.

So, no, the US isn’t going to default against itself. SS benefits will be paid. But if those two sentences are going to hold true, when you consider the national debt, you need to add in this, too. So all those who keep saying “Oh, no — SS is not in crisis” — that may be true. But the /rest/ of the government financial structure is looking a a bit less healthy to make it so, even if that debt is not generally included when looking at national debt figures (because they are usually quoted as “national debt held by the public” and all that debt owed to SS is not counted. (currently $13 trillion, btw).

http://research.stlouisfed.org/fred2/series/FYGFDPUN