Wednesday, February 29, 2012

The Shortcomings in My Education

Without appearing to pat myself on the back too much, I like to think I'm a man of many talents. I can cook well. I can dance a mean tango (and waltz, and rumba, and other dances). I enjoy writing interesting and chatty letters (as many of you know from personal experience) and am very good at reading to children.

But for all that, I am a babe in the economic woods. I don't understand a lot of the economic gobbledygook spewed out by the presidential wannabes and have to work very hard to make sense of the competing statistical broadsides launched by each political party. It continues to amaze me that different commentators can use different interpretations of the same data to prove diametrically opposing positions, in the same way that accountants using differing accounting systems can use the same data to prove a profit (for the shareholders) or a loss (for the tax man). I wrote about this back in December of 2008 in this post. I wish I understood economics, but I don't, and I'm not likely to in time to be as well-informed as I'd like to be for the presidential election.

And this is why this article, which has been in my blog fodder file for a while, is very timely: Politicians Exploit Economic Ignorance, by Walter E. Williams. I don't agree with everything Mr Williams writes, but he does make some very good points about taxes and the double-talk and sleight-of-hand politicians use when they try to convince us about who really pays them, and why.

Where I break with Mr Williams is where he discusses the issue of taxing corporations. He writes that a corporation faced with a tax increase on its profits has three options: raise the price of its product (which essentially passes the tax on to its customer ... you); lower the dividends it pays to its investors (which could well be ... you); or lay off workers (which might mean the loss of a job ... yours). His main point is that "In each case, it is people, not some legal fiction called a corporation, who bear the burden of the tax."

Mr Williams was, of course, writing before the Supreme Court decided (in Citizens United v Federal Election Commission) that corporations are, in fact, people. And Mr Williams clearly implies that economic ignorance means ignorance of conservative economic theories ... under which anything that interferes with the ability of a corporation to make maximum profits is bad.

It's true that, ultimately, it's you and I who pay taxes, because we can't afford the reinforced battalions of high-powered lawyers and lobbyists who ensure that corporations and the very wealthy are legally protected from the burden of taxation. Is this fair? Well, of course it is, if you're a corporation (excuse me, a person) or a very wealthy individual. If you're a member of the struggling middle and lower classes, not so much.

And this gets back to my original wish ... that I better understood the ins and outs of economic theory - in both its liberal and conservative interpretations - so that I could more intelligently fine-tune my BS filter during this trying season.

Unfortunately, I'm stuck with the storehouse of information and experience I have now ... which allows loudly-shouting talking heads to give me a variation on the lecture I got from my four year-old granddaughter Leya this past weekend: she was upset because I couldn't see the gaping wound she thought was there on her utterly unscratched knee, and told me that "If you can't see that, Opa, you need to go to the hospital and get your brain fixed!"

All I can say is that it'll need a lot of fixing once the election is over...

Have a good day. More thoughts tomorrow.



eViL pOp TaRt said...

Mr. Williams is basically right about the role of taxes in corporate behavior. However, taxes is only one case of a more general relationship: anything that increases costs of business (like costs of raw materials) in any form can be responded to by a corporation in those three ways. Is that what they mean by trickle-down economics?

Mike said...

Two things come to mind about economics...
Figures don't lie but liars can figure.
Economists are nothing more than gypsy forture tellers in training.

Duckbutt said...

With corporations, their continued existence is dependent on their making a profit of some kind. What is reasonable or unreasonable is going to be greatly dependent on whose point of view is involved.

Ajax said...

Hmmm and we real people have the same three choices.
Work another day to pay the tax, save less, or spend less. So i'm not sure it matters if the govt taxes corps or not, except that they are more able to buy loop holes, enriching congressmen.