Answering Allan Meltzer in the WSJ

It’s Not That Hard to Do

Writing in the WSJ Allan Meltzer, the Wednesday guest “Re-iterator of  the Conservative position" asks a question about Ireland’s very low corporate tax rates.  Background:  As a part of its economic development program the Republic of Ireland instituted very low corporate tax rates in an attempt to convince multi-national corporations to locate in Ireland (successful) and to convince multi-national corporation to engage in accounting manipulation of taxable income to domicile taxable income in Ireland (very successful).

Mr. Meltzer asks

The reaction in France is that Ireland should not have the lower tax rates that fostered investment and productivity growth. Is that fairness or envy?

The answer, Mr. Meltzer, is easy.  It is neither “fairness nor envy”.

IT IS THE FACT THAT FRANCE ALONG WITH A LOT OF OTHER COUNTRIES HAS HAD TO BAIL OUT THE IRISH ECONOMY AT A COST OF TENS OF BILLIONS OF DOLLARS BECAUSE OF THE IRISH MIS-MAMAGEMENT OF THEIR ECONOMY.

(sorry about the shouting, no sure if you would pay attention otherwise).  You see, if country A has to bail out Country B, in part because Country B instituted very low corporate tax rates to steal companies from Country A and which result in a shortfall of government revenues for Country B, Country A will not be a happy camper.

On other topics Mr. Meltzer goes onto say, and our responses are

Why is it fair to distribute more welfare to today's voters at the expense of their children and grandchildren who will pay for this less productive use of resources?

Why is it fair for lack of environmental regulation and control to allow the current tax payers to burden their children and grandchildren with the cost of cleaning up the environment and the cost of living in a more polluted world?  (The Dismal Political Economist just loves answering a question with a question.)

Higher taxes to support a larger welfare state means a larger share of national resources pay for a Medicare system that everyone recognizes as expensive and inefficient.

The “everyone” that Mr. Meltzer refers to must not include the vast majority of experts and recipients who don’t find Medicare inefficient.  And yes it is expensive, except that it is far less costly than the private insurance substitute proposed by Mr. Ryan.

More spending reduction, especially for Medicare and Medicaid, allows a more productive use of resources for growth.

The Dismal Political Economist needs to translate this sentence, which is really saying that "spending reductions on Medicare and Medicaid, which will damage the health of the elderly and the very poor will allow a more substantial tax cut for wealthy Americans." 

See, The Dismal Political Economist likes to tell it as it is.