ECONOMIC MYTHS

Michael Kinsley has an amusing piece on the economic illogic that passes for conventional wisdom:

Bush was in New Mexico on Monday with a new answer to critics who complain that his tax cut proposal favors the rich. In two words: small business. “Most new jobs in America are created by small businesses.” Therefore tax cuts “must focus on the entrepreneur.” And thence to more familiar bromides: It’s not “the government’s money,” it’s “your money”; “our greatest strength” is “our individual citizens”; criticism is “just typical Washington, D.C., political rhetoric, is what it is.”

The myth of small business is one of the more ridiculous bipartisan superstitions that influence government policy. Small businesses, by their nature, come and go. They create more jobs than big businesses and wipe out more jobs, too. Any small-business owner burdened by high taxes is, by definition, more affluent than the typical big-business owner, who is an ordinary working American with an interest in a retirement fund. Small businesses are swell. But special favors for small business make no sense in terms of either fairness or prosperity.

While I support lowering taxes almost reflexively, I agree with Kinsley that targetted tax cuts favoring some sectors of the economy over others are probably unwarranted. We can add “the family farmer” to this list, too. Kinsley continues:

“We’re standing in the midst of what we call the American dream,” he said. MCT is privately owned by the family of Ted Martinez, who founded it on a shoestring in 1973 and is now a wealthy VIP who hangs around with politicians. “The Martinez family is living that dream,” Bush said.

Before we even get to the fantasy element, there is a logical problem here, isn’t there? A successful “small” business makes an odd poster child for the proposition that the government is getting in the way of small-business success. How did the Martinez family manage to achieve the American dream during a period when high taxes were supposedly thwarting that dream? If MCT Industries is so successful under current arrangements, why does it need a tax cut?

Heh. The rest of the article goes on to demonstrate that, in MCT’s case, the company actually got all sorts of government help along the way. This is one of Kinsley’s better pieces in some time.

FILED UNDER: Economics and Business
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Gail says:

    Hi – Family farmer here. Before I ask a couple of questions, here is our situation:

    My husband is 4th generation on original family land. We are not incorporated.

    Corn prices are the same (WITH subsidies) today as they were the year I was married (30 years ago). Tractor prices, fertilizer, etc. are not, by a huge margin. Our first 120 horse tractor: $27,000. The one we bought last year: $112,000 (same HP) Yields have increased but only about 70%.

    When my husband’s father dies we will not be able to pay the estate taxes and keep farming.

    My husband is working a 40+ hour a week job and farming on top of it. ALL the farmers we know under 60 are also working two or more jobs per family *besides* farming.

    We pay, in cash, $10,000 per year for self-employed health insurance. That is the deal employers around here cut to employ farmers – we get extra time off in the spring and fall (usually 4 weeks, total) and they don’t provide insurance.

    We will not farm (even without the estate taxes) after my in-laws are gone because we are sick of govt. regs, govt. programs that *we* can’t even understand, double social security, etc., etc. More and more younger farmers feel the same way.

    So, my first question is: given that we could import all our food and not use any government help for farmers, do you think this is a good idea? At this point in history should we be dependant on others or should we maintain the ability to feed ourselves as a country?

    Second question: Do you believe that as family farmers disappear (a notoriously hard group to effectively organize, or even get to agree on anything)food prices will go down and government involvement will be less? I maintain that when the only entity raising beef is Swift-Premium, who will have a stall-to-slaughter-house-to-store operation, prices will climb dramatically.

    Sorry this is so long.

  2. James Joyner says:

    Gail,

    See my post on this here. It started off as a response to this, but got too long.