5 ms·

> The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education, build out social system

> The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education, build out social systems, and invest into onshoring select strategic industries by raising taxes at the high end. Like... Scandinavia?

JensRantil 2y ago
As an example, yes.
AnthonyMouse 2y ago
Scandinavia is using oil and gas reserves as a captive tax base. It doesn't really generalize to markets where capital is mobile.
- fifilura 2y ago
  That is only Norway. Maybe a little bit of Denmark, but Denmark is not considered an oil economy. And I don't know what you mean with "captive tax base" but Norway just piles up the wealth they are too afraid to use it since it will increase the inflation.
  - AnthonyMouse 2y ago
    Norway is the one that actually makes it work. Their GDP per capita is slightly higher than the US and more than $30,000 higher than the other Scandinavian countries. "Captive tax base" means the industry can't move to another country as a result of high taxes. You can move factory jobs to China by moving the factory. You can't move oil and gas extraction jobs to China by moving the oil field.
    - redeeman 2y ago
      and a basic sandwich costs 3x that of in denmark :)
      - AnthonyMouse 2y ago
        That's the premise, isn't it? The local sandwich shop owner, a small business, makes more money relative to the global price of an iPhone or a solar panel so there is less wealth inequality. The only useful increase in equality is the one that makes ordinary people better off. Making them poorer just to spite the rich by a larger amount is absurd.
        fifilura 2y ago
        The idea behind subsidising re-education is that it benefits the society in the long run. I guess I have no proof that it isn't what makes Scandinavian GDP/capita lower.
        AnthonyMouse 2y ago
        It isn't funding education in itself that lowers GDP, it's high tax rates. Investors put money where it gets the best returns. Suppose one country has a 20% tax rate and the other has a 60% tax rate, i.e. they keep 80% of the returns instead of 40%. Then they don't invest in the second country unless the returns are twice as high to begin with, and in most cases they're not. Governments making beneficial use of tax dollars can counteract some of that, because the investments would increase productivity there (e.g. more educated workforce), but for that to work the government would have to make net positive investments against the losses resulting from higher tax rates. That's notoriously difficult and governments more often fail than succeed at doing it efficiently, and there is a strong incentive for corruption. If any significant amount of tax money is directed to cronies or politically connected constituencies, the possibility of not causing net harm quickly plummets. Moreover, government spending has diminishing returns. Collecting enough in taxes to have a basic government that can at least enforce laws against violence and provide transportation infrastructure has very high returns. The first $10M you spend on police might cause the number of unsolved murders to go from 1000 to 500. The next $10M you spend might cause it to go from 500 to 450, because the remaining ones are harder to solve, and because there are fewer remaining to solve. At some point additional spending isn't getting enough of a benefit to be worth the cost. And the same for infrastructure and education and all the rest of it. The exact breakeven point is obviously a matter of some debate, but there is generally a negative correlation between higher tax rates and GDP per capita, implying that most current governments are either taxing at inefficiently high levels because the marginal government program isn't worth the cost, or that there are productive investments governments could be making with the existing money but instead they're allocating it to something else, e.g. because of government corruption or mismanagement.
- lern_too_spel 2y ago
  That's just Norway.
paulddraper 2y ago
Yes. Scandinavia is the gold standard for liberals. Unless you are talking about immigration, and then no one ever heard of them.
- autoexec 2y ago
  Scandinavia has its problems too, but they're doing a lot better than we are in many measures that aren't "number of billionaires getting richer while the rest of the population gets poorer every year." People there are happier, healthier, and better educated than they are here.
  - fifilura 2y ago
    Sweden actually has a higher rate of billionaires than USA (and Norway). https://en.m.wikipedia.org/wiki/List_of_countries_by_number_of_billionaires https://en.m.wikipedia.org/wiki/List_of_countries_by_number_... Not that that has to be a good thing though...
    - autoexec 2y ago
      Sweden has less income inequality and higher economic mobility than the US (Norway does better). Although it's been getting worse, the American Dream is still much more attainable in Sweden than it is in the US.

JensRantil 2y ago

As an example, yes.

AnthonyMouse 2y ago

Scandinavia is using oil and gas reserves as a captive tax base. It doesn't really generalize to markets where capital is mobile.

fifilura 2y ago
That is only Norway. Maybe a little bit of Denmark, but Denmark is not considered an oil economy. And I don't know what you mean with "captive tax base" but Norway just piles up the wealth they are too afraid to use it since it will increase the inflation.
- AnthonyMouse 2y ago
  Norway is the one that actually makes it work. Their GDP per capita is slightly higher than the US and more than $30,000 higher than the other Scandinavian countries. "Captive tax base" means the industry can't move to another country as a result of high taxes. You can move factory jobs to China by moving the factory. You can't move oil and gas extraction jobs to China by moving the oil field.
  - redeeman 2y ago
    and a basic sandwich costs 3x that of in denmark :)
    - AnthonyMouse 2y ago
      That's the premise, isn't it? The local sandwich shop owner, a small business, makes more money relative to the global price of an iPhone or a solar panel so there is less wealth inequality. The only useful increase in equality is the one that makes ordinary people better off. Making them poorer just to spite the rich by a larger amount is absurd.
      - fifilura 2y ago
        The idea behind subsidising re-education is that it benefits the society in the long run. I guess I have no proof that it isn't what makes Scandinavian GDP/capita lower.
        AnthonyMouse 2y ago
        It isn't funding education in itself that lowers GDP, it's high tax rates. Investors put money where it gets the best returns. Suppose one country has a 20% tax rate and the other has a 60% tax rate, i.e. they keep 80% of the returns instead of 40%. Then they don't invest in the second country unless the returns are twice as high to begin with, and in most cases they're not. Governments making beneficial use of tax dollars can counteract some of that, because the investments would increase productivity there (e.g. more educated workforce), but for that to work the government would have to make net positive investments against the losses resulting from higher tax rates. That's notoriously difficult and governments more often fail than succeed at doing it efficiently, and there is a strong incentive for corruption. If any significant amount of tax money is directed to cronies or politically connected constituencies, the possibility of not causing net harm quickly plummets. Moreover, government spending has diminishing returns. Collecting enough in taxes to have a basic government that can at least enforce laws against violence and provide transportation infrastructure has very high returns. The first $10M you spend on police might cause the number of unsolved murders to go from 1000 to 500. The next $10M you spend might cause it to go from 500 to 450, because the remaining ones are harder to solve, and because there are fewer remaining to solve. At some point additional spending isn't getting enough of a benefit to be worth the cost. And the same for infrastructure and education and all the rest of it. The exact breakeven point is obviously a matter of some debate, but there is generally a negative correlation between higher tax rates and GDP per capita, implying that most current governments are either taxing at inefficiently high levels because the marginal government program isn't worth the cost, or that there are productive investments governments could be making with the existing money but instead they're allocating it to something else, e.g. because of government corruption or mismanagement.
lern_too_spel 2y ago
That's just Norway.

paulddraper 2y ago

Yes. Scandinavia is the gold standard for liberals. Unless you are talking about immigration, and then no one ever heard of them.

autoexec 2y ago
Scandinavia has its problems too, but they're doing a lot better than we are in many measures that aren't "number of billionaires getting richer while the rest of the population gets poorer every year." People there are happier, healthier, and better educated than they are here.
- fifilura 2y ago
  Sweden actually has a higher rate of billionaires than USA (and Norway). https://en.m.wikipedia.org/wiki/List_of_countries_by_number_of_billionaires https://en.m.wikipedia.org/wiki/List_of_countries_by_number_... Not that that has to be a good thing though...
  - autoexec 2y ago
    Sweden has less income inequality and higher economic mobility than the US (Norway does better). Although it's been getting worse, the American Dream is still much more attainable in Sweden than it is in the US.