The high cost of low taxes: Americans don’t want to maintain America

The high cost of low taxes: Americans don’t want to maintain America November 30, 2012

Welcome to the future of “small government.” America’s infrastructure was once the best in the world. But we didn’t want to pay to maintain it.

David Cay Johnston: “America’s Coming Infrastructure Disaster”

For decades, America has scrimped on taking care of the public furniture, endangering people and weakening the economy as bridges rust, roads crumble, dams weaken, and water mains leak. The sudden collapse of an Interstate highway bridge in Minneapolis in 2007, killing 13, and the cracks that shut down the Sherman Minton Bridge connecting Indiana and Kentucky last year (it reopened in February) are warning signs of widespread, but hidden, dangers lurking all around us.

Even greater threats can be found among the decrepit corporate-owned infrastructure, including high-pressure oil and natural-gas pipelines that can explode without warning, electric power poles long past their replacement dates, and a telecommunications system that is far less reliable today than it was two decades ago — despite customers paying more than a half-trillion dollars for upgrades.

America’s infrastructure gets a grade of “D” from the American Society of Civil Engineers, which recommends that we spend $2.2 trillion on repairs and maintenance.

… Under the banner of deregulation, the monopolies that supply electricity, water, gasoline, natural gas, and Internet access have been hollowing out the privately owned infrastructure on which modern life and economic activity depend. Instead of putting more into maintenance, they have slashed budgets. At the same time, they earn phenomenal profits: up to 55 percent on their assets, eight times the average for all corporations.

Corporate monopolies that own railroad bridges, hydroelectric dams, and high-pressure pipelines have skimped on taking care of this infrastructure, putting lives and property across America at unnecessary risk from blackouts, collisions, and explosions, even the threat of entire towns being washed away by bursting dams.

Photo by Leon Tucker, The (Cherry Hill, NJ) Courier-Post.

KYW/CBS Philly: “Freight Train Derails, Spills Chemicals in Paulsboro, NJ; Evacuations Ordered”

Officials say a freight train derailed over the Mantua Creek, leaking a chemical called vinyl chloride, which is considered toxic and highly flammable. Hazmat crews are currently on scene.

It appears the five cars derailed when a bridge they were traveling over collapsed. Some of the trains are currently submerged in the Mantua Creek.

Rescue units have been dispatched to the scene after numerous people complained of respiratory problems. A number of people in the immediate area have been evacuated.

The U.S. Coast Guard has also been notified because the chemical might be leaking into the Delaware River.

Travis Waldron: “How Increasing Infrastructure Spending Provides a Major Boost to Our Economy”

The United States has a massive infrastructure deficit, with independent analysts finding that the country could need as much as $2 trillion in immediate investments just to bring its infrastructure up to date. With the economy recovering slowly and our nation’s roads and bridges crumbling, a new paper from the San Francisco Federal Reserve found that making investments into infrastructure has substantial short- and medium-term benefits for the economy.

Each dollar invested into infrastructure boosts state economies by at least two dollars, the paper found:

Federal highway grants to states appear to boost economic activity in the short and medium term. The short-term effects appear to be due largely to increases in aggregate demand. Medium-term effects apparently reflect the increased productive capacity brought by improved roads. Overall, each dollar of federal highway grants received by a state raises that state’s annual economic output by at least two dollars, a relatively large multiplier. […]

In other words, for each dollar of federal highway grants received by a state, that state’s GSP rises by at least two dollars.

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  • Turcano

    The modern “consensus” of academic literature on the subject is that increasing the minimum wage has, at worst, a very minor negative impact on employment.  And this negative impact can be offset with initiatives like better unemployment insurance.  This also assumes that costs aren’t passed on to the consumer, and under that scenario, costs go up less than half as much as wages do.

  • EllieMurasaki

    Probably not safe to assume costs won’t be passed on to the consumer. Which is why I want to peg minimum wage to the consumer price index, such that if prices go up then minimum wage will follow, and minimum wage will always be enough to live on given the prices of everything at last recalculation, which will never be more than a year ago. Hopefully businesses will realize that lower profits are better than an inflationary spiral, and any that start by passing costs to the consumer will therefore stop.

  • Turcano-  So why not raise the minimum wage to 30 dollars an hour then? Doesn’t make sense.  There are lots of different opinions on minimum wage on economics, I doubt you could find a consensus, nor would it be very relevant if you could. 

    Ellie- the CPI is not the most trustworthy stat. They eliminate gas and food in their equation.  As far as pegging things, you are talking about a kind of central planning that would never happen.  It makes more sense to attack the problem of how to help the working poor from somewhere else.

  • EllieMurasaki

    So redo the consumer price index formula to something more in keeping with what living expenses actually are, or come up with a new better thing to track prices of things that living-expenses money gets spent on, and then peg federal minimum wage to that.

    Or scrap minimum wage entirely in favor of writing a monthly check from federal funds to every single citizen and perhaps also every single legal resident, enough to cover that month’s living expenses for that person; money for children gets divided between whoever’s got custody of said child such that if the kid lives with both parents all the time or with each parent half the time, then each parent gets half the money for the kid, and if the kid lives with Mom five days a week and Dad two, Mom gets five-sevenths of the money for the kid and Dad two-sevenths.

  • oh my days

  • EllieMurasaki

    I don’t see any other acceptable options here, Chris. Either we make sure that everyone who can work is working and thereby bringing in over the course of each month at least enough for that person to live on for a month with supplemental programs for those who can’t work full time or whose household income isn’t enough for the household, or we make sure that everyone gets enough money for the month whether they’re working for it or not.

    Any suggestion that involves someone not having enough to live on is NOT ACCEPTABLE.

  • We usually spend about $200 a month on maintenance.

    Unless you mean amortizing the cost of a yearly $1000 repair, if your mechanic is hitting you up for this much every oil change, you’re probably being seriously ripped off.

    I am a little bit agog at the notion that healthy young people have to pay as much or more than the cost of car insurance for their health insurance. O_O

  • Daughter

     I don’t mean we spend $200 every month, but when we need repairs, they’re expensive, so yes, that’s the average of what we spend over the year. Our cars are old, and both cars have more than 168,000 miles on them (among other thing, the newer car carried us cross country).

  • The interesting thing is that the taxes on a $3000 a month joint income are actually comparatively small.

    The strange thing is how Republicans have managed to distract people from the true origin of the squeeze on their paychecks (food, gas and health costs) to focus on a relative red herring (taxes).

  • Daughter

    Totally agree. A 0.1% sales tax increase was just voted down in my county (very, very narrowly). The result is that public transportation services are going to be eliminated after 7 PM weekdays, and altogether on holidays and weekends. So people who depend on  public transport are SOL during those times. It’s maddening – that people would find that 0.1% more of a hardship than people not being able to get to work (and what that will do to the economy to have more people unemployed).

  • EllieMurasaki

    Food not so much, actually. Official poverty line is a household income of three times what a household of that size ought to be paying for food, which means the official count of people in poverty is a dramatic undercount, because food has shrunk as a proportion of typical household expenses. Living wage in this county for a household of one adult is ten dollars an hour, which is four hundred a week before tax; assures
    me that a single adult’s healthy food budget (cheap version) should clock in at forty dollars a week, give or take a few dollars.

    Of course, food deserts, fast food, tasty treats that are not counted in the healthy food budget but do fall under food expenses, transporting groceries sans car, etc etc. Food’s still rather less than a third of household expenses no matter how one slices it.

    Also –rounding down to the nearest dollar, six European countries and the US, 7, 7, 7, 8, 8, 8, 3. Gas prices in the US only hurt us because we don’t know any better.
    Health care, now, that’s a big one, but Republicans don’t dare do anything about lowering its cost to consumers, as that would (1) reduce health insurance companies’ obscene profits and (2) imply that health care is a right not a privilege.

    Housing expenses is the other big one, but doing anything about mortgages would drop banks’ profits, and about rents, landlords’ profits.


    Or scrap minimum wage entirely in favor of writing a monthly check from
    federal funds to every single citizen and perhaps also every single
    legal resident, enough to cover that month’s living expenses for that
    person; money for children gets divided between whoever’s got custody of
    said child such that if the kid lives with both parents all the time or
    with each parent half the time, then each parent gets half the money
    for the kid, and if the kid lives with Mom five days a week and Dad two,
    Mom gets five-sevenths of the money for the kid and Dad two-sevenths.

    I am absolutely dead serious about this:

    There is absolutely nothing wrong with this plan. It would not destroy the economy, it would not bankrupt our culture. It would not turn us into a nation of indolent morons. It would not cause runaway inflation. It would work and it would solve everything. This can actually be demonstrated using math and economics and physics and everything
    But it would never happen because the idea that it is morally imperative for some people to starve to death is very deeply ingrained in our culture.

  • Hmm. Meat costs are kind of skewed in the USA compared to Canada’s (the “sale” days are when meat runs between $3 and $7 a pound) so my judgement of a food component of a budget (especially for a $40k/year couple) is probably off for Americans, and you could probably shave that $500 for food down to about $400, especially if the hypothetical couple in question eat more plant products than meat products.

    I don’t like the whole “gas prices are low relative to the world’s standards”, because it doesn’t take into account that Europeans can afford the higher prices due to more egalitarian wage structures as well as very dense housing and good transportation networks which tend to offset some of the need for a personal vehicle.

    If gas cost $7 a gallon all that would happen is that all the folks on minimum wage would end up going flat broke twice as fast as they do now trying to get to their jobs on time.

  • Carstonio

    If I understand you correctly, you’re talking about a guaranteed minimum income. What’s deeply ingrained in our culture is not a moral imperative for some people to starve to death, although that is certainly the effect, but a deep and largely unjustified mistrust of human nature. There’s nothing wrong with being skeptical of human nature, but the attitude here seems to view society like the Cornucopia in the Hunger Games. I’ve heard at least one rightist argue that while too much economic inequality is bad for society, so is too much equality, because it doesn’t provide any incentive or inspiration. That deep mistrust of human nature is disgustingly paternalistic, presuming to know what’s best for the individual.

  • P J Evans

     Yes. It runs about $400 a month at my place, if you sign up for Major Non-Profit Less-Evil plan. The other is less expensive, but it’s Evil. And that’swithoutchildren.

  • P J Evans

     Actually, businesses might discover that they do better when people are paid enough to live on – people will be able to buy stuff new, or go out to dinner at a restaurant instead of a fast-food place.
    I hate the assumption that money vanishes from the economy when the paycheck is delivered.

  • Carstonio

     I hate that assumption as well, as well as the related assumption that money disappears from the economy when the government collects and spends it. I get the impression that recessions are simply reduced mobility of money.

  • Daughter

     Didn’t Richard Nixon propose some sort of guaranteed income?

  • EllieMurasaki

    Yeah, I’m sure that’s the case, but it wouldn’t be instantaneous, and (assuming most debtors use the additional money to pay off debts first) probably wouldn’t even show up in the same quarter as the rules change. You know businesses are all about the quarterly reports.

  • EllieMurasaki

    I think that’s the definition of ‘recession’, actually.

  • EllieMurasaki

    Related:–in addition to raising the minimum wage to $10/hr quickly and indexing it to inflation thereafter, the blogger proposes:

    mandated minimum benefits (paid leave and so on) for 40 hr/wk workers, giving 25 hr/wk workers twenty-five fortieths of those benefits and 35 hr/wk workers thirty-five fortieths, so that it stops being attractive to hire two part-timers for a position in order to avoid paying either of them the benefits of a single full-timer

    making overtime paid at time and a half for over forty hours a week and double time for over sixty hours for anyone who earns under $50K/yr regardless of what the FMLA currently says about supervisory positions and such like

    making overtime for people paid $50001-$150K/yr be paid at the same rate as overtime for people making $50K/yr so that nobody ever works unpaid overtime
    requiring overtime pay for part-timers who are working any hours at all outside a previously agreed and infrequently changeable forty-hour block–not necessarily 9-5 M-F, but if that’s the agreed block, a part-timer working a single hour on a weekend or before nine or after five on a weekday would be paid overtime for that hour regardless of how many other hours they were working that week–so that part-timers work at least somewhat predictable hours instead of whenever the hell the employer needs them that doesn’t bring them to full-time hours for the week


  • Turcano

    In fairness, I did go over both, and the most likely scenario is a combination of the two.  But again, this is a response to the notion that minimum wage irreparably damages the economy with its dreaded socialism.