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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 455761  
Subject: Fiscal cliff and 1937 Date: 1/15/2013 1:14 PM
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Steve wrote, "The government doesn't create wealth, it redistributes it."

I replied, "To a certain extent that is true. However, nowadays, you should modify that by saying, "The government collects and redistributes wealth and also borrows money from the Federal Reserve which is created out of thin air and was never wealth to start with.""

Then I thought...remember 1937? Few of us were alive then, but my beloved Grandma was so I think of this as "extended experience" (in a sense).

After struggling up from the nadir of the Great Depression, the stock market recovered nicely until 1937. There was a serious recession and stock market drawdown in 1937. Keynesian economists assign blame to cuts in federal spending and increases in taxes at the insistence of the US Treasury, while monetarists, such as Milton Friedman, assign blame to the Federal Reserve's tightening of the money supply in 1936 and 1937.

http://en.wikipedia.org/wiki/Recession_of_1937%E2%80%931938

http://research.stlouisfed.org/fred2/series/DJIA
https://dl.dropbox.com/u/45054803/DJIA%20Depression%20Era.xl...


Date DJIA
1937-08-16 189.34

1938-03-31 98.95 (drawdown of 48%)


How much of today's government spending is tax collections, how much is direct borrowing (sales of Treasury debt to individuals, institutions and nations) and how much is created by the Federal Reserve?

http://research.stlouisfed.org/fred2/series/TGDEF
Net Government Saving [This is the 3Q2012 current net deficit.]
2012:Q3: -1,229.3 Billions of Dollars, Quarterly, Seasonally Adjusted Annual Rate

http://research.stlouisfed.org/fred2/series/FGRECPT
Federal Government Current Receipts [Taxes collected] 2012:Q3: 2,671.3 Billions of Dollars Quarterly, Seasonally Adjusted Annual Rate

http://research.stlouisfed.org/fred2/series/GFDEBTN
Federal Debt: Total Public Debt (GFDEBTN)
2012:Q3: 16,066,241 Millions of Dollars, Quarterly, End of Period, Not Seasonally Adjusted

http://research.stlouisfed.org/fred2/series/WSHOTS
Federal Reserve Assets - Securities Held Outright - U.S. Treasury Securities, 2013-01-09: 1,676,307 Millions of Dollars [This is stable and not increasing.]

http://research.stlouisfed.org/fred2/series/WSHOFDSL
Federal Reserve Assets - Securities Held Outright - Federal Agency Debt Securities, 2013-01-09: 76,361 Millions of Dollars [This is declining.]

http://research.stlouisfed.org/fred2/series/WSHOL
Federal Reserve Assets - Securities Held Outright - Securities Held Outright, 2013-01-09: 2,679,380 Millions of Dollars [This is increasing.]

Of the Total Public Debt, roughly 10% is held by the Federal Reserve and is money created out of thin air by the Federal Reserve to buy Treasury securities in order to increase the money supply and manipulate interest rates.
http://research.stlouisfed.org/fred2/series/M2

The exploding deficit over the past 5 years (since 2007) was caused by the recession, which reduced receipts as expenditures increased (e.g. unemployment insurance, wars).

I think that both fiscal and monetary actions impact the real economy. The Federal Reserve has taken unprecedented actions to increase the money supply and has announced its intention to keep real interest rates negative until the unemployment rate drops to 6.5% (which may be forever depending upon increasing job loss due to automation).

The fiscal cliff negotiations that "succeeded" at New Year were a drop in the bucket and essentially meaningless in the larger picture.

Major declines in the government deficit or the money supply could cause a repeat of 1937. I am not recommending a policy here -- just saying that METARs should keep a close watch on the changes because a dramatic change in government and/or Fed spending and borrowing could cause a massive change in the markets. It's happened before.

Wendy
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Author: steve203 Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413443 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 2:04 PM
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Keynesian economists assign blame to cuts in federal spending and increases in taxes at the insistence of the US Treasury, while monetarists, such as Milton Friedman, assign blame to the Federal Reserve's tightening of the money supply in 1936 and 1937.

If you subscribe to the monetarist view, the resolution is obvious. As the government reduces spending, the Fed forces banks to withdraw the excess reserves, which presently amount to some $1.4T

Immediately upon the policy reform, banks feverishly moved cash to the Fed, from $200 billion within a month, to $800 billion by the end of 2008, to a peak of $1.6 trillion in July 2011. Today there remain $1.4 trillion in excess reserves sitting idle at the Federal Reserve

https://priceofdata.wordpress.com/2013/01/08/excess-reserves...

http://research.stlouisfed.org/fred2/series/EXCRESNS

The banks would then need to lend out the funds to earn interest, and that would replace the curtailed government spending...it would just be distributed differently. It would obviously be better if these two market distortions, excess reserves and excess deficit spending, were eliminated in a rational and gradual manner, but that would require the government be run by adults.

Steve

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413447 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 3:18 PM
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I wonder if the statement that the government does not create wealth, it redistributes it is true.* Yes, that is true of entitlements; however, the government develops many things that grow into big industries. Take for example, the mainframe computer, the GPS, and the World Wide Web. Miniaturization of electronics that grew into the whole desktop/laptop/mobile phone computing industry and many others.
The miniaturization of electronics was developed largely by the DoD and NASA, but some other Federal agencies as well. It was airmail that made commercial airplanes a business.

Control Data developed the first all transistorized computer and did business almost exclusively with the Federal government which had a thirst for the mainframe computer. The geographic positioning system was developed by the government for targeting purposes and was finally released to the public under stress in a degraded form. Likewise the WWW was developed for military purposes so that military computers could "talk" to one another. Though Al Gore did not invent the internet, he did work toward making it available to the public. The Boeing 747 airplane was the result of a competition for an airplane that could lift the shuttle.

As the above are items that outgrew their original purpose for development by the government out into civilian big business, I would say that the Federal government is responsible for many, if not most, parts of modern life.

* Frankly, I feel this is a highly political statement that certain groups of people like to get together and tell themselves.

brucedoe

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413452 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 4:27 PM
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I wonder if the statement that the government does not create wealth, it redistributes it is true.

The govt does create wealth--but it does not do so for itself. Rather, the govt identifies a variety of requirements/needs that it can not yet fulfill. Because of that inability to meet its needs, the govt then spends money to have private companies design and develop things that will enable the govt to meet its requirements/needs. As the govt is the customer paying for the R&D, this is a good revenue source for businesses. Being able to supply a commercial version of the newly-developed product/service is another objective of business--because that creates additional wealth for the business owners and managers. But it does not create wealth for the govt. Rather, it creates additional revenue sources for the govt because of the additional wealth creating additional income which is then taxed.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413453 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 4:31 PM
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Rather, it creates additional revenue sources for the govt because of the additional wealth creating additional income which is then taxed.

Reads like a bunch of gobbledygook that ignores the fact that someone must be taxed (wealth redistributed) in order for any of that to occur.

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Author: wittgenstein Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413455 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 4:56 PM
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I would say that the Federal government is responsible for many, if not most, parts of modern life.

Bruce, as a retiree like me, who has been witness to the steady expansion of the number of parts of modern life for which government has accepted responsibility..and indeed the role of government in making so many technological advances possible, I wonder if you think there is a problem inherent in the evolution of prevailing attitudes about how people should fund their retirements.

As social security has been augmented over the years by more widespread use of tax-advantaged savings, individually administered retirement accounts like IRAs and Roths and shared employee benefit plans like 401Ks, some of us who have been managing investment assets have been rather troubled by steadily increasing (and perhaps risky?) invasion of retirement accounts to finance not only life requisites prior to retirement, but purchases of non- necessary assets ranging from second homes to all manner of consumer discretionary trinkets many seem to find irresistable.

Many people may not feel it is a problem, and it may not be, but it seems to me that sort of conclusion will require a more robust economy over time than I foresee. However I also think lack of foresight is the frequent mother of pessimism.

jz

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413456 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 5:09 PM
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I would say that the Federal government is responsible for many, if not most, parts of modern life.

Responsible for or simply helped it along the way?

Is it your contention that such things as the microchip and commercial air travel would not exist today if the government had not been involved in some form in the beginning?

Perhaps I am reading too much into your quoted statement.

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413458 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 5:29 PM
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Reads like a bunch of gobbledygook that ignores the fact that someone must be taxed (wealth redistributed) in order for any of that to occur.

Not a surprise. The govt is *always* looking for new stuff to be developed. That is part of the tax collection system already in place and why the funds are needed. The US would not exist as a country today if govt leaders at that time had not done *precisely* this type of R&D in the 1770s.

http://faculty.apec.umn.edu/vruttan/documents/chap2-mass%20p...

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Author: MisterFungi Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413461 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 7:05 PM
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<I wonder if the statement that the government does not create wealth, it redistributes it is true.>

Of course it is not true.

"Government" doesn't drop out of the sky. In the U.S., "government" was created primarily by wealthy people who were smart enough to understand that their wealth would benefit from the multiple functions that only government can perform efficiently, or even at all. Those functions include, among others, providing for the common defense, financing major infrastructure construction and maintenance, managing common-pool resources, enforcing contracts, maintaining law and order, establishing money and regulating the banking system--all the stuff that's in the Constitution and has grown out of it in the 200+ years since.

All of that has been absolutely essential to creating wealth here, leaving aside government investments in education, agriculture, railroads, public health, aerospace, the internet, Tang, etc., etc.

Having said all this, it is also true that governments can destroy, and have destroyed, wealth throughout history. Mostly (but not always), that has happened when powerful interests (wealthy ones, mostly) have attempted to capture government authority to extract "rents."

There is a large literature on the topic, most of it argumentative, but some of it grounded in good evidence. See, e.g., Acemoglu and Johnson's recent book, Why Nations Fail, or earlier works by, e.g., Douglass North, Mancur Olson, and other scholars.

What is an investment implication of the foregoing? Um-m-m, that the U.S. is a more secure investment prospect than, say, Somalia or Haiti is?

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Author: knighttof3 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413467 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/15/2013 8:29 PM
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I wonder if the statement that the government does not create wealth, it redistributes it is true.

This is not a binary outcome.
Some actions by the government create wealth - education, R&D (whether bought or built by the government); some preserve ("involuntary redistribution" aka theft of) wealth - law enforcement, military; but by far the most actions redistribute wealth from Peter to Paul.
Examples for Peter:Paul -
private sector : overall government
wealthy : poor
taxpayers : banksters
Americans : foreign aid recipients
etc etc.

By the way, the government must not only redistribute wealth as whole, but it must also destroy it. If 100% of our labor force was in the government, where would the money come from to pay their salaries? Clearly, government overall is a NET sink of wealth, not a source.

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Author: AdvocatusDiaboli Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413477 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 5:19 AM
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By the way, the government must not only redistribute wealth as whole, but it must also destroy it. If 100% of our labor force was in the government, where would the money come from to pay their salaries? Clearly, government overall is a NET sink of wealth, not a source.


Several functions of government which are redistributive in nature such as providing for universal education, a comprehensive road infrastructure, sanitation (as in sewage systems), universal electrification, contract enforcement and regulation and (to a lesser degree) anti-trust regulation and enforcement are a necessary requirement for a modern industrialized economy. If government had not provided for these requirements over the last century, the US economy would have grown far slower and would today be a semi-industrialized developing country. GDP would be be perhaps 10-20% of what it is today.
So saying that government is a "net wealth sink" really doesn't make much sense - without the aforementioned government functions there would hardly even be any wealth.

There are of course a lot of things the government does that are wealth "sinks". Agricultural subsidies come to mind.
Then there are others which are redistributive and seem to "sink" some wealth but increase overall utility.
For example, if you redistribute 1 dollar from a rich man to a poor man you have increased overall utility because 1 dollar has far more utility for a poor man than for a rich man.
This effect becomes particularly obvious if you redistribute 1000 dollar that would have been spent on caviar and champagne to pay for medical treatment that restores or maintains the ability of a poor man to work and earn a living and/or that prevents the further spread of communicable diseases.
This type of redistribution has big positive externalities.

Of course, if you redistribute too much wealth, you get negative consequences having to do with incentives etc.

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413484 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 10:07 AM
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For example, if you redistribute 1 dollar from a rich man to a poor man you have increased overall utility because 1 dollar has far more utility for a poor man than for a rich man.
This effect becomes particularly obvious if you redistribute 1000 dollar that would have been spent on caviar and champagne to pay for medical treatment that restores or maintains the ability of a poor man to work and earn a living and/or that prevents the further spread of communicable diseases.


These threads always go into the weeds, but I wonder why you use the champagne and caviar here? If we changed "champagne and caviar" to "opening a new factory", doesn't your argument get turned on its head?

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Author: MegHammond Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413485 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 10:19 AM
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If we changed "champagne and caviar" to "opening a new factory", doesn't your argument get turned on its head?

Those would be investment dollars, taxed differently than consumption dollars. The argument stays right side up.

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Author: Abby1st Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413491 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 11:51 AM
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Interesting that the 747 was flown before the space shuttle program was formalized. Does this mean that the 747 was not developed with the space shuttle lifts in mind?

First flown commercially in 1970, the 747 held the passenger capacity record for 37 years.[6]

The (space shuttle) program formally commenced in 1972, although the concept had been explored since the late 1960s, and was the sole focus of NASA's manned operations after the final Apollo and Skylab flights in the mid-1970s. The Shuttle was originally conceived of and presented to the public in 1972 as a 'Space Truck' which would, among other things, be used to build a United States space station in low earth orbit in the early-1990s and then be replaced by a new vehicle. When the concept of the U.S. space station evolved into that of the International Space Station, which suffered from long delays and design changes before it could be completed, the service life of the Space Shuttle was extended several times until 2011 when it was finally retired

The below indicates that Boeing took on the development of the 747 with no government help (this would indicate that at least in this case (and in many others I am sure) the government benefited by using a product that had been developed by the private sector for profit:

Boeing had promised to deliver the 747 to Pan Am by 1970, meaning that it had less than four years to develop, build, and test the airplane. Work progressed at such a breakneck pace that all those who worked on the development of the 747 were given the nickname "The Incredibles". The massive cost of developing the 747 and building the Everett factory meant that Boeing had gambled its very existence on the 747's success, and the company was nearly bankrupted in the early 1970s. The gamble paid off, however, and Boeing enjoyed a monopoly on very large passenger transports that has only been threatened 35 years later with the advent of the Airbus A380.

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413496 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 12:34 PM
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If 100% of our labor force was in the government, where would the money come from to pay their salaries?

I worked for the government to get some of my taxes back.

brucedoe

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Author: wittgenstein Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413511 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 4:05 PM
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If 100% of our labor force was in the government, where would the money come from to pay their salaries?

I worked for the government to get some of my taxes back.

brucedoe



I think that actually we're very lucky in the US to have a Treasury
division (IRS) that in addition to being pretty serious about their role as collectors (and referees) is also constructive
about questions like the use of MLPs to gain financial efficiency.


IRS Encouragement

http://www.investorvillage.com/smbd.asp?mb=5028&mn=28130...


The Internal Revenue Service, which referees which kinds of businesses can form (Master Limited Partnerships), is encouraging their spread. Among a record number of rulings on the matter last year, the IRS said in October that companies that convert natural-gas liquids into ethylene, an ingredient in plastics and antifreeze, could form MLPs. Dow Chemical Co. (DOW) was among stocks that rallied on the news as investors speculated the companies might spin off plants into tax-free vehicles.



They're not out to get us, just trying for accuracy.






jz

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Author: knighttof3 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413528 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 7:32 PM
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Several functions of government which are redistributive in nature such as providing for universal education, a comprehensive road infrastructure, sanitation (as in sewage systems), universal electrification, contract enforcement and regulation and (to a lesser degree) anti-trust regulation and enforcement are a necessary requirement for a modern industrialized economy.

For some reason, you quoted my OP selectively. I had clearly mentioned the role of education and law enforcement. These are not redistributive in that everyone (rich or poor) needs them and there is no cash (or equivalent assets such as land) transfer of wealth.


Then there are others which are redistributive and seem to "sink" some wealth but increase overall utility.
For example, if you redistribute 1 dollar from a rich man to a poor man you have increased overall utility because 1 dollar has far more utility for a poor man than for a rich man.
This effect becomes particularly obvious if you redistribute 1000 dollar that would have been spent on caviar and champagne to pay for medical treatment that restores or maintains the ability of a poor man to work and earn a living and/or that prevents the further spread of communicable diseases.


These statements ignore basic economics. Champagne and caviar contribute to the national GDP and overall wealth just as much as medical treatment. Don't bring your moral judgments into how other people should spend their money. A dollar spent is a dollar circulated in the economy.

If you want to attack the rich, concentrate on their savings. A dollar saved in the bank lowers the velocity of money, hence lowers the nominal GDP, hence lowers the rate of increase in wealth, hence lowers the wealth. And of course the rich save more than the poor, so in that sense, giving a dollar to the poor makes more sense than giving it to the rich (because it will be spent, not what it will be spent on.)


Of course, if you redistribute too much wealth, you get negative consequences having to do with incentives etc.


So.... people grabbing your stuff by force makes you mad, and giving you free stuff makes you happy. No kidding.

The point is, there is no perpetual motion machine. Keeping aide the morals of redistribution, that act of redistribution cannot be frictionless, so the government will always spend more wealth than it creates (indirectly.) Every worker that works for the government is a worker that the private sector has lost, where he could generate wealth literally out of nothing. Example, Nature doesn't charge a farmer to grow crops; and cows don't charge a rancher for beef and milk. Of course there are costs of seeds and hay, respectively, but there is a net value added due to the time, skill and effort used in "exploiting" (using) Nature and cows, by the farmers and ranchers. Government workers are in a similar situation but their exploitees are other people working in the private sector. Like financial intermediaries, their net contribution has to be negative. Rearranging wealth cannot create wealth.

Note that the "expanding pie" argument does mitigate some of this waste, in areas like education, law enforcement, basic R&D; areas that do not constitute a transfer of wealth. Not in welfare, progressive taxation, etc which is what redistribution of wealth usually refers to.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413537 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/16/2013 10:25 PM
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The below indicates that Boeing took on the development of the 747 with no government help (this would indicate that at least in this case (and in many others I am sure) the government benefited by using a product that had been developed by the private sector for profit:

Boeing got - and gets - billions of dollars in "subsidy" by doing R&D for the military.

The European Union on Thursday asked the World Trade Organization for permission to impose $12 billion in annual trade penalties on U.S. companies, saying Washington hadn't ended subsidies to aerospace company Boeing Co. BA -3.38% that the WTO said last year violated international trade rules. The EU claims Washington has failed to end subsidies to Boeing that the WTO said violated trade rules.

The move marked another chapter in the long-running trade battle between the the U.S. and the EU over subsidies that governments give to their respective aircraft makers, Boeing and Airbus, a unit of European Aeronautic Defence & Space Co.

The WTO found that both companies benefited from illegal government subsidies that included low-interest loans, tax breaks and research grants.

http://online.wsj.com/article/SB1000087239639044332840457802...

I am sure the OP was incorrect in asserting that the 747 was designed with the Space Shuttle in mind. It was the natural progression of the industry, adding "size" to increase the efficiency of airlines by increasing passenger loads without increasing commensurate services (double the passengers with the same number of gate agents, landing slots, pilots, etc.)

The idea came from (wait for it) the US military, which commissioned studies on heavy-lift capacities and let contracts to several airframe and engine manufacturers. After winnowing down the proposals, the military gave even more money to Boeing and GE to continue development. Boeing, of course, took the opportunity to design an aircraft which also served civilian needs. As you might imagine, there are tremendous synergies designing an aircraft with Pentagon help which you then turn around and sell commercially.

And that is what the EU is complaining about (although it's rather silly, seeing that Airbus operates with tremendous direct subsidies as well.)

Additionally, the government is a customer, and helps amortize Boeing's production and start-up costs over a larger number of sales. Yes, the 747 was a "bet the farm" gamble, except the government wouldn't have let it collapse. By that time they were too far in, as well, and couldn't really have afforded to let Boeing go under. The military guaranteed purchases, which afforded some comfort to the banks which were financing Boeing at the time.

"With no government help"? Not hardly.
 


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Author: AdvocatusDiaboli Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 413557 of 455761
Subject: Re: Fiscal cliff and 1937 Date: 1/17/2013 1:36 AM
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For some reason, you quoted my OP selectively. I had clearly mentioned the role of education and law enforcement. These are not redistributive in that everyone (rich or poor) needs them and there is no cash (or equivalent assets such as land) transfer of wealth.


They are redistributive in so far as they are funded by taxation. A rich person will pay a lot more "education and law enforcement tax" than a poor person. Of course the rich person arguably also tends to benefit more from an educated workforce and law enforcement protecting his assets.


These statements ignore basic economics. Champagne and caviar contribute to the national GDP and overall wealth just as much as medical treatment. Don't bring your moral judgments into how other people should spend their money. A dollar spent is a dollar circulated in the economy.

Utility isn't a question of "morals". It's a valid and important economic concept.


Example, Nature doesn't charge a farmer to grow crops; and cows don't charge a rancher for beef and milk. Of course there are costs of seeds and hay, respectively, but there is a net value added due to the time, skill and effort used in "exploiting" (using) Nature and cows, by the farmers and ranchers. Government workers are in a similar situation but their exploitees are other people working in the private sector. Like financial intermediaries, their net contribution has to be negative. Rearranging wealth cannot create wealth.

Rearranging wealth CAN create wealth. I already mentioned the example of offering basic medical care to poor people who would otherwise not be able to afford it and become invalided, spread disease etc.
Maintaining the ability to work of even a low-skilled worker has HUGE payoffs in the long run.
The same applies to things like unemployment insurance, for example. Without unemployment insurance, the loss of a job will in many cases lead to homelessness. And once you're homeless, it's really difficult to get back into employment.
Welfare - if done properly so as not to enable indolence - is a HUGE generator of wealth, because in the absence of a social safety net periods of unemployment, injury, illness, an episode of mental depression etc. will often derail the life of a person or a family and lead to a very rapid downward spiral from which it is often impossible to recover.

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