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Wow! I love this!*


"Modern economies are based on the command of knowledge and information. Since knowledge is created by basic and applied research, the United States should increase the share of its GDP that is spent on R&D, a share that has been stable at a little more than 2.5%. The patent system encourages applied research, but basic research, in medicine and other fields, is not patentable, so it needs, and has received, an extra push through subsidies. While most basic research projects fail, the successes often bring enormous benefits to society. Neither bureaucrats nor scientists can predict in advance which projects will succeed and which will fail, so it is important to encourage a broad peer-reviewed approach to basic research topics and investigators."
Modern economies still based on demand and supply. WWII need better weapon, more efficiency system for MFG, Auto jobs created because of demand for mobility in industry age. Computer is invented due to requirement of Math in both business and science (nuclear weapon for example). With basic jobs heading to oversea, the demand is lower (purchasing power is lower,even for Gov.). Without hi-tech job market, little or no drive to gain knowledge (few of the local kids actively seek Gov jobs and infrastructure jobs, such as road repair, that can not be easily exported, the medical job is so hot partly because of high demand for the health care locally. One of the bright engineer switched to become a medical doctor after telecom crash tells the story....). Basic research can only be conducted when the corp is rich, can support long term goal. Not fit with the current MBA school bean counter agenda. (heard many times: if it can not be counted, it doesn't matter).
One simple solution: a company create jobs locally, give them (a) tax benefit (b) provide grant or loan for expansion. If company export jobs, increase tax (movie industry know how to explore the system, just look at old Auto city just south of Canadian boarder, they are blooming. Money well spend on the state level. possibly will be repay in the form of income tax in the future).
Create demand by full employment (like the WWII), the system will fix itself. Forget the knowledge stuff, look at the China, Foxconn got how many employee? are they all hi-tech? check their MFG assembly line photos. It is job export followed by wealth transfer (5-8 years delay in between). Wake up. jobs, jobs,jobs.


Ha! This week our boys differ! Becker, curiously goes beyond even "Chicago school" to right wing mythology, while Posner has the more thoughtful and seemingly accurate handle on our MESS.

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Joe Linker

You win the Jonathan Swift "Modest Proposal" award of the week.

Raymond P. Bilodeau

This has potential. So a multibillionaire should be paying 30 million dollars plus for his/her health care. Take note, health insurance CEOs. You are not charging the rich nearly enough!

shawn disney

The authors seem to be more or less describing the general approach of the last 30 years,or do we understand it to mean that they DID Work, for the 1% who really count in the country, and will continue to work until the Peasants get their pitchforks and put an end to it. Or at least figure out the bi-partisan scams behind "business as usual".





Becker gets it right. So far as corporate income taxation is concerned, reducing marginal tax rates in the U.S. would not only free up capital here at home, but also remove the present disincentive for U.S. multinationals to repatriate lower-taxed earnings of their foreign subsidiaries. The present Administration fails to get the point and, instead, focuses on closing perceived technical loopholes in the Tax Code in a Quixotic effort to combat imaginary "abuses" that, in truth, are rational competitive responses to anti-competitive corporate tax policies here in the U.S.

James Walker

Becker's support of extending the Bush tax cuts fails to take into accoun the difference in endowmwnts between the wealthy and the middle class. There are two points here. First, the Bush tax cuts had a small substitution effect (the driving purpose of proposing the cuts to shift income from spending to savings). The middle class has most of their non home assets in retirement accounts, which are tax deferred. Therefore, they are not impacted much by changes in dividend and interest income taxes. Meanwhile, the wealthy have the opposite situation. Even there, given the lower propensity of the wealthy to consume, the substitution effect is small, but the income effect is very large. These tax cuts gave significant after tax income gains to the wealthy. That is one reason why the gap between the rich and poor continues to widen. The second point is that even though there is more savings, the high amounts of cash held by corporations strongly indicates that the Bush tax cuts are not driving more business investment.


...Indeed that the reason for the gap between the rich and poor, is because the rich pay a 15% tax on their investments while the middle class in their 401Ks pays 0.


Jake and others: Hmmm, any thoughts on raising (close) to enough to pay our bills?

"Don't tax me, don't tax thee, tax the guy behind the tree??"

Joseph B.

Right, P.T - until they take it out of the 401(k) and pay regular tax rates that progress upwards.


Jack can quote former Sen. Russell Long all he pleases, but it takes more than platitudes to establish economically sensible tax policy.


Right Joseph B.
...While the rich have also already paid the higher tax upfront too so the yearly 15% tax they pay on any growth is on reduced investment capital in the first place.

It just entertains the hell out of me to be sitting outside the US (I did my stunt in the US but saw America turning collectivist long ago and bailed out)and watch Americans abandon their principles and spiral down towards decline using pitchfork economics as their great hope. The more they hurt, the more redistribution they ask for, the more productivity drops, the more they hurt, and so on. Once in this cycle, decline will be swift - it's no longer the next generation's problem. Its here. It's started. It's unstoppable.


PT.... Barnum I assume? Truth is no such thing HAS taken place here. Homework: Take a look at tax rates, wage distribution (before or after tax) and check back, OK?

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Mortgage amortization

It's a very very very good article!!!


Not sure about it, after saw the movie "inside job". The business school is too close to the wall street (some of them are the wall street).

Penny Stocks

Thank you for sharing i really get what i was looking for, keep it the good work going.


This article proposes no fundamental re-examining of the fiscal problems the US faces. Further, as #Jack noted above, Becker goes off the deep end into conservative ideology. some thoughts:

-Per capita income has grown more for the bottom 4 quintiles of earners, and nearly identically for the top quintile, under Democratic administrations (assumed higher taxes) than under Republicans since WWII.
-Skill biased technological change, and the enormous gains in income for the top 1% of earners argues that a redistributional policy of slightly higher marginal tax rates for the highest earners is at worst growth neutral.
-The US spends more on Defense than the rest of the world combined. This is absurd (and unquestioned). Our foreign policy would be much stronger if the defense budget was cut from >$700B by ~$200B and our approach was not one of unilateral global power projection. Why propose cuts in Medicare and SS and not propose cuts in defense?


That’s right Alex,

Telling people that if they make more than $88k, starting in 2014 they will not only pay 10-20K for their own health insurance but also for someone else’s (since they will have to earn after tax dollars to pay the insurance premiums) while if they make less than 88k, someone else will pay most of their health insurance (subsidy) is going to be growth neutral…

HOPE of increased prosperity through CHANGE to lower incentives to work.



I don't consider myself qualified to comment on the tax changes implied by the health insurance policy. My commentary was aimed at the debate over allowing the Bush Tax Cuts to expire, which I think they should. A 3.6% increase in marginal tax rates for the highest earners has been more than offset by the increasing returns to income that this 2% of the population has seen over the past 30 years.

Personally, I think the best reform for health insurance would be to remove the employer tax subsidy and to increase deductibles, moving health insurance towards a model of catastrophe insurance.

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