Are We Going to Make It Up in Volume?

I made a comment somewhat along the lines of what I posted here to a post by Doug Mataconis at OTB and I was a bit puzzled by some of the responses to it. They reminded me of the story about the guy who lost a dollar on every sale who was convinced he would make it up in volume.

Illinois’s problem is that its expenses are growing faster than its revenue and, since the underlying economic activity that its revenue are based on isn’t growing either, it can’t cause its revenue to increase as fast as its expenses by raising the marginal rates. A case in point is the affiliates tax Illinois passed last year and recently declared unconstitutional and invalid. Rather than yielding additional revenue it actually reduced revenue (since most online retailers dropped their affiliates program in Illinois rather than collecting the tax). Adding insult to injury the state was forced to defend the law in court and lost.

I’m still waiting for the people (like Medicaid recipients or Chicago teachers) who are outraged at the state or city’s inability to maintain their benefits or raise their pay, respectively, to explain what they think should be done.

9 comments… add one
  • michael reynolds

    Should we expect regular citizens to explain — or step up for a dose of pain — when their leaders have failed to do so?

    As long as people believe that someone else is gaming the system and getting away with it, they won’t volunteer to take less. It’s one of the reasons why it matters whether we have honest and open government practices, and why it matters if people perceive that the system is essentially fair. The way the system is seen by people right now — as a spoils system that favors the rich and connected — anyone who isn’t yelling, “Me me me!” constantly looks like a damn fool.

    We don’t function well as a country without virtue. We need patriotism and self-sacrifice and concern for community as counters to greed and the lust for power. And it isn’t just government that’s failing. Why aren’t the churches talking about this? Why aren’t unions talking about it honestly? Why aren’t there teach-ins at colleges?

    Fairness and honesty aren’t throw-aways to be laughed off. People have to believe in the system or the system breaks down. If they believe, they’ll give. If they don’t, then it’s all down to greed and narrow self-interest, rendering virtue obsolete.

  • As long as people believe that someone else is gaming the system and getting away with it, they won’t volunteer to take less.

    That’s part of the moral hazard that occurred when the banks were bailed out leaving management in place and GM was bailed out and management replaced while unions came out unscathed. That lent credence to pay to play as an explanation for the policies.

    We don’t function well as a country without virtue.

    Which is among the reasons that I consider it vital that we eschew torture, attacking civilians, and waging war by deceit, even when it puts us at a tactical disadvantage.

  • michael reynolds

    It conflicts with my natural ruthlessness, but I have slowly over the years come to the position that it’s useful to do right. It only took 57 years. It’s a work in progress. I still see morality as a filter to be applied only after first drawing the shortest line from problem to solution — an approach that works like a charm for plotting stories.

  • PD Shaw

    I think the unions’ plan is to blame the politicians. (I’m starting to get these ads when I go to OTB). To what end? Are the unions going to throw their support behind the Republicans? Should we not vote for any Illinois politicians who failed to act (like Obama)? If Chewbacca lives on Endor, you must acquit.

  • Drew

    Everything works in a book, Michael, by definition; because you write it.

    Real live organizations are the most difficult thing I’ve come across in lif e t o make behave. That’s a difference between us. You live in la-la land.

  • michael reynolds

    Drew:

    Dude, let me enlighten you.

    The odds of a businessman making a living are far, far greater than the odds a writer will. There are a hell of a lot more successful Harvard MBAs than there are writers. The number of people vying for my job are far greater than the number vying for yours. Every bored mommy and English major and reporter and frustrated teacher and unemployed engineer wants my gig. You know how many people want to make a million dollars sitting in a rocking chair working four hours a day while smoking a cigar and staring out at San Francisco Bay? Pretty much everyone.

    Now, the odds that a high school drop-out who didn’t start writing until he was 34 will make it against that much competition? And that he’ll continue to make it for 23 years? And succeed not only in the US but in a dozen other countries? And be contracted up for the next three years? In the middle of a revolution in the business?

    If it was easy, everyone would be doing it. It’s harder than it looks.

  • Drew

    Michael

    You whiffed. (unlike my White Sox who are pounding the ball) You totally missed my point.

    You referenced the easy point to point way things work when you get to write them in a book. I simply. Took t he snark opportunity to point out that many of the policy prescriptions and descriptions you talk about here- having never run or owned a significantly sized organization – best described as hearding cats, don’t come as easily. Chill.

    As for the balance, have you not read some of my comments about your current profession? You are communicating with a fan. And further, someone who actually “gets” the difficulty of certain professions. If you read the current blogosphere or popular press you would think private equity is easy money. But it, too, is one of the hardest positions in America to get, much less to do well. I’ll see your “everyone would do it” and raise you. Whether in blogs debates or in various real live circles I often hear how easy PE investing is. (see: the current Bain debates). At that juncture I simply ask a few pointed questions and invite said shallow thinker to come on in, the water is warm. Slack jawed responses ensue. They wouldnt have a clue, or a chance. (think Hey Norm or Beasley) It’s easy to be in the peanut gallery.

    Reverse enlightenment finished. Have a good weekend.

  • Ben Wolf

    A tax increase is functionally equivalent to a spending cut: both reduce the financial wealth of the non-government sector. In an economic downturn where the private sector can’t turn to banks for loans to replace the net financial assets lost to Illinois’ tax increase, people and businesses reduced their spending to compensate. It was a really dumb idea on par with Japan’s tax hike in 1997 which squashed their recovery.

  • michael reynolds

    Drew:

    You know what? You’re right, I misinterpreted your comment. Apologies.

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