Commerce and the Wealth of Nations

I was struck the other day by an article in the New York Times that describes the different approaches of the US and China to Afghanistan, in which the US shoulders the burden of war, while China reaps the benefits of commerce. Quoting from the article, I tweeted: “American troops help make Afghanistan safe for Chinese commerce.”

In response, @kamalram wrote: “During WW1 and the early days of WW2, the United States focused on commerce when much of Europe was at war. History gets repeatd”

Pundits have long proclaimed the 21st century “the Chinese century”, and @kamalram may well be right that America’s wars against terrorism are a turning point. But the lesson is broader than that China is securing rights to rare-earth minerals in Afghanistan while the US gets mired in a messy war. The question is who creates the industries of the 21st century, which system of government is best at encouraging innovation, and which citizens have the drive to tackle hard problems and turn them into great opportunities.

This line of thought in turn put me in mind of Thomas Friedman’s recent column, Off to the races, in which he argued:

I’ve long believed there are two basic strategies for dealing with climate change — the “Earth Day” strategy and the “Earth Race” strategy. This Copenhagen climate summit was based on the Earth Day strategy. It was not very impressive. This conference produced a series of limited, conditional, messy compromises, which it is not at all clear will get us any closer to mitigating climate change at the speed and scale we need….

I am an Earth Race guy. I believe that averting catastrophic climate change is a huge scale issue. The only engine big enough to impact Mother Nature is Father Greed: the Market. Only a market, shaped by regulations and incentives to stimulate massive innovation in clean, emission-free power sources can make a dent in global warming. And no market can do that better than America’s….

In the cold war, we had the space race: who could be the first to put a man on the moon. Only two countries competed, and there could be only one winner. Today, we need the Earth Race….

Whether you’re a “warmist” or a “denier,” you should have no doubt that green technology is going to be one of the biggest business opportunities of the 21st century. As Friedman continues:

Even if the world never warms another degree, population is projected to rise from 6.7 billion to 9 billion between now and 2050, and more and more of those people will want to live like Americans. In this world, demand for clean power and energy efficient cars and buildings will go through the roof.

Harnessing the market is also key to my thinking about “government as a platform” (aka “Government 2.0). As I wrote in an as-yet-unpublished chapter for the upcoming O’Reilly book, Open Government: Collaboration, Transparency, and Participation in Practice:

If you look at the history of the computer industry, the innovations that define each era are frameworks that enabled a whole ecosystem of participation from companies large and small. The personal computer was such a platform. So was the World Wide Web. This same platform dynamic is playing out right now in the recent success of the Apple iPhone. Where other phones had a limited menu of applications developed by the phone vendor and a few carefully chosen partners, Apple built a framework that allowed virtually anyone to build applications for the phone, leading to an explosion of creativity, with more than 100,000 applications appearing for the phone in little more than eighteen months, and more than 3000 new ones now appearing every week.

This is the right way to frame the question of “Government 2.0.” How does government become an open platform that allows people inside and outside government to innovate? How do you design a system in which all of the outcomes aren’t specified beforehand, but instead evolve through interactions between government and its citizens, as a service provider enabling its user community?

It’s worth noting that the idea of government as a platform applies to every aspect of the government’s role in society. For example, the Federal-Aid Highway Act of 1956, which committed the United States to building an interstate highway system, was a triumph of platform thinking, a key investment in facilities that had a huge economic and social multiplier effect. Though government builds the network of roads that tie our cities together, it does not operate the factories and farms and businesses that use that network: that opportunity is afforded to “we the people.” Government does set policies for the use of those roads, however, regulating interstate commerce, levying gasoline taxes as well as fees on heavy vehicles that damage the roads, setting and policing speed limits, specifying criteria for the safety of bridges and tunnels, and even for vehicles that travel on the roads, and performing many other responsibilities appropriate to a “platform provider.”

While it has become common to ridicule the 1990s description of the Internet as the “information superhighway,” the analogy is actually quite apt. Like the internet, the road system is a “network of networks,” in which national, state, local, and private roads all interconnect, for the most part without restrictive fees. We have the same rules of the road everywhere in the country, yet anyone, down to a local landowner adding a driveway to an unimproved lot, can connect to the nation’s system of roads.

The launch of weather, communications, and positioning satellites is a similar exercise of platform strategy. When you use a car navigation system to guide you to your destination, you are using an application built on the government platform, extended and enriched by massive private sector investment. When you check the weather – in the newspaper, on TV, or on the internet, you are using applications built using the National Weather Service (or equivalent services in other countries) as a platform. Until recently, the private sector had neither the resources nor the incentives to create space-based infrastructure. Government as a platform provider created capabilities that enrich the possibilities for subsequent private sector investment.

There are other areas where the appropriate role of the platform provider and the marketplace of application providers is less clear. Health care is a contentious example. Should the government be providing health care, or leaving it to the private sector? The answer is in the outcomes. If the private sector is doing a good job of providing necessary services that lead to the overall increase in the vitality of the country, government should stay out. But just as the interstate highway system increased the vitality of our transportation infrastructure, it is certainly possible that greater government involvement in health care could do the same. But it should do so, if the lesson is correctly learned, not by competing with the private sector to deliver health services, but by investing in infrastructure (and “rules of the road”) that will lead to a more robust private sector ecosystem.

…platforms always require choices, and those choices must periodically be revisited. Platforms lose their power when they fail to adapt. The US investment in the highway system helped to vitiate our railroads, shaping a society of automobiles and suburbs. Today, we need to rethink the culture of sprawl and fossil fuel use that platform choice encouraged. A platform that once seemed so generative of positive outcomes can become a dead weight over time.

As we head into the second decade of the 21st century, we as a nation, we as a world need to make good choices about where we invest our time, our resources, and our ingenuity. It’s the job of our leaders to make choices that give us leverage, that is, that create multiplier effects on our efforts.

The choice isn’t between climate change alarmism and climate change denial, or between big government and small government. The choice is between dynamism and stagnation, between leadership that creates opportunity and leadership that protects the status quo, and, at bottom, between effective and ineffective strategies for increasing the total wealth of our society.

And of course, that wealth is more than material. Quality of life means more than quantity of stuff, and a single well designed device (or immaterial service delivered through said device) can deliver more value than a mountain of schlock. We all want to consume less and enjoy more, and it’s certainly possible that there will be revolutions in which the next great innovation is itself a technology platform, a substrate of possibility on which immaterial economies grow and prosper.

I’d love to see, in this New Year, this new decade, deeper thinking about the society we want to build, and what kind of policies will encourage the market to make the right choices.

And I’d love to hear your thoughts about policy choices that might encourage 21st century industries here in America and around the world.

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  • Brian Ahier

    Using information technology to improve government (government as a platform). Also using health IT to make healthcare more accessible, affordable and improve quality and clinical outcomes. With the new resources applied to health IT(http://ahier.blogspot.com/2009/12/rules-for-health-it.html) I believe we’ll see great improvements in the next decade.

  • Preston Austin

    I love the general thinking of both platforms for government and government as platform – I’m fond of the empowering of users to innovate that platforms lead to.

    However, I tend to feel this is largely unrelated to subsequent government competition using a given platform. Government competition is as good as any other competition in making a market work so long as gov doesn’t abuse its special powers. We need a better set of principles surrounding how governmnent participates in markets, not an acceptance that society doesn’t get to have things that markets fail to provide.

    Many services start with government monopolies that provide a “basic package”, and so long as government facilitates rather than blocks private innovation to attempt to beat its quality of service, I’m all for that.

    In the supposedly complex areas like health care, I think the complexity is often an illusion. The gov should compete to provide whatever society deems to be an appropriate minimal service package at whatever price point gov can hit with its economies of scale at whatever subsidy level taxpayers will accept (apparently that’s currently emergency care only). It shouldn’t compete for premium service niches beyond that and private competitors should be encouraged to add to or rebuild the baseline offering as they see fit, or even offer worse options cheaper.

  • birkenbihl

    great post, makes me want to say 4 things:
    1. when will the (government 2.0-) book appear?
    2. will there be an electronic version? hopefully with letters the readers on pc.s laptops and mobiles can enlarge without making the lines longer like with normal pdf.s (i hate pdf.s, very user-unfriendly).
    3. will there be parallels draws to “government” within companies? next year one of my major themes for my managers will be “democracy within management”…
    4. are you planning a German version?
    i shall be talking to approx. 600 – 1000 managers in three German cities in May + June. it might be a good book for my taret group.
    vera f. birkenbihl

    ps if you want to answer, presently please this mail address:
    vfb.insitute@googlemail.com (yes, there is a “mistake” in the word “institute”, it has a reason, so please don’t try to correct, haha).
    :-) vfb

  • Jaime Castello

    Great post! Best thing in the new year … yet. The big question for me here is about leadership. It seems as if the leadership model that we have now is not able to cope with the multiplying ability of society to process and analyze information, and make thus informed decisions. The leadership model we live in (in all organizations, companies and governments) seems to come from an era of scarce and hard to precess information, where leaders are empowered by a largely “ignorant” crowd to decide for them. Can we trust this leadership model to make the good decisions to evolve into a new way of making decisions and policies? I’m not so sure. Looking back at history, it seems as if what’s needed is some kind of revolution … and that is a troubling idea (seeing what revolutions have caused in the past). I wish for a way to make the transition as smooth and trauma free as possible.
    Thanks a lot for the inspiration!
    Jaime

  • Dick Ross

    I first listened to you on Science Friday, began to follow you on Twitter, and participated in your Gov. 2.0 web conference. I would be of the opinion that all of our institutions from family, local government, education, economy, etc. are in need of major evolutionary transformations. The really strategic decision for me is where to start. Certainly a strong case could be made for energy which is the fundamental building block of the physical universe.

    I would argue however that we need to transform our economic transactions. What is governing us [government, business, and consumers] is simply a mistaken notion of what an economy is and how it works. It is not possible in this venue to bring forth evidence to justify such a revolutionary sentence but I would offer one suggestive thought based on the economic theory of Bernard J. Lonergan, one of the greatest philosophic minds of the 20th century but little know in the economic world. If we start with the an understanding of the imminent intelligibility of an economy, one startling realization is that the present system is governed by the laws of finance rather that the laws of the productive cycle. A failed understanding of the very role of money in an exchange economy lies at the core of our economic problems.

    Thanks for the opportunity to participate in your efforts to make a difference.

    Dick Ross

  • Shi Chuan

    Hi,

    As a Chinese, I would say this is so far the most non-biased, positive article I have read for a while.

    There is lack of understanding between the east and west, and there have been too many conspiracies from both sides.

    Since the competition between us is inevitable, why don’t make it a positive one? And no matter who wins, the world will benefit from it. But the reality, on the other hand, is so many people in the world can’t develop relational thinking like the way you do.

  • Shi Chuan

    Sorry, I mean *rational thinking.

  • Alex Tolley

    Great sentiments, and I would be very interested in seeing some concrete examples of new government initiatives as a platform.

    I suspect however, that to do anything will require some sort of Shumpeterian “creative destruction” in government, to clear away the cruft and permanence that these institutions accrete with their natural evolution.

    As you say, choices have to be made, but we can see already what happens when we try to make big choices such as health care with our current institutions. The results are very sub-optimal.

    I think that government institutions need to be incentivized differently. Perhaps rewarding employees or departments by how successful any platform initiative becomes. Thus we can applaud departments that make government data accessible online, but we should provide real rewards when we see significant and diverse use of that information outside of government. What is important is that those incentives don’t just benefit a few private companies as has heretofore often happened.

    As always, it is important to understand when public goods are preferential to private goods and ensure that those public goods are provided with positive feedbacks. I would posit that a national, wireless, broadband infrastructure would be the one of the C21st equivalents of the road system. If so, it will be interesting to see how government as platform will provide that infrastructure over the entrenched private interests. Perhaps there are lessons to be learned from history over how toll roads were broadly eliminated?

  • Ben Pratt

    “encourage the market to make the right choices…”?

    If we knew what the right choices were, we’d have no need for a market.

    Markets harness the dispersed knowledge out there that is inaccessible to any one person or group of people, and, in the face of pervasive uncertainty, through the rivalrous process of competition, allows for the discovery of successive approximations towards the a better future.

  • Tim O'Reilly

    Ben -

    I’m afraid you’re repeating the standard cant without thinking about it deeply enough. Governments always shape market choices. Sometimes they do it well, and sometimes they do it badly.

    A couple of (good) examples are those I gave in the piece:

    * the interstate highway system (which was a good idea at the time, though has some drawbacks that are now becoming apparent)
    * the internet
    * the GPS system

    all of which were enabling technologies that the market could build on.

    A couple of examples of bad government incentives:

    * Over-cheap credit and lax regulation, leading to the recent real estate bubble.

    * Baking in fossil fuel consumption into the economy by collecting gasoline tax and using it to fund roads (even though we now know that’s a dead end), while holding alternative modes of transportation to a much higher standard. (Only autos have their infrastructure cost paid for by a government mechanism. Railroads, airlines, etc. are all expected to pay their own plant, which is why none of them can compete with cars.)

    * “Selling” spectrum, which has led to incumbents keeping it for old uses rather than exploring new uses.

    * Extending the length of copyright, so that incumbents get to protect a few valuable products while impoverishing the public domain.

    The list goes on and on.

    There is no pure, untrammeled market – except perhaps in failed states like Somalia, where you see “the market” unfettered by any government intervention. We evolved governments because the market didn’t work too well by itself – the strong take advantage of the weak, and warlords and oligarchs are the order of the day.

  • martin luther blissett

    shi: actually i think your 1st chosen adjective: ‘relational’ was, although unconsciously unintentional, a rather insightful description in this case.

    and yes, agreed, it does seem that the west/east convergence on political, economic & social levels has been mired in misunderstanding, and more focused on the integration of the negative, dysfunctional aspects of each culture into the other.

    it is perhaps only when we each begin to more fully integrate the positive aspects of each other’s culture into our own {e.g. the merging of individual liberty with collective responsibility through voluntary conscious co-creation} will the evolutionary sparks begin to fly.

    tim: it is a synchronic blessing to find this article & your work on new year’s day. i especially find the emphasis of encouragement as the foundation of approach quite encouraging.

    thank you for providing a home for these possibilities.

  • martin luther blissett

    edit: perhaps ‘collective intelligence’ is closer to the desired meaning than ‘collective responsibility’…but i’ll let shi decide.

  • bruce jacob

    I like the notion of government as platform provider … great concept. However, it seems wishful thinking — an idealistic description of what should be … though it is a vision to which I would subscribe. The trick is to pitch this vision so that the government wants to do it, not because it is the right thing to do, but because doing so is in the government’s best interests. You gave the following examples of platforms:

    - the interstate highway system

    - the internet

    - the GPS system

    All of these were set up for national defense. The government did not fund these programs because they would provide platform benefits to individuals; that was an added bonus (in the latter two cases, one that wasn’t realized until much later). It’s rare these days to catch the government doing any sort of long-range thinking, so I’m guessing any future large-scale program has to be couched in terms of defense.

    You can probably make an argument that any socioeconomic advantage today becomes a de facto strategic advantage in the military sense … but it will be an abstract, indirect sort of argument. In contrast, the examples above were pretty concrete in their use to the military.

  • Tim O'Reilly

    Shi, and Martin Luther,

    I also liked the “relational thinking” image. I agree wholeheartedly that whatever country we live in, we need to engage the market in solving the world’s great problems. And while the market will surprise us by tackling many of them on its own, government leadership can make a crucial difference in areas where the investment is too great for the market to take the first step.

  • Tim O'Reilly

    Bruce -

    You make an interesting point, that much of the government’s long-term thinking ends up being done by the military. (That’s also a good answer to those who think that “the market” is the source of all wisdom.)

    But keep in mind that regardless of the original impetus, the government made crucial decisions to open these technologies to public access. GPS satellites didn’t have to be made available for private use. That was a policy decision.

    I’ve been doing a lot of advocacy around the idea of platform thinking, and it’s resonating with a lot of people in Washington. So I’m optimistic that we’ll see some more decisions that are market-leading but market-enabling!

  • Dick Ross

    I would suggest that the “market” is always a conceptual framework dominated by institutions both governmental, financial, and corporate. If that conceptual framework is flawed, then it is only accidental that we have created policies that meet the standards suggested in the highway system, the internet, etc.

    Thinking deeply seems to me an invitation to grasp the theoretical that is operative in an extraordinary complex. In the physical sciences there are numerous examples over the years of the individuals in the scientific community having such insights whether that be Einstein in physics or Darwin in biology. What I think our times are asking is the creation of a community of thinkers in the concrete operations of our economies that would bring about just such an insight. As I mentioned in an earlier post, I believe that the first step in creating that community was the work of Bernard J. Lonergan. See – http://www.utppublishing.com/pubstore/merchant.ihtml?pid=7146&step=4

    Dick

  • Michael R. Bernstein

    Hmm. Worth considering the value to national defense of more robust platforms, then.

    It is clear to most security analysts that US infrastructure (energy, communications, etc.) needs to be more resilient in the face of inevitable disruption (whether man-made and intentional, such as 9/11, or natural, like Katrina), but most policies governing infrastructure investment for security still revolve around hardening, instead.

    I wonder, would a national-security argument for breaking the broadband duopolies get any traction?

  • Alz

    The problem with the “Government as a Platform Idea” is that the Government is really in the application business and the Government doesn’t do a very good job of running actual programs.

    I read last week that in Wisconsin, there are now more people in government than manufacturing. Since the government doesn’t produce much (and what it does produce is done relatively inefficiently). it means a downward trend towards negative growth and a lower standard of living.

  • Tim O'Reilly

    Alz -

    You’re exactly right that government isn’t very good at the applications business, which is why I’m putting out the “government as platform” idea. It’s a different way of thinking about the role of government, which can hopefully lead to a new kind of cooperation between government and the private sector.

    What I have in mind is something very much like what the PC did to the computer business, what the web did to the content business, and what Apple did to the mobile phone business – move from a “we do it all” model to “we created the best platform for other people to build on, and that’s why we’re better.”

  • Alz

    Thanks Tim. I’ve been thinking about this a bit.

    I’d say that we already have HAD government as a platform: it’s how the country was founded.

    Limited government with enumerated powers.

    What it takes is a population that is educated in the “system” so everyone can communicate, get along, and work to improve the system through change that follows the foundational rules that can be changed through a process.

    This is how the country was founded, but we have drifted from our foundations that allowed it to work.

    I think the only way to make it work is to go back to our roots.

  • Jim

    When government nurtures a market rather than playing in it, good things happen.

    We all want emergent, creative communities that allow society to evolve. We all want clean environments. I struggle to see how cap and trade will provide either, although it will require massive government subsidy and a significant rise in cost of living.

    Why not experiment in large cities with deregulation of zoning? No one can walk to the corner grocery. Besides dissuading physical activity, it is economically inefficient for the delivery system not to provide at least a core group of items closer to habitats.

    It impedes individual community and interaction, since people are either in their houses, or in their cars. And since it impedes community, it increases loneliness and its associative neuroses (which are many), detachment and crime rates. It encourages drinking and driving.

    Psychologically there is a huge difference between having to get in the car to go to work, and the perceived marginal cost of driving an extra 15 minutes to work by moving to the suburbs. And tax incentives could be created for working at home.

    The race to the suburbs is further exacerbated by realty prices unnaturally ballooned by strictures on land use. Ironically, such movements tend to eat up the most fertile agricultural land in the country.

    In a related discipline, we have moved away from efficient housing which utilizes cisterns and the properties of the earth in underground living spaces to both cool and warm inner space climates.

    We could drastically reduce the cost of living and pollution while increasing community at the same time.

  • Solid Jinx

    What we need is the government to fix our healthcare system just like they fix our banking system. Then everything will be mighty perfectamundo.

  • Sir Author Silly

    I wonder what would have happened if the US government invented the printing press. I’m pretty sure there would be a central agency where all authors would submit their publications for printing by the highly efficient federal government so that the government employees could make sure that the paper was the correct quality and that there were no hazardous materials in the paper or the binding glue. Everyone would be able to register to receive their books with the national book clearinghouse and the books would be delivered efficiently by the United States Book Procurement Agency.

    As least that’s how we did it in Communist Russia.

  • Margaret Sanger

    Instead of trying to ward off all them newcomers, lets each spread out into groups of two persons per square mile. That ought to make everybody breathe a little easier, and no more problems finding a parking space neither.

  • Tim O'Reilly

    Sir Author Silly -

    Your name is accurate. Your comments are indeed silly.

    Let’s see: the US built the Interstate Highway system, yet the private sector builds the cars, the trucks, and the cities that grow up along them. The US gov funded the internet, and turned it over to the public to do with it what they will. The US gov built the GPS satellite system, opened it up to private companies, and enabled the geolocation market that is literally exploding today. The US gov delivers healthcare to older Americans at half the average cost of private insurance, despite having a population that requires more care.

    Yes, the US gov does a lot of things badly, but so does any big private company. And frankly, a lot of the things that are wrong with the US government is that it does so few things directly. Almost everything that you hate about government is done by private contractors, while almost everything you like about government is done by people who used to go by the old term of appreciation, “public servants.”

    I’m appalled by what I see when I go to Washington, because so much is wrong. But I’m also inspired by what I see because so much is right. We need to spread the lessons of what has worked, and make government better, not tear it down with unthinking, ignorant criticisms worthy of talk radio.

  • Sir Author Silly

    Tim.

    Thank goodness we have private businesses like O’Reilly publications to lead us through the travails of our so-called constitutionally “limited” government.

    Thank goodness as well that our US constitution still protects a few things that are “free” like speech, so that both objective and subjective listeners may arrive at their independent opinions about what’s “worthy” and what’s not.

    SAS

  • Dwight. D. Wisenhower

    Lets see Mr. O’Reilly how far government efforts go and what the unintended consequences might be…

    Interstate Highway System: Might it have put the railways out of business? Might it have created dependency on foreign oil? Might it have contributed to extreme health risks? Perhaps we might have been better if private industry had continued to build more railroads. Do you dare dispute that with any actual facts, or do you just like to drive to Disneyland every summer.

    The Internet: Although we all know that Al Gore invented the National Information Infostructure while he was Vice President, and not the actual Internet, I think most of the credit for the invention of the Internet goes to a few people who at most had some grant money, but probably not even that. If you’re thinking that the government invented TCP-IP, that probably too is a stretch. And while we do use the Internet, it didn’t really have much commercial us until Tim Berners-Lee invented the World Wide Web. So I think that while the Internet is nice, the real tipping point was the World Wide Web, and I don’t think that CERN is a department of the US Government. But we might want to ask Al Gore about that.

    Finally, there was never any intention to use GPS for civilian purposes, and the military had to be ordered to do so by President Reagan. Even then, there were many government obstacles to commercial adoption.

    Now I do agree that the US government does many things badly, including regulating US telecommunications carriers, who still cannot seem to provide reliable broadband that matches even poor old South Korea. But give the FCC some time. They might get around to it yet. I wouldn’t bet your pacemaker on it though.

    PS: Keep your sense of humor. I’m just messin with ya.

  • Unintended Consequences

    Hmm. Lets see.

    Government idea: No-doc housing loans from FMAC. Unintended Consequence. Housing bubble.

    Government idea: Ethanol Fuel. Unintended Consequence: Grain shortages and food inflation. (But Betty’s SUV got to the soccer game alright).

    Government Idea: Mortgage Deduction. Unintended Consequence: MacMansions.

    Government Idea: Hydro-electric Power / Dams. Unintended Consequence: Fish Extinction. (Who wants to eat fish anyway).

    Government Idea: Bank Bailout. Unintended Consequence: Billion dollar bonus pools.

    Government Idea: Student loans for everybody. Unintended Consequence: Grade and tuition inflation.

    Shall we go on?

  • Fact Checker

    From “Wikipedia Timeline of US Railroads”

    1950s and 1960s: Drastic decline in railroad travel in the United States of America, due to automobiles, trucks, and airplanes, as first jetliners take to the air. Railroads respond through mergers and attempts to shut down trains and railroad lines. However, the ICC refuses to let railroads shut down many trains.

    From Wikipedia “Interstate Highway System”

    The Interstate Highway System was authorized by the Federal-Aid Highway Act of 1956 – popularly known as the National Interstate and Defense Highways Act of 1956 – on June 29. It had been lobbied for by major U.S. automobile manufacturers and championed by President Dwight D. Eisenhower.

  • Fact Checker

    From Wikipedia Ethanol:

    The U.S. federal government gives ethanol producers a 51-cent-per-gallon tax credit and mandates that their fuel be blended into the nation’s gasoline supplies.

    Michael Grunwald reports that one person could be fed for one year “on the corn needed to fill an ethanol-fueled SUV”.[45] He further reports that though “hyped as an eco-friendly fuel, ethanol increases global warming, destroys forests and inflates food prices”.

    From Washington Post:

    The interest deduction is one of the biggest tax benefits in the federal budget, according to the congressional Joint Committee on Taxation. From fiscal 2006 to 2010, according to a committee study, federal revenue losses attributable to the mortgage interest deductions are expected to total $402.7 billion. Other federal studies have documented that the benefits of the write-off are heavily skewed toward higher-income taxpayers who have larger-than-average mortgages.

    Over the past two decades, occasional proposals have been made in Congress to rein in the deduction — say, by limiting it to mortgage amounts of less than $300,000. But the write-off has never been seriously endangered because it is so popular with taxpayers and has fierce support in the banking, real estate and construction industries.

    Wikipedia: Bonneville Dam

    Prior to the New Deal, development of the Columbia River with flood control, hydroelectricity, navigation and irrigation was deemed as important. In 1929, the US Army Corps of Engineers published the 308 Report that recommended 10 dams on the river but no action was taken until the Franklin D. Roosevelt administration and the New Deal.

    Wikipedia: Salmon

    The Columbia River salmon population is now less than 3% of what it was when Lewis and Clark arrived at the river.

  • Fact Checker

    From Wikipedia: Student Loans

    The United States uses a federally guaranteed student loan program to help college students pay for their education. The program allows students to borrow money at a reduced interest rate and defer payment until they are no longer in school.

    New York Times: Richard Vetter

    Work done at my research center reinforces findings of others that exploding student loan programs have contributed to higher tuition charges… The root cause of low college attainment among poor people is … abysmal academic preparation in our mostly free public secondary schools, particularly those located in inner cities.

  • Tim O'Reilly

    Fact Checker –

    This is news that there are bad government programs?

    Of course there are. Just as there are awful decisions made in the private sector (the recent banking crisis being a prime example.)

    That doesn’t change my argument. If government does things right, it can spark private sector innovation.

  • Tim O'Reilly

    Unintended consequences -

    Government ideas? I suspect that these were all private sector ideas foisted on the government by lobbying interests.

    It’s pretty amazing how people who talk about the unregulated power of the market are eager to feed at the trough when it better serves their interests.

    Frankly, I love Republican free market economic ideology. It’s just that it’s so far from what they practice.

    Last time we had a balanced budget was under Clinton. The bulk of the national debt was run up under Republican administrations, or continuing their programs.

  • Fact Checker

    Tim.

    I say you’re wrong on both points.

    A: This has nothing to do with a political party. I’m not a Republican.

    B: This has nothing to do with the genesis of the ideas. So what if the ideas come from private parties. The fact is, when government gets involved in forcing change, those actions can have tremendously negative consequences simply because of the magnitude of the government power and intervention. Call it big foot. Call it T-Rex. The government is clumsy, inefficient and non-particular. Thus the situation for extremely negative consequences of government action.

  • Hans Von Foobar

    Stupid Unintended Consequences by European Governments

    From Wikipedia: (1900′s) Horsepower Tax

    The tax horsepower or taxable horsepower was an early system by which taxation rates for automobiles were reckoned in some European countries like Britain, Belgium, Germany, France, and Italy; some US states like Illinois charged license plate purchase and renewal fees for passenger automobiles based on taxable horsepower. The tax horsepower rating was computed not from actual engine power but by a simple mathematical formula based on cylinder dimensions.

    The fiscal benefits of reduced cylinder diameters (bore) in favor of longer cylinders (stroke) may have been a factor in encouraging the proliferation of relatively small six cylinder engined models appearing in Europe in the 1930s, as the market began to open up for faster middle-weight models. The system clearly perpetuated side valve engines in countries where the taxation system encouraged these engine designs, and delayed the adoption of ohv engines because the small cylinder diameter reduced the space available for overhead valves and the lengthy combustion chamber in any case reduced their potential for improving combustion efficiency.

  • Economics Professor

    No kidding on the tuition issue. Check this out.

    http://www.huffingtonpost.com/2010/02/22/college-debt_n_471023.html

  • Mother Orwell

    O’Reilly. You talk about pigs at the trough? George Orwell in Animal Farm taught us who the real pigs are, and what they do.

    They are still busy helping themselves today:

    http://www.washingtontimes.com/news/2010/jun/4/ftc-floats-drudge-tax/