[I am relaunching my blog and I am recycling my old content. Very green. Since posting this my co-author Jong Hee Park has moved to Seoul National University]

Saturday Morning Farmers Market Thoughts
US Agriculture Policy

A trip to the Tower Grove Farmers Market has me thinking about agriculture policy. It also reminds me how delicious breakfast tacos can be.

A few years ago I wrote up a little piece with Jong Hee Park (U Chicago) for the Political Economist newsletter on U.S. agriculture policy.

The short story is that everyone talks about the massive amount of farm subsidy money flowing in the US. Lots of it doesn’t even go to farmers (people paid to not farm). This sums up to about $260 billion over the past 15 years. Some of the best data on the subject comes from the Environmental Working Group.

Why do the US government offer such high levels of farm subsidies? The standard answers include:
1. Farmers are geographically disbursed and thus overrepresented through the Senate
2. Agriculture committees hold gatekeeping power
3. Durable coalitions have been formed linking farmers and urban representatives through food stamp and school lunch programs since the 1970s
4. Farm groups spend massive amounts of money on campaign contributions and lobbying
5. The US has a history of farming

We address the logical and empirical problems with most of these arguments in our piece.

I the bigger issue that we try to point out is that the United States is actually much less generous in their farm programs than other countries. Estimates vary, but the US usually comes in the bottom third of countries, with more support for farmers than Canada, Australia, and New Zealand, but much lower than the European Union, South Korea, and Japan.

The very nerdy question that literally keeps me up at night is:

Why is it that agriculture is protected more than other industries across countries? Research that might have some insights into this question is a paper on envy and altruism in international trade.

But the more I think about it, does agriculture get more protection than other industries? Agriculture producers (along with textile firms) are shielded through subsidies and trade policy. But lots of industries receive other forms of support, ranging from generous tax treatment (technology companies), government procurement contracts (Boeing), foreign ownership restrictions and regulation (finance). I think agriculture receives a disproportional amount of support, but I haven’t seen any data confirming this.

Ok, these questions used to keep me up at night before having a baby. Now I have time to blog about them while Walter takes a nap. Perhaps I should be thinking about my French Open Draw.

A Taxing Weekend
Odd debates on corporate taxation
As a tenured professor I have the ability to choose any research topic I want. I’ve chosen to look at the politics of corporate taxation. Hello? Still there? I also choose to marathon run for fun. But give this post a try.

What is especially interesting to me is that the rhetoric in the US and across the world (at least in the European countries I know). Many of the debates are centered on the tax rate paid by corporations.

The US corporate tax rate has been pretty much constant at 35% for the last few decades. (Ok, it rose from 34% to 35% under the Clinton Administration). What do firms actually pay in taxes?

According to a study by the GAO the median rates is 0%. For links to commentary on this study see here.

I’ve just starting to work with a Adam Rosenszweg at WashU Law and we did a some very preliminary data collection of the Fortune 500. Excluding major outliers, the effective rate of taxation for most firms has declined over time.

How does this work in practice? For examples from the New York Time on Apple see here and here. For GE see here.

Let’s forget about the partisan bickering about paying “the fair share” or how taxation hurts the “job creators”. Let’s also forget that I’m using quotes without attributing a source. The point is on the focus on tax rates seems odd.

What is interesting about this to a political scientist? There are obviously some unanticipated “loopholes” that firms have become very adept at exploiting. This includes the use of some tax havens and complex transfer pricing. Hello? Are you still here? Great!

But the use of high corporate tax rates and lots of exceptions/exemptions/loopholes/subsidies could be explained by a number of political factors. One, for example, is that fights between Republicans and Democrats over corporate tax rates are little more than posturing that have little effect on the economy (or tax revenue). Politicians can effectively grandstand, with Republicans pushing for lower rates, despite the fact most firms pay taxes much lower than the statutory rates. Democrats and hold the line with high corporate taxes, knowing full well that firms effectively avoid most of these taxes anyways.

An even more cynical view is that the current tax system is politically effective. Incumbent politicians can maintain high corporate tax rates that are generally politically popular, while offering major concession to firms under the table.

The most cynical view is that this is essentially legal corruption. Politicians can extract campaign contributions and other goodies from firms in exchange for lower effective tax rates.

There is clearly a lot of work to be done in this area. But the most interesting part to me is how meaningless tax rates are, and yet they tend to be the center of most (public) political debates on corporate taxation.

These are just some random thoughts before a holiday weekend. Questions, questions, questions.

[I am relaunching my unpopular blog. Nothing like a dated nationalization from the archives to excite my readers]

Don’t Nationalize Me Argentina

I have been following the recent decision of Argentina to nationalize a major Spanish natural resource investment. Background on the decision can be found here. (Note: I say “Argentina” since this decision was proposed by the President and passed by an overwhelming majority in both houses of the legislature.)

The European response includes direct sanctions on Argentina for the expropriation along with a recent escalation of an existing trade dispute within the WTO.

A number of theories are floating around about the timing of this decision, but the one striking fact is that public opinion polls show that the majority supports this expropriation.

This pattern of popular nationalizations may seem like an obvious political decision. There are clearly cases of nationalizations during fiscal and financial crises. In a little preliminary data analysis with some of our graduate students (Chi-yi Lee. Noel Johnston, and Hadi Sahin) we actually find that nationalizations are less common during periods of crisis. This fits previous research on the choice of governments to liberalize (trade and capital account) during financial crisis.

Why is Argentina different? What explains different government responses to crisis?

Right now I have more questions than answers. This might be the difference between academics than pundits. Questions, questions, questions.

[I am migrating my old content to this blog. This is my first blog post.]

First blog post from a non-blogger
I am trying my hand at a little blogging. In the dense blog marketplace I wonder if it makes sense to start my own blog? I will probably repost existing work. Like the Hufflington Post but with no revenue generated.

My topics will mostly include:

International political economy
US economic policy
The Green Bay Packers
My son Walter
Food
I will also include a little bit of trash talking from time to time.

I am relaunching my blog. You don’t care.