Monday, November 17, 2014

Tim Fernholz — Why the US is planning to make telephone users pay for public school internet

The US government is mulling a plan to increase its investment in broadband at public schools and libraries by $1.5 billion, at the cost of a small increase in telephone service fees. 
It’s easy to tell where people stand on the issue: Those who favor the investment, like Federal Communications Commission chairman Tom Wheeler, note that the average household already pays about 99 cents per phone line into the “Universal Service Fund,” a government account dedicated to increasing access to communications networks. Those who oppose the proposed 16-cent increase, as the outspoken Republican FCC commissioner Ajit Pai does, call it a 16% increase in the telephone tax.… 
Behind the political squabbling, US internet infrastructure lags that of other wealthy countries in usage rates and quality. According to data assembled by the OECD, the US is in 16th place when it comes to broadband penetration, 12th when it comes to average speed and 22nd at median speed.
Because we "can't afford" it.
The debate over plugging more school children into speedy broadband connections—an investment in a future high-tech work force—is a proxy for the larger question of how the government should stimulate the economy and whether the internet should be seen as a public good.
Why the US is planning to make telephone users pay for public school internet
Tim Fernholz


JLC said...

Tom -- wanted to call your attention to an MMT based story that Yes Magazine has recently published. See

Tom Hickey said...

Thanks, JLC. Good one. I promoted it to a post.

The economic news has been sparse lately. Needed something today.

Dan Lynch said...

Besides the MMT perspective that we don't need taxes to "pay for" internet, I also like to look at how a proposed tax would affect inequality. A phone tax is a regressive consumption tax.

Other economic news today -- Japan is officially in recession thanks to the sales tax increase and the failure of monetary policy.

This article about Gini caught my eye -- that Gini is driven almost exclusively by the rich. This has policy implications for MMT because mainstream MMT's position is to lift up the poor but leave the rich alone. While lifting up the poor is commendable, it barely makes a dent in Gini.

Tom Hickey said...

Even funding social programs, it's necessary to tax economic rent since government spending, including transfer payments, ultimately flows either back through taxes or into saving, and it’s the top that saves most.

A lot of personal saving goes to saving for education and retirement. Public education and pension plans would remove this need to save from income for such provision, either by saving before the expenditure or by borrowing (dissaving) and then paying down the loan with interest after the expenditure (saving + interest).

There is really no need for individuals in nation with a developed economy that is a currency sovereign to save either for education and a basic pension that meets minimum needs. There's also policy space for a safety net, including a JG, that meets minimum needs, too. If people want to save to exceed the minimum, that's their choice. But no one should be forced to live in involuntary poverty in a prosperous society.

However, this injection of funds would be spent and ultimately flow back to government through taxes or flow up to savers who are predominantly the wealthy, increasing their power to influence the political process. To prevent the latter, the former would have to be sufficient to return most of the injections through progressive taxation and taxes specifically aimed at externality and rent.