Tuesday, April 03, 2007

John Filan: a Free Lunch for the people of Illinois? on Cable and Streaming.

Jeff Berkowitz:…But it is either the shareholders or the employees who are hit, or the customers [who are hit by the State Gross Receipts Tax]. Would you agree to that?

Blagojevich Administration Chief Operating Officer John Filan: Well, not completely. Because there are choices, just like there are choices in government. You know, it is the cost of doing business. And, a business has a cost of materials when they buy products from places. They have labor costs...
This Week's suburban edition of "Public Affairs," airing in the Chicago metro suburbs, features John Filan, Chief Operating Officer for the State of Illinois in the Gov. Blagojevich Administration, discussing and debating the impact of the Governor’s Gross Receipts tax on jobs, profits and customer prices; education reform and education funding reform, how to compensate educators, the cost of government and much, more with show host and legal recruiter Jeff Berkowitz.See, below, for the Public Affairs suburban airing schedule. You may also [Go Here to watch this week's suburban show with John Filan, and soon next week's suburban "Public Affairs," show with 3rd Ward Aldermanic Candidate Pat Dowell and 43rd Ward Chicago Aldermanic Candidate Michele Smith as well as other shows with such notables as Obama, McCain, Giuliani, Barrett, Syverson and many others on your computer; you can drag the dial on the bottom of the screen to watch only portions of the thirty minute shows; trouble accessing our cinema page on your computer? Try I-Tunes: the same Public Affairs shows are also available there].
John Filan will be the featured guest on the Monday, April 16, 2007 [8:30 pm, Cable Ch. 21] City of Chicago edition of "Public Affairs."
3rd Ward Aldermanic Candidate Pat Dowell and 43rd Ward Aldermanic Candidate Michele Smith will be the featured guests on the Monday, April 9, 2007 [8:30 pm, Cable Ch. 21]City of Chicago edition of "Public Affairs." Dowell and Smith are joined by the ghosts of incumbents Tillman and Daley.
The "Public Affairs," cinema page gives you a choice of more than twenty-five episodes of “Public Affairs," to watch on your computer including this week's suburban show with John Filan . The cinema page also will soon have next week's suburban show with Chicago Aldermanic Candidates Pat Dowell and Michele Smith, recent shows with Cook County Commissioners Quigley and Peraica, Metropolitan Planning Council President MarySue Barrett, Phantom of the City Council--Brendan Reilly, State Rep. Paul Froehlich, as well as interviews, discussions or remarks with or by U. S. Senators John McCain and Barack Obama, former NYC Mayor Rudy Giuliani and many, many more pols on our video podcast page[Go Here to Watch the Shows on your computer; you can drag the dial on the bottom of the screen to watch only portions of the thirty minute shows].
John Filan, a University of Chicago MBA, previously Director of Office of Management and Budget and currently Chief Operating Officer in the Blagojevich Administration, debates and discusses the issues with show host and legal recruiter Jeff Berkowitz. Topics discussed include who bears the cost of tax increases, whether the Blagojevich Administration’s proposed Gross Receipts Tax is the largest state tax increase by any state in the last decade, what is the true cost of Government, according to the late, great Economics Nobel Laureate Milton Friedman; would the Governor lobby for a dramatic increase in the number of Charter and Voucher Schools, does the Governor support performance based compensation of public school educators and administrators, is small business being hit hard by the Gross Receipts Tax, is the Governor or Lt. Governor the best spokesperson for the “little guy,” does the Gross Receipts Tax lack an appropriate link to the ability to pay, should there be a re-structuring of the way medical care is dispensed by emergency rooms to those without health insurance, is the Governor pushing for property tax relief; are there three billion dollars of waste, fraud and abuse in the state budget, is arbitraging the bond/stock market a good way to fund Illinois public employee pension funds, is leasing the lottery a good way to fund Illinois public employee pension funds, would the Governor veto House Bill 750—the tax swap and does the Blagojevich administration have the best proposal to deal with under funded state pensions.
Axiomatic in economics and especially what we used to call University of Chicago Economics, the “Chicago School of Economics,” or simply Chicago Economics is the proposition that there ain’t no such thing as a free lunch [TANSTAAFL]. If it is has value, there is a cost to it-- certainly an opportunity cost.

An application of the TANSTAAFL view of the world is that if the government imposes a cost on business, that cost will be borne by the owners, the employees or the customers of the businesses. The elasticities of demand and supply will determine how much each group of individuals bears, but there is no disputing that the tax will come out of the hide of one of those three groups. There is no where else to find individuals to pay the tax.

And, remember, there ain’t no such thing as a free lunch. If the State of Illinois government is going to collect seven billion dollars in tax revenue, well, then, individuals will pay seven billion dollars. Remember, corporations don’t pay taxes, individuals do.

John Filan, to my surprise, didn’t agree with the above [See the transcript, below]. His view, apparently, is that companies get more efficient when taxed. That is, the imposition of the tax causes the companies to innovate or operate more efficiently. In John Filan's world, the companies’ other costs decline, apparently just offsetting the cost of the new tax. Therefore, business owner profits, employee wages and jobs-- and prices to customers will be unchanged as a result of the Gross Receipts Tax the Governor has proposed. A free lunch for Illinois, so to speak.

The thing of it is, I doubt there is an economist at the University of Chicago, Harvard, Yale, Northwestern, MIT or any other top school of economics, liberal or conservative, who would support John Filan on this.

But, if I am wrong, in any of the above, we hope Illinois Chief Operating Officer Filan will let us know and we will publish his comments-- right here, verbatim, on this blog.

One thing is for sure: We very much appreciate John Filan coming on our show. Not everybody in John’s position will subject himself to tough questioning on “Public Affairs.” But, this is the second time Mr. Filan has done so in two years, and we look forward to his doing so in the future-- again and again.
Jeff Berkowitz:…You got an MBA from the University of Chicago.

John Filan, Chief Operating Officer, Illinois State Government, Gov. Blagojevich Administration: That’s correct.

Jeff Berkowitz:…So you understand free market economics, right?

John Filan: I hope so, yeah.

Jeff Berkowitz:…And, you probably even believe in the free market, right?

John Filan: I do.

Jeff Berkowitz:…So you know that when there is a tax [on a Company], that tax is either going to be borne either by the shareholders of the Company, or it is going to be borne by the employees [of the Company], or it is going to be borne by the customers [of the Company]. There is no other way. There is no corporation out there that has a pot of money and the Corporation pays it. It comes from those three groups I identified, right? How much it [taxes] comes from each group we can quibble about and we can look at demand and supply elasticities, and stuff like that

John Filan: Um, um.

Jeff Berkowitz:…But it is either the shareholders or the employees who are hit, or the customers [who are hit]. Would you agree to that?

John Filan: Well, not completely. Because there are choices, just like there are choices in government. You know, it is the cost of doing business. And, a business has a cost of materials when they buy products from places. They have labor costs. They have insurance costs. They have costs of rent. And, they have a variety of taxes they pay, many of them local. Property taxes, income taxes certainly. Social Security taxes. So, all of those things are a cost of doing business, and they have to manage those effectively to compete in their industries. So, I think it is really how you manage your costs--and you manage them competitively—that simply drives our economy.

Jeff Berkowitz:…But, there is no other place for the taxes to come from [except for] those three things: owners-- or shareholders or partners-- depending on how the entity is set up; employees, who will either suffer a lower wage or may be let go; or customers who will pay a higher price…The Corporation is just a legal fiction, you understand that. It doesn’t pay taxes. Its shareholders, its partners, its owners pay, or it comes from the customers, or it comes from the employees. Is there some other box that is out there that I am not identifying?

John Filan: But, I think the characterization is what I am trying to clarify. The corporation has an obligation to set its prices competitively and it has an obligation to manage its costs efficiently just like it is expected of us in state government-- and some companies do and some don’t-- and some governments do and some don’t. I think the critical issue is that every time—you know I was the managing partner of a CPA firm—every time we had a cost increase, whether it was insurance or whether it was a payroll cost or whether it was a cost of supplies, we had to look at that in the context of running our firm competitively and it didn’t mean that you right away said, “Oh, I’m going to pass that on to somebody.” The first thing you did is say, “you work on that throughout the year and manage your company in the most effective way possible.”

Jeff Berkowitz:…But, by managing your company—if you don’t pass it on, if the customer is not going to pay, then either the employees pay or the shareholders pay. Somebody has to pay.

John Filan: Well, I think you also try to reduce your costs where you can. You try to manage your operation more efficiently. You try to reduce costs where you can, producing more efficiently.

Jeff Berkowitz:…But, you try to do it before, you always try to run it efficiently. Before there is a tax increase, you try to reduce your costs, don’t you? You always try to have your costs as low as they can be, consistent with the service or product that you are providing, right?

John Filan: Well, correct.

Jeff Berkowitz:…That’s basic economics.

John Filan: But, not all companies are effective at it

Jeff Berkowitz:…[Then] they go out of business.

John Filan: And, you always try a little harder when there is competition. I think that is the key.
Gov. Blagojevich's COO, John Filan, as he is airing this week on Public Affairs in 35 Chicago Metro suburbs [See below for the suburban airing schedule] and as will be airing on Monday, April 16, 2007 [8:30 pm on Cable Ch. 21, CANTV] on the City of Chicago edition of Public Affairs. The show was recorded on March 25, 2007. You may also[watch the show with John Filan here].
In twenty-five North Shore, North and Northwest suburbs, the "Public Affairs," show airs every Tuesday night in the regular weekly Public Affairs slot, 8:30 pm on Comcast Cable Ch. 19 or 35, as indicated, below.

In ten North Shore suburbs, the Public Affairs show airs three times each week in its regular slots at 8:30 pm on Comcast Cable Ch. 19, Monday, Wednesday and Friday, as indicated, below. ******************************************************
The suburban episode of Public Affairs with guest Illinois Chief Operating Officer John Filan airs Tonight :

at 8:30 pm on Comcast Cable Channel 19 in Buffalo Grove, Elk Grove Village, Hoffman Estates, parts of Inverness, Lincolnwood, Morton Grove, Niles, Northfield, Palatine, Rolling Meadows and Wilmette

And at 8:30 pm on Comcast Cable Channel 35 in Arlington Heights, Bartlett, Glenview, Golf, Des Plaines, Hanover Park, Mt. Prospect, Northbrook, Park Ridge, Prospect Heights, Schaumburg, Skokie, Streamwood and Wheeling.

and this week on Monday night, Wednesday night and Friday night at 8:30 pm and a special airing tonight at 9:30 pm on Comcast Cable Channel 19 in Bannockburn, Deerfield, Ft. Sheridan, Glencoe, Highland Park, Highwood, Kenilworth, Lincolnshire, Riverwoods and Winnetka.
Jeff Berkowitz, Show Host/Producer of "Public Affairs," and Executive Legal Recruiter doing legal search can be reached at JBCG@aol.com