Bad Keynesian Policies cause influx of Romanian and Bulgarian Migration into Germany

Posted by PITHOCRATES - February 10th, 2013

Week in Review

It is interesting that countries that get into trouble using Keynesian economic policies tend to go to countries that relied on Keynesian policies less for help.  States with high government spending and bloated public sectors turn to countries with less government spending and less bloated public sectors for help.  Yet Keynesian economic policies are still the dominant polices of many nations.  Including the US, the UK, China, countries within the Eurozone, Bulgaria and Romania (see German warning over Romanian and Bulgarian migration by Rosa Silverman posted 2/6/2013 on The Telegraph).

German cities have warned that an influx of Romanian and Bulgarian economic migrants will cost them dear and put the “social peace” at risk…

Berlin, Hamburg, Dortmund and Hanover have seen a six-fold increase in economic migration from the two countries since 2006, which they say has left them struggling to cope…

The warning comes amid fears in Britain that tens of thousands more Romanians and Bulgarians will come here each year after formal restrictions on the numbers of low-skilled workers from the two countries end next year.

A report by the campaign group Migration Watch UK warned last month that up to 70,000 migrants could arrive annually from then.

Of course the question that just begs to be asked is why are Romanians and Bulgarians leaving their countries in the first place?  The Cold War is over.  The communists are gone.  These are beautiful countries.  Blessed with farm land.  And natural resources.  With some great people.  And a lot of history.  So why leave?  Because they caught the Keynesian contagion during the Nineties.  Their central banks kept interest rates artificially low to stimulate economic activity.  Which they did.  But a lot of that economic activity was artificial.  A bubble.  Times were good.  They expanded government employment.  And government pay and benefits.  And then the 2007-2008 financial crisis came along.  Bursting that bubble.  Leaving these nations with budget deficits.

Both nations were on track to join the Eurozone.  Working hard to meet the Maastricht criteria.  Conditional for entry into the common currency of the Eurozone.  After the financial collapse meeting the Maastricht criteria became more difficult.  As the fall in economic activity and the rise in the unemployment rates of these countries caused tax revenue to fall.  Creating deficits that approached or exceeded those permitted under the Maastricht criteria.  And the Keynesian cure for a recession, easy credit and more government spending, just made those deficits worse.  And it caused inflation to rise to or above that permissible under the Maastricht criteria.  They had to borrow money to meet their spending obligations.   And a condition of those loans was to bring their spending down to acceptable levels.  Like that to meet the Maastricht criteria.

Long story short the damage these Keynesian policies caused required very painful austerity to fix.  High unemployment and austerity makes people want to leave home for sunnier economic climes.  As Germany has been the bedrock of the Eurozone because of their more responsible governing and restraint in government spending these people went to Germany.  And to the UK.  Who didn’t join the Eurozone.  And aren’t mired in the Eurozone sovereign debt crisis.  Though they are implementing a little austerity of their own to bring down their budget deficits.

High government spending and large deficits cause trouble.  The U.S. has numbers worse than both Bulgaria and Romania.  Which means there is trouble ahead.  But unlike other nations the United States’ population won’t be able to travel to sunnier economic climes.  For no country will be able to absorb that amount of migration.  Not even Germany.  Or the UK.  Combined.

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Abortion and Birth Control are Bankrupting Social Security and Medicare

Posted by PITHOCRATES - January 20th, 2013

Week in Review

For the first time in history a credit reporting agency (Standard and Poor’s) downgraded the U.S bond rating in 2011.  Why?  The agency said they needed to see $4 trillion in spending cuts over 10 years.  The best Congress could do was $917 billion in spending cuts over 10 years.  And the creation of a super-committee to find another $1.5 trillion.  For a total of $2.417 trillion in spending cuts.  At least, on paper.  That never happened.  After winning reelection the president held out for and got increases in tax rates.  So he could increase spending.

So how did the U.S. get to where they needed to cut $4 trillion in spending?  Well, a large part of it has to do with abortion (see 55,772,015 Abortions in America Since Roe vs. Wade in 1973 by Steven Ertelt posted 1/18/2013 on LifeNews.com).

The United States marks 40 years of legalized abortion in all fifty states at any time for any reason throughout pregnancy on January 22nd, the anniversary of the Roe v. Wade Supreme Court decision. Since that time, there have been approximately 55,772,015 abortions that have destroyed the lives of unborn children.

Taxpayers pay taxes.  And how do we get taxpayers?  By having babies.  So when we aborted over 55 million babies the effect on tax revenue was profound.  We can see how by making some assumptions.  And doing a little math.

First of all, 55,772,015 abortions over 39 years come to on average 1,430,052 abortions a year.  Dividing this number by two to pair off couples for baby-making that comes to 715,026 couples.  Without abortion available we’ll assume about 80% of these couples will have children.

The first babies of the 715,026 enter the workforce 20 years later.  So in that year the number of additional workers paying taxes equals 2,002,072 (1,430,052 + (0.8 X 715,026)).  The following year the second child of this couple enters the workforce while another couple’s first child enters the workforce.  This brings the additional workers paying taxes equal 3,146,114.  And so on until each couple brings in three new taxpayers into the workforce. Over a decade the number of new workers paying taxes equals 110,685,999.

Assuming a median income of $50,000 these 110,685,999 taxpayers earn a total of $5.5 trillion over ten years.  Assuming an effective federal income tax rate of 18% the total federal income tax these people would have paid equals approximately $996 billion.

Using the 12.4% Social Security tax rate (both employer and employee) the amount of Social Security taxes these people would have provided over 10 years equals approximately $686 billion.

Using the 2.9% Medicare tax rate the amount of Medicare taxes these people would have provided over 10 years equals approximately $160 billion.

Adding these taxes together (Social Security and Medicare) they add up to $847 billion.  Adding this to the amount of federal income taxes brings the amount of taxes these people would have provided over ten years to about $1.8 trillion.

When they wrote Social Security and Medicare into law the average family size had fallen from around 5 to about 3.5 over a decade or so.  If you take that $1.8 trillion and adjust it for 3.5 children (1.8/3 X 3.5) the lost tax revenue equals $2.15 trillion.  At 4 children that lost tax revenue comes to $2.5 trillion.  At 5 children that lost tax revenue comes to $3.1 trillion.  At 6 children it’s $3.7 trillion.

Today’s seniors entered child-bearing age long before women’s liberation, birth control and abortion.  So most women got married and had children.  It is not uncommon for today’s seniors to come from families of 10 children or more.  This is significant because when the actuaries set up Social Security and Medicare they assumed these trends would continue.  But they didn’t.  The birth rate (and the population growth rate) declined since Social Security and Medicare became law.  Causing the population to age.  More people are now leaving the workforce and collecting Social Security and Medicare benefits than there are workers entering the workforce to pay for them.

Abortion has been a part of this decline.  In a current 10-year projection we are seeing anywhere from $1.8 trillion to $3.7 trillion in lost tax revenue due to abortion.  If Roe v. Wade didn’t legalize abortion and the Left didn’t assault the family (encouraging women NOT to get married or have children) during the Seventies as radical feminism took off there would have been a lot more births.  Perhaps as many as those actuaries thought there would be when they calculated the costs of Social Security and Medicare.

If normal family patterns had continued not only would these abortions not have happened families may have had more children.  Producing more taxpayers.  There were 3,136,965 live births in 1973.  The average family size then was about 2.5.  If you divide the number of births by average family size you get about 1,254,786 families having children.  If each of these families had one additional child that additional 1,254,786 children would be approximately 87.7% of the average number of abortions.  If these children grew up to have three children of their own we can calculate this additional tax revenue the same way we did for the loss revenue from abortion.  Or we can multiply the loss revenue from abortion ($1.8 trillion) by 87.7% to approximate what those additional children in 1973 would contribute in a ten-year projection today.  Approximately $1.9 trillion.  Adding the losses from abortion and families having one less child brings the total of loss tax revenue to $4.04 trillion.  Which equals the $4 trillion S&P was looking for in spending cuts.

So what is the cause for America’s deficits?   Is it because the rich aren’t paying their fair share in taxes?  No.  It’s because of abortion and birth control.  And radical feminism.  That attacked the family and encouraged women to do anything but get married and have children.  Something FDR and his New Dealers never designed Social Security and Medicare to take into account.  For FDR and his New Dealers were sexists.  As are Social Security and Medicare.  These programs require women to marry and have children to stay solvent.

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Defying Economic Sense the 1% now support Higher Tax Rates on their Income

Posted by PITHOCRATES - December 29th, 2012

Week in Review

Now everyone is ganging up on the Republicans.  In the fiscal cliff showdown.  The Republicans want some deficit reduction coming from spending cuts.  They have modified their position to allow some higher tax rates.  But they want those spending cuts.  Which the Democrats simply refuse.  They want all deficit reduction to come from higher tax rates.  Now even the 1% are saying to tax them more.  At least, according to a new poll (see Majority of Rich Want Themselves Taxed More: Poll by Robert Frank, CNBC, posted 12/24/2012 on Yahoo! Finance).

American Express Publishing and The Harrison Group found that 67 percent of the top one percent of American earners support higher income taxes. Their support has grown since the election. This summer, 62 percent of them supported higher taxes.

Some might say the rich are hoping to tax people richer – or poorer — than themselves. The top one percent consist of people making more than $450,000 a year. But the survey clearly shows most One Percenters favor taxing themselves. More than half say that they support taxing those making $500,000 or more…

“There is an absolute willingness for the vast majority of the One Percent to take a tax increase,” said Jim Taylor, Vice Chairman Harrison Group. “What the Republicans think is not necessarily what their constituents think.”

Ask yourself this.  Why are super rich movie, television and music stars staunch supporters of the Democrat Party?  Is it because in their music studies they minored in economics?  No.  I don’t think so.  I would even go so far as to posit that they cannot differentiate between classical economics, the Austrian school of economics, the Chicago school of economics and the Keynesian school of economics.  Though they are staunch supporters of the last one.  Because the Democrats embrace Keynesian economics as it enables big government spending.  So why are super rich movie, television and music stars staunch supporters of the Democrat Party?   So they can escape the bitter attacks on wealth business owners face.

These superstars live lives like Roman Emperors.  All without having a real job.  So they have no understanding of economic fundamentals.  Or the first thing about scraping the cash together to make a payroll.  But they do know that if they support and campaign for Democrat candidates they can enjoy their obscene wealth without someone attacking them for living like Roman Emperors.  Could it be the reason why the superrich 1% are coming out in favor of higher tax rates on themselves?  Perhaps.  For there is no good economic reason to do so.

Raising taxes on them will not make a dent in the deficit.  In fact, if you added all the federal income taxes those earning $200,000 or more paid in 2010 (see Table 3.  Number of Individual Income Tax Returns, Income, Exemptions and Deductions, Tax, and Average Tax, by Size of Adjusted Gross Income, Tax Years 2001-2010) it comes to approximately $489 billion.  If you divide that number by the highest marginal tax rate (at high income levels most income is taxed at the highest marginal tax rate) that comes to about $1.397 trillion.  Which is just over the average Obama annual deficit of $1.324 trillion.  So if you confiscated 100% of all earning from those earning $200,000 or more it will pay for one year’s deficit.  So taxing the rich a few more percentage points will do NOTHING to reduce the deficit.  The deficit is just too big.  And there are just too few rich people.  No, the only way to reduce the deficit by higher taxes only is to hit the middle class with a huge tax increase.  Or you could cut spending.  Which would require no new middle class tax.  Like the Republicans want.

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President Obama to Raise Taxes but it won’t Help our Budget Woes

Posted by PITHOCRATES - November 11th, 2012

Week in Review

It takes two things to make tax revenue.  Tax rates.  And economic activity.  For if you don’t have the economic activity it doesn’t matter what the tax rates are.  Because any given percentage of smaller amount of national income will be less than the same percentage of a larger amount of national income.  That is, higher incomes produce more tax revenue.  Not higher tax rates.  It’s simple arithmetic.  Something the Democrats talked a lot about in the recent campaign.  As if they understand this simple arithmetic.  Yet they don’t seem to understand that taxing a bigger pile of money produces more tax revenue that taxing a smaller pile of money (see Obama Wins 2012 Election: Why Your Taxes Are Going Up by Morgan Korn posted 11/7/2012 on Yahoo! Finance).

Obama has vowed to raise the top income tax rate for individuals to 39.6% and let the Bush-era tax breaks end for the highest income earners. The majority of Americans — those who are lower to middle class — could also see a 2% tax increase if Congress allows the temporary payroll tax holiday to expire at the end of the year…

Len Burman, a professor of public affairs at Syracuse University and a co-founder of the bipartisan Tax Policy Center, believes higher tax rates play just a small role in resolving the nation’s budget woes.

“In the long term [Obama] is going to need to raise taxes on more than just the rich,” Burman says in an interview with The Daily Ticker. “The budget problem isn’t going to be solved without broader-based tax increases, preferably done in the context of tax reform and also serious entitlement reform. We’re not going to be able to solve this on the tax side alone.”

After World War II our veterans came back home and started making babies.  Giving us the baby boom.  And the baby boomers.  Who entered the workforce about 20 years later.  Causing a boom in the tax base.  Resulting in a higher national income.  And higher tax revenues.  Which LBJ put to good use with his Great Society.  Giving us Medicare that cost a small fraction of our incomes in payroll taxes.  It was nothing in the grand scheme of things.  While the benefits were huge for our seniors.

So the welfare state exploded.  Thanks to that increasing tax base.  And those veterans making so many babies.  But then something happened in the Sixties.  Those baby boomers did not return the favor and continue the baby boom.  Instead opting to have fun instead.  Enter birth control.  And abortion.  Birthrates fell.  In time fewer people entered the workforce than left it.  Causing the population to age.  And the tax base to shrink.  All while those new entitlement programs continued to grow.  So fewer and fewer people paid for more and more entitlements.  A recipe for disaster.  A recipe for what we have today.  Entitlement spending obligations greater than the current tax base can afford.  And you can’t fix that with higher tax rates or new taxes.  You need a larger tax base (i.e., another baby boom).  Or entitlement reform.

It would take another 20 years for a new baby boom to produce new taxpayers.  So that leaves entitlement reform as our only choice.  And the only serious attempt to reform entitlements was roundly dismissed by the Democrats when Paul Ryan put his plan on the table.  Which was the only plan.  The only problem with the Ryan plan was that politicizing it would benefit the Democrats in the upcoming election.  So that’s what they did.  For winning elections trumps everything for Democrats.  Even saving Medicare.

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Drill, Baby, Drill works well in Russia, Nigeria, Saudi Arabia, Kuwait and the UAE

Posted by PITHOCRATES - April 29th, 2012

Week in Review

So if we drill, baby, drill for oil everywhere it won’t do a thing to lower oil prices.  According to the Obama administration.  Besides, we’ll just export the oil (or refined gasoline) anyway.  So what’s the point?  Well, here’s a thought.  Oil prices are high.  So if the U.S. drilled for oil everywhere and exported all of that oil it may not impact the price of gasoline (though most rational people believe it would) here’s something else that could come from it (see Petrodollar profusion posted 4/28/2012 on The Economist).

FIRST, the good news: China, the country at the centre of the debate about global imbalances, has a current-account surplus that has fallen sharply over the past few years. Now the bad: China was never really the prime culprit when it comes to imbalances at the global level. The biggest counterpart to America’s current-account deficit is the combined surplus of oil-exporting economies, which have enjoyed a huge windfall from high oil prices (see left-hand chart). This year the IMF expects them to run a record surplus of $740 billion, three-fifths of which will come from the Middle East. That will dwarf China’s expected surplus of $180 billion. Since 2000 the cumulative surpluses of oil exporters have come to over $4 trillion, twice as much as that of China…

The most effective policy tool to reduce oil exporters’ current-account surpluses is public spending, and investment in particular because of its high import content. Increased public spending could also help these economies diversify away from oil. That would support their future economic development and create more private-sector jobs for young, growing populations. To maintain social stability, many of these governments need to spend more on education, health care, housing and welfare benefits. Some oil producers, such as Russia and Nigeria, are running fairly balanced budgets, but the governments of the Gulf states are awash with cash. Since 2005 Saudi Arabia, Kuwait and the UAE have increased public spending by 7-8 percentage points of GDP. Even so, the three countries are expected to run an average budget surplus of over 15% this year. That leaves plenty of room to be a little more spendthrift.

Europe, Japan and the United States are suffering under huge budget deficits and trade deficits.  Their aging populations and the pensions and health care for them is threatening the solvency of these nations.  Who have no choice but to raise taxes and borrow ever more money to pay these obligations.  You know who doesn’t have these problems?  Those big oil-exporting economies.  Who are “awash with cash.”  Unlike Europe, Japan or the United States.  Seems to me that it’s better to be “awash with cash” than to be mired in debt.

So drill, baby, drill I say.  Let’s have the same problem the oil exporters are having.  Too much cash.  We could eliminate income taxes.  AND pay all our Social Security and Medicare obligations.  As well as all the education and women’s health programs you desired.  Wouldn’t that be nice?  I mean who would be opposed to that?  Except, of course, the Obama administration.  Because according to them there is nothing to gain from putting more oil onto the market during record prices.  Too bad our president isn’t as much a free market capitalist as they are in Russia, Nigeria, Saudi Arabia, Kuwait and the UAE.

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Rich Doctors say Tax Them More to Help Fund the Canadian ‘Obamacare’ System that Makes them Rich

Posted by PITHOCRATES - March 25th, 2012

Week in Review

People distrust rich people.  That’s why they want to tax them more.  Because they have more than enough money.  No matter what they say about earning their money or how they invest their wealth to create jobs.  People don’t want to hear any of this.  For they ‘know’ that these rich fat cats are lying just to keep from having to ‘share’ their wealth.  But whenever a rich guy says ‘tax us rich people more’ everyone hangs on to their every last word.  For if they are talking about raising taxes on the rich then these are not your typical rich.  They’re the good kind.  Like these doctors in Canada (see Tax us more, doctors urge (Are the lawyers listening?) by Michael Babad posted 3/22/2012 on The Globe and Mail).

A group of doctors is taking a page from Warren Buffett’s tax-the-rich call, urging the Canadian and Ontario governments to tax higher-income earners more…

Doctors for Fair Taxation plan to announce their scheme in Toronto this afternoon, calling for additional taxes on people earning more than $100,000. You’d be hit with an additional 1 per cent if you earn between $100,000 and $170,000, 2 per cent if you earn up to $640,000, and 3 per cent for up to $1.85-million. Above that it would be 6 per cent.

“We feel that this is a moral argument,” Dr. Michael Rachlis, who founded the group that so far boasts more than 50 physicians, told The Canadian Press.

“We cannot talk about throwing people out of work and cutting needed programs for people,” said Dr. Rachlis, an associate professor at the University of Toronto.

Wow.  Sounds very selfless, doesn’t it?  These rich guys asking to be taxed more to help their country?  At least on the surface it does.  But the question that begs to be asked is what are they spending so much money on that they have to raise taxes?  And when you learn what that is it puts these doctors into a different light.

Here’s an article from 2010.  About two years ago.  Talking about a budget crisis.  Where spending is out of control.  Spending that the Canadians just can’t sustain.  And where is this out of control spending?  Why, it just happens to be in the industry that pays these doctors.  Canada’s single-payer health care system.  Talk about coincidences.  These doctors asking rich people everywhere to help pay the nation’s bills.  Where the biggest bill is the one that pays these doctors (see Soaring costs force Canada to reassess health model by Claire Sibonney posted 3/31/2010 on Reuters).

Pressured by an aging population and the need to rein in budget deficits, Canada’s provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system.

Ontario, Canada’s most populous province, kicked off a fierce battle with drug companies and pharmacies when it said earlier this year it would halve generic drug prices and eliminate “incentive fees” to generic drug manufacturers.

British Columbia is replacing block grants to hospitals with fee-for-procedure payments and Quebec has a new flat health tax and a proposal for payments on each medical visit — an idea that critics say is an illegal user fee.

And a few provinces are also experimenting with private funding for procedures such as hip, knee and cataract surgery.

It’s likely just a start as the provinces, responsible for delivering healthcare, cope with the demands of a retiring baby-boom generation. Official figures show that senior citizens will make up 25 percent of the population by 2036.

Proponents of national health care in America blame the private health insurers, the pharmaceuticals and the hospitals for out of control health care costs.  What they say we need is a system like Canada.  Where they put people before profits.  And yet here they are.  The Canadians.  With a health care system suffering from out of control costs.  Which they are trying to fix with higher taxes.  Additional fees.  Even a little Americanization (that is, privatization).  Makes you wonder why we’re going forward with Obamacare while the Canadians are finding that type of a system is unsustainable.  Especially when our retiring baby boomers outnumber their retiring baby boomers. 

Canada, fretting over budget strains, wants to prune its system, while the United States, worrying about an army of uninsured, aims to create a state-backed safety net.

Healthcare in Canada is delivered through a publicly funded system, which covers all “medically necessary” hospital and physician care and curbs the role of private medicine. It ate up about 40 percent of provincial budgets, or some C$183 billion ($174 billion) last year.

Spending has been rising 6 percent a year under a deal that added C$41.3 billion of federal funding over 10 years.

But that deal ends in 2013, and the federal government is unlikely to be as generous in future, especially for one-off projects.

Wow.  Look at that.  Almost half of provincial budgets pay for the ‘free’ health care of Canadians.  Which is causing budget deficits at the provincial level.  And at the national level.  Well, up until 2013, that is.  When the national government is going to address their budget deficits by cutting their health care payments to the provinces.  Increasing the provincial budget deficits in the process.  Leaving the provincial governments to tax and spend more.  Or ration care and cut spending more.  Including doctor pay.  Could this have anything to do with those selfless physicians asking that their government tax the rich more?  Perhaps.

Brian Golden, a professor at University of Toronto’s Rotman School of Business, said provinces are weighing new sources of funding, including “means-testing” and moving toward evidence-based and pay-for-performance models.

“Why are we paying more or the same for cataract surgery when it costs substantially less today than it did 10 years ago? There’s going to be a finer look at what we’re paying for and, more importantly, what we’re getting for it,” he said.

Other problems include trying to control independently set salaries for top hospital executives and doctors and rein in spiraling costs for new medical technologies and drugs.

Ontario says healthcare could eat up 70 percent of its budget in 12 years, if all these costs are left unchecked…

The province has introduced legislation that ties hospital chief executive pay with the quality of patient care and says it wants to put more physicians on salary to save money.

In a report released last week, TD Bank said Ontario should consider other proposals to help cut costs, including scaling back drug coverage for affluent seniors and paying doctors according to quality and efficiency of care.

So the power of government inserted into the health care system has done nothing to lower the cost of medical procedures in Canada.  Makes you scratch your head, doesn’t it?  Because the proponents of Obamacare say that’s exactly what the power of government can do.  But in practice it has failed to do what these theorists say it can do.  Cut costs.  Through bureaucratic management.  And ‘turning of the screws’ on the medical device and drug manufacturers.  Despite this very practice NOT working in Canada.  Which means that the proponents of Obamacare think the Canadian bureaucrats simply aren’t smart enough to make their health care system work efficiently.  That the system of government-managed health care is a flawed system when it comes to costs and efficiency.  Or that government-managed health care is not about costs or efficiency.  But about the bureaucracy itself.  The control and power it offers the politicians.  And the votes it can buy them.

“Many of the advances in healthcare and life expectancy are due to the pharmaceutical industry so we should never demonize them,” said U of T’s Golden. “We need to ensure that they maintain a profitable business but our ability to make it very very profitable is constrained right now.”

Scotia Capital’s Webb said one cost-saving idea may be to make patients aware of how much it costs each time they visit a healthcare professional. “(The public) will use the services more wisely if they know how much it’s costing,” she said.

Wait a minute.  To fix the government-managed system they need to make the patients aware of the costs so they can choose wisely?  There’s a name for such a system.  We call it capitalism.  The very thing missing from government-managed health care.  And the very reason why government-managed systems (the Canadian health care system, the American Medicare/Medicaid programs, the UK’s National Health Service, etc.) fail to control costs.  And why Obamacare will fail to control costs.  Because they exclude the one thing that controls costs best from government-managed systems.  Capitalism.  Where people make spending decisions based on cost.  Which will never happen when someone other than the patient pays for the costs for the medical services a patient receives.  For no one ever asks ‘how much’ when they’re not paying the bill.

So when a rich doctor says to tax the rich more is this selfless?  Or selfish?  You decide.

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The British Government takes over Royal Mail’s Underfunded Pension Fund for Short-Term Deficit Reduction

Posted by PITHOCRATES - March 18th, 2012

Week in Review

The U.S. Postal Service (USPS) is going broke.  Why?  Two reasons.  People email and text today.  Even pay their bills online.  So they’re not mailing letters.  And every piece of mail the people don’t mail is lost revenue for the USPS.  Which can be a problem in an organization that has a high overhead.  And an aging and retiring workforce.  Which brings us to the second reason.  Pensions.  Just like in Britain (see Government to take on Royal Mail pension to pay down debt by Matt Falloon posted 3/19/2012 on Reuters).

Chancellor George Osborne will use a 28 billion pound ($44.36 billion) asset transfer from taking on the Royal Mail’s pension fund to pay down government debt next year, a government source said on Sunday.

The transfer of the state-owned mail company’s pension scheme – subject to European Union approval and due to be announced in next week’s budget – will reduce the government’s budget deficit next year, while the liabilities from the scheme, worth 37.5 billion pounds, will show up on the government’s accounts across the next two decades as they are drawn on by scheme members…

In the long run, however, there will be an overall cost to the Treasury from the transfer because the scheme’s liabilities outweigh its assets.

The Royal Mail is no different than the USPS.  People are emailing, texting and paying their bills online in Britain, too.  Which means neither 20th century postal service can make it in the 21st century.  They both need to reinvent themselves.  And fast.  But the LAST thing either nation should do is to bail out their postal service.  Not when each nation is struggling under record deficits.  For this will only delay the day of reckoning.  And make it far more costly.  Allowing greater losses to accrue.  In the face of growing pension payouts.

Short-term fixes for long-term problems is very bad policy.  It’s what we call kicking the can down the road.  It doesn’t fix any problems.  It only makes them more difficult to fix.  Burying the country under ever growing deficits.  And placing incredible tax demands on taxpayers not even born yet.   So you know the Americans will follow suit.  And bail out the USPS.  Because of late they seem to have a penchant for making bad decisions.

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The Europeans try to Shake Down the World with their Emission Trading Scheme but China, Russia, India and the US fight Back

Posted by PITHOCRATES - March 18th, 2012

Week in Review

The European Union thought that they had struck gold.  Their little Emission Trading Scheme.  Which would force foreign governments to fund a large portion of their chronic budget deficits.  By forcing them to buy permits to emit carbon in their airspace.  As well as other nations ‘ airspace.  Even in airspace over the high seas.  A bold scheme their Emission Trading Scheme.  Though not strictly legal.  And requiring a submissive airline industry that has no problem saying “make me your bitch” to the Europeans.   Which doesn’t look to be the case (see U.S. sides with China against airlines emissions tax by Tim Devaney posted 3/15/2012 on The Washington Times).

The European Union’s plan to impose a tax on international airlines for their carbon emissions has run into fierce head winds, with the Obama administration joining China, India and other powers in a growing global drive to force the EU to back down…

“It’s a tricky one: Fight a trade war with the entire world, or back down,” said Richard Aboulafia, vice president of analysis at Virginia-based Teal Group. “I’m thinking they’re going to back down.”

China is one of the biggest opponents of the plan, which would tax airlines for their carbon outputs for flights to or from Europe. The controversial part of the tax, which has drawn complaints that the fee is illegal under international trade law, is that it is assessed based on the entirety of the flight distance, not just the part spent over European airspace.

Hitting back at Europe where it counts, China has canceled plans to purchase 55 jets worth $14 billion from Airbus.

On Thursday, it suspended a purchase of 10 Airbus A330s, a move made just days after Airbus complained to European politicians about China having put off buying 10 A380 superjumbos and 35 A330s.

China and Russia have said their airlines will not comply with the emissions charge, which could keep their carriers from traveling to Europe altogether. Congress has considered a similar measure.

At a meeting last month in Moscow, almost 30 countries adopted a resolution threatening Europe with eight forms of retaliation they would consider if the charge is not scrapped. Among those measures are bringing legal cases before international trade forums, not granting European carriers landing rights and routes, and new levies against EU national airlines…

Airlines aren’t necessarily opposed to paying for their emissions in European airspace, which is unquestionably under EU jurisdiction, but chafe at being charged for emissions over other parts of the world. For example, European airspace takes up only 9 percent of a flight from San Francisco to London, according to Airlines for America. The rest is over the U.S., Canada and the high seas, but airlines would be charged for the entire 5,371-mile trip.

Money talks and a silly Emission Trading Scheme walks.  Or soon will.  Unless the Europeans want to take on the whole world.  Plunging the international economy into a trade war.  Could they be so arrogant?  Well that’s a silly question.  Of course they can be.  But will they put their silly environmentalism where their economies are?  And do they think the world is so ignorant not to see that this is just a way to get others to pay for their chronic budget deficits?  The world is betting they’re not.  And will back down.  Which they’d be wise to do.  For if they thought they had deficit problems before an international trade war directed at them they ain’t seen nothing yet.

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Labour Supports Pay Freeze for Public Sector Workers

Posted by PITHOCRATES - January 15th, 2012

Week in Review

Deficits have consequences.  Because you can’t just keep on borrowing money you don’t have.  So eventually the day comes when everyone realizes that they must live within their means.  Even political opponents (see Balls backs public sector pay freeze posted 1/14/2012 on the BBC News UK).

Shadow chancellor Ed Balls has indicated Labour will support a pay freeze for public sector workers in order to help reduce the deficit.

Mr Balls told BBC Radio 4’s Today programme that getting people into jobs must come before higher pay.

The UK’s deficit is about 10% of GDP.  Ditto for the US.  The UK’s debt is about 95% of GDP.  The US is about 100% of GDP.  In Reagan’s last year as US president it was only about 51% of GDP.

Deficits and debt are rising to dangerous levels.  They’re so high in the UK that the Labour party, the party of public sector workers, will support a freeze for public sector workers.  That’s serious.  For even in the US where the numbers are even worse the Democrats (the party of public sector workers) don’t dare to breathe such sentiments.  They still talk about making the rich pay their fair share of taxes.  They never talk about cutting spending.  Never.  Unless it’s defense spending.

The Brits are trying to do the responsible thing.  Even the political opposition is going along because it’s in the best interests of their country.  Suspending politics as usual at the highest levels.  It would be nice to see something like that in their former colony.  The United States.

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The Supercommittee Succeeds in Preventing Deficit Reduction without Raising Taxes

Posted by PITHOCRATES - November 27th, 2011

Week in Review

The supercommittee failed.  Deadlocked over higher taxes.  What a surprise.  And by surprise I mean it’s what everyone expected.  Because it never had anything to do with deficit reduction.  It was just yet another opportunity for Democrats to raise taxes.  And when they failed it was yet another opportunity to blame Republican intransigence.  While all the time refusing to budge from their demand for new taxes (see Supercommittee Failed, and Spending Is Still the Problem by Curtis Dubay posted 11/25/2011 on The Foundry).

Overspending, especially on entitlements such as Social Security, Medicare and Medicaid, is the cause of our debt problem.

Higher taxes are unnecessary because there is enough revenue flowing into Washington as long as Congress holds spending to historical levels. According to the Congressional Budget Office (CBO), with all current tax policies, including the Bush tax cuts, tax revenue will surpass its historical average as a share of the economy in a decade. And should the economy break the shackles of growth-impeding Obama policies faster than CBO anticipates, tax revenues will exceed that mark much sooner.

On the other hand, in 2021 the federal government will spend 26 percent of the economy, well in excess of its historical average of 20 percent. And it will keep growing on this trajectory, primarily because of the growth in entitlements. The data is clear. We have a spending problem – not a taxing problem.

They’re forecasting tax revenue at record amounts.  Yet it’s not enough.  It’s never enough.  Why?  Because the government spends it faster than they can collect it.  And that’s the problem.

Advocates of raising taxes often resort to the argument that debt reduction requires spending cuts and tax increases. But they’re merely revealing their preference for bigger government. Higher taxes lead to bigger government because Congress always spends the extra revenue it raises. The new taxes never go to deficit reduction. That’s why any deal that offers spending cuts in exchange for tax hikes is fundamentally unbalanced – despite the president’s claims.

Higher taxes would go to pay for the spending increases that President Obama and his allies foisted upon the country – including stimulus spending, Obamacare, and a host of other big government programs. Unless they’re reformed, entitlement programs would also devour new tax revenue as more baby boomers retire.

Presidents Reagan and George H.W. Bush learned the tax-and-spend lesson the hard way. They agreed to deals that were supposed to cut spending and raise taxes. While the tax hikes became permanent law, succeeding Congresses were under no obligation to abide by the agreed-upon spending levels and quickly undid them. The same would be true today if Congress strikes a similar deal.

How to you get a deficit?  By spending more than you collect in taxes.  Note the word ‘spending’.  That’s key.  Because if you don’t spend more than you collect in taxes you don’t have deficits.  Record lows in tax revenue didn’t cause Barack Obama’s record deficits.  Record government spending caused those record deficits.  Again, spending is key.  Because you have to overspend to get a deficit.

This isn’t chicken and egg stuff.  Spending clearly came first.  Then deficits.  So the logical and rational way to deficit reduction is to cut spending.  Not to raise taxes.  Because raising taxes just supports further overspending.  And you know they will.  Because they always do.  Because you don’t buy votes with deficit reduction.  You buy votes with spending.

Which is why the supercommittee failed.  Because it was supposed to fail.  If the full House couldn’t agree to spending cuts neither could a supercommittee.  Because they all report to the same leadership.  This was just theater to raise the debt ceiling.  And a delaying tactic by the Democrats who hoped they could turn public opinion into favoring tax hikes.

So now what?  I’m guessing more lies.  And more theater.  At least until 2012.  When the curtain finally falls on this tragic comedy.

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