The Risk of Death by Meteor greater than the Risk of Death by Global Warming

Posted by PITHOCRATES - March 2nd, 2014

Week in Review

There is an oft used expression that goes something like this.  In the long run we’ll all be dead.  So the long-term isn’t as important as the short-term.  Politicians live their lives by this.  As they irresponsibly borrow and spend to win votes.  Who don’t worry about the long-term damage they’re doing to the country.  Because in the long run they’ll be dead.  But they don’t have that same sentiment when it comes to global warming.  Where they say we must act now before it’s too late.  And we give our children a future devastated by global warming.  Giving them a future devastated by their reckless and irresponsible financial policies they’re okay with.  But not a future ruined by global warming.  Even though the financial devastation will probably come first.  Or this (see 400-kg meteor hits the moon by QMI Agency posted 2/24/2014 on the Toronto Sun).

On Sept. 11, 2013, a 400-kg rock hurtling through space at 61,000 km/h in the Mare Nubium smashed into the surface of the moon, releasing as much energy as 15 tonnes of TNT.

The meteor was 10 times bigger than the last record-holder, a 40-kg rock NASA observed hitting the moon March 17, 2013.

They say this rock was as big as a small car.  We better hope that nothing bigger than this hits the moon.  For if something does it could break the moon apart.  Disrupting tidal currents on earth.  And sending a chunk of the moon much larger than a small car into Earth.  Doing more damage than we can even imagine.  A real concern.  For a current hypothesis for the formation of the moon is from something as large as Mars smashing into Earth.  So there is a lot of space crap zinging around out there.  And we would probably be better served in trying to think of a way to defend against getting crushed to death by a rock from outer space than worrying about global warming.  For the odds are probably greater for getting hit by a piece of space crap than dying from global warming.

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We are in the Worst Economic Recovery since that following the Great Depression because of Keynesian Economics

Posted by PITHOCRATES - February 15th, 2014

Week in Review

We are in the worst economic recovery since that following the Great Depression.  Why?  Because of Democrats.  Who are all Keynesians.  And that’s a big problem as all of our worst economic times were given to us by those who adhere dogmatically to Keynesian economics.  That school of economics that gave us the Great Depression.  The stagflation of the Seventies.  The dot-com bubble.  The bursting of the dot-com bubble.  And the dot-com recession.  As well as the subprime mortgage crisis and the Great Recession.  In all of these events the Keynesians in power followed Keynesian economic policies to avoid recessions.  And then to pull us out of recessions when their avoidance didn’t work.  Then doubling down on the things that didn’t work previously.  In particular artificially low interest rates.  Which have been around zero for the last 5 years.  And massive federal spending to stimulate the economy when the private sector wasn’t spending.  Two pillars of Keynesian economics.  Neither of which have done anything to help improve the worst economic recovery since that following the Great Depression.

This is the problem with all the ‘noted’ economists the government likes to cite.  They embrace poor economic principles.  Proven wrong over and over again.  They can come up with some impressive looking charts and graphs but their analysis is all wrong.  And the fact that we’re in the worst economic recovery since that following the Great Depression proves it better than any chart and graph.  They’re wrong.  And continue to be wrong.  Yet they provide the economic policies for our country.  Some of the greatest nonsense you will ever hear.  Things you wouldn’t do in your business.  Or in your personal life (see Student Loans Are A Drag On The Economy And Society by Josh Freedman posted 2/11/2014 on Forbes).

While loans are intended to expand college access to a broader population, the nature of risk that they entail also produces the opposite result. Low- and middle-income students worried about the consequences of taking out a loan will be more likely to decide that college attendance is not worth the risk…

Studies have found that high debt levels not only deter access at the beginning, but can also drive students away from completing college once they have already started… students who start college but do not graduate are stuck with loan repayments and no college degree. They still have to repay their loans but do not have the economic boost of a college degree to help them have enough income to cover this cost.

First of all, why is it when it comes to a college education no one ever demands that we lower the cost.  Like we do with greedy oil executives who keep the price of gasoline high.  Why is it no one attacks the greedy people in higher education that keep education so costly?

The problem is too many people are going to college for the wrong reason.  There is a reason why there is a list of the best party colleges every year.  Because a lot of these kids want to go to these schools.  Which explains why colleges in Colorado are seeing a spike in out-of-state applications.  Because these kids want to go to a college where they can party with legal marijuana.  And to make that partying easier they’re majoring in easier degree programs that the college assured these kids would provide them a comfortable living after graduation.  So they can get that profitable tuition out of these kids.  Often times paid for by these kids’ student loan borrowings.  So the colleges are misleading a lot of these kids to make a buck.  Leaving them saddled with a lot of student loan debt if they quit.  Or even more student loan debt if they stay in until graduation.  While getting a degree that can’t get them a job.

A second issue with increasing levels of student loan debt is the effect on the economy… Individuals with more student loan debt were less likely than individuals without student loan debt to purchase homes or cars.

Yes, having too much debt is a bad thing.  It reduces your disposable income.  Preventing you from purchasing a house or a car.  Yet these same economic advisors have no problem with raising taxes and devaluing the currency (i.e., printing money) to pay for all of the government’s stimulus spending.  Higher taxes reduce our paychecks.  And devaluing the currency raises real prices.  Reducing what we can buy with our smaller paychecks.  No, a Keynesian has no problem with debt at the federal level that affects everyone.  But student loan debt is just a terrible thing for those kids who dropped out of college or who didn’t get a degree that an employer could use.

In the wake of the financial crash, households have been trying to deleverage, or pay down their debt so they can have a healthier financial outlook, reduce the amount of their income that they use to service their debt, and begin investing and consuming again…

A look at the data suggests that student loans have slowed down households in the process of paying down debt. Since 2008 — the peak level of household debt — households lowered their levels every type of debt except student loan debt. Student loans have continued to grow throughout this process of deleveraging.

Of course the one thing missing from this analysis is the horrible economy President Obama’s Keynesian policies have given us.  Since he became president he has destroyed some 10,948,000 jobs.  Based on the number that were out of the labor force in the January 2014 BLS jobs report (91,455,000) and how many were out of the labor force when he entered office (80,507,000).  This is why people are struggling with debt levels.  There are no jobs.  If there was a robust economy flush with jobs people wouldn’t worry about taking on debt to invest in the future.  As long as they got a useful college degree in a high-tech economy.  And not something useless like women’s studies or poetry.

But aren’t people facing poor job prospects just taking out more loans to avoid working as baristas at coffee shops that drip the coffee super slowly for no apparent reason? This does not appear to be the case from the debt data. Student loan debt has grown at almost exactly the same rate since the crash as it had been the previous five years — i.e. steadily and without fail.

Student loan credit level has been steadily rising because the cost of a college education has been steadily rising.  Again, where is the outrage at our greedy educators getting rich by loading up these kids with student loan debt for a degree they can’t use in a high-tech economy?

…the loan system allows colleges to raise prices, which causes more students to take out loans. States, facing budget pressures, have also pulled back on investment, putting even more risk on students and further increasing the need for loans.

Again, where is the outrage at our greedy educators who keep raising tuition, forcing these kids to take out more and more student loan debt?

The risk and burdens that come from forcing students to take out debt up front and pay it back later is problematic from head to toe (tassel to hem, one might say). To create a better system of higher education, we need to look at alternatives to the current debt-financed model.

So the solution is for the taxpayer to foot the bill for these useless college degrees at these party colleges?  How is that going to solve any problem?  All that will do is allow more people to go to a college in Denver where they can get high for 4 years.  And then go to work as a barista at a coffee shop that requires no 4-year degree.  How does that make anything better?  Other than get more young people to vote Democrat.  Then again, perhaps that is the only objective of Keynesian economics.  Which is why those on the left embrace these failed policies with a religious fervor.  Because it helps them win elections.  Even while they’re destroying the economy.

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Is Chicago the Next Detroit?

Posted by PITHOCRATES - February 9th, 2014

Week in Review

Another big American city is having ‘Detroit’ problems.  And may soon follow Detroit down the Road to Serfdom.  The warning signs are all there.  But will this big American city—Chicago—listen?  Well, Chicago like Detroit is a big Democrat city.  So, no.  They will not heed the warning signs.  And will make things even worse by going more ‘Detroit’ (see Chicago Votes to Go the Way of Detroit by Michael Auslin posted 2/6/2014 on National Review).

Chicago mayor Rahm Emanuel is increasingly a textbook example of how far the Democratic party has moved to the left since Bill Clinton’s day.

Emanuel, who cut his teeth in Clinton’s administration, just presided over a $1.9 billion increase in Chicago’s debt, only months after Moody’s downgraded the city’s bond ratings three notches based on its growing and unsustainable spending and debt obligations…

Old-line Democratic cities, it seems, have learned nothing from Detroit’s collapse. Wishful thinking, ignorance of the parallels, and misleading excuses are the common defenses trotted out by city administrators who have no intention of having to deal with the mess they have either made or worsened. Indeed, Emanuel explicitly rejected the Detroit comparison, arguing that, unlike the Motor City, which was fatally dependent on the auto industry, Chicago has “an extremely diverse economy where no one sector is more than 13 percent of the employment.”

That may be true now, but surely Emanuel knows that Illinois’s and Chicago’s high tax rates are causing a business exodus. The Chicago Tribune recently highlighted ten major companies threatening to leave Illinois and the Chicago area, including the Chicago Board of Trade, U.S. Cellular, and CME Group, the world’s biggest futures exchange company. Part of Chicago’s problem is being stuck in Illinois, which has the country’s third-highest unemployment rate, a dysfunctional state government, and crippling taxes that have led over 30 companies to cross over the state line to Indiana recently. But Chicago’s own borrowing and profligate pension promises will continue to eat away at its credit rating and desirability of doing business there. All this will help hollow out the city and its tax base, and eventually could lead to an all-too-familiar downward spiral once the productive elements of the city decide the benefits of staying don’t outweigh the costs of moving.

Of course the reason why Emanuel is throwing Chicago into this black hole of debt is because he is a Democrat.  And that’s how Democrats win elections.  By buying votes.  With a lot of good-paying jobs in the public sector.  Jobs with generous benefits.  Especially in retirement.  Thanks to profligate pension promises.  Requiring a large portion of city taxes to go to pay these underfunded pension obligations.  That are so underfunded they need to borrow money in addition to those high taxes to meet those pension obligations.

This is exactly what happened in Detroit.  The massive cost of their public sector became harder and harder to pay for.  So they began to fleece businesses as much as they could.  With higher taxes, fines, fees, regulations, etc.  Which only chased businesses out.  Making their problem worse.  For they never cut their spending.  Even though half of their tax base had disappeared they still tried to spend as if their tax base never shrunk from its high in the Sixties.  And we see where that led to.  Bankruptcy.  Something Chicago is now flirting with.  And a fate they will share if they don’t cut back their spending to what they can support without fleecing businesses out of the city.

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With every Increase of the Debt Ceiling we get Closer to Third-World Status

Posted by PITHOCRATES - February 8th, 2014

Week in Review

George W. Bush’s last deficit was $498.37 billion.  President Obama’s deficits were $1,539.22 billion, $1,386.92 billion, $1,350.31 billion, $1,120.16 billion and $680 billion, respectively.  President Obama has taken the national debt from $12,973,669,938,453 to $16,738,183,526,697.  And increase of $3,764,513,588,244 (29%).  Or the amount added to the national debt from 1791 through 1985.

So President Obama did in 5 years what his predecessors did in 194 years.  Putting the U.S. dollar in great peril.  For the only reason why the United States hasn’t become a third-world economic basket case is because the U.S. dollar is the world’s reserve currency.  But once the world loses confidence in the American dollar they may choose another reserve currency.  And if they do all of that printing and borrowing will hit the U.S. economy hard.  Making the inflation of the stagflation Seventies seem like child’s play.

We can’t keep printing and borrowing money.  For we are approaching a tipping point.  Yes, having the power to print money can forestall the inevitable.  As long as people still have confidence in your currency.  But if they don’t there is nothing to prevent the U.S. from spiraling down into third-world status just as every other nation that destroyed their economy with out of control printing and spending.  Making these debates over increasing the debt ceiling more than Kabuki Theater (see All’s Fair in Love, War and Government? by Robert Schlesinger posted 2/3/2014 on US News and World Report).

The way that the approach to the debt ceiling has changed – going from a rhetorical opportunity and classic round of Kabuki Theater where lawmakers feign outrage and denounce the debt ceiling increase they know they’re going to vote for anyway to a genuine threat to the economy – illustrates a larger trend in Washington: the movement away from certain accepted norms in our governance. As I’ve written before, there used to be unwritten rules which helped keep the governance train on its rails – they limited the use of the filibuster to rare issues, they made the notion of deliberately shutting down the government in order to extract policy concessions out of bounds and the same with the idea of intentionally harming the economy by not raising the debt ceiling.

Those norms have increasingly been replaced with an ends-justifies-the-means view that the pursuit of power makes anything OK. That’s a real problem for our democracy.

The ends-justifies-the-means in the pursuit of power?  Yes, that is a problem for our democracy.  Such as passing the Affordable Care Act on partisan lines with back room deals.  Causing people to lose the health insurance and doctors they liked and wanted to keep.  Higher insurance premiums and higher deductibles.  A cost that went from just under $1 trillion over ten years to over $1 trillion each year (if our health care is anything like Canada’s health care).  And prolonging the worst economic recovery since that following the Great Depression.  Even telling the Lie of the Year.  Horrible things for our Democracy.  All in the pursuit of power.  In the left’s quest for the holy grail of power.  National health care.

With our huge debt weighing down our democracy we are fast approaching the tipping point.  And raising the debt ceiling may not be the best thing to do.  So someone should be trying to get some spending cuts before agreeing to raise the debt ceiling.  To save our democracy.  Before it’s too late.  Thanks to the Democrats’ pursuit of power.  Where ‘the ends-justifies-the-means’.  Even if it turns the country into a third-world nation.

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Obama’s myRAs are just another way to Transfer Money from the Private Sector to the Government

Posted by PITHOCRATES - February 2nd, 2014

Week in Review

Social Security has failed to provide for our retirement.  So President Obama wants another government retirement program.  So it, too, can fail the American people (see What Americans think about Obama’s myRA retirement accounts by Melanie Hicken posted 1/31/2014 on CNNMoney).

Obama’s new ‘myRA’ retirement accounts aim to help millions of workers begin saving for retirement. The accounts will be backed by the government, charge no fees and you’ll be able to contribute directly from each paycheck…

“Why would anyone consider giving a broke and bankrupt government any more of your money? That’s foolish,” said 62-year-old reader Steve Keller…

[Kathryn Riss] and her husband keep the modest savings they do have in money market accounts, which earn less than 1%. The myRA, on the other hand, will invest in government savings bonds and provide returns of around 2% to 3%, depending on interest rates.

Why can’t people earn more than 1% on their retirement savings in a bank?  Because of the Federal Reserve.  And Keynesian economics.  That focuses on consumer spending with tunnel vision.  It’s the only thing that counts as far as they are concerned.  And keeping interest rates near zero is supposed to encourage people to borrow and spend money.  For they will only lose purchasing power if they don’t.  What with banks only offering something less than 1% interest.  Thanks to the Federal Reserve printing money.  Making it so plentiful that people can borrow it practically for free.  And if they are paying the banks practically nothing to borrow it that’s all the banks can afford to pay their depositors.  Practically nothing.

The government will invest those myRAs into government savings bonds?  Yeah, right.  The government is going to take that money and spend it.  Because they have a voracious appetite to spend.  Which is why the Social Security Trust Fund has nothing but IOUs in it.  Government bonds that the government can’t afford to redeem without printing more money.  The Keynesian source of all our woes to begin with.  Which will only get worse the more ways the government thinks of to transfer money from the private sector to the government.  Taxes.  Service charges, surcharges, fees, etc.  Regulatory fines and penalties.  Treasury bonds and bills.  Medicaid.  Medicare.  Obamacare.  And now myRAs.

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Alan Greenspan blames Irrational Risk-Taking and not his Keynesian Policies for the Subprime Mortgage Crisis

Posted by PITHOCRATES - October 26th, 2013

Week in Review

Since the Keynesians took over monetary policy we’ve had the Great Depression, the inflation racked Seventies, the dot-com bubble/recession of the late 1990s/early 2000s and the subprime mortgage crisis.  It’s also given Japan their Lost Decade, a deflationary spiral that started in the late Eighties that they are still fighting today.  As well as the sovereign debt crisis still ongoing in Europe.  So Keynesian economics has a record of failure.  Yet governments everywhere embrace it.  Why?  Because they love having the power to create money.  Especially when it’s ostensibly for helping the economy.  Which it never does.  As efforts to do so resulted in the carnage noted above.  But it always gives a good excuse for another surge in government spending.  And Keynesians love government spending.

Why does Keynesian economics fail?  Alan Greenspan, former chairman of the Federal Reserve whose policies helped create some of this carnage (dot-com bubble and subprime mortgage crisis), explains (see Greenspan ponders the roots of a financial crisis he failed to foresee by Martin Crutsinger, The Associated Press, posted 10/21/2013 on The Star).

Now, Alan Greenspan has struck back at any notion that he — or anyone — could have known how or when to defuse the threats that triggered the crisis. He argues in a new book, The Map and the Territory, that traditional economic forecasting is no match for the irrational risk-taking that can inflate catastrophic price bubbles in assets like homes or tech stocks.

This is why the Soviet Union lost the Cold War.  Because their managed economy failed.  As all managed economies fail.  Because it is impossible to know the decisions of hundreds of million people in the market.  These people making decisions for themselves result in economic activity.  But when governments try to decide for them you get Great Depressions, debilitating inflation, bubbles and nasty recessions.  As well as the collapse of the Soviet Union.

People only took irrational risks when the Federal Reserve (the Fed)/government interfered with market forces.  The dot-com bubble grew because the Fed kept interest rates artificially low.  So was it irrational for people to take advantage of those artificially low interest rates and make risky investments they otherwise wouldn’t have made?  Yes.  But if the Fed didn’t keep them artificially low in the first place there would have been no dot-com bubble in the second place.

Was it irrational for people to buy houses they couldn’t afford when the Clinton administration forced lenders to qualify the unqualified for mortgages they couldn’t afford?  Was it irrational behavior for people to buy houses they couldn’t afford because of artificially low interest rates, ‘cheap’ adjustable rate mortgages, zero-down mortgages, interest only mortgages and no-documentation mortgages?  Yes.  But if the Fed/government did not interfere with market forces in the first place to increase home ownership (especially among those who couldn’t qualify for a conventional mortgage) there would have been no subprime housing bubble in the second place.

The problem with Keynesians is they call anyone who doesn’t behave as they hope to make people behave with their policies irrational.  That is, people are irrational if they don’t think like a Keynesian and therefore cause Keynesian policies to fail.  But before there could be irrational exuberance there has to be a climate that encourages irrational exuberance first.  For if we went back to the banking system where our savings rate determined our interest rates as well as the investment capital available there would be no bubbles.  And no irrational exuberance.  What kind of a banking system would that be?  The kind that vaulted the United States from their Founding to the number one economic power in the world in about one hundred years.  And they did that without making money.  Unlike today.

Q: The size of the Federal Reserve’s balance sheet stands at a record $3.7 trillion, reflecting all the Treasurys and mortgage-backed securities the Fed has bought to push long-term interest rates down. You have expressed concerns about this size, which is more than four times where the balance sheet stood before the start of the financial crisis. What are your worries?

A: My basic concern is that we have to rein this thing in well before the demand for funds picks up and makes it very difficult to rein in. (Inflation) is not immediate. It is down the road. But historically, there are no cases where central banks blow up their balance sheets or where countries print money which doesn’t hit (with higher inflation).

The balance sheet is four times what it was before the Great Recession?  That’s an enormous amount of new money created to stimulate the economy.  And yet we’re still wallowing in the worst economic recovery since that following the Great Depression.  I don’t know how much more you can prove the failure of Keynesian economics than this.  About five years of priming the economic pump with stimulus stimulated little.  Other than rich Wall Street investors who are using this easy money to make more money.  While the median household income falls.

Keynesian economics attacks the middle class.  While enriching the ruling class.  And their crony friends on Wall Street.  These policies further the divide between the rich and everyone else.  Yet they continually say these same policies are the only way to reduce the divide between the rich and everyone else.  The historical record doesn’t prove this.  And those familiar with the historical record know this.  Which is why the left controls public education.  So people don’t learn the historical record.  Because once they do it becomes harder to win elections when you’re constantly lying to the American people.

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World War II Veterans not allowed on the National Mall while Illegal Immigrants Are

Posted by PITHOCRATES - October 12th, 2013

Week in Review

The Democrats are loving the government shutdown.  They get to screw Americans and blame it on the Republicans (see Obama wants you! Feds hiring for thousands of open jobs amid shutdown by Jim McElhatton posted 10/8/2013 on The Washington Times).

The federal government is shut down, but that hasn’t stopped agencies from running lots of “help wanted” ads.

More than 4,000 job postings remained active on the federal government’s hiring site as of Tuesday. Although many ads first ran before the shutdown began, nearly 500 posts were placed in the past three days.

They can’t let World War II veterans visit the outdoor World War II monument on the National Mall but they can hire up to 4,000 new employees?  Further proof that the partial shutdown is political.  With the left making it as painful as possible to the masses of people.  While making sure their few friends and campaign donors are not inconvenienced.  Such as the big rally on the National Mall for illegal immigrants.

World War II veterans-no.  Illegal immigrants-yes.  World War II veterans-no.  Government bureaucrats-yes.  Political-yes.  Democrats put the needs of the people above their political agenda-no.

There are two Americas.  Resembling a 2-story outhouse.  Where the American people are on the lower level.  And the liberal Democrats are on the upper level.

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Even the French feel they are Taxed too Much

Posted by PITHOCRATES - September 28th, 2013

Week in Review

President Obama is sick and tired of the Republicans, conservatives and the people who don’t give him everything he wants.   The fiscal year ends Monday so he has to fight with the Republican controlled House of Representatives to get them to pay for his increased spending.  And because he’s spending so much we have to raise the debt limit again so we can borrow the money to pay for his out of control spending.  How he wished the United States was more like France.  They don’t have these problems.  Why, the French will even elect a socialist president.  While President Obama has to veil his contempt for capitalism France can just tax and tax and then tax again.  And no one bitches about high taxes.  Well, that may be changing (see Why do the French tolerate such high taxes? by S.P. posted 9/24/2013 on The Economist).

The government is planning an extra €3 billion ($4 billion) of taxes next year, which will push up the overall tax take in the economy to 46.5% and make 2014 the fifth consecutive year that the tax burden in France has grown. François Hollande, the Socialist president, was elected last year on a promise to tax the rich, with a scheme for a top income-tax rate of 75%. But the tax bill is now wearing holes in the pockets of not just the rich but the rest, too. Why do the French put up with paying so much tax..?

Historically, the French have tolerated high taxes as the price of decent public services and a proper universal safety-net. All those fast trains, first-rate hospitals and public crèches do not come for nothing, and the French are the first to defend a way of life subsidised by the public purse that can often only be bought privately in Britain or America. Moreover, the French make a firm distinction between taxes and social-insurance contributions. Only half of households have to pay income tax, but everybody pays social charges… Indeed, the longstanding tolerance for taxes has underpinned the solidity of French sovereign debt, since it is a fair bet that France’s government can efficiently collect the taxes it needs…

This social contract, however, could be on the verge of breaking down. Over the past year, as taxes on beer and cigarettes have risen, tax-free overtime abolished, tax deductions squeezed and tax-band thresholds frozen, even the French have started to grumble. Polls suggest that tax increases have become the top worry among voters, and chief reason for Mr Hollande’s calamitous popularity ratings. The sharp rise in taxes, which began under Nicolas Sarkozy, the previous president, as part of an effort to reduce the government’s budget deficit, is all the more resented at a time when the French are no longer convinced that their public services—underperforming state schools, overcrowded commuter trains—are so much better than those that cost less in other countries. What is the point of paying Swedish-style taxes (or more) if you do not receive Scandinavian-style public services in return?

The new mood has not passed the politicians by. Mr Moscovici acknowledged recently that the French are “fed up” with taxes. Mr Hollande even conceded in a television interview that tax increases have been “too much”. Most of the effort to reduce the budget deficit in 2014 will now fall not on tax increases but public-spending cuts. Mr Hollande has promised a “tax pause”, which will be part of the message in the 2014 budget.

Yes, even the French are tiring of constantly rising taxes.  Especially when they keep paying more for less.  Which is what happens with socialism.  High taxes are a disincentive.  When you have “decent public services and a proper universal safety-net” it takes away a person’s ambition to do more and achieve more.  They may want to.  But if half of their income from this extra effort goes to taxes why put in any extra effort?  After all, there are already “decent public services and a proper universal safety-net” available.  Why work twice as hard to have virtually the same things?

This is the price of the welfare state.  It makes people less willing to take risks.  To start a business.  To create something new that everyone will want to have.  Socialism kills the entrepreneurial spirit.  And stalls the engine of job creation.  With all those small businesses going uncreated huge amounts of wealth goes uncreated.  Wealth that they can never tax.  Tax revenue doesn’t grow to keep up with the growth in spending.  So they increase tax rates.  And find other ways to make people pay more taxes.  While the quality of services fall.  Just like they are in France.  Just as they are in the United States.

And they will only get worse in the United States with the addition of Obamacare.  Which will explode the deficit while throwing the country back into recession.  With a corresponding fall in tax revenue the government will look for other ways to make people pay more taxes.  It’s happening in France.  As it has happened in every other socialist country.  And will happen in the United States.  Because of President Obama’s veiled contempt of capitalism.  The kind of contempt for capitalism shown by socialist President François Hollande.

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France tried the President Obama Balanced Approach to Deficit Reduction only to see it Fail

Posted by PITHOCRATES - September 1st, 2013

Week in Review

All we heard during the debt ceiling debate and the sequester debate from President Obama is that we must have a balanced approach.  Tax hikes now.  And spending cuts later.  Which, of course, means no spending cuts.  Ever.  For why would they cut spending after they got their tax hikes?  Too many Republicans got snookered by past Democrats on that false promise.

President Obama assures us that if we raise tax rates it will solve all of our problems.  But if we cut spending that’s just stupid.  Because government spending creates economic activity.  According to the Keynesian economics playbook, at least.  And President Obama is a Keynesian.  In fact, he’s so much a Keynesian that some would even call him a socialist.  But Keynesian economics hasn’t worked in America.  It didn’t work in the 1970s.  It gave us a dot-com bubble in the 1990s.  And the beginning of the real estate bubble that burst into the subprime mortgage crisis in the 2000s.  So we’ve tried Keynesian economics and it doesn’t work.  And, as it turns out, Keynesian economics that borders on outright socialism doesn’t work either (see France signals shift to tax cuts in boost to business by AFP posted 9/1/2013 on France 24).

France’s Socialist government is hinting it may appease discontent at tax rises by putting more stress on spending cuts in its fight to control the budget and boost growth…

France has so far relied on tax hikes for about two-thirds of its fiscal adjustment. Most famously it hiked the tax rate to 75 percent on income above 1 million euros.

The reliance on tax hikes has also prompted warnings from the IMF and European Commission that it should focus more on cutting spending in order to avoid snuffing out the recovery…

France’s social welfare system is funded primarily by charges on labour, burdening businesses…

A threat to nationalise a French plant owned by steel giant Arcelor Mittal to protect jobs raised concerns among foreign businesses…

The latest purchasing managers surveys by Markit found that while business activity is picking up in the eurozone overall, it contracted at a faster rate in France this month.

Francois Hollande has been president since May 15, 2012.  That’s about one year and three months.  And in that time his socialist government raised taxes.  But barely cut spending.  Just as President Obama wants to do to reduce the U.S. budget deficit.  Despite the fact that it doesn’t work.  As France has proven.

The U.S. doesn’t have to try the President Obama way.  The balanced approach.  AKA, the all tax and no spending-cut approach.  Because France has tried it in a grand way only to see it fail.  It failed so badly that they’re talking about outright socialism.  Nationalizing industry.  Because the economic climate is so anti-business in France that there is no job creation.  Because there is no business growth.  Worse, the French economy is contracting.  That’s right, while the rest of the Eurozone is seeing growth France’s economy is going deeper into recession.  Because they’re doing what President Obama wants to do in the U.S.

It’s time we purge Keynesian economics from our governments for good.  It is the source of all the great financial problems countries are having all around the world.  All it does is empower those in power.  Elevating them to elite positions.  Where they enjoy a life of plenty and extreme comfort.  While their people struggle to provide for their families.  It’s time that we return to classical economics.  Save our money and live frugally.  Creating private investment capital from our savings via a sound banking system.  Where bankers practice good lending practices without governments passing their risks onto the taxpayers.  Which is what gave us the subprime mortgage crisis.  And the worst recession since the Great Depression.

Finally, governments have to spend less.  So we can cut tax rates.  Providing the spark to ignite private investment.  Which drives business expansion.  And creates jobs.  Which is what people want.  So they can provide for their families.  Not more benefits that the government can’t pay for.  No matter how high the government taxes them.

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U.S. Expatriates giving up their Citizenship to escape the Long Reach of the IRS

Posted by PITHOCRATES - August 11th, 2013

Week in Review

Once an American always an American.  As far as the IRS is concerned, that is (see Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom by Dylan Griffiths, Bloomberg, posted 8/9/2013 on Yahoo! Finance).

Americans renouncing U.S. citizenship surged sixfold in the second quarter from a year earlier as the government prepares to introduce tougher asset-disclosure rules.

Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008.

The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.

Just to clarify what this means, these are people who no longer live in the United States.  They earn their money outside of the United States.  And they pay taxes to the countries they live in on the income they earn while living there.  But they still hold onto their U.S. citizenship.  In case they want to return to the United States one day.  Where they may resume earning income there.  And paying taxes there.

Taxes are supposed to pay for the cost of government that is providing for you.  The military that protects the United States.  Social Security.  Etc.  Things these expatriates may in all likelihood never use.  True, they may benefit from the U.S. military keeping the peace in the world.  But no more than the people living in these other countries.  So this is not about financing the cost of benefits they are consuming.  It’s all about funding out of control government spending that they do not benefit from in the least.  Green energy subsidies.  The Obama stimulus.  Obamacare.  Food stamps.  And other federal assistance programs.  Benefits that are in most cases an ocean away from these people.  Yet the U.S. government wants to track these people down.  And make them pay taxes for stuff they’ll never use.  Unlike every other nation in the Organization for Economic Cooperation and Development.

The additional compliance costs for companies to ensure that Americans they hire are filing the correct U.S. tax returns and asset-declaration forms are at least $5,000 per person, said Ledvina.

For individuals, the costs are also rising. Getting a mortgage or acquiring life insurance is becoming almost impossible for American citizens living overseas, Ledvina said.

“With increased U.S. tax reporting, U.S. accounting costs alone are around $2,000 per year for a U.S. citizen residing abroad,” the tax lawyer said. “Adding factors, such as difficulty in finding a bank to accept a U.S. citizen as a client, it is difficult to justify keeping the U.S. citizenship for those who reside permanently abroad.”

So these people are not giving up their U.S. citizenship because they are greedy.  They’re doing it because it is too difficult and too costly for them and their employer if they hold onto their U.S. citizenship.  Of course, once they give up their citizenship the government loses all access to their money.  So what’s next?  Preventing people from ever leaving the United States?  Turning the U.S. into a police state?  Or would it be simpler just for the government to stop spending so much?

I think most people would prefer a government that spends less than living in a police state.

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