Aging Populations and Replacement Birthrate

Posted by PITHOCRATES - April 28th, 2014

Economics 101

(Originally published July 8th, 2013)

Trying to follow a Baby Boom with a Baby Bust creates Problems in Advanced Economies with Large Welfare States

In the late 1960s began a movement for zero population growth.  It called for women to have only enough babies to replace the current population.  Not to have too many babies that would increase the population.  Nor have too few babies that the population declines.  Something that women could easily do because of birth control.  And, later, abortion.  The drive behind this was to save the planet.  By keeping large populations becoming like a plague of locusts that devour the earth’s resources and food until the planet can no longer sustain life.

China did these zero population growth people better.  By promoting a negative population growth rate.  Limiting parents to one child.  They did this because during the days of Mao’s China the country set some world records for famine.  Their communist state simply couldn’t provide for her people.  So to help their communist system avoid future famines they tried to limit the number of mouths they had to feed.  Of course, trying to follow a baby boom with a baby bust creates other problems.  Especially in advanced economies with large welfare states.

China’s one-child policy and the preference for boys have led to a shortage of women to marry.  Some Chinese men are even looking at ‘mail-order’ brides from surrounding countries.  But China is going to have an even greater problem caring for her elderly.  Just like Japan.  Japanese couples are having less than 1.5 babies per couple.  Meaning that each successive generation will be smaller than the preceding generation.  As couples aren’t even having enough children to replace themselves when they die.  Leaving the eldest generation the largest percentage of the overall population.  Being paid and cared for by the smallest percentage of the overall population.  The younger generation.

States with Aging Populations are Suffering Debt Crises because they Spend More than their Tax Revenue can Cover

As nations develop advanced economies people develop careers.  Moving from one well-paid job to another.  As they advance in their career.  Creating a lot of income to tax.  Allowing a large welfare state.  Which is similar to a Ponzi scheme.  Or pyramid scheme.  As long as more people are entering the workforce than leaving it their income taxes can pay for the small group at the top of the pyramid that leaves the workforce and begins consuming pension and health care benefits in their retirement.  And there is but one requirement of a successful pyramid scheme.  The base of the pyramid must expand greater than the tip of the pyramid.  The wider the base is relative to the top the more successive the pyramid scheme.  As we can see here.

Babies per Generation - Constant Replacement Birthrate

Generation 1 is at the top of the pyramid.  It is the oldest generation.  Which we approximate as a period of 20 years.  In our example Generation 1 are people aged 78-98.  They’re retired and collecting pension, health care and other benefits.  Some combination of Social Security, Medicare, Medicaid, food stamps, heating assistance, etc.  All paid for by Generation 2 (58-78), Generation 3 (38-58) and Generation 4 (18-38).  Each generation is assumed to bring 6 children into the world.  So these couples are not only replacing themselves but adding an additional 4 children to further increase the size of the population.  Which really makes running a pyramid scheme easy.  For if we assume each member in Generation 1 on average consumes $35,000 annually in benefits that Generations 2 through 4 pay for that comes to $555.56 per person annually.  Or $46.30 per person monthly.  Or $10.68 per person weekly.  Or $1.53 per person daily.  Amounts so small that Generations 2 through 4 can easily pay for Generation 1′s retirement.  Now let’s look at the impact of a declining birthrate with each successive generation.

Babies per Generation - Declining Replacement Birthrate

When all couples in each generation were having on average 6 children this added 1.9 billion new taxpayers.  Which greatly reduced each taxpayer’s share of Generation 1′s retirement costs.  But thanks to birth control, abortion and the growing cost of living each successive generation has fewer babies.  Generation 2 only has 3 children.  Enough to replace themselves.  And add one new taxpayer.  Generation 3 has only 2 children.  Only enough to replace the parents.  Providing that zero population growth that was all the rage during the late 1960s and the 1970s.  While Generation 4 only has 1 child.  Not even enough to replace the parents when they die.  Causing a negative population growth rate.  Which is a big problem in an advanced economy with a large welfare state.  For instead of adding 1.9 billion new taxpayers they only add 217.5 million new taxpayers.  Greatly increasing each taxpayer’s share of Generation 1′s retirement costs.  Instead of paying $555.56 per taxpayer they each have to pay $5,384.62 annually.  Or $448.72 per taxpayer monthly.  Or $103.55 per taxpayer weekly.  Or $14.79 per taxpayer daily.  Numbers that prove to be unsustainable.  The state simply cannot tax people this much for Generation 1′s retirement.  For if they did this and added it to the rest of government’s spending they’re taxing us to fund it would take away all of our income.  This is why advanced economies with aging populations are suffering debt crises.  Because their spending has grown so far beyond their ability to pay for it with tax revenue that they borrow massive amounts of money to finance it.

If you want a Generous Welfare State you need Parents to have More Children

If you carry this out two more generations so every generation only has one child the per taxpayer amount tops out at $14,736.84 annually.  Or $1,228.07 per taxpayer monthly.  Or $283.40 per taxpayer weekly.  Or $40.49 per taxpayer daily.  Amounts far too great for most taxpayers to pay.  This is what an aging population does in a country with a large welfare state.  It makes the population top-heavy in elderly people who no longer work (i.e., pay taxes) but consume the lion’s share of state benefits.  When couples were having 6 children each across the generations there was a ratio of 84 taxpayers per retiree.  When there was a declining replacement birthrate that ratio fell to 15 taxpayers per retiree.  If we look at this graphically we can see the pyramid shape of this generational population.

Generational Population - Constant Replacement Birthrate

With 84 taxpayers per retiree we can see a nice and wide base to the pyramid.  While the tip of the pyramid is only a small sliver of the base (Generation 4).  Making for a successful Ponzi scheme.  Far more people pay into the scheme.  While only a tiny few take money out of the scheme.  This is why Social Security and Medicare didn’t have any solvency problems until after birth control and abortion.  For these gave us a declining replacement birthrate over time.  Greatly shrinking the base of the pyramid.  Which made the tip no longer a small sliver of the base.  But much closer in size to the base.  That if it was an actual pyramid sitting on the ground it wouldn’t take much to push it over.  Unlike the above pyramid.  That we could never push over.  Which is why the above Ponzi scheme would probably never fail.  While the one below will definitely fail.

Generational Population - Declining Replacement Birthrate

If you want a generous welfare state where the state provides pensions, health care, housing and food allowances, etc., you need parents to have more children.  For the more children they have the more future taxpayers there will be.  Or you at least need a constant replacement birthrate.  But if that rate is below the rate of a prior baby boom the welfare state will be unsustainable UNLESS they slash spending.  The United States has a replacement birthrate below the rate of a prior baby boom.  While the Obama administration has exploded the size of welfare state.  Especially with the addition of Obamacare.  Making our Ponzi scheme more like the second chart.  As we currently have approximately 1.75 taxpayers supporting each social security recipient.  Meaning that it won’t take much pushing to topple our pyramid. We’re at the point where a slight breeze may do the trick.  For it will topple.  It’s just a matter of time.

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Even with the Bribes Chinese Health Care is Better since Privatization

Posted by PITHOCRATES - April 12th, 2014

Week in Review

China has recently privatized their health care system.  Sort of.  They have private health care providers and a state health insurance that helps pay for it with a small patient ‘co-pay’.  Quality of care did increase.  But health care providers don’t get paid a lot in China.  And turn to other means of compensation that is not without its problems (see ‘Guardian angels’ to protect Chinese doctors from patients by Malcolm Moore posted 4/9/2014 on The Telegraph).

Hospitals in Beijing will recruit 1,500 “guardian angels” to protect their doctors from violent attacks by patients.

In recent years, angry patients have killed a number of Chinese doctors, often citing frustration at how they have been handled by the healthcare system…

Doctors and nurses in hospitals are violently attacked every two weeks on average, the state media said, by patients angry at long waiting times, high medical bills and haughty or uncaring doctors…

The government has promised to root out corruption in the healthcare system, and the Health Ministry said in February it would target patients who bribe doctors for better treatment.

Yes, bribes.  Or hongbao, as it’s called in China.  If you want some decent care in a Chinese hospital you have to slide an envelope with money in it to your health care provider.  Otherwise you’ll only get what the state health insurance will buy you.  Long waiting times, high medical bills (for what the state insurance doesn’t cover—a high deductible, if you will) and haughty or uncaring doctors.  Which tells you how bad the health care system must have been before they privatized it.  For it’s a lot better now than it used to be.

So China made their health care better by privatizing it (although it is still so bad that angry patients who paid good bribes for their loved one’s care are assaulting their doctors and nurses every two weeks on average).  While the United States is going the other way.  Towards more state control.  Pity the Obama administration can’t be more like China when it comes to health care.  And try to improve the quality of health care instead of making it worse.  Which they will likely do as their cost saving measure is simply to pay health care providers less.  Which will likely discourage doctors from entering the system.  Or remaining in the system.  Leading to longer waiting times.  And, perhaps, bribes.  At least from those who want good care for their loved ones.

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Environmental Certification of Oslo Airport won’t prevent any Carbon Emissions from the Planes using it

Posted by PITHOCRATES - March 29th, 2014

Week in Review

Some say it’s pointless for the United States to cut back on its carbon emissions.  For whatever we do it won’t change what China and India are doing.  And what are they doing?  They’re building coal-fired power plants like there is no tomorrow.  So it is kind of pointless what we do.  For when it comes to global warming it won’t make a difference what one nation on the globe is doing.  As the massive amounts of carbon emissions produced by China and India will enter the atmosphere surrounding the globe.  Which will affect the United States.  Even if we shrink our carbon footprint to nothing.

In a similar manner it is kind of pointless for an airport to try and minimize its carbon footprint (see Oslo Airport achieves environmental certification by Joacim Vestvik-Lunde posted 3/28/2014 on Sustainable Aviation Newswire).

On Monday, 24 March 2014, Oslo Airport received a certificate showing that it is certified according to the internationally recognised ISO 14001 standard by DNV GL (Det Norske Veritas Germanischer Lloyd)…

Developed by ISO (the International Organization for Standardization), ISO 14001 is an international standard for environmental management based on two concepts: continuous improvement and regulatory compliance…

OSL has been focused on protecting the external environment ever since the airport was on the drawing boards. OSL is working systematically to reduce the environmental impact of its operations and also uses new technology and innovation to improve its performance. These measures include converting stored winter snow into cooling energy in the summer, the recovery of energy from wastewater and a pilot project to study the use of hydrogen as an energy source for vehicles at the airport. OSL has been certified since 2010 at the highest level of Airport Carbon Accreditation, a voluntary scheme to systematically reduce greenhouse gas emissions together with the players at the airport.

If there was any place that should get a pass on their carbon footprint it should be an airport.  Because whatever they do will not offset the carbon emissions of the airplanes landing and taking off from that airport.  And they emit a lot of carbon.  So much that the Europeans wanted to extend their emissions trading scheme (ETS) to include airlines.  Making them pay for the amount of carbon they emit when flying in EU airspace.  Something the Chinese are very opposed to.  As are other non-EU members.  So much so that they delayed the inclusion of air travel into the ETS.

The biggest carbon emitters at any airport are the planes.  Nothing even comes close.  So why spend the money for a costly certification when it won’t make any difference?  For the only way to make a real cut in carbon emissions at an airport is to get rid of the planes.  Of course, if they did that then we wouldn’t need any ISO 14001 compliant airports, would we?  But if we did this it wouldn’t stop China and India from building their coal-fired power plants.  Proving how futile any efforts in combating manmade global warming are.  It’s just money that could have been spent on feeding the hungry.  Housing the homeless.  Treating the sick.  Or a myriad of other social spending that actually helps some people.

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Byzantine Empire, Bosporus, Silk Road, Dutch East India Company, English East India Company, Tea Act and Opium Wars

Posted by PITHOCRATES - March 11th, 2014

History 101

(Originally published May 15th, 2012)

To encourage Risk Takers to Travel Halfway around the World Mercantile States granted Monopoly Charters

The modern world began because Europeans had a penchant for silk and spices.  Something they enjoyed during Roman times.  When the Romans ruled the world.  And the Mediterranean Sea was nothing more than a Roman lake.  But when the empire stopped conquering new lands and sending the spoils of war home they had to turn to other means to pay for the cost of empire.  Taxes.  To pay for the Roman government and their public spending.  And the Roman legions.  This excessive government spending led to the fall of the western half of the empire.  But the eastern half lived on for another 1,000 years or so.  Why?  Because the capital of the Byzantine Empire was Constantinople.  On the Bosporus.  Trade crossroads of the world.

This city was so rich everybody wanted to conquer it.  So they could have all those riches.  For everything that came along the Silk Road from China crossed into Europe at the Bosporus.  Soon Muslims fought Christians in the Holy lands.  Then more Christians came.  The Crusaders.  Those who didn’t die went back to Europe with some of those Chinese luxuries.  Spices.  Silk.  Porcelain.  Etc.  Sparking a renewed interest in these finer things in Europe.  Especially the spices.  For European cooking was horribly bland at the time.  The Ottoman Turks eventually took Constantinople.  Renamed it Istanbul.  And controlled that lucrative trade.  Making those much sought after Asian goods rather expensive in Europe.  Which they had no choice but to pay.  Because if you wanted those luxuries you had to go through Istanbul.  Until the Portuguese sailed around Africa and found a direct route to those cherished goods, that is.

It was the Commercial Revolution.  A new age of international trade.  A trade even more profitable than what the Ottoman Turks controlled.  Because big ocean-going vessels can carry more cargo than anything coming over land on the Silk Road.  And these new European maritime powers wanted that wealth.  And the power it would provide.  To encourage risk takers to get into those wooden ships and travel halfway around the world they granted monopoly charters.  The Dutch East India Company (VOC) was one of the largest.  And one of the wealthiest.  But this was not your typical company.  The VOC established overseas colonies.  It waged war.  Established treaties.  Even coined its own money.  Because of this thousands of VOC ships stuffed full of valuable cargoes sailed to Antwerp and Amsterdam, making the Dutch very wealthy.  And powerful.

The Tea Act allowed the Company to Ship their Tea Directly to America and exempted them from any Duties

Of course the Dutch weren’t the only ones doing this.  They had competition.  Portugal.  Spain.  France.  And England.  Who would bump into each other numerous times fighting for control of this trade.  And those colonies.  The English and the Dutch would fight 4 wars.  Which is how Dutch-founded Manhattan became part of the British Empire and, subsequently, one of America’s greatest cities.  The English East India Company gave the VOC a run for its money.  Parliament even passed legislation to give the English a monopoly on all trade with their American colonies.  The Navigation Acts.  Which stated that all trade to and from America had to be on English ships.  And all trade had to go through an English port.  Where the ships were unloaded and the cargoes inspected.  And taxed.  Then they could reload their cargoes and continue on their journey.  All tenets of mercantilism.  This kept the lower-priced Dutch goods out of America.  And prevented the Americans from selling to the Dutch directly for higher prices.  So it shut down the Dutch from all American trade (except for a prosperous black market). And brought in some lucrative tax revenue for England.  While extending shipping times and increasing prices for the Americans.  Which they were not happy about in the least.

The English East India Company (the Company) was similar in structure to the VOC.  And soon made the Indian subcontinent a wholly owned subsidiary of the Company.  But it wasn’t cheap.  Waging war was costly.  As was managing those conquered territories (something the Romans had also learned).  Then a famine in Bengal in 1770 claimed about one-third of the local population.  Making laborers more scarce.  And more expensive.  All at a time when the sales of their imported goods were falling in Europe.  There were warehouses full of unsold Chinese tea that they couldn’t sell.  Making for a bad time for the Company.

Higher costs and lower sales spelled trouble.  And that’s what the Company had a lot of.  Trouble.  So the Company turned to Parliament for help.  And Parliament helped.  By allowing the Company to ship their tea directly to America without having to unload it in a British port.  Or pay a duty on that tea.  Which would greatly reduce their costs.  And allow them to sell it in America cheaper than they did before.  So Parliament passed the Tea Act in 1773.  Making life better for all involved.  But the Tea Act left in place another tax in the previous Townshend Acts.  Which was a bigger problem than getting cheaper tea (which they could get on the black market from the Dutch).  These taxes on the British subjects in America were unconstitutional.  Because there were no Americans sitting in Parliament.  This was taxation without representation.  A much bigger issue than cheap tea.  So they threw that first ‘cheap’ tea into Boston Harbor.  The Boston Tea Party being a major step towards war with the mother country.  And American independence.

Britain became the Lone Superpower after Abandoning their Protectionist Mercantile Policies and Adopting Free Trade

The American Revolutionary War was not the only headache the British got from their mercantile policies.  Part of those policies required maintaining a positive balance of trade.  So there was always a net inflow of bullion into the mother country.  That’s why raw materials shipped into Britain from America.  And finished goods shipped out to America.  Finished goods are more valuable than raw materials.  So the Americans had to make up for this balance of trade in bullion.  Resulting in a net inflow of bullion into the mother country.  Very simple.  As long as you can manufacture higher valued goods that other people want to buy.

And this is the problem they ran into with the Chinese.  For though the British wanted those Chinese spices, silk and porcelain the Chinese didn’t want anything the British manufactured.  Which meant Britain had to pay for those luxuries with bullion.  Including all that Chinese tea they craved.  Which resulted in a net outflow of bullion to the Chinese.  The British fixed this problem by finding the one thing that the Chinese people wanted.  Indian opium.  Grown in Bengal.  Of course, this turned a lot of Chinese into opium addicts.  The addiction problem was so bad that the Chinese banned opium.  But the British were able to smuggle it in.  They sold so much of it that they used the proceeds to buy their tea.  Thus reversing the bullion flow.

Not the finest hour in the British Empire.  The Chinese and the British would go on to fight a couple of wars over this opium trade.  The Opium Wars.  Which the British did all right in.  Even gaining Hong Kong in the bargain.  They didn’t build any long-lasting love with the Chinese people.  But Hong Kong turned out pretty nice under the British.  Especially after they abandoned their protectionist mercantile policies and adopted free trade.  Which made the British the lone superpower for about a century as they modernized the world by leading the way in the Industrial Revolution.  And the Chinese in Hong Kong were very happy indeed to be there when the communists took over the mainland.  And caused a famine or two.  For they lived comfortably.  In a state founded on mercantilism.  That achieved its greatest prosperity during the free trade of capitalism that followed Britain’s mercantile ways.

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Abortion is Good in the United States but Bad in China

Posted by PITHOCRATES - January 26th, 2014

Week in Review

Advanced economies with expansive welfare states are incurring large budget deficits and growing national debt.  Why?  Because of birth control.  And abortion.

These massive welfare states were implemented before the Sixties.  When people were having more babies than they are now.  Following World War II there was a baby boom.  Following the baby boom, though, there was a baby bust.  Fast forward to today and a lot of those baby boomers are leaving the workforce and collecting taxpayer-financed benefits in retirement.  While the smaller baby bust generation is paying the taxes for those benefits.  Resulting in less money going into the welfare state than is going out in benefits.  Giving those deficits.  And that growing national debt.

A declining birthrate is the death knell of a welfare state.  So if you want a healthy welfare state you need people to have more babies.  So each generation is bigger than the one before it.  So there is always more money going into the welfare state than is going out.  Allowing the state to pay for those generous benefits without going bankrupt.

So birth control and abortion can bankrupt advanced economies with generous welfare states.  But abortion can do something else (see One-Child Policy Is One Big Problem for China by Susan Scutti posted 1/23/2014 on Newsweek).

Late last year, China’s National People’s Congress eased the one-child policy. The government didn’t exactly admit it was a mistake; according to Chinese officials, the guidelines helped avert 400 million births and in so doing, accelerated modernization…

Enforcement of the one-child policy during the early 1980s was controversial not only in China but around the globe. Early stories emerging from the rural villages focused on coercive practices, including forced late-term abortions and involuntary sterilization, as well as the “neighborly” snitching on pregnant couples who dared to conceive a second child…

…In China, there are currently 32 million more boys under the age of 20 than girls.

Medical advancements and technology have played a key role in creating this surplus of boys. “The Chinese government contracted with GE to provide cart-mounted ultrasound that could be run on generators so that the most obscure village had access to fetal sex determination,” said Hudson. Given the ability to know the sex of their unborn children, many parents aborted female fetuses…

It appears that the outraged cries from within and without have been heard. The Chinese government has spent millions of dollars in recent years to fund research into the implications of this radical skew in gender population numbers.

Having more men than women has led to a lot of single men who want to marry but can’t.  As there are not enough women to match up with men.  Which has caused a lot of these men to turn to prostitutes.  Something human traffickers are more than happy to supply them with.  Sending women there from neighboring countries to work in the sex industry.

The world is outraged over the number of aborted female fetuses in China.  Including the American left.  Yet they have no problem with abortion.  Aborting female fetuses is wrong.  But aborting male AND female fetuses is fine.  Apparently.  As abortion is sacred to those on the left.  Just mention that you want to revisit Roe v. Wade and see them go apoplectic.  For that is settled law.  And anyone who wants to take away a woman’s right to have an abortion is waging a war on women.  While in China abortion itself is the war on women.  So on the one hand abortion is the great liberator of women (outside of China).  While on the other hand it is the great exterminator of women (inside of China).  So it’s both good and bad.  When you use the imaginary logic of liberals, that is.

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China’s Fettered State-Capitalism puts Poisonous Gutter Oil on Store Shelves

Posted by PITHOCRATES - January 11th, 2014

Week in Review

There’s a myth in America that if we don’t have government food inspectors that evil corporations will sell poisonous food to unsuspecting Americans.  As if people will keep buying from a food manufacturer who has a reputation of poisoning their customers.  They won’t.  For every food brand has a competitor just waiting to take their business away.  Which they will do if the people believe they sell a higher quality product.  So there is a huge incentive to sell people nothing but the best and safest food they can.  For without government limiting a business’ competition it is only their good name that keeps customers coming back.  Unlike in China (see Ten jailed for producing, selling ‘gutter oil’ posted 1/7/2014 on China Daily USA).

A man was given a suspended death sentence and two others life in jail for producing and selling poisonous food, a court in east China ruled on Tuesday…

In 2006, they began to produce “gutter oil”, which refers to oil illegally made by reprocessing waste oil or even leftovers from restaurants. It was then marketed and re-used as cooking oil.

They then sold the “gutter oil” to 17 edible oil dealers in Shandong and Shanxi provinces, with a sales value of 52.4 million yuan…

China has been clamping down on “gutter oil” as part of its food safety efforts. The oil, which contains carcinogenic substances, is dangerous if consumed.

This is what happens when you fetter unfettered capitalism.  And transform it into state-capitalism.  Or a planned economy.  Where the government picks winners and losers.  Favoring their friends.  And hurting their competition.  Such as by limiting competition to protect their friend.  Giving them a state-enforced monopoly.  The only way a monopoly can exist.

Without competition you can sell crap and the people have little choice but to buy it.  Which is why a lot of businesses in a planned economy like China do things like this.  Because they can get rich.  Until someone catches them.  Because without unfettered capitalism other competitors can’t enter the market to keep them honest.  Leaving you to rely on a bloated, ponderous and often corrupt public sector to police that planned economy.  And because they aren’t that good you get people trying to sell gutter oil in China.  While food manufacturers police themselves in the United States.  Because they know their brand is not the only brand on supermarket shelves.

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Governments turn People into Addicts to generate Tax Revenue

Posted by PITHOCRATES - January 4th, 2014

Week in Review

During the days of the British Empire Great Britain had a problem.  They loved Chinese tea.  But the British had nothing the Chinese wanted in trade.  Except for one thing.  Silver.  Hard money.  Which was a problem for Britain.  They were running out of hard money.  So they came up with an ingenious way to solve that problem.  By getting as many Chinese hooked on opium as possible.  So they could trade Indian grown opium for Chinese tea.  It worked out great for the British.  But the Chinese didn’t like it.  And fought two opium wars with the British.  Which did not end well for them.

North Korea has a hard money problem, too.  And they, too, turned to drugs.  Crystal meth.  Which North Korea manufactured in state-run labs.  Destined for China.  Where they tried to get as many people addicted to crystal meth as possible.  So they can sell it in exchange for Chinese currency.  Which they could use to buy Chinese food.  To help ward off famine in North Korea.  This worked pretty well for North Korea.  But only gave China another addiction problem.

In the United States the government found other ways to raise revenue.  The first two big sources of addiction-revenue were cigarette and alcohol taxes.  But it soon proved not enough.  They then got people addicted to playing the lottery.  When that revenue proved to be insufficient they then got people addicted to casino gambling.  But government spending had grown so great that this revenue was still not enough.  So the government is looking at other things to get people addicted to (see Why Legalizing Marijuana Is a Smart Fiscal Move by Bruce Bartlett, The Fiscal Times, posted 1/3/2014 on Yahoo! News).

Perhaps the dominant factor driving marijuana legalization is the desperate search for new revenue by cash-strapped state governments. The opportunity to tax marijuana is potentially a significant source of new revenue, as well as a way of cutting spending on prisons and law enforcement. The California Secretary of State’s office, for example, estimates savings in the hundreds of millions of dollars from both factors. The following summary is from a proposed state ballot initiative in California (No. 1617)…

It is not surprising that revenue considerations should be critical in the marijuana legalization movement. That was previously the reason why cigarettes were not banned until the 1920s despite a strong nationwide movement to do so. In the wake of Prohibition, governments simply needed cigarette tax revenue too badly. And when Prohibition ended, the need for new revenue after the Great Depression decimated government budgets was a driving force.

Indeed, according to author Daniel Okrent, expectations of the revenue from taxing legal liquor were so great in 1932 that some people thought it might permit the repeal of income taxes. It’s worth remembering that in 1900, taxes on alcohol and cigarettes constituted half of all federal revenues. Indeed, the only reason Prohibition was possible in the first place was that the income tax established in 1913, which was greatly expanded by World War I, would replace the revenue lost from the liquor tax after Prohibition.

There have been no great cuts to revenue like that following Prohibition.  Government spending has just grown so great that it far exceeds the nation’s ability to pay for it with current taxes and borrowing.  So they are looking to make people addicted to marijuana to help pay for their large public sectors.  As well as their vote-buying welfare state.  And when this proves insufficient they can turn to other sources of revenue.  Such as decriminalizing and taxing heroin.  Cocaine.  Crack.  Crystal meth.  Opium.  Even prostitution.  People are already doing these things.  So they can’t be any worse than marijuana.  As long as only responsible adults indulge in these activities.  Just as only responsible adults will smoke marijuana in Colorado.  For think of the tax revenue heroin, cocaine, crack, crystal meth and opium could generate.  For those drugs are really addictive.  And just think how much old rich men would enjoy 18 year old prostitutes.  Prostitution would be a booming business to tax.  These young women could generate great tax revenue for the government by just doing what consenting adults want to do.

We could do these things to find new sources of revenue.  Or we could NOT make people addicts.  Or NOT sell women into prostitution.  Instead we could cut the size of the public sector and the welfare state.  So we can cut spending.  Which would eliminate the need to produce new tax revenue in the first place.  Allowing people to keep their hard-earned money instead of handing it over to the government.  To pay for generous pensions and retiree health care for others.

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Free Speech is becoming an Endangered Species in Communist Vietnam

Posted by PITHOCRATES - December 1st, 2013

Week in Review

The American left has been critical of free speech that they don’t agree with.  Nancy Pelosi has stated she would like to bring back the Fairness Doctrine (aka the Hush Rush Bill).  Forcing radio stations who carried conservative talk shows like the Rush Limbaugh show to carry equal programming of the opposite viewpoint.  For try as they might liberals have no Rush Limbaugh of their own.  So if they can’t beat them they would like a law to encourage broadcasters to drop these conservative talk shows.  As they probably would if they were forced to carry an equal amount of programming of the opposite viewpoint.  For it would be easier just not to carry controversial programming.

And then there’s net neutrality.  Which is kind of like the Fairness Doctrine for the Internet.  But more complex.  And more murky.  The left likes the idea of enforcing net neutrality.  Especially if they could shut down conservative websites they didn’t like.  For that would make it harder to fund raise.  And you wouldn’t have to use the IRS to illegally impede conservative fundraising.  Like they did with Tea Party groups in the 2012 election.  Getting caught in that was just a pain in the ass for the Democrats.  And they would love to be able to do the same thing without anyone throwing the Rule of Law in their face.

The rollout of Obamacare was not all that great.  And the White House didn’t like what they were hearing in the media.  So they called in their friends in the liberal media.  And said you’re killing us.  Please don’t say these things anymore.  And, instead, say these talking points.  Lie for us.  Just help us get these idiots (the people losing their health insurance because of Obamacare) off of our backs.  It was an ‘off the record’ meeting so we don’t know exactly what they said.  But this was probably the gist.  A return to that recurring theme of theirs.  Trying to censor bad things being said about them.  Using these sneaky ways because they just can’t do this (see Vietnam: Criticize government on social media and go to jail by Dara Kerr posted 11/29/2013 on CNET).

 Vietnam is joining the ranks of Iran, Saudi Arabia, and China, as being known as a country that censors its citizens on social media.

The government introduced a new law this week that fines people $4,740 for posting comments critical of the government on social-networking sites like Facebook, Twitter, and YouTube, according to Reuters. Some people could also face extensive prison terms.

While the law is unclear about what kind of speech sparks government censorship, it does say that “propaganda against the state” and “reactionary ideology” would elicit fines.

Vietnam’s communist government has increasingly censored its citizens’ free speech over the past few years. According to Reuters, arrests and convictions for criticizing the government online have skyrocketed the last four years…

In a recent Global Transparency Report, Google said that it has seen an alarming incidence in government requests to gather information on their citizens. Some of the top offending countries in Google’s report include the US, India, and Germany.

You know the Obama administration would love to do this.  You should at least not be surprised if they did.  For they are spying on us.  And collecting information on us.  Using the IRS to silence the opposition.  Lying to us, telling us a YouTube video killed our ambassador and three other Americans in Benghazi.  Something they are tired hearing about.  And no doubt envy Iran, Saudi Arabia, and China for being able to do what they want to do but can’t.  Having the power to take away our free speech.

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Powerful Government Forces suppressing the Economic Principles of Friedrich Hayek in China and America

Posted by PITHOCRATES - November 16th, 2013

Week in Review

Large governments like to control their economies.  And their people.  Because those in power always want one thing.  More power. 

The United States became the world’s number one economic power before the federal government grew into the thing it is today.  Way too big.  Reaching way too far into the private sector economy.  Before Keynesian economics became all the rage to empower the growth of governments there was classical economics.  With simple principles.  Thrift.  People thought long-term and saved their money instead of buying everything they wanted today.  Banks collected their savings and transformed them into investment capital.  The more people saved (i.e., the thriftier they were) the more capital there was available to loan to entrepreneurs.  Thus lowering interest rates.  There was also sound money.  Backed by gold.  In various forms of the gold standard.  That held the value of money over time.  And the federal government taxed little.  Regulated little.  And spent little.  These classical economic principles stimulated strong economic growth.  (Principles similar to the Austrian school of economics championed by Friedrich Hayek.)  And it is these principles that we have moved away from as we turned to Keynesian economics.  And a form of state-capitalism that we have today.

During the Nineties China turned to classical economic principles.  As they slowly allowed people some economic liberty.  But just a taste of it.  For the ruling Chinese communists did not want what happened during the collapse of the Soviet Union to happen in China.  The Chinese Communist Party would not collapse like it did in the former Soviet Union.  While there were free thinkers that embraced the principles of Friedrich Hayek the state kept them on a short leash.  A leash that appears to be even shorter these days (see A Lonely Passion: China’s Followers of Friedrich A. Hayek by DIDI KIRSTEN TATLOW published 10/30/2013 on The New York Times).

Hayek believed that economic planning by the state leads to a loss of individual liberty, and that a private economy run by people whose rights are protected and enlarged by good laws delivers the best life.

‘‘There is some distance between Hayek and the current realities’’ in China, Gao Quanxi, a prominent Chinese Hayekian and law professor at Beihang University in Beijing, said in an interview this week.

Mr. Gao was probably choosing his words carefully. The gap is enormous, as he explained last Friday in a talk at the Unirule Institute of Economics, a think tank in Beijing…

In his talk, titled ‘‘Reconsidering Hayek’s Theoretical Legacy,’’ Mr. Gao did not mince words: China is less free now than 10 years ago, at the end of the Jiang Zemin era. There is no ‘‘free market of ideas’’ in universities. Publishing on topics the authorities disapprove of has become more difficult. The state is on the march…

Capitalism, several participants said, functions in China according to the unwritten rules created by the power holders, not by good laws, as Hayek urged.

‘‘Communism has failed. Socialism has failed. What we have here is statism. And Hayek really opposed that. So how should we understand Hayek in the context of today’s China?’’ asked Mr. Gao…

Many economists, scholars and politicians believe that China is facing deep challenges to its economic model, that it needs to shift from a fixed investment-fueled economy, where the hand of the state is heavy, to one with more private enterprise and market forces.

President Obama and the Chinese communists share something in common.  They both are trying to move their economies in the same direction.  Only the Chinese communists don’t publicly bash capitalism as much as President Obama and his fellow Democrats do.

When China was enjoying double digit GDP growth the liberals in the United States wanted to do what the Chinese were doing.  To manage the economy more.  As they thought they were even more brilliant than communist state planners in China.  And could even outperform the Chinese economy.  If they could only control it.  Decide what we make.  Like solar panels.  And electric cars.  Of course, most of China’s economic growth produced exports.  And they sold well because of China’s low wages.  Which is pretty much all they had going for them.  Their middle class did not grow.  And with the worldwide decline in economic activity thanks to Keynesian economic policies by state planners everywhere who think they are smarter than the market their export market cooled.  As it cooled so did their GDP growth.

China is suffering a little economic malaise now because they don’t have a thriving middle class of entrepreneurs starting small businesses.  All they have are large state-run factories.  That produce exports.  Because they don’t have a thriving middle class to buy these products.  Which is what happens when you don’t have individual liberty.  Friedrich Hayek understood this.  Pity the Chinese communists don’t.  Or President Obama and his fellow Democrats.  Then again, perhaps they do.  But they know the price of individual liberty is less government power.  And that’s just something anathema to communists.  President Obama.  And Democrats.

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Tariffs raised the Price of Honey while failing to keep Chinese Honey out of America

Posted by PITHOCRATES - September 28th, 2013

Week in Review

The typical argument for tariffs is that they will save American jobs.  But the cost of the tariffs added on to the products costs us a lot more than the wages of the jobs they save.  Because there are more consumers than producers.  So tariffs help a small percentage of the population while hurting a much larger percentage of the population.

Also, the cost difference between the more costly domestic produced goods and the much lower priced imported goods invites crime.  Because if you can get that lower-priced import and sell it at the higher tariff price you can make a lot of money.  So much money that some people can’t resist breaking the law (see The Honey Launderers: Uncovering the Largest Food Fraud in U.S. History by Susan Berfield, Bloomberg Businessweek, posted 9/23/2013 on Yahoo! Finance).

Americans consume more honey than anyone else in the world, nearly 400 million pounds every year. About half of that is used by food companies in cereals, bread, cookies, and all sorts of other processed food. Some 60 percent of the honey is imported from Argentina, Brazil, Canada, and other trading partners. Almost none comes from China. After U.S. beekeepers accused Chinese companies of selling their honey at artificially low prices, the government imposed import duties in 2001 that as much as tripled the price of Chinese honey. Since then, little enters from China legally.

In September 2010… ALW perpetuate a sprawling $80 million food fraud, the largest in U.S. history… to illegally import Chinese honey…

…E-mails mention falsifying reports from a German lab, creating fake documents for U.S. customs agents, finding new ways to pass Chinese honey through other countries, and setting up a Chinese company that would be eligible to apply for lower tariffs…

ALW relied on a network of brokers from China and Taiwan, who shipped honey from China to India, Malaysia, Indonesia, Russia, South Korea, Mongolia, Thailand, Taiwan, and the Philippines. The 50-gallon drums would be relabeled in these countries and sent on to the U.S. Often the honey was filtered to remove the pollen, which could help identify its origin. Some of the honey was adulterated with rice sugar, molasses, or fructose syrup.

Another argument for tariffs is that they keep inferior and dangerous goods out of the country.   Like this Chinese honey adulterated with ”rice sugar, molasses, or fructose syrup.”  So the tariffs didn’t do much to keep this inferior good out of the country.  It just made people pay three-times as much for this inferior product.  While making the Chinese and American honey industry richer.

Tariffs never help consumers.  They only help the businesses granted tariff protection.  And criminals.  While the consumers have to pay more for less.  Just so a small percentage of the population can keep their high-paying jobs.  Or sell their honey at three-times the market price.

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