Scotland wants to Keep the Pound in a (somewhat) Independent Scotland

Posted by PITHOCRATES - March 8th, 2014

Week in Review

The Greek crisis happened because there was a currency union without a political union.  The Eurozone set some pretty strict limits on deficits and debt to join.  Why?  Because people in the Eurozone would all be using the same Euro.  So they didn’t want one country running up deficits or their debt.  Because if they did they wouldn’t just be messing with their economy.  They would be messing with the entire Eurozone economy.

Well, that’s what Greece did.  They were spending so much money that they had large deficits that added to a large debt.  A euro-denominated debt.  Which meant a default would raise borrowing costs for other euro-denominated debt.  Raising the borrowing costs for the Eurozone.  So to avoid that required other Eurozone nations to help Greece with their debt.  Requiring higher taxes in the more responsible countries of the Eurozone to pay for the irresponsible spending of Greece.  Neither option (default or rescue package) being a popular option.  Especially for the Greek people.  For the rescue package came with strings.  And the big one was austerity.  They had to stop spending so much.  Which meant a lot of people lost some of their government benefits.  Making them very unhappy.  Leading to some rioting in the streets.

Had there been a political union this would not have happened.  For there would have been only one entity borrowing and spending Euros.  One entity taxing the Eurozone nations.  And one entity printing money.  Much like the federal government in the United States.  And London in the United Kingdom (see Scotland’s referendum: Salmond says independence will benefit whole UK posted 3/4/2014 on BBC News Scotland Politics).

An independent Scotland with a strong economy would benefit the whole of the UK, First Minister Alex Salmond has told a gathering in London…

“I believe George Osborne’s speech on sterling three weeks ago – his ‘sermon on the pound’ – will come to be seen as a monumental error.

“It encapsulates the diktats from on high which are not the strength of the Westminster elite, but rather their fundamental weakness.

“In contrast, we will seek to engage with the people of England on the case for progressive reform.”

But Tory MP Mr Mundell said that Mr Salmond was saying that a choice to leave the UK and become independent “means staying exactly the same as we are now”.

He added: “By definition, that simply cannot happen.

“No one should be under any illusion that voting for independence means getting independence, which means becoming a new country outside the UK.

If the Eurozone sovereign debt crisis has taught us anything it’s that a currency union without a political union is not a good thing.  An independent Scotland would eliminate the political union there is now.  And the reason why England does not want a currency union with an independent Scotland is because of what happened in the Eurozone.  It doesn’t work.  At least, it doesn’t work well.  Which begs the question why do they want independence but not complete independence (keeping the pound)?

One can only surmise so they can have more autonomy over their taxing, borrowing and, of course, spending.  Perhaps to spend more.  Creating larger deficits.  And a greater pound-denominated debt.  Which would be of great concern to other holders of pound-denominated debt.  The rest of the United Kingdom.

It is unlikely that independence would lead to a stronger Scottish economy.  Or a stronger UK economy.  If it did then the whole point of the Eurozone would be a lie.  To create a larger economic zone to compete with the large economic zone that is the United States.  Because bigger is better.  At least in terms of GDP.  The British Empire was bigger than the United Kingdom is now.  And the United Kingdom is bigger than a United Kingdom without Scotland.  And an independent Scotland would be smaller than all of the above.  So if you want to maximize GDP you would want to maximize the size of your economy.  Not shrink it.  Which leads one to believe that the reason for independence is something other than economic.  Because the UK is too English?  Perhaps.  Whatever the reason let’s just hope everything works out for the best.  For the United Kingdom did make the world a better place.  With great people like Adam Smith from Scotland.  And John Locke from England.  To name only two of the greats to come from the United Kingdom.

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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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FT187: “It’s odd how we can never afford a tax cut but we can always afford new spending.” —Old Pithy

Posted by PITHOCRATES - September 13th, 2013

Fundamental Truth

The Democrats’ idea of Bipartisanship is Republican Capitulation

It’s that time of the year again.  Summer is winding down.  The weather is starting to cool.  The harvest is coming in.  The stores are already stocking their shelves with Halloween decorations.  Yes, it’s the end of the government’s fiscal year.  The time the government will run out of money unless Congress passes a new budget.  Or what passes for budgets these days.  Continuing resolutions.

This that magical time of year when Republicans and Democrats come together to negotiate the government’s budget for the upcoming fiscal year.  The give and take process where they sit down and work with each other.  Civilly.  Saying things like, “Yes, that is too costly.  We need to spend less there.”  And, “You’re right, that is important to the people and we should spend more there.”  And the occasional, “I agree.  That program is no longer needed and we can remove it from the budget entirely.”

I am, of course, lying.  These are things that are rarely, if ever, said to each other.  For when it comes to these budget battles it is always the same.  The Republicans try to be responsible and cut spending.  The Democrats then call them greedy corporate toady Nazis.  The Republicans will then suffer a general emasculation and give the Democrats their spending hikes.  And perhaps a tax hike or two.  While asking them to please like them and invite them to the cool parties.  And the Democrats will then commend the Republicans’ bipartisanship.  What others would call capitulation.  Happy that things are once again right in the world.  With the Republicans once again the Democrats’ bitch.

Entitlement Spending creates a Permanent Underclass that keeps the Privileged Class in Power

John Emerich Edward Dalberg-Acton, known more simply as Lord Acton, said, “Power tends to corrupt, and absolute power corrupts absolutely.  Great men are almost always bad men.”  And boy was he on to something there.  For something happens when some good conservatives go to Washington.  They enter a world like no other.  Nothing they could ever have dreamed of.  A world that once belonged only to the nobility and the aristocracy.  Those things Americans fought for their independence from.  And here they are.  After winning an election to rein in the kind of government spending that makes this living possible.  And they say, “What, end all of this?  Are you mad?”

So many cross over to the dark side.  Sell their souls.  Forsake their constituents.   Do great dishonor to our Founding Fathers.  All because they like the money and the power.  Especially the power.  Some resist.  Those from the Tea Party seem more immune than most when it comes to the corrupting influences of Washington.  But these people who stand on principle?  Those who serve their constituents honorably?  The left will fling every invective upon them.  A figuratively flinging of excrement.  To try to beat them down and break them.  To get them, too, to forsake their constituents.  And to join them as they drop trou and defecate on the Constitution.  Figuratively, too, of course.  At least I hope so.

So this is what makes the budget process so adversarial.  You have those who are trying to do the right thing for the people.  And those on the other side who want to corrupt these people.  To get them to quit fighting against them and to join them.  So they can maintain their privileged class.  This is what all that entitlement spending is all about.  It’s nothing but alms.  To keep the people content enough so they don’t rise up.  But not too content that they don’t fear that those greedy corporate toady Nazis may take away their meager alms.  And once they get someone to think like that they have a voter for life.

There comes a Point when Raises in Tax Rates actually Reduce Tax Revenue

The key, then, is keeping people poor.  For the whole privileged class thing those in Washington have doesn’t work unless they have poor people who need them.  Which is why they spend so much time reminding the poor how much they need them.  The Democrats in Congress.  Who are always there fighting for them.  Keeping their alms flowing.  But also keeping them poor.  Which a welfare state does well.  Because if you have enough to subsist lethargy will do the rest and destroy the spirit.  Getting the poor to accept their place as a permanent underclass.  That needs a permanent privileged class taking care of them.

There is only one problem.  This destroys lives.  People in this permanent underclass may have gone on and done great things.  They may have been doctors.  They may have been engineers.  They may have been entrepreneurs.  But they will never be those things because the left sacrificed them to maintain their privileged class.  Forever consigning them to the underclass.  So the privileged class has someone to take care of.  No matter how costly it gets to maintain this entitlement culture.  No matter how great the deficits get.  Or how great the national debt grows.

So there is another problem. As you convert taxpayers into tax-consumers you have to keep raising taxes on those remaining in the tax base.  But as you raise tax rates you put the brakes on economic expansion.  And with reduced economic activity there is reduced tax revenue.  There comes a point when raises in tax rates actually reduce tax revenue.  And we’ve passed that point.  Which is why we have record deficits.  A record national debt.  And the worst economic recovery since that following the Great Depression.  Because we are spending, taxing and regulating too much.  Which is why uncorrupted conservatives want to cut taxes, defund Obamacare, roll back other costly regulations and reduce spending.  Things the left bitterly opposes.  For doing so means we don’t need them as much as they need us to need them.

So as the budget battle commences you will hear the usual refrain from the left.  We can’t afford tax cuts.  As they equate tax cuts with government spending.  But we can always afford new government spending.  So the left will call for bipartisanship.  That is, capitulation.  And eventually make the Republicans their bitch.  Again.  And increase the national debt.  Again.  Putting the nation on the path to bankruptcy.  What the left considers a small price to pay to maintain their privileged class.  As long as that bankruptcy comes after they’re dead and buried.  After they enjoyed their time in the privileged class.  Which is why the left is also less likely to believe in God and life after death.  For it is easier to be bad when there is nothing to fear after a bad life.

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The EU will have to find another way to Confiscate Private Sector Wealth because the ETS is Kaput

Posted by PITHOCRATES - April 20th, 2013

Week in Review

The Emissions Trading Scheme (ETS) was the European Union’s (EU’s) way of combating global warming.  By making carbon emitters pay for their carbon emissions.  But Europe is mired in recession.  And the Eurozone is suffering a sovereign debt crisis.  Which hasn’t helped to pull Europe out of recession.  And it appears that the economic reality in Europe is dooming the ETS (see If Carbon Markets Can’t Work in Europe, Can They Work Anywhere? by Bryan Walsh posted 4/17/2013 on Time).

But the ETS—and carbon trading more generally—is not doing well, and its problems are taking some of the green shine off of Europe. Since its launch the ETS has struggled, with the price of carbon falling as the 2008 recession and overly generous carbon allowances undercut the market. In the ETS business are given free allowances to emit carbon—too many free allowances mean they don’t need to reduce their carbon emissions much, which erodes the demand for additional carbon allowances on the market and causes the price to drop. Prices fell from 25 euros a ton in 2008 to just 5 euros a ton in February. There was a way to fix this—take 900 million tons of carbon allowances off the market now and reintroduce them in five years time, when policymakers hoped the economy would be stronger and demand would be greater. As anyone who’s taken Econ 101 would know, artificially reducing the supply of carbon allowances in such a drastic way—something called “backloading”— should force the price back up.

But on April 16, the European Parliament surprised observers by voting down the backloading plan. In turn, the European carbon market collapsed, with the price of a carbon allowance falling by more than 40% over the day. “We have reached the stage where the EU ETS has ceased to be an effective environmental policy,” Anthony Hobley, the head of climate change practice at the London law firm Norton Rose, told the New York Times. The ETS is a mess.

Backloading failed because even in very green Europe, economic concerns seemed to trump environmental ones. European Parliamentary members worried that any action that would cause the price of carbon to rise would add to European industry’s already high energy costs.

This should make China happy.  For there was no way no how they were going to pay for the carbon emissions from their airplanes entering European airspace.  In fact they warned they would cancel their Airbus orders and give them to Boeing if the Europeans tried to force them to help bail out the Eurozone in their sovereign debt crisis.  For this was what the ETS would ultimately do.  Transfer great amounts of wealth from the private sector to the public sector.  Which would have gone a long way in helping the Eurozone to continue to spend money they don’t have.

The ETS was nothing but a new tax on business.  Cloaked in the guise of making the world a better—and greener—place.  But the EU is suffering economically.  A large part of the sovereign debt crisis is due to having less economic activity to tax.  So the EU needs to improve the economy.  So they can generate more tax revenue from the current tax rates.  But increasing taxes on the carbon emitters will not help businesses.  It will only increase the cost of business.  Increasing their prices.  Making them less competitive in the market place.  Reducing their sales.  And killing jobs.  Which will generate even less tax revenue from the current tax rates.

The problem in the EU is not global warming.  Or insufficient tax revenue.  They have a spending problem.  This is what caused their deficits.  That gave them their soaring debt.  Just like every other nation that ever suffered a debt crisis.  Including the U.S.  Trying to fix a spending problem with more taxes just doesn’t work.  Only a cut in spending can fix a spending problem.  It’s not like the old chicken and egg question.  Excessive and unsustainable spending always comes before a debt crisis.  Always.

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President Obama has a Lot in Common with the Social Democracy Ideology of the NDP

Posted by PITHOCRATES - April 13th, 2013

Week in Review

The New Democratic Party (NDP) of British Columbia is a social-democratic political party.  Their political ideology is Social democracy.  And the Social democracy political ideology is to transform capitalism into socialism through progressive social reform.  And they do that with higher taxes and wealth redistribution.  In fact, the current NDP leader in British Columbia has pledged to raise taxes should they win the coming election (see NDP promises tax hikes if elected by Bryn Weese, QMI Agency, posted 4/11/2013 on Vancouver 24 hrs).

Corporations, banks, polluters and the wealthy will pay more if the BC NDP wins the provincial election.

The party’s fiscal plan, unveiled at Simon Fraser University Thursday, calls for: a one point rise in the corporate tax rate from 11% to 12%, reinstating a 3% bank tax, expanding the carbon tax to include vented oil and gas emissions, and raising the personal income tax rate to 19% on incomes over $150,000 a year.

The party, if elected, also plans to run the same $800 million deficits it alleges the ruling BC Liberals are hiding. In total, the NDP would run nearly $2 billion in deficits over the next three years until the party, it says, would balance the budget in year four of a NDP government.

“We’re looking at those who have a little more to give a little more,” NDP finance critic Bruce Ralston told reporters…

The fiscal plan is a broad look at how the NDP will pay for its election platform, which will be detailed during the campaign. On Thursday, the party promised a childcare and early-education plan and a poverty-reduction strategy.

Earlier this week, NDP Leader Adrian Dix proposed increasing the tax credits for TV and film productions in the province to 40% of labour costs.

Sound familiar?  It sounds a lot like what you hear coming out of Washington.  For the Obama administration wants to tax corporations, banks, polluters and the wealthy more.  In fact they’ve used the same language.  “We’re looking at those who have a little more to give a little more.”  The Obama administration is running deficits.  President Obama even talked about expanding funds for childcare so children as young as 4 years old can receive state indoctrination.  I mean, early developmental skills.  The Obama administration has a poverty-reduction strategy.  They call it food stamps.  Some have even called him the food stamp president because more people than ever use food stamps.  And the Obama administration as a special relationship with TV and film production.  He even changed his stance on same-sex marriage in exchange for more Hollywood campaign donations.

So what does this mean?  Does it mean that President Obama is a Social democrat, too?  Because he shares the same political ideology of the NDP?  Social democracy?  Does this mean President Obama wants to transform capitalism into socialism through progressive social reform?  Of course not.  Just because it looks like a duck and walks like a duck and quacks like a duck it doesn’t mean President Obama is a socialist-leaning anti-capitalist.  It’s just a coincidence that he looks like, walks like and quacks like a socialist-leaning anti-capitalist.

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Hope, Fear and Lies

Posted by PITHOCRATES - December 13th, 2012

Politics 101

The Founding Fathers were Gentlemen of the Enlightenment with Sound Philosophical Beliefs

Politicians have to win elections.  They have to persuade and convince people to vote for them.  Once upon a time that meant vigorous debate where candidates explained why their way was the better way.  Going right back to the Founding.  Where Alexander Hamilton and Thomas Jefferson bitterly contested each other’s vision for the country.  And the debate often got dirty.  Such as when Hamilton’s political enemies exposed his extramarital affair with the con-woman Mrs. Reynolds who seduced Hamilton with the purpose of blackmailing him.  Who wanted to use this information to say he was involved in a bigger scheme with Mr. Reynolds in defrauding the federal government.

Treasury Secretary Hamilton met three gentlemen of the political opposition in private.  Admitting to his affair.  And proved beyond a shadow of doubt that all money paid to the blackmailers came from Hamilton’s private funds.  Not a penny came from the Treasury Department.  According to 18th century gentlemanly behavior the matter was closed.  The affair was a personal matter.  It would be imprudent to make it a public issue.  But upon Hamilton’s retirement a bitter political enemy leaked this information to a scandalmonger.  James Callender.  Who wrote a book exposing this private matter.  The History of the United States for the Year 1796.  Jefferson had helped to finance Callender.  And reveled in Hamilton’s scandal.  But when you lie down with dogs, you get up with fleas.  And Jefferson did.  For Callender published articles confirming rumors that Jefferson had fathered children with his slave Sally Hemings.

Politics then were just as dirty as they are today.  And often crossed the line.  But underneath all the scandals and mudslinging there were philosophical principles.  They did these things for principle.  For they feared the opposition and what their policies would do the fledgling nation.  There was political patronage and political corruption.  But above that was a battle of competing political ideology.  Waged by men well read in history.  Familiar with John Locke.  And Charles-Louis de Secondat, baron de La Brède et de Montesquieu.  Icons of the Enlightenment.  Whose philosophies can be found in the Declaration of Independence and the U.S. Constitution.  These Founding Fathers were rich propertied men.  Established in their careers.  Who had little left to prove.  These gentlemen of the Enlightenment did what they did not for money or political favor.  So they could live a more comfortable life.   They did these things out of principle.  Based on sound philosophical beliefs.

The Democrats try to Scare the Bejesus out of People to Get and Keep the Republicans out of Office

It’s not like that anymore.  Instead of rich successful people entering politics for selfless reasons people of no accomplishments enter politics to become rich and powerful.  Who have no principles.  Who will buy and sell anyone to remain in power.  Of course they don’t campaign by saying this.  Instead, their campaigns are based on hopes and fears.  And the telling a lot of lies.  With little principle.  Or sound philosophical beliefs.

In 2008 President Obama campaigned on hope and change.  To get away from the partisan politics of the past.  Democrats continue to peddle hope.  Health care for everyone.  College degrees for everyone.  High-paying green jobs and energy independence.  A return of manufacturing jobs.  Spending our way out of recession with Keynesian stimulus spending.  A bigger social safety net.  Talking to our enemies instead of going to war with them.  And making them like us by resolving all of our differences with diplomacy.  That we can have whatever we want.  If only we got the Republicans out of office.

While at the same time the Democrats try to scare the bejesus out of people if we don’t get and keep the Republicans out of office.  For the Republicans want to take away birth control and abortion from women.  And keep them from being independent and having careers.  The poor will remain poor.  The rich will get richer.  And the hungry will die.  Slavery will be reinstituted.  The Republicans will tax the middle class more so they can give tax breaks to rich corporations.  They will burden the nation with massive deficits with their tax cuts for the rich.  Global warming will continue unchecked.  Our drinking water will be polluted.  And our atmosphere will become poisonous to breathe.  All because Republicans put profit before people.

The Left tells a lot of Lies to Win Elections because all they have are Failed Keynesian Economic Policies

Republicans, on the other hand, peddle the hope that we can return to the prosperity of Ronald Reagan.  By cutting tax rates.  For throughout U.S. history whenever the government cut tax rates prosperity followed.  As well as flooded the treasury with tax dollars.  For contrary to the fear peddling of the Democrats cuts in tax rates have historically increased tax revenue.  And can again.  As Ronald Reagan campaigned in 1984, it can be Morning in America again.  We can be prouder, stronger and better.

While at the same time Republicans like to scare people with national security issues.  The Clinton administration handled terrorist attacks against America in the courts.  Which emboldened America’s enemies into an escalation of attacks resulting in 9/11.  The one in 2001.  Not the attack in 2012 on the U.S consulate in Benghazi.  While the Democrats believe our enemies hate us because George W. Bush made them hate us with his cowboy swaggering ways.  And that was the only reason.  Even though Bush had little time to swagger before the attacks on 9/11.  Those in 2001.  Not the ones in 2012.  The Republicans say our enemies hate us for who we are.  As we are too Christian.  And allow our women to have careers and use birth control and abortion.  Something our enemies won’t allow their women to have.

President Obama did not end partisan politics.  He lied about that.  For his administration has been perhaps the most partisan in U.S. history.  With no interest whatsoever in compromise.  He and the Democrats continue to lie about the Reagan tax cuts.  And the Bush tax cuts.  Blaming tax cuts for all our woes.  And our deficits.  Despite those tax cuts increasing tax revenue.  They lied about a war on women.  Having one of their cronies in the mainstream media create it by asking Mitt Romney if he wanted to take away women’s birth control.  And they continuously spread the lie that the rich aren’t paying their fair share in taxes.  When the top 10% of income earners pay about 70% of all federal income taxes.

So the Left tells a lot of lies to win elections.  Because that’s all they have.  They do not have a Morning in America they can talk about.  Just failed Keynesian economic policies.  Like the 4 years of Jimmy Carter.  The 4 years of President Obama.  And what may have been the 4 years of Bill Clinton had it not been for the Republicans taking control of Congress 2 years into his presidency.  Of course the Republicans can tell a lie, too.  The big one being their claim of being conservative like Ronald Reagan.  As they too often fall for the lies coming from the Left.  And appear more interested in living a comfortable life than sound philosophical beliefs.

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Women are having Fewer Babies and they’re having them Later in Life Guaranteeing Continued Financial Crises

Posted by PITHOCRATES - November 4th, 2012

Week in Review

Aging populations are plaguing advanced economies.  In Japan.  The United States.  Britain.  France.  Spain.  Italy.  Greece.  And others.  All countries with large welfare states.  Large deficits.  And mountains of debt.  Fewer people are entering the workforce than are leaving it.  Resulting in a shrinking tax base.  Requiring higher taxes.  More borrowing.  And when all else fails, budget cuts.  Which is where the British are in trying to keep their NHS solvent.  Cutting 20% from the NHS budget.  While the US added Obamacare to a budget that is already causing record deficits.  Caused by fewer people entering the workforce than are leaving it.  So that’s how we got here.  Now how does the future look (see CDC: U.S. Birth Rate Hits All-Time Low; 40.7% of Babies Born to Unmarried Women by Terence P. Jeffrey posted 10/31/2012 on CNSNews)?

The birth rate in the United States hit an all-time low in 2011, according to a report released this month by the federal Centers for Disease Control and Prevention…

While the overall birth rate declined to a record low, the birth rates for women in the 35-39 and 40-44 age groups actually increased from 2010 to 2011.

Pretty bleak.  Not only are women having fewer babies they’re waiting another 10-20 years before having them.  Which means when the full costs of Obamacare hit we’ll have perhaps an all-time low of new workers entering the workforce to pay the taxes to fund Obamacare.  And the rest of that swelling welfare state.

In about twenty years our spending obligations will grow too great for taxes and borrowing to pay.  Which means the US will have no choice but to follow the UK.  And make massive spending cuts in our health care.  Resulting in increased wait times.  Rationing.  And perhaps a little Greek-style protesting.  Unless we repeal Obamacare.  And make some serious reforms in our two most costly programs.  Medicare.  And Social Security.  If we do we can save them.  If we don’t we probably can’t save them.  This is the choice we have to make.  Forced onto us by a declining birthrate.

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President Obama is “the Best Food-Stamp President in American History”

Posted by PITHOCRATES - October 21st, 2012

Week in Review

Newt Gingrich called President Obama “the best food-stamp president in American history.”  Because, Gingrich said, President Obama has spent more on food stamps than any other president.  Supporters of the president have attacked Gingrich’s comments.  Calling them untrue.  And racist.  So is Newt Gingrich a lying racist?  Or is President Obama the “the best food-stamp president in American history?”  All we can do is look at the numbers (see Report: Welfare government’s single largest budget item in FY 2011 at approx. $1.03 trillion by Caroline May posted 10/18/2012 on The Daily Caller).

The government spent approximately $1.03 trillion on 83 means-tested federal welfare programs in fiscal year 2011 alone — a price tag that makes welfare that year the government’s largest expenditure, according to new data released by the Republican side of the Senate Budget Committee…

The data excludes spending on Social Security, Medicare, means-tested health care for veterans without service-connected disabilities, and the means-tested veterans pension program…

CRS reports that food assistance programs — the third largest welfare category behind health and cash assistance — experienced the greatest increase in spending, with 71 percent more spending in 2011 than in 2008. The agency explained that this spending increase was largely due to the growth in the Supplemental Nutrition Assistance Program, or food stamps.

Well, apparently President Obama is “the best food-stamp president in American history.”  At least, based on his 71% increase in food assistance programs spending.  Where most of the increase in spending came from food stamps.  So it would appear that Newt Gingrich is not a lying racist.

Total 2011 defense spending (military defense, veterans, foreign military aid and foreign economic aid) was $964.8 billion according to us government spending.  Or $0.9648 trillion.  Which is less than $1.03 trillion in spending on means-tested federal welfare programs.  Now here’s an interesting side note.  The Constitution calls for defense spending.  While it doesn’t call for any welfare spending.  So this is quite the deviation from our Founding.  And one the Founding Fathers would probably not approve of.  As you can enrich some defense contractors with that defense spending.  But you can’t buy a lot of votes with it.  Not like the votes you can buy by giving people lots and lots of free stuff.   And $1.03 trillion can buy a lot of stuff.

When you have an economic record that is an abject failure you can’t run on your record.  Because most people are not better off after 4 years of President Obama.  Unless, of course, they got some of that $1.03 trillion in additional federal spending.  Which is about all a failed presidency can hope for.  Grateful benefits recipients.  As long as there are enough of them.  And when you increase some federal spending by $1.03 trillion there just may be enough of them.

One final note.  We’ve had trillion dollar deficits in each of President Obama’s 4 years in office.  Deficits that we had to finance by borrowing from China.  Excessive spending and borrowing that caused the first credit downgrade in US history.  All, it would appear, to create more grateful benefits recipients to help with the president’s reelection.  Because his 4 years in office have been an abject failure.  With his only success being the expansion of the welfare state.  Leading to the aforementioned credit downgrade.  And a bleak future of a new normal.  High unemployment.  Low GDP growth.  High taxes.  Stagflation.  And Malaise.

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China has no Pension or Health Care Benefits for their Rapidly Aging Population unlike in the West

Posted by PITHOCRATES - September 22nd, 2012

Week in Review

The Chinese economy is cooling off.  Worse, they have some even more bad news in their future (see Ageing China: Changes and challenges by Damian Grammaticas posted 9/20/2012 on BBC News China).

Life expectancy in China today rivals that in the West – it is one of this country’s impressive advances. Except China has not yet built a social safety net to provide pensions, affordable healthcare or homes for all its elderly.

Yet another reason why the Chinese economy is outpacing those in the West.  While Europe and the United States have suffered from the effects of an aging population China hasn’t.  At least, not yet.  While those in the West keep raising taxes and selling sovereign debt to pay for pensions and health care for the elderly and retired China has been growing their economy and using its proceeds to buy the sovereign debt of those Western nations.

So what is it like living in a nation without a social safety net?

“We don’t get a government pension because I never paid taxes. We don’t have any savings,” he says.

Because he has children and a wife, he does not qualify for a place in a care home – only those without relatives are eligible.

Of Henan’s 8.5 million elderly, just 2% are cared for in nursing homes. So Niu Yubiao and his wife fend for themselves.

The couple have seven grown-up children. But like other young people in the area, they have left home to look for work. Niu Yubiao has no idea where they are.

The reason why they don’t have any savings is not because they are greedy and materialistic.  It’s because they live in abject poverty.  And barely earn enough to survive.  This is what it’s like in China once you leave the modern cities on the coast.  The economic miracle of China has not reached the impoverished masses in their interior.

Today, there are 180 million Chinese aged over 60, just over 13% of the population. That will double to 360 million in fewer than 20 years, when China will have more retirees than the entire population of the US.

By the middle of the century, their ranks will soar again to 480 million.

China is ageing so fast that a process that took up to a century in the West will happen in the coming 30 years here. And as the ranks of the elderly swells, the working-age population is starting to shrink…

China’s incredible economic growth has been built on its vast, cheap labour supply. But the numbers entering the workforce have started falling. China’s birthrate has collapsed – at its peak in the mid-1980s 25 million babies were born every year. Now there are about 15 million births a year. The dramatic drop is the result of a richer, developing society and of the one-child policy…

Currently, China funds only meagre pensions, and there are six workers paying taxes for each retiree – in 20 years’ time, there will be just two workers for every pensioner.

This is the current problem in the advanced economies in the West.  A declining population growth rate following the post-World War II baby boom is bankrupting their nations.  For those social safety net programs the Chinese don’t have were implemented in these Western countries before the baby boom turned into a baby bust.  Now the elderly generations in these nations grow faster than the younger generations.  More seniors are retiring and consuming government-provided pensions and health care while fewer are entering the workforce to replace them and pay the taxes to fund these programs.  So they have increasing government expenditures at a time of declining government revenue.  Thanks to a lower population growth rate.  Which has overwhelmed governments.  Causing greater budget deficits and soaring levels of debt.

As bad as things are in the Western countries what’s waiting for China is of such a massive scale that one shudders to think what will happen.  For even if China continues to enjoy high economic growth their aging population will bankrupt them.  Either by caring for the elderly.  Or by driving up labor costs and/or labor unrest as their baby bust fails to replace those leaving the workforce.  Bringing that economic juggernaut to a crashing halt.

But the scenario is even bleaker.   For they have driven much of their economy with artificial economic growth.  Fueled by Keynesian policies.  Artificially low interest rates.  And government interference into the private sector.  Much like what gave the U.S. the subprime mortgage crisis and the Great Recession.  And much like what gave the Japanese their asset bubble and their Lost Decade.  For all demand-side stimulative growth (i.e., Keynesian growth) ends in Great Recessions or Lost Decades.  Because this kind of growth is inflationary.  And when you inflate asset values you make asset bubbles.  Which ultimately burst.  And when they do they bring down those inflated values to market prices.  The longer those inflationary policies were in place the higher those asset values soared and the more painful the deflationary fall.  Just ask anyone in Japan.  Or in the U.S. with an underwater mortgage.

So China has some unpleasantness in their future.  Perhaps a deflationary spiral.  Along with an accelerated aging population.  Either one by itself is bad.  But together it could be more than the Chinese economy can handle.  And the fallout of any Chinese crash will ripple through every other nation’s economy.  Where we all will feel it.  And suffer the consequences.  Because we are all Keynesians, too.  At least, the economic policies of our governments are.  And when China can no longer buy U.S. sovereign debt there will be no more deficit spending.  Just massive spending cuts.  Or, if they choose to simply print money, massive post World War I Germany inflation.  Where it will take a wheelbarrow full of money to buy a loaf of bread.  Like in post World War I Germany.

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Jimmy Carter, Malaise, Ronald Reagan, Austrian Economics, Morning in America, Barack Obama, Keynesian Economics and Great Recession

Posted by PITHOCRATES - September 4th, 2012

History 101

It was Morning in America again because Ronald Reagan reduced the Misery Index by 42.7%

Ronald Reagan was a supply-sider when it came to economics.  Of the Austrian school variety.  In fact, one of his campaign promises was to bring back the gold standard.  A very Austrian thing.  The Austrian school predates the Keynesian school.  When the focus was on the stages of production.  Not on consumer spending.  These policies served the nation well.  They (and the gold standard) exploded American ingenuity and economic activity in the 19th century.  Making the U.S. the number one economy in the world.  Surpassing the nation that held the top spot for a century or more.  Perhaps the last great empire.  Great Britain.

Following the stagflation and misery (misery index = inflation rate + unemployment rate) of the Seventies Reagan promised to cut taxes and governmental regulations.  To make it easier for businesses to create economic activity.  Easier to create jobs.  And he did.  Among other things.  Such as rebuilding the military that the Carter administration severely weakened during the Seventies (it was so bad that the Soviet Union put together a first-strike nuclear option.  Because they thought they could win a nuclear war with Jimmy Carter as president).  During the 1980 campaign Reagan asked the people if they were better off after 4 years of Jimmy Carter.  The answer was no.  Four years later, though, they were.  Here’s why.  (Note:  We used so many sources that we didn’t source them here to save space.  The inflation rate and unemployment rates are for August of the respective years.  The dollar amounts are annual totals with some estimates added to take them to the end of 2012.  The debt and GDP are not adjusted for inflation as they are only 4 years apart.  Gas prices and median income are adjusted for inflation.  There may be some error in these numbers.  But overall we believe the information they provide fairly states the economic results of the presidents’ policies.  (This note applies to both tables.))

Reagan entered office with some horrendous numbers.  The Carter administration was printing so much money that inflation was at 12.9% in 1980.  Added to the unemployment rate that brought the misery index to 20.6%.  A huge number.  To be fair Carter tapped Paul Volcker to be Fed Chairman and he began the policy of reigning in inflation.  But Carter did this far too late.  The only way to cure high inflation is with a nasty recession.  Which Volcker gave Ronald Reagan.  But it worked.  By 1984 inflation fell 8.8 points or 66.7%.  Even with this nasty recession the unemployment rate fell 0.2 points or 2.6%.  Which shaved 8.8 points off of the miserable index.  Or reducing it by 42.7%.  This is why it was morning in America again.  The Left to this day say “yeah, but at what cost?” and point to the record deficits of the Reagan administration.  Saying this is the price of tax cuts.  But they’re wrong.  Yes, the debt went up.  But it wasn’t because of the tax cuts.  Because those tax cuts stimulated economic activity.  GDP rose 12.6% by 1984.  And tax receipts even increased with those lower tax rates.  Because of the higher GDP.  By 1984 Reagan’s policies increased tax revenue by 28.9%.  And on a personal level the median income even increased 0.4%.  And this following a very bad recession a few years earlier.  Finally, gas prices fell 22.2%.  And the way Americans feel about rising gas prices this was truly morning in America again.

To Top off the General Malaise of the Obama Economy Gas Prices Soared while Median Income Fell

Barack Obama is a Keynesian through and through.  A believer in pure demand-side economics.  To that end his administration focused everything on increasing consumer spending.  Tax and spend policies.  Income redistribution.  Deficit spending.  Anything to make America ‘more fair.’  Raising taxes on the rich so the poor can spend more money.  With the Keynesian multiplier they believe this is the path to economic prosperity.  Just doing everything within their power to put more spending money into the hands of poorer people.  Increasing government regulation, fees and fines as well as taxes to bring more money in Washington so they can redistribute it.  Or spend it directly on things like roads and bridges.  Or solar power companies.  Even paying people to dig a hole and fill it back in.  Because these people will take their wages and spend them.  Creating economic activity.

So President Obama put Keynesian economics to work.  Beginning with a $787 billion stimulus bill.  Investments into green energy and the jobs of the future.  Like a Department of Energy loan of $528 million to the now bankrupt Solyndra.  Which was only one of many loans.  The bailout of the UAW pension fund (aka the auto bailout).  The government poured $528 million into GM.  And President Obama touted the Chevy Volt, boasting that GM would sell a million each year bringing his green goals to fruition (GM is struggling to sell 10,000 Volts a year).  A lot of malinvestment as the Austrians would say.  But a Keynesian sees any government expenditure as a good investment.  Because if all the people who receive this government money spends at least 80% of it (while saving only 20%) the Keynesian multiplier will be five.  Meaning that the net gain in GDP will be five times whatever the government spends.  So how has that worked for the president?  Well, here are his numbers:

The government spent so much money that the federal debt increased by $5.4 trillion.  Trillion with a ‘T’.  That’s over a trillion dollar deficit each of the president’s 4 years in office.  And his last year isn’t even a whole year.  Unprecedented until President Obama.  And what did all of that federal spending get us after about 4 years?  An unemployment rate 2.1 points higher.  Or 33.9% higher than when he took office.  Inflation fell but it did nothing to spur GDP growth which grew at an anemic 3.1%.  Which is less than a percentage point a year.  Which is why the Great Recession lingers still.  Meanwhile the Chinese are having a bad year with a GDP growth of 7.8%.  So all of that spending didn’t help at all.  In fact, it made things worse.  The economic activity is so bad that even tax receipts fell 2.2% after four years of President Obama.  Which has many in his party saying that we need to raise tax rates.  Contrary to what Ronald Reagan did.  And to top off the general malaise of the Obama economy gas prices soared 107.6% under his presidency.  While the median income fell 7.3%.  One has to look hard to find any positive news from the Obama economy.  And there is one.  Inflation did fall.  But even that really isn’t good.  As it may be an indicator of a looming deflationary spiral.  Giving America a lost decade.  Like Japan’s Lost Decade.

The Flaw in Keynesian Thinking is that it Ignores the Layers of Economic Activity above the Consumer Level

So there you have an Austrian and a Keynesian.  Both entered office during bad economic times.  Although things were much worse when President Reagan took office than when President Obama took office.  The misery index was 20.6% in 1980.  It was only 11.6% in 2008.  About half as bad for President Obama than it was for President Reagan.  It came down 16.4% under Obama.  But it came down 42.7% under Reagan.  Which is why it isn’t morning in America under President Obama.  Reagan increased tax receipts by 28.9 % by the end of his first term.  They fell 2.2% under Obama.  Adjusted for inflation Reagan averaged annual deficits of $348 billion.  That’s billion with a ‘B’.  Obama averaged $1.324 trillion.  That’s trillion with a ‘T’.  Or 280% higher than Ronald Reagan.  Gas prices fell 22.2% under Reagan.  They rose 107.6% under Obama.  Median income barely rose 0.4% under Reagan.  But it fell 7.3% under Obama.  In short there is nothing in the Obama economic record that is better than the Reagan economic record.

And why is this?  Because Obama’s policies are Keynesian.  While Reagan’s policies were Austrian.  Reagan focused on the stages of production to improve economic activity.  Cutting taxes.  Reducing regulatory compliance costs.  Creating a business-friendly environment.  A system that rewarded success.  Whereas Obama focused on consumer spending.  Tax, borrow and print (i.e., quantitative easing).  So the government could spend.  Putting more money into the pockets of consumers.  Which stimulated only the last stage in the stages of production.  So while some consumers had more money it was still a business-unfriendly environment.  Where tax, regulatory and environmental policies (as well as the uncertainty of Obamacare) hindered business growth everywhere upstream from retail sales.  From raw material extraction to industrial processing to construction to manufactured goods.  Where these Obama’s policies punish success.  For the bigger you get the more you pay in taxes and regulatory compliance costs.

The greatest flaw with Keynesian economics is that it looks at aggregate supply and demand.  With a focus on consumer spending.  And ignores the layers of economic activity that happens before the consumer level.  The Austrian school understands this.  As did the British when she became one of the greatest empires of all times.  As did America during the 19th century.  No nation became an economic superpower using Keynesian economics.  Japan grew to be a great economic power during the Fifties and Sixties.  Then went Keynesian in the Eighties and suffered their Lost Decade in the Nineties.  Some Keynesians like to point to China as an example of the success of Keynesian economics.  But they still have a fairly restrictive police state.  And their economic policies are hauntingly similar to Japan’s.  Some have even posited that it is very possible that China could suffer the same fate as Japan.  And suffer a deflationary spiral.  Resulting in a lost decade for China.  Which is very plausible considering the Chinese practice state-capitalism where the state partners closely with businesses.  Which is what the Japanese did in the Eighties.  And it hasn’t been great for them since.  As it hasn’t been great in America economically since the current administration.

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