Guns, Butter and Abortion

Posted by PITHOCRATES - February 24th, 2014

Economics 101

Democrats will cut Defense but not Entitlements because fewer People in Defense vote Democrat

A cornerstone of the Obama presidency is social justice.  Primarily through redistribution of wealth.  Raising taxes to fund a growing welfare state.  To help those not lucky enough to have won life’s lottery.  Such as expanding the food stamp program (Supplemental Nutrition Assistance Program).  Which has grown over 70% under President Obama.

Of course, this costs money.  A lot of it.  Added on top of an already costly welfare state.  Driven by entitlement spending.  Social Security.  And Medicare.  The biggest portions of federal spending.  And it only keeps growing.  Making the welfare state unsustainable without entitlement reform.  But the politicians won’t touch entitlements.  The third rail of politics.  Because they’re afraid of losing votes in the next election.  So they’d rather the country implode instead of reforming entitlements.  And hope that implosion comes after they’re dead and buried.  For as long as they get to enjoy their lives they could give a rat’s behind about future generations.

But they will touch defense spending.  And often do when they are looking for more money for the welfare state.  Even now.  The Obama administration is proposing spending cuts in defense spending.  That will shrink the size of the military.  And cut pay and benefits for some of the lowest paid people in the country.  The people who go in harm’s way for their country.  They won’t touch entitlement spending because it may hurt people that typically vote Democrat.  But they have no problem doing just that to those who wear a uniform to serve their country.  Who don’t always vote Democrat.  Just so they can have a generous welfare state like the European social democracies they so admire have.  Who can have them because they don’t have large defense budgets.  For the United States has been protecting them since World War II.

People can’t pay Taxes to fund a Welfare State without a Job that Provides an Income to Tax

If you watch television you’ve probably heard New York State’s commercials to attract new businesses to New York.  Where the state is promising that businesses will be “100% tax-free for 10 years.  No income tax, business, corporate, state or local taxes, sales and property taxes, or franchise fees.”  Which is a clear admission from the state with the second highest tax burden in the country that high taxes hurt business.

The tax burden is so great in New York that some businesses have moved their operations out of state.  And people with vacation homes in New York who only visit them a couple of weeks out of the year are selling them.  As the state is taxing their incomes as if they are permanent New York residents.  But despite these high taxes New York has suffered great budget deficits.

New York City is a Democrat city.  Their high taxes pay for a large welfare state.  A large public sector.  And the enormous costs of their public sector benefits.  In particular, health care and pension costs.  But their high tax rates have shrunk the tax base.  Because people can pack up and move out of state.  Just as businesses can.  Which is why they are doing a 180-degree turn on taxes.  In a desperate attempt to get businesses to come to New York.  For even if these businesses aren’t paying taxes their employees will.  Income taxes.  Sales taxes.  Property taxes.  Liquor taxes.  Cigarette taxes.  Etc.  None of which they can pay if there are no jobs to give them an income the state can tax.

The Number of Abortions is having a Direct Impact on the Economy and Tax Revenue

New York City released its SUMMARY OF VITAL STATISTICS 2012 THE CITY OF NEW YORK PREGNANCY OUTCOMES this month.  In it you can find why New York City, New York State and the federal government are having such a difficult time paying for their welfare states.  It’s because of liberal Democrat policies.  Not on the spending side of the equation.  But on the revenue side of the equation.

In 2012 there were 73,815 abortions.  Which are future taxpayers that weren’t allowed to be born.  That’s right, before anyone pays the high tax rates of a welfare state they have to be born first.  And when they are not born that’s future tax revenue the government cannot collect.  If we look at a 20 year period (about a generation) and assume 73,815 abortions each of those 20 years that’s 1,476,300 people that never will pay taxes.  If they earned on average $30,000 each that’s $44,289,000,000 of economic activity they never created.  And at a New York State tax rate of 11.7% that’s $5,181,813,000 in lost tax revenue for the state.

But it gets worse.  If you divide this number by two you get the total number of couples (a man and a woman) that could have started a family.  If each couple had 3 children this lost generation could have brought in another 2,214,450 taxpayers into New York City.  Adding them to their parent’s generation and assuming a median family income of $53,046 (an older generation established in their career earning more and a younger generation just starting their career earning less) brings the total lost economic activity for these two generations of possible New Yorkers to $195,779,524,500.  And lost tax revenue for the state of $22,906,204,367.  So the number of abortions is having a direct impact on the economy.  And tax revenue.  Making it necessary to cut guns to pay for more butter.  Whereas if these taxpayers were born we could have both our guns and butter.  And live in a world made safe by the most powerful military in the world.  Peace through strength.  The Ronald Reagan way.  And not a world where our enemies are constantly testing our resolve.  The Jimmy Carter and President Obama way.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , ,

Self-Esteem is out and a Useful Education is in at Schools in Perth, Australia

Posted by PITHOCRATES - May 26th, 2013

Week in Review

I’ll never forget this classic episode of Gomer Pyle – USMC.  Sergeant Carter was feeling old.  Which depressed him.  Gomer wanted to help him recapture the vigor of his youth.   So on a long march Gomer emptied Sergeant Carter’s pack and filled it with straw.  Late into the march his men were fatigued.  But not Sergeant Carter.  He was fresh as a daisy.  Until he went into his pack and saw it was filled with straw.  Which made him feel old and depressed again.

Gomer’s mistake was making the pack lighter instead of heavier.  For if he completed the march and learned he had carried a heavier pack than everyone else he would have felt strong again like in his youth.  For making it through things when they are hard builds confidence.  Even if you fail once or twice along the way.  This prepares you for whatever the future has in store for you.  But making it through something because you had it easy or never faced criticism or suffered a failure doesn’t really prepare you for anything.  But extreme frustration as you are unable to handle adversity.  Or recover from failure (see Students to learn about failure by Bethany Hiatt posted 5/25/2013 on The West Australian).

One of Perth’s most prestigious and academically successful schools is cutting back on praise and rewards for students.

It has concerns that society’s focus on boosting self-esteem leaves many struggling to cope with failure on leaving school.

St Hilda’s Anglican School for Girls wrote to parents explaining why it introduced strategies this year to minimise praise, reduce reward stickers for participation and provide work that was deliberately too difficult so students could experience failure.

Junior school head Julie Quansing-Rowlands said the prevailing wisdom in schools for many years had been that building up children’s self-esteem would lead to high achievement.

But recent research showed this simplistic approach backfired.

Over-praising meant children were less able to cope with disappointments they faced later in life…

Heaping praise on students also gave them a false sense of their ability and led to a sense of entitlement…

“We’re beginning to understand that it actually damages children to constantly praise them, constantly tell them they’re special and build up their self-esteem,” he said.

“New research is demonstrating that it’s not self-esteem but self- respect and self-control that really are the best predictors of how well kids are going to perform in high school…”

WA Primary Principals Association president Stephen Breen said schools and parents had probably gone too far in puffing up children’s self-esteem by praising everything.

“As a consequence, a lot of kids don’t accept criticism,” he said.

This is what liberals did to the American public schools.  Ruined them by trying to build self-esteem instead of preparing our kids for life.  Which has fed into an entitlement mentality where kids today expect life to be handed to them without having to work hard to get ahead.  That’s why so many go to college and get worthless degrees.  Because they just expect to get a good job when they graduate. Even though they learned no marketable skills in college.  But they had a good time.  And have the student loan debt to prove it.  Which they’ll never be able to pay back working a service job that they could have gotten without a college education.

If you’re looking to move and you have kids you may want to consider Perth, Australia.  For I hear if your kids go to school there they’ll learn how to work hard.  They’ll earn good grades.  Maybe a bad one or two.  But they will be able to complete a degree program at a college that will have real market value.  Preparing them for the real world after school.  No matter what life throws at them.  So they won’t be coming back home to live in your basement.  But they will have you move in with them so they can take care of you in your golden years.  Because your parenting and a good Perth education allowed them to achieve more in life than you did.  The way it should be.  Not having future generations achieving less than their parents.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , ,

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

Posted by PITHOCRATES - November 11th, 2012

Week in Review

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

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

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

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

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

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

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

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , ,

FT134: “There will always be poor and oppressed people because someone has to vote for liberal Democrats.” —Old Pithy

Posted by PITHOCRATES - September 7th, 2012

Fundamental Truth

Liberal Democrats would Not Like an America without Poor and Oppressed People

In the anti-nuclear power movie The China Syndrome Jack Lemmon’s character wanted to warn everyone about his dangerous nuclear power plant.  He was a control room operator at the plant.  During one event there was a vibration.  The reactor shut down (SCRAM) safely.  But Lemmon’s character did some investigating and found that some safety reports had been falsified.  And in his quest to publicize this fact people died.  So he did the only thing he could.  He locked himself inside the control room at the nuclear power plant.  Requested that the characters played by Michael Douglas and Jane Fonda come down to put him on the air live.  And threatened to create a nuclear catastrophe himself if that didn’t happen.  That’s right, as dangerous as that reactor was he did NOT shut it down.

Odd, really.  He threatened to cause what he was trying to prevent.  Why?  Well, consider what would have happened if he did everything he did with one change.  Instead of threatening his own nuclear catastrophe he shut down that reactor.  So it was safe and could not harm anyone.  If he did that what do you think would have happened?  No one would have brought that news crew (Douglas and Fonda) to the plant.  And plant security would have just broken into the control room and subdued Lemmon.  But because he left the reactor hot and dangerous they didn’t break in and subdue him.  And they brought in that news crew.  Because his threat of causing a nuclear catastrophe gave him power.  While a safe and shutdown reactor gave him no power.

So what do we learn from this?  Sometimes the thing you’re fighting against is the very thing that gives you power.  A purpose.  A reason for getting out of bed in the morning.  Something that gives you a job.  Something that pays the bills.  And it’s just not disgruntled nuclear power plant operators.  Imagine a world with no crime.  If there was no crime we wouldn’t need any police officers.  Something police officers wouldn’t like.  Just as firefighters wouldn’t like a world without fires or accidents.  Just as cardiologists would not like a world without heart disease.  Just as environmentalists would not like a world without global warming.  Just as advocates of affirmative action would not like a world without discrimination.  Just as liberal Democrats would not like an America without poor and oppressed people.

The Poor and Oppressed are a Favorite Constituency of the Federal Government

The more horrible the things people are fighting against the greater are the need for these people.  The Left makes use of this strategy all of the time.  Falling test scores means we need to spend more on education.  As in hiring more teachers.  And paying them more.  This works the other way, too.  When municipalities are running budget deficits because of costly public sector contracts calling for high pay and generous benefits they place a new millage on the ballot.  And warn the people that if they don’t vote ‘yes’ for these higher taxes they will have no choice but to increase the number of rapes, murders and assaults.  As well as increase the number of deaths from fires, heart attacks in the home and car accidents.  Because if the people vote ‘no’ they will lay off police officers and firefighters.  Instead of renegotiating those contracts that are causing their financial problems.  No.  It’s never cutting back on the things that are bankrupting their cities.  It’s always putting the fear of God into their electorate.  So the public sector workers can maintain their generous pay and benefits.

Of course some will say that our teachers, police officers and firefighters don’t get paid that much.  If that’s true then they belong to some real crappy unions.  Because you join a union to get better pay and better benefits.  And you pay union dues for the union’s help in getting better pay and better benefits.  Also, if we didn’t already pay them very well you would know what their pay and benefits were during these millage requests.  For it sure would help their argument for higher pay if most people made more than they did.  Because, let’s face it, we need good teachers, police officers and firefighters.  If we paid them less than most other people everyone would feel guilty and vote ‘yes’ without hesitation.  But during these millage requests they don’t make public their current pay and benefit schedule.  And it’s hard to find this information online.  Because that’s ‘personal’.  Even though we pay them with public money.  Which should tell you something.  They’re paid better than most people.  Because they’re asking for more without telling us how much they currently make.  For it is hard to get sympathy for your pay level when you make more than most other people.

It’s no secret that government workers get better pay and benefit packages than people in the private sector.  Especially in the federal government.  Where federal employment grows by leaps and bounds every year.  And they create ever new programs to fight against something.  So they can keep hiring more people into the federal bureaucracy.  To reward friends and cronies.  And to endear a growing federal government to ever more people.  So they will continuously help to support and promote that sprawling bureaucracy.  Through their votes.  And by making as many people as possible dependent on the government.  Making the poor and oppressed a favorite constituency of the federal government.  As it has been for a very long time.  Despite the numerous battles to end poverty and oppression.

The Liberal Democrat Answer to Poverty is Not a Job but a Government Entitlement

JFK was a tax-cutter.  Just like Ronald Reagan.  They both believed that you had to create a business-friendly environment to create jobs.  Because if a business did well it grew and hired more people.  That’s why both JFK and Ronald Reagan had strong economic growth and low unemployment during their presidencies.  And they each brought in a lot of tax revenue into Washington.  Even with their low tax rates.  So low tax rates are good.  They help businesses grow.  They help people get jobs.  They lower the price of consumer goods so people can buy more for less.  And they bring in more revenue to the government to help those who need help.  Of course liberal Democrats hate this.  Because if everyone is doing well there is no need for all their agencies and programs.  Or them.

Shortly after the assassination of JFK things changed.  LBJ became president.  Who was a big liberal Democrat.  Who declared unconditional war on poverty.  This was in 1964.  The plan was to explode the size of the federal government.  Which is what he did when he gave us the Great Society.  The war on poverty would become one of America’s longest war.  Longer than the wars in Iraq and Afghanistan.  Longer than the Vietnam War.  Even longer than the Cold War.  The war on poverty continues to this day.  Requiring ever more government agencies.  And programs.  Yet they’ve all failed to end poverty.  Proven by the fact that every generation of liberal Democrats running for office is an advocate for the poor and oppressed who have no voice but theirs.

The liberal Democrat answer to poverty is not a job but a government entitlement.  Because jobs lead to lower unemployment.  And less purpose for a liberal Democrat.  Liberals don’t want jobs and low unemployment.  They want high taxes and high unemployment.  So they can matter.  And make a difference.  So they can have a cushy job with high pay and generous benefits.  So they attack tax cuts.  They attack any lowering of regulatory costs.  And anything else that would help businesses create jobs.  Which would take the poor and oppressed away from them.  They don’t want people to be rugged and independent.  They want them needy and dependent.  And they want as many people as possible to be needy and dependent.  Even if it leads to a little rioting.  Especially if it leads to a little rioting.  For a little level of danger can be useful.  As it can be in a nuclear power plant in an anti-nuclear power movie.  Because it’s very hard to get taxpayers to vote for people that want to increase your taxes and make your lives more costly.  While some liberals genuinely care about making people’s lives better many more are like Jack Lemmon in The China Syndrome.  Who understand that they must maintain a certain level of poverty and oppression in the nation.  Or they will have no power.  As no one will vote for them.  Because if you’re in the business of ending poverty and oppression you need a certain level of poverty and oppression to fight against.  Always.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FT114: “One of the most effective ways to get privilege is to force fairness on others.” -Old Pithy

Posted by PITHOCRATES - April 20th, 2012

Fundamental Truth

Voters are so Greedy and Selfish with their Hard-Earned Money that they’re not going to Vote to be Subjugated

History is strewn with people oppressing others to gain privilege for themselves.  Kings, emperors and nobles were always a small minority of civilizations.  But they had the power.  And the wealth.  While the masses suffered abject poverty and went hungry.  Or suffered through famines.    And died.  With early civilizations this was just the way of life.  Because there was no middle class.  No free market capitalism.  And no rule of law.  Life was for the most part subsistence farming.  Where most ate only what they grew.  While the kings, emperors and nobles enjoyed lots of food and drink.  Even enjoyed having a little fun.  Unlike the impoverished masses.  Having privilege made life better.  Which is why the privileged worked hard to keep it.  By forcing others to work hard to provide that better life for them.

But times change.  Privileged ruling classes fall.  And middle classes rise.  Creating vibrant economies.  And representative government.  Then one day the privileged find that they are no longer privileged.  That wealth isn’t automatically theirs.  Instead it belongs to the people who earn that wealth.  And if the once-privileged want wealth then they, too, have to work to get it.  So they, too, can have nice things.  And that they can only have these things if they earned enough to afford them.  Which is a great problem if you don’t want to work.  Don’t have any ability to earn a high income.  Or if you have a feeling of entitlement.  Like in days of yore.  Where you didn’t need anything but a good last name to live the good life.  On the backs of those who didn’t live the good life.

Feelings of entitlement don’t die, though.  They don’t go away once the middle class starts sharing the wealth.  Well, not so much sharing it but earning it.  And keeping it.  Instead of giving it to a privileged ruling class.  Which poses a problem for those who aspire to join a ruling class.  Especially now that we have those pesky elections.  Because voters are so greedy and selfish with their hard-earned money that they’re not going to vote to be subjugated.  They’re not going to vote in a privileged ruling class so they can live like royalty.  While those who pay for that royal lifestyle don’t.  ‘Vote for me so I can live better than you’ is just not a winning political platform.  So that’s why politicians lie.

The Privileged Elite uses Class Warfare to take other People’s Wealth

What do you need to live a privileged life?  Lots of money.  No secret here.  But the secret is how to get that money.  In particular, how do those who don’t want to work or have no talent or have no ability create wealth?  Here’s the secret.  They don’t create wealth.  They take wealth.  By going into government.

Only government has the power to tax.  Which can be a great source of wealth.  Other people’s wealth.  Which is any privileged class’ second favorite kind of wealth.  Second only to the wealth they already took from others.  Because that’s what they want.  Other people’s wealth.  And they’ve found a clever way of taking it.  By making the world a fairer place.  And who’s against fairness?  They’re going to make sure that the poor and children have access to food and affordable housing.  And who’s against the poor?  The children?  You’d have to be a pretty vicious, heartless bastard to be against the children.  And the poor.  They’re going to make sure that women have access to reproductive health care.  For who hates women?  I’ll tell you who.  Anyone that opposes raising taxes.  They hate women.  Children.  The poor.  For the world is full of haters.  And just who are these haters?  Aanyone that earns a lot of money and doesn’t want to pay higher taxes.  These people hate anyone not as wealthy as they are.  Because they hate fairness.  And paying their fair share.  Because they’re greedy.  And hate women and children.  And puppies, too.

This is the way the privileged take other people’s wealth.  Class warfare.  And it’s very effective.  By being the party of the poor, disadvantaged, children, women and puppies, they’re kind and benevolent.  With other people’s money, of course.  But those people are evil so it’s okay.  People hate them.  But they like their kind government benefactors.  Who are looking out for their best interests.  Not rich people.  Or corporate profits.  No, our kind government benefactors make sure those greedy rich people and corporations pay their fair share.  Because that’s all that they want.  It’s all anyone wants.  To be fair.

North Korea is pretty much at the End of the Fairness Road

Later incarnations of the privileged ruling class used the fairness approach to give themselves a better life.  While oppressing their people.  Even killing them.  Through famine.  Or deliberate acts of violence.  All in the name of fairness.  And nothing better epitomizes this than communism.  Where everyone was equal.  Brothers.  Comrades.  There were no profits.  No capitalism.  No competitiveness.  No.  Everyone was equal.  They paid everyone the same.  They dressed everyone the same.  They housed everyone the same.  They fed everyone the same.  Very little.  For one thing you never saw in a communist country was obesity.  Instead you probably heard the rumbling of tummies as most people were hungry all of the time.  There was no income inequality.  No gender inequality.  No.  In communism they had nothing but equality.  Life was fair.  Because no one had anything more than anyone else.  As they perfectly distributed the misery and poverty equally among the impoverished masses.

That was for the masses.  It was quite a different thing for the privileged ruling elite.  Those in the party apparatchik.  And the inner party members themselves.  Who were more equal than others.  These people dressed better.  They had better housing.  Even cars.  They ate better.  Some so well that they grew obese.  North Korea suffers from recurring famines to this day but Kim Jong IL had a bit of a weight problem.  As his son does.  Kim Jong-un.  No, life is very good for the privileged ruling elite.  And hell for those living under them.  Who the ruling elite let die of hunger.  And send to concentration camps if they dare speak of their displeasure.  For only under communism is life fair.  And they just can’t risk the unhappy masses to spoil it for the privileged few.

North Korea is pretty much at the end of the fairness road.  The country is so poor and impoverished and hungry that people will risk their lives to try and escape this land of fairness.  To get somewhere that isn’t so fair.  Like South Korea.  Where they have capitalism.  And inequality.  Where someone can come with nothing, work hard and earn a better life.  Allowing them to pay for housing.  And put food in their rumbling bellies.  For a fair and oppressive government surely cannot.  All they can do is create great inequality between the people and the ruling class.  Far greater than that between the rich and poor in any capitalist country.  For the poor in countries like the UK, Canada and the United States are living far better than anyone outside the ruling elite in North Korea.  This is where the fairness road ends.  But it starts with class warfare.  Where a privileged few live the good life through high taxes.  Taxes they use to force fairness on others.  While those at the top manage that fairness.  Skimming a lot off the top of those taxes for themselves.  And what’s left they spend on the poor, disadvantaged, children, women and puppies.  Just enough to make sure the people love their very rich and wealthy government benefactors.  So they can win the next election.  At least while they still have to deal with those pesky elections.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FT98: “The difference between a right and an entitlement is that other people don’t have to pay for a right.” -Old Pithy

Posted by PITHOCRATES - December 30th, 2011

Fundamental Truth

Our Rights are Free to Enjoy because no one must Suffer any Burden for us to Enjoy these Rights

The Roman Empire fell because of high taxes.  The Americans declared their independence from the British Empire because of high taxes.  The French Revolution erupted over high taxes.  Warren Harding won the 1920 presidential election because of high taxes.  Ronald Reagan won the 1980 presidential election because of high taxes.  Both Harding and Reagan were tax cutters.  The moral of this story?  People don’t like paying taxes.  Never have.  And never will.

The Bill of Rights contains the first 10 amendments to the U.S. Constitution.  Some of these rights include the freedom of religion and the freedom of speech (First Amendment).  The right to keep and bear arms (Second Amendment).  Protection from quartering troops in our homes (Third Amendment).  Protection from unreasonable search and seizure (Fourth Amendment).  See a trend?

Our rights are free to enjoy.  That is, when we enjoy our rights it doesn’t cost anyone else.  When people speak their mind there isn’t an associated cost that goes with it that we must fund with taxes.  For people to be free to own a gun and keep it in their house there isn’t an associated tax to pay for that right.  There isn’t a line item in the federal budget to prevent soldiers from moving into my house during times of peace.  No.  These rights are free.  No one must suffer any burden for us to enjoy these rights.

A Right is not a License to Compel Others to do something Against their Will

Rights are God-given.  Meaning that no person may deny these rights to anyone.  We want these rights.  We enjoy these rights.  And the fact that they don’t cost anything to have and enjoy is especially nice.  Because as noted earlier people don’t like paying taxes.  They never have.  And never will.

But we do pay taxes.  For those things that are necessary and Constitutional.  Such as a strong military to protect and defend our country from enemies foreign and domestic.  We don’t enjoy paying these taxes.  But we do enjoy being safe and free from oppression.  So we can enjoy our Constitutional rights.

Now, when is a right not a right?  When it’s not guaranteed in our Constitution and/or there is a cost that others must bear.  For instance, I can’t go to an electronics store and take a large plasma TV and tell the clerk that it’s my right to have that TV.  Because it’s not a right.  (Or an entitlement.  Yet.)  Why?  For one it’s not in the Constitution.  And it’s not just because we didn’t invent them yet.  Even if they were around at the time of the framing of the Constitution the Founding Fathers would not have included them.  Because they have a cost.  For someone to have one as a right someone else must pay for it.  And if someone else must be compelled to provide something for you then it is not a right.  Because a right is not a license to compel others to do something against their will.  There’s another name for that.  Slavery.

Health Care, Pensions, Food, etc., are not Rights because they have Costs

So if you agree with me so far (and it would be hard not to if you’re being honest), then you must agree that housing, health care, pensions, food, etc., are not rights either.  Because they have costs.  And the only way for others to have these without paying for them is to compel others to pay for them against their will.  Which is, of course, slavery.  Something else that is forbidden by a Constitutional amendment.  The Thirteenth Amendment.

So providing these things to the poor is not and should not be required.  But it would be nice.  And it should be voluntary.  Like it was.  Once upon a time.  Before there were entitlements.  We called it charity.  And it worked.  Well.  Our ancestors, those beautiful rugged individualists, would laugh at us today for how we’ve made a mess of things.  Be disgusted to see how soft we’ve become.  And then probably spit on us with contempt.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , ,

Learning nothing from Europe’s Financial Crises, Obama pushes hard to increase the Debt

Posted by PITHOCRATES - July 11th, 2011

No Economy is too Big to Fail

Having too much debt is a bad thing.  For one thing, you have to pay it back eventually.  And until you do, you have to service it.  Make interest payments.  Which can become very large if you have a lot of debt.

Greece has a lot of debt.  So much that they can’t sell any more.  And they can no longer service that debt.  Which is a big problem for the European Union (EU), in particular the Eurozone and its common currency the Euro.  Greece is small.  But the EU is big.  And Greece’s problem is now their problem because of that common currency (see Eurozone moves to stop Greek debt crisis by Gabriele Steinhauser, Associated Press, posted 7/11/2011 on USA Today).

Investors are concerned that the debt crisis, which has so far been contained to the small economies of Greece, Ireland, and Portugal, could soon drag down bigger countries like highly indebted Italy and unemployment-ridden Spain. The mere size of their economies could easily overwhelm the rescue capacity of the rest of the eurozone…

“The fact that contagion is spreading marks the failure of politicians to draw a line under the Euro-crisis to date,” Rabobank analyst Jane Foley said. “As yields rise and debt financing costs become even more exaggerated the difficulties of containing the crisis become even bigger.”

The Europeans crated the EU and the Eurozone to counter the economic prowess of the United States.  And it has.  Their economies run shoulder to shoulder.  Which is why the U.S. should be worried about what is happening in Greece.  And how scared the EU is that their contagion may spread.  For no economy is too big to fail from an overload of debt.

Excessive Government Debt making Investors Nervous

If you’re looking for confirmation on the size and reach of the Greek debt crisis, look no further than the world’s financial markets (see Markets Tumble on Debt Crisis by The Associated Press posted 7/11/2011 on The New York Times).

Wall Street and global stocks slid further Monday because of renewed concerns about the euro zone’s debt crisis and after a dismal jobs report in the United States last week rekindled concerns about the recovery in the world’s largest economy…

The downbeat sentiment in markets was worsened by indications that Europe’s debt crisis might be spreading beyond the three countries that have already received rescue packages. There have been mounting concerns that after Greece, Ireland and Portugal, much-larger Italy and Spain could need bailouts to manage its tremendous debt load.

Investors are nervous.  Both about Greece and the EU.  And the United States.  They’re worried about excessive government spending.  And excessive government debt.  Because the higher the debt the higher the interest paid on the debt.  And interest paid on the debt is money spent that results in nothing beneficial.  It’s just a drag on the economy (i.e., higher taxes are required to pay it).  Or worse.  As in borrowing money to service the debt.  Which makes a bad problem (too much debt) worse (more debt).  Which is a further drag on the economy.

The Children refuse to Eat their Peas

And speaking of debt, there was no progress on the budget debate to increase the debt limit.  As if anyone was surprised by this (see WRAPUP 9-Obama, lawmakers fall short on US debt deal by Steve Holland and Thomas Ferraro posted 7/11/2011 on Reuters).

U.S. President Barack Obama and top U.S. lawmakers fell short on Monday of finding enough spending cuts for a deal to avoid an Aug. 2 debt default and Republicans came under fresh pressure to agree to tax hikes.

The two sides achieved no breakthrough in a roughly 90-minute meeting and scheduled a third straight day of talks for Tuesday. This came after Obama, at a news conference, declared it is time for both Republicans and Democrats to “pull off the Band-aid, eat our peas” and make sacrifices.

I’m a grownup.  And I like peas.  I think a lot of grownups like peas.  That’s probably why I see a lot of peas in grocery stores.  But one thing I don’t see is kids begging their mother to buy more peas.  No.  Mothers have to tell them to eat their peas even though kids don’t want to.  Because kids just don’t know what’s good for them.  And mothers, being mothers and not diplomats, don’t discuss this.  They just dictate terms to their children.  Which is what Obama appears to be doing.  Trying to dictate terms to the children on the other side of the aisle.  To get them to accept what’s best for them.  Because he knows best.  Like Mother.

The Treasury Department has warned it will run out of money to cover the country’s bills if Congress does not increase its borrowing authority by Aug. 2. Failure to act could push the United States back into recession, send shock waves through global markets and threaten the dollar’s reserve status.

This ‘running out of money’ line is very strange.  The government is currently collecting some $2 trillion plus in cash a year.  Which comes out to about $180 billion a month.  And as long as your employer is withholding taxes from your paycheck, there’s money flowing into Washington.  So how exactly are they running out of money?

Back into recession?  Didn’t know we ever came out of recession.

Boehner also took issue with Democrats’ suggestion that most of the spending cuts should be concentrated out into future years, rather than beginning right away.

Smart man that Boehner.  He knows Democrats lie.  “Raise taxes now and we’ll make spending cuts later.  Promise.  $3 in cuts tomorrow for every new dollar in taxes today.”  Ronald Reagan fell for it.  George H. W. Bush, too.  But tomorrow never came.  And neither did those spending cuts.  The Democrats had their new taxes.  So they said, “Screw you, Republicans.  Suckers.”

Obama used the latest in a series of White House news conferences to urge lawmakers on both sides to stop putting off the inevitable and agree to tax increases and cuts in popular entitlement programs, trying to persuade Americans he is the grownup in a bitter summer battle over spending and taxes…

Obama is seeking to cast himself as a centrist in the bitter debate. His 2012 re-election hopes hinge not only on reducing America’s 9.2 percent unemployment but on his appeal to independent voters who are increasingly turned off by partisan rancor in Washington and want tougher action to get the country’s fiscal house in order.

And that’s what this debate is all about.  The 2012 election.  If he comes out of this smelling like a centrist he wins.  Even if he loses the debate.  Because he can campaign as a centrist.  Even though he’s the biggest leftist to have ever entered the Whitehouse.  Who tripled the deficit.  And put the U.S. on the road to national health care.

So how much exactly are they looking to raise the debt limit by to save the country?

They said Obama’s view was that without tax increases, the package would at best be little more than $1.5 trillion in deficit reduction, far short of the estimated $2 trillion needed to extend the $14.3 trillion debt ceiling through the end of 2012.

Hmmm, $2 trillion dollars.  Where can we find $2 trillion dollars?

You Repeal Obamacare and we’ll raise the Debt Limit by $2 Trillion

Here’s a thought.  How about repealing Obamacare?  If we need to live within our means and can’t muster the guts to reform entitlements, then Obamacare is a no-brainer.  It’s not an entitlement yet.  No one would miss it if they repeal it.  Because how can you miss something you don’t even have yet?  So how much money would this save?  Let’s take a look at some facts and figures from an interesting article (see Obamacare Tragedy Primed To Further Explode the Deficit by Peter Ferrara posted 7/6/2011 on The American Spectator)?

…close analysis of the CBO score and additional new data indicates that, quite to the contrary, Obamacare will likely add $4 to $6 trillion to the deficit over its first 20 years, and possibly more…

Of course, the deficit is not the biggest problem.  Even bigger is that regardless of the deficit, Obamacare involves trillions of increased government spending and taxes…

In the Wall Street Journal on June 8, Grace-Marie Turner, President of the Galen Institute, estimated based on the numbers in the McKinsey report that as many as 78 million Americans would lose their employer provided coverage.  If those workers ended up receiving the new Obamacare exchange handouts, the estimated costs for those subsidies in the first 6 years alone would soar by 4 times, adding nearly $2 trillion to the costs and deficits of Obamacare during that time…

Such draconian cuts in Medicare payments would create havoc and chaos in health care for seniors.  Doctors, hospitals, surgeons and specialists providing critical care to the elderly such as surgery for hip and knee replacements, sophisticated diagnostics through MRIs and CT scans, and even treatment for cancer and heart disease would shut down and disappear in much of the country, and others would stop serving Medicare patients.  If the government is not going to pay, then seniors are not going to get the health services, treatment and care they expect.

Yet, reversing these unworkable Medicare cuts would add $15 trillion to the future deficits caused by Obamacare.

So Obamacare isn’t going to reduce the deficit after all.  How about that?  You see, Boehner is right not to trust Democrats.  Because they lie.  And while they’re bitching and moaning about trying to raise the debt limit by $2 trillion Obamacare will add another $4 to $6 trillion, or more, to the deficit over its first twenty years.  And there’s a whole bunch of unpleasantness in addition to that.  78 million people losing their private insurance coverage.  And the gutting of Medicare that will destroy that program.  Which will add another $15 trillion to future deficits. 

This should be the Republican position.  This is the deal they should offer.  Raise the debt limit by $2 trillion.  And repeal Obamacare.  Final offer.  Take it or leave it.  Either eat your peas.  Or you, President Obama, can default on America’s debt obligations.  For it is your Obamacare that has put us in this position in the first place.

Too much Debt is a bad Thing

Having too much debt is a bad thing.  We see it in Europe.  The EU is worried about what’s happening in Greece spreading to larger countries in the Eurozone.  Markets are jittery about Europe’s financial crises.  Even on Wall Street.  Because too much debt is a bad thing.  And no economy is too big to fail from an overload of debt.

The whole world understands this.  That too much debt is a bad thing.  And yet what is the Obama administration doing?  Piling on to their debt.  And not in a little way.  They’re collecting some $2 trillion in cash each year but it’s not enough.  They need to borrow an additional $2 trillion this year to pay their bills.  I don’t know what’s going on in Washington but one thing for sure – it ain’t good governing.

Repeal Obamacare.  Solve a bunch of problems with one act of legislation.  And demonstrate some good governing for a change.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

We’d do better Emulating Bourbon Country than China

Posted by PITHOCRATES - June 25th, 2011

A Generous Government robs the Private Sector

The economy.  It’s bad today.  It’ll be bad tomorrow.  And probably will still be bad when many are thinking about retiring.  I say thinking.  Because that’s all they may be able to do about retirement.  Think about it.  As they keep working well into retirement age (see Retirement As We Know it Is “Dead”: EuroPacific’s Pento by Peter Gorenstein posted 6/22/2011 on Yahoo! Finance).

“Americans are have negligible savings, the real estate market is still in secular decline, stock prices are in a decade’s long morass, real incomes are falling, public pension plans are insolvent and our entitlement programs are bankrupt.”

Pento believes these issues could be resolved if the government takes the right steps. What might those be? He recommends lowering taxes, reducing inflation and balancing the budget as a means to increase the value of the dollar. If the dollar had more purchasing power and interest rates were higher, retirees would be able to live off their fixed income, he says.

Please note the common theme in the resolution.  Less government.  Less government spending.  Les government taxing.  Less government quantitative easing (i.e., stop depreciating the dollar).  Because it is all of this government intervention into the private sector that has killed so many private sector jobs.  Reduced our real incomes.  Bankrupted our entitlement programs.  And destroyed our pensions (because fat pension funds are just too tempting to ‘borrow’ from to pay for more spending.  And by borrow I mean steal).

A generous government is a government that robs the private sector to pay the beneficiaries of the public sector.  But they have taken so much that they have given the private sector the worst recession since the Great Depression.  Which, in turn, has starved government coffers.  Talk about killing two birds with one stone.

There’s no Recession in Bourbon Country

Despite being in the worst recession since the Great Depression thanks to all that government intervention into the private sector, there is some positive economic activity out there.  One area in particular that is near and dear to my heart.  Bourbon (see Bourbon’s popularity feeds growth of Kentucky distilleries by Bruce Schreiner, Associated Press, posted 6/25/2011 on USA Today).

The producers are aiming to quench a thirst for bourbon — especially premium brands — that is steady in the U.S. and rapidly expanding overseas, thanks in part to the comeback of cocktails appealing to younger adults, lower tariffs, robust marketing and a larger middle class in emerging markets.

A tariff is a tax on an import.  To protect the domestic competition.  Or so goes the theory.  Protective tariffs destroyed a lot of American industry that had no incentive to improve (textile, steel, automotive, etc.).  But that’s another story.  Thankfully, bourbon is an American spirit.  All proper bourbon hails from Kentucky.  Thanks to those freshwater streams through the limestone bedrock of those rolling hills.  So there are no foreign bourbon markets to protect.  Keeping tariffs lower than they may be otherwise.  Thus providing a healthy export market. 

Industry observer F. Paul Pacult, editor of the quarterly newsletter Spirit Journal, said bourbon makers are showing an adventurous side with premium offerings that reflect an “intramural competition.”

“There’s more innovation happening in Kentucky right now than any other place in the world,” Pacult said.

Now Kentucky is bourbon country.  There are a lot of distillers competing against each other.  And yet the bourbon market as a whole is growing.  There’s no recession in bourbon country.  Which just goes to prove the old maxim.  Competition makes everything better.

The industry’s biggest boost, though, has come from exports.

Producers of bourbon and Tennessee whiskey reaped $768.2 million in export sales in 2010, up from $303.8 million in 2000, according to the spirits council, citing statistics from the U.S. Department of Commerce and the U.S. International Trade Commission.

The biggest overseas customers include Australia, Japan, the United Kingdom and Germany, but the industry is looking at two seemingly bottomless markets — China and India — along with other emerging markets in Asia and Africa.

China and India.  Those two countries driving up the price of oil.  Because of exploding demand in their emerging middle classes.  Countries that gave up much of their communist/socialist ways.  Who turned their disdain for capitalism to ‘dain’ (which I think means the opposite of disdain).  And they have smoking hot economic growth.  Hard to believe that a communist country, China, is schooling the United States in free market capitalism.

Crony Capitalism and Corruption in China

Or are they?  Oh, they are getting more Western.  But not like the UK or the USA during the Industrial Revolution or the booming times that followed.  But after the growth of Big Government in those counties (see The long arm of the state posted 6/23/2011 on The Economist).

Chinese students used to aspire to a job with a foreign company. Now they are more likely to want one with an SOE [state-owned enterprises].

This may seem an odd choice, since the dynamism in China’s economy is mostly generated by non-state firms… In 1999 government-controlled firms owned 67% of industrial capital; a decade later their share had fallen to 41%. But in the industries that pay the highest salaries, state firms dominate.

A new shorthand has entered common parlance: guojin mintui, meaning the state [sector] advances and the private retreats. ..It has been tightening its grip on some industries it considers “strategic”, from oil and coal to telecommunications and transport equipment. It has been devising market-access rules that favour state firms. And to the chagrin of private businesses, it has allowed state companies to remain active in a surprising range of palpably non-strategic sectors, from textiles and papermaking to catering. In recent years property development has become a lucrative sideline for government businesses. “The tentacles of state-owned enterprises extend into every nook where profit can be made,” writes Zheng Yongnian of the National University of Singapore.

Already the young people are choosing the public sector over the private sector when it comes to their career.  Because the bloated public sector pays more.  With this higher pay they must be attracting the best and brightest to these SOEs.  So these SOEs must be kicking the non-state firms’ asses.

Some Chinese economists worry that the government’s response to the global financial crisis will bolster state enterprises and their bad habits at a time when they urgently need reforming. As the confederation’s researchers put it, much stimulus spending has involved “swapping from the left hand to the right hand”: the state lending to the state…

Unirule noted that the profits of state-owned industrial companies had increased nearly fourfold between 2001 and 2009. But their average return on equity was less than 8.2%, whereas that of larger non-state industrial enterprises was 12.9%. Factor in the low cost of borrowing enjoyed by SOEs and their access to land at below-market prices, the report said, and their real return on equity between 2001 and 2009 was minus 1.47%. They are, in effect, destroying capital.

Apparently not.  They actually have a negative return on investment.  So the SOEs are just deadwood propped up by government spending and special privilege.  Reminds me of another Asian country awhile back.  Where there was private sector/public sector partnering.  Where capital was shuttled from the left hand to the right hand.  Anyone like to guess the country I’m thinking about?  Anyone?  No?  Here’s a hint.  China and this other country hate each other.  Bitterly.  Which makes it rather ironic that they’re now following their example.  That Asian country is Japan.  During the Eighties.  A decade of spectacular growth.  That was more bubble than growth.  And we all know what happened in Japan in the decade that followed.  Not a whole hell of a lot.  Because the bubble popped.  And they suffered a devastating deflationary spiral similar to the Great Depression.  It was so bad that they called the Nineties the Lost Decade.

Some foreign businesspeople complain that market-opening measures initiated in the 1990s and early 2000s have run out of steam.  Many saw China’s accession to the WTO ten years ago as a great impetus for reform. But when the country reached the end of its transition period in 2006, its will faltered. Many foreign companies still report doing good business. But especially since the global financial crisis, the government has been widely accused of twisting rules in favour of its state-owned or, sometimes, private-sector favourites…

Local governments sometimes play a decisive role in determining which firms succeed and which fail. Take Himin, a manufacturer of solar water heaters based in the city of Dezhou in the northern province of Shandong. Himin is a private company, but it is the local government’s champion. Together Himin and the government have devised a branding strategy for Dezhou as China’s “solar city”. The government has helped Himin to grow by requiring apartment buildings to be equipped with solar water heaters and by subsidising solar-heated bathhouses in villages.

This is not capitalism.  This is crony capitalism.  Not much different from mercantilism.  And not a sustainable economic model.  Unlike entrepreneurism.  Like they’re doing in Kentucky.  While the nation is suffering the worst recession since the Great Depression, distillers are investing and innovating, competing against each other as they book record exports.  Without any partnering with their government.  While Himin is in bed with government.  A government that giveths.  And can just as easily taketh away.  And with business dependent only on their relationship to government, you can bet that there isn’t a lot of investing and innovating going on at Himin.  Because they don’t have to.  So why would they?

This scheme to encourage what the government calls “indigenous innovation” focuses on seven “strategic” industries, from alternative energy and low-carbon-emitting vehicles to information technology. First Financial Daily, a Chinese newspaper, reported that investments by these industries could amount to as much as $1.5 trillion over five years, of which the state is likely to contribute 5-15%. Mr McGregor says the scheme involves creating new Chinese technologies on the back of foreign ones supplied by companies eager for a share in the government’s massive spending. Some Chinese scientists have complained about the likely waste involved in state-directed R&D, but the party loves big projects too much to listen.

Good innovation doesn’t need government money.  Investors are more than willing to finance a good thing.  What investors don’t like to invest in are bad investments.  Which is typically what the government invests in.  Because a good investment can attract private capital.  So that leaves the bad investments for government to fund.

People flocking to the government for financing are just like ants at a picnic.  They just want to get in while the getting is good.  But they have little of value to offer.  They’ll just pull a lot of money out of the private sector that could have been put to better use.  By producing real economic growth.  With a positive return on investment.

Worse is the state directing private investment.  People risking capital know what good R&D is.  People risking other people’s money don’t.  And they’re far more tempted to consider political reasons than good science.

China’s state-sector reforms in the 1990s went for the low-hanging fruit. A decade ago angry workers were easily cowed into submission by police or bought off with handouts. But any further reform would affect the interests of people in the top echelons of the party as well as their families, who have extensive connections with state-owned firms.

Zhu Rongji, the former prime minister whose reforms obliterated many of China’s state-owned firms in the late 1990s, has also gone on the attack. In April he made a rare public appearance at his alma mater, Tsinghua University. He handed over copies of a four-volume collection of his speeches, due to be published later this year, and pointedly invited readers to “make comparisons with the situation today”. To his supporters, the present looks grim.

Top echelons of the ruling communists, as well as their families, are well connected with state-owned firms?  No wonder they have negative returns on equity.  They’re stealing money from these SOEs.  This is everything the communists said the capitalists did.  And here the wealthy communist elite are doing it themselves.  Exploiting the poor working class.  How ironic.

Maybe the Chinese are just drunk with power.  Or on that fine Kentucky bourbon.

You’re going to Work until you’re Dead

The Chinese economy is a house of cards.  Much like it was in Japan in the Eighties.  And it will crash.  One day.  Just as the Japanese economy fell.  And no doubt a round of deflation will follow.  Like in Japan.  The Chinese are already raising interest rates to stamp out inflation.  To try and stop a bubble in their economy.  Much like the rest of world is.  Well, pretty much everyone but Ben Bernanke in the U.S.  Who may still try another round of quantitative easing.  Silly Americans.  Adding inflation to high unemployment only gets you the misery of the Seventies.  Carter‘s stagflation.

Although some of that economic activity may be somewhat artificial, it is producing surpluses.  Enough for the Chinese to buy U.S. debt.  So the Americans can continue to pay for their entitlement programs.  Such as Social Security.  And Medicare.  Which everyone and their brother knows will go bankrupt in the not so distant future.  Just as the Baby Boomers start retiring en masse to stress these programs like they’ve never been stressed before.  Now imagine the Chinese economy crashing.  And their surpluses turn to deficits.  And they can’t buy U.S. debt anymore.  That’d be one painful scenario.  Unable to borrow money, the U.S. would have no choice but to cut spending.  In a big way.  As in all those entitlement programs.  Which account for almost half of all federal spending.  Ouch.

Retirement as we know it dead?  You better believe it.  You’re going to work until you’re dead.  Even if you saved for your own retirement.  Because a broke government is a desperate government.  And if they can’t raise enough money taxing income, and the Chinese aren’t buying our debt, they’ll start taxing your wealth.  Your savings.  Your assets.  Your retirement.  Some nations already do.  So it’s not unprecedented.  Which would make a Chinese crash rather depressing. 

Gee, I’d hate to be in our shoes.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

It’s Entitlement Reform or Bust. Literally.

Posted by PITHOCRATES - April 27th, 2011

Boehner not Wedded to Ryan’s plan to Reform Medicare

Just when you thought someone was getting serious about addressing the 800 pound gorilla in the room.  That thing that is driving this car into the ditch.  Entitlement spending.  Unsustainable entitlement spending.  The young guns laid down a bold plan.  But the old guard is now backing away from it (see Boehner: ‘Not Wedded’ to Ryan Plan for Medicare by Danny Yadron posted 4/26/2011 on The Wall Street Journal).

House Speaker John Boehner (R., Ohio) said he is “not wedded” to Mr. Ryan’s plan to redo Medicare. “Paul Ryan has an idea that’s certainly worth consideration,” Mr. Boehner said in an interview with ABC News. “I’m for it. It’s our idea. It’s Paul [Ryan]’s idea. Now other people have other ideas. I’m not wedded to one single idea.”

For crying out loud, who do you gotta sleep with to get some entitlement reform around here?

This is why the Founding Fathers did not include Entitlements in the Constitution

Somebody needs to do something with Medicare and fast.  Because the current entitlement spending (the biggest chunk of which is Medicare) is going to bankrupt the United States.  The Heritage Foundation has published a new book chock full of charts (some of which they crunched from 2008 tax data).  If you’re looking for a good book to curl up with on a rainy night, this isn’t it.  But if you want to make some sense out of all these numbers being thrown around out there, this is a must read. 

Based on current projections, by 2049 spending on Social Security, Medicaid, Obama Subsidy Program and Medicare will consume all tax receipts, leaving nothing else to pay for military spending or interest on the debt (see Entitlements Will Consume All Tax Revenues by 2049 from The Heritage Foundation 2011 Budget Chart Book).

If the average historical level of tax revenue is extended, spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will consume all revenues by 2049. Because entitlement spending is funded on autopilot, no revenue will be left to pay for other government spending, including constitutional functions such as defense.

Sure, some may not care that the military will be completely defunded.  But at the rate of growth of this entitlement spending on ‘autopilot’, we won’t be able to pay that other great expense.  Interest on the federal debt.  And that’s a big deal.  For it’s what everyone is talking about right now.  Now that we’re fast approaching the legal debt ceiling.  If we don’t raise it, the Obama administration claims, we’ll destroy the credit worthiness of the nation (see Treasury quietly plans for failure to raise debt ceiling by Lori Montgomery and Brady Dennis posted 4/26/2011 on The Washington Post).

The White House is warning that catastrophe will strike if Congress fails to raise the limit on the national debt: With too little cash to pay creditors, the U.S. government would default. Interest rates would skyrocket. And the economic recovery would collapse.

So, yeah, this entitlement spending is pretty serious.  If unchecked, its growth will make it impossible to pay for defense and interest on our debt.  And continuous deficit spending adds more and more to the debt.  Other than a spike during World War II, the national debt as a percentage of GDP was at or below 50%.  Obama has taken that above 50% for the first time since FDR.  And then it just soars after that.  By 2050 they project it to be 344% of GDP (see National Debt Set to Skyrocket from The Heritage Foundation 2011 Budget Chart Book).

In the past, wars and the Great Depression contributed to rapid but temporary increases in the national debt. Over the next few decades, runaway spending on Medicare, Medicaid, and Social Security will drive the debt to unsustainable levels.

Of course, a trillion dollar stimulus or two and a national health care program only compounds the problem.  Even Obama is now saying we can’t spend more than we have, implying that we’re just not taxing the people enough for the current level of spending.  But it’s not a lack of taxing that caused the problem.  It’s the orgy of spending that is (see Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits from The Heritage Foundation 2011 Budget Chart Book).

The main driver behind long-term deficits is government spending[,] not low revenues. While revenue will surpass its historical average of 18.0 percent of GDP by 2021, spending will shoot past its historical average of 20.3 percent, reaching 26.4 percent in the same year.

But didn’t we cause the deficit by letting the rich not pay their fair share of taxes?  George W. Bush gave the rich unfair tax breaks.  And President Obama renewed the tax breaks for the rich.  It seems to me that if we would only stop the free ride of the rich we could solve a lot of our fiscal problems.  I mean, just how much are these cheap bastards paying anyway? 

Well, funny you should ask.  Because they’re paying a lot.  The top 1%, the richest of the rich (those earning $380,354+ annually)?  These cheap bastards are paying 38.02% of all federal income taxes.  The top 10% (those earning $113,799+ annually)?  These cheap bastards pay 69.94% of all federal income taxes.  It appears that these cheap bastards aren’t all that cheap after all.  The rich are paying the lion’s share of all federal income taxes.  While the bottom 50% (those earning $33,048 or less annually) are only paying 2.7% of all federal income taxes (see The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes from The Heritage Foundation 2011 Budget Chart Book).

Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all.

It’s the entitlements, stupid.  They’re breaking the bank.  When the Founding Fathers wrote the Constitution there wasn’t any entitlement spending in it.  Why?  Because they didn’t want them in the Constitution.  It wasn’t in their plan for the federal government.  Why?  Because they all feared what would happen when people started voting themselves money from the federal treasury.  Franklin warned that it would be the end of the republic.  You see, he said if we started doing that we would eventually end up exactly where we are.  Wise man, that Franklin.  As were all the Founding Fathers.  They knew better than to give us a democracy.  They wanted people who knew better (or should know better) between the people and the treasury.  So that some demagogue couldn’t come along and promise federal benefits in exchange for votes.  Like they do today.  And plan to do until the country spends itself into the ground.  Obama’s 2012 budget calls for entitlement spending that consume 58% of the entire budget (see More Than Half of the President’s Budget Would Be Spent on Entitlement Programs from The Heritage Foundation 2011 Budget Chart Book).

In combination with other entitlements, Medicare, Medicaid, and Social Security constitute the lion’s share of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent.

That’s an infinity percent increase ((58%-0%)/0%) since 1787.   For something the Founding Fathers didn’t want the federal government to do.  And trying to pay for this is forcing the nation into a “catastrophe.”  If they were alive today they’d probably say, “See, I told you so, you stupid sons of bitches.  And, by the way, thanks for taking our gift to you and destroying it in a little over 200 years.  Makes those 8 years of the Revolution all the more worth it.  You should have listened to us.  But no!  What do we know?  The English Civil War, the Enlightenment, the Magna Carta…what are these?  Sure, they influenced us.  But what do they mean to you?  Probably about as much as our constitution.  Whatever the hell you want it to mean.  Because it’s a ‘living document’.  “Sure, the Founding Fathers wrote this but they meant something completely different.”  Oh, did we?  How interesting.  We were so stupid we didn’t even know how stupid we were.  Gee, thanks for pointing that out to us.  You ungrateful sons of bitches.”

Or something like that.

American Civil War II

Everyone knows we have a problem with entitlement spending.  It will eventually bankrupt the United States.  We all know it has to be reformed.  But no one wants to because it may cost votes.  You see, you don’t buy votes by taking money back.  You buy votes by giving money away.  So everyone just kicks the can down the road.  All the while the cost of reform grows ever higher.  Much like it did in the first half of the 19th century.  When we kept kicking another can down the road.  Always trying to find a compromise to fix things for today.  And letting someone else worry about tomorrow.  I’m sure you know what I’m talking about.  If you don’t, here’s a hint.  That problem ended about 150 years ago.  At the conclusion of the American Civil War.

We have a growing underclass that pays no income taxes that is now half of the population.  We have a small middle class/rich that is paying most of the taxes.  And a ruling elite.  Kind of reminds me of another civil war.  The French Revolution.  So it is not inconceivable that our class warfare could turn into actual warfare.  There was civil strife in Greece when they went bankrupt.  But the European Union bailed them out.  The question here is who will bail out the United States?  Or, rather, who can bail out the United States?  For, at the moment, it doesn’t look like anyone can.

Speaking in worst case scenarios, it may become necessary to rewrite our history books.  We will have to revise the American Civil War to the American Civil War I (1861-1865).  To differentiate it from the American Civil War II.  Whose start and end dates have yet to be determined.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , ,

UK Budget Cuts Ignite Riots, Gives Glimpse of USA Future

Posted by PITHOCRATES - March 26th, 2011

Unruly Mobs Attack the Police…in London

The riots in the Middle East were ignited by high unemployment, high food prices and little government relief for either.  Some countries have all but degenerated into civil war.  But violent unrest is not limited to the Middle East.  Even some of the most advanced Western economies are having their problems (see TUC protest march: anarchists on the rampage in London by Patrick Sawer and David Barrett posted 3/26/2011 The Telegraph).

Police fought mobs of masked thugs who pelted officers with ammonia and fireworks loaded with coins.

The anti-capitalists started fires, smashed their way into banks, hotels and shops, bringing chaos to Britain’s busiest shopping street.

The violence began as Ed Miliband, the Labour leader, addressed a TUC rally of at least 250,000 peaceful protesters in Hyde Park who had marched from Westminster to demonstrate against government spending cuts.

Yeah, you read that right.  London, England.  Unbelievable, isn’t it?  The violence against the police?  And property?  Wow.  And look who’s doing it.  Bloody anti-capitalist anarchist thugs. 

After five hours of running battles, there were 75 arrests. At least 30 people, including five police officers, were injured. Police said the anti-capitalists threw lightbulbs filled with ammonia at them…

They ordered limited use of “kettling” to contain the rioters but admitted that such was the scale of the violence, they could not protect property.

The UK has big time budget problems.  High taxes are hurting the economy.  Ever increasing public benefits require more and more tax revenue.  And increases the debt.  They cannot sustain this spending without crashing the economy.  Or bankrupting the nation.  But the anarchists don’t care.  Because they’re anti-capitalists.  And simply don’t understand rudimentary economics.  Or numbers with a ‘£’ in front of them.

From Rich Empire to Bankrupt Nanny State

So just how bad are things in the UK?  Bad.  The country is at a crossroads.  It may forever change if it doesn’t change course.  During World War II it was the Nazis threatening their survival.  Today it’s their own spending (see Britain’s leaders should come clean on the true depth of the fiscal crisis by Liam Halligan posted 3/26/2011 on The Telegraph).

The UK’s fiscal crisis is of monumental historic importance. The future of the free world may not be at stake as it was in Churchill’s day. What is in the balance, though, is the prosperity of the British people for at least the next few decades and our status as a top-ranking nation.

This is a common theme among great nations that fall from greatness.  Out of control government spending.  It brought down the Roman Empire.  And the British Empire.  But the great nation that built it remains.  For now, at least.  But the government spending is burdening Britain more than her empire ever did.

Over the last 12 months, then, this country’s “on-balance-sheet” liabilities have risen by £147bn. That’s roughly what we spent on the NHS and defence combined in 2010 – and that was merely, during this last year of “austerity”, the incremental increase in what Britain has put “on tick”.

That’s my point – and I will keep making it until it fully enters the public discourse. It is the total debt numbers that Osborne, the Tories and our politicians in general should focus on, not the size of the annual deficit.

This is another common theme with great nations.  They have big military forces.  To protect what is theirs.  And to maintain the peace.  The Royal Navy built the British Empire.  And maintained world peace.  As did the Roman Legions.  That’s why there was a Pax Romana.  And a Pax Britannica.  These empires ushered in great periods of peace.  And their rule of law and free markets provided great prosperity.  But the prosperity led to entitlement.  And state benefits.  Such as the NHS (National Health Service).  State spending increases to meet the desires of voters.  And that spending is now unsustainable.  They have to cut something.  Because they just can’t borrow anymore.

In 2009, the UK spent £31bn – around 6pc of total tax receipts – on debt interest payments. That’s money down the drain. By 2015, we won’t have reached, in Churchill’s words, some “broad sunlit upland”. After four more years of deficits, debt services costs, according to last week’s Budget, will by then be £67bn a year – or almost 10pc of total tax receipts. These shocking numbers are also likely to be under-estimates, given the UK’s massive “off-balance-sheet” liabilities and the Treasury’s benign assumption of future gilt rates.

These interest costs are staggering.  Any meaningful cuts will have to be greater than the annual debt cost if they have any hope of bringing down deficits.  Or the debt.  And they were trying to make some meaningful cuts.  Almost £100bn.  And we saw what happened.  People took to the streets in violent protest.

All of us – politicians, commentators and voters – should compare the quality of our current national debate, its utter detachment from reality, with the statesmanship and candour of Churchill’s “blood, toil, tears and sweat“. For such hard truths inspired a nation, while winning Churchill untold respect.

Of course, during Churchill’s time, there wasn’t a nanny state.  After enduring World War I and the Great Depression, austerity was an all too familiar way of life.  It isn’t like that today.  Today students protest if they don’t get a free college education.  It is questionable even if Winston Churchill himself could inspire today’s entitlement culture.  They’re just too spoiled, lazy and greedy.

A Look into America’s Future

All right, so that’s what’s happening in the UK.  How about the USA?  We have our problems.  But we’re not as bad off.  Obamacare is not quite the NHS.  Yet.  But we have the same entitlement culture.  Out of control state spending is plunging us into record deficits and debt.  High taxes and regulatory compliance has drawn out the Great Recession.  And when some governors start cutting their budgets to balance their budgets, the people protested.  Our day of reckoning is coming.  And N. Gregory Mankiw wrote how a future president might inspire the American people ala Churchill in 2026.  It’s an interesting look at what could very well be our future (see It’s 2026, and the Debt Is Due by N. Gregory Mankiw posted 3/26/2011 on The New York Times).

The seeds of this crisis were planted long ago, by previous generations. Our parents and grandparents had noble aims. They saw poverty among the elderly and created Social Security. They saw sickness and created Medicare and Medicaid. They saw Americans struggle to afford health insurance and embraced health care reform with subsidies for middle-class families.

But this expansion in government did not come cheap. Government spending has taken up an increasing share of our national income.

Today, most of the large baby-boom generation is retired. They are no longer working and paying taxes, but they are eligible for the many government benefits we offer the elderly.

Our efforts to control health care costs have failed. We must now acknowledge that rising costs are driven largely by technological advances in saving lives. These advances are welcome, but they are expensive nonetheless.

If we had chosen to tax ourselves to pay for this spending, our current problems could have been avoided. But no one likes paying taxes. Taxes not only take money out of our pockets, but they also distort incentives and reduce economic growth. So, instead, we borrowed increasing amounts to pay for these programs.

This part of the story we know.  It’s how we got here.  Or there, as it were, in this tale from the future.  Now comes the debt spiral.  Which will force us to act.  And make decisions no one wants to, or is willing to, now.  Which will be even more painful hence.

For years, the United States government borrowed on good terms. Investors both at home and abroad were confident that we would honor our debts. They were sure that when the time came, we would do the right thing and bring spending and taxes into line.

But over the last several years, as the ratio of our debt to gross domestic product reached ever-higher levels, investors started getting nervous. They demanded higher interest rates to compensate for the perceived risk. Higher interest rates increased the cost of servicing our debt, adding to the upward pressure on spending. We found ourselves in a vicious circle of rising budget deficits and falling investor confidence.

When the treasury tried to auction off some bonds in this tale there were few takers.  So this future president secured a loan from the International Monetary Fund (IMF) with some draconian strings.  The IMF required big cuts in spending (Social Security, Medicare, Medicaid, Obamacare and subsidies – farming, ethanol production, public broadcasting, energy conservation and trade promotion).  And big tax increases. 

We will raise taxes on all but the poorest Americans. We will do this primarily by broadening the tax base, eliminating deductions for mortgage interest and state and local taxes. Employer-provided health insurance will hereafter be taxable compensation.

We will increase the gasoline tax by $2 a gallon. This will not only increase revenue, but will also address various social ills, from global climate change to local traffic congestion.

AS I have said, these changes are repellant to me. When you elected me, I promised to preserve the social safety net. I assured you that the budget deficit could be fixed by eliminating waste, fraud and abuse, and by increasing taxes on only the richest Americans. But now we have little choice in the matter.

If only we had faced up to this problem a generation ago. The choices then would not have been easy, but they would have been less draconian than the sudden, nonnegotiable demands we now face. Americans would have come to rely less on government and more on themselves, and so would be better prepared today.

Even in the future presidents will be making the same promises that they cannot keep.  And make the same lament.  If only we continued the policies of Ronald Reagan.  Kept government small.  And relied on ourselves.  Had we, we’d never be in this financial mess now.  Or hence.

Dead People haven’t a Care in the World

Our own greed will do us in.  Insatiable want of government benefits kills great nations.  Even the UK and the USA are not immune from this.  But the easy political road is to pander to the people.  Give them what they want.  To get their votes.  They do this knowing full well they are destroying the future.  So why do they do it?  Because most of those in government are old.  And when it comes time to pay the piper, it will be a moot point.  Because they will be dead.  And dead people haven’t a care in the world.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

« Previous Entries