Greek Debt Crisis, Social Democracy, Welfare State, Keynesians, Inflation, Tax Evasion, Common Currency and the Eurozone

Posted by PITHOCRATES - June 19th, 2012

History 101

Higher Debt Balances accrue Higher Interest Costs that Reduce Income

The Greek debt crisis has been in the news for a long time.  Which has contributed to the Eurozone sovereign debt crisis.  Most people understand that it’s bad.  But they may not understand how bad.  Or understand what exactly happened.  What caused it.  And why they can’t fix it.  For it’s been a crisis since 2009.  And all we hear is that it’ll be apocalyptic if we don’t bail out Greece and save the Euro.  Which would be bad.  As most apocalypses tend to be.

To get a general understanding we’ll use an analogy.  Let’s say you just got a new job and are now earning $80,000 annually.  Your future is bright.  And you’re very happy.  You buy a big house.  And you run up your credit cards furnishing it with lots of nice stuff.  Because you’re earning $80,000 a year and can easily afford it.  Well, perhaps not easily.  But you can still put food on the table.  And take a nice vacation with your better half.  But then a recession sets in.  They cut your bonus.  And some of your benefits (taking a large health care deduction out of your check).  But that house payment remains the same.  As do your credit card bills.  So you cut out the vacation.  And eat more hamburger and less steak.  To adjust to the lost income.  Then worse comes. 

You lose your job.  Go on unemployment.  Which doesn’t pay your bills.  So you desperately look for a new job.  In the bad economy the best job you can get pays only $50,000.  Which is a lot more than unemployment.  But a far cry from $80,000.  You can keep making your house payment.  But you have to slash nonessential spending.  And cut up your credit cards.  Because those high credit card balances require a payment that’s almost as big as your house payment.  Almost your entire paycheck goes to your creditors.  All because you started spending money you didn’t have because you thought that $80,000 job would never go away.  In fact you spent based on what your income would grow to.  Beyond that $80,000.  This is the Greek debt crisis.  Only without the spending cuts.

A Policy of Constant Inflation Monetizes Old Debt and Bumps People up into Higher Tax Brackets

Like the rest of Europe Greece became a social democracy.  Which is socialism-light.  The people learned they had the keys to the treasury.  All they had to do was to vote for people who liked using that key.  And they did.  Government spending soared beginning in the Seventies.  The public sector grew.  Creating a lot of government jobs.  With some generous pay and benefits.  But the country was also a welfare state.  Which meant everyone got a state pension.  State health care.  And other state social benefits.  You didn’t have to work for the government to enjoy the generosity of the state.  And the state was generous.

And the generous government spending just grew more generous.  Strong economic growth allowed more spending.  And more borrowing.  (From 2000 to 2007 Greece led the Eurozone in economic growth.  Which probably sealed their fate.  Because the increased spending during boom times they could never sustain during bad economic times.  And bad economic times were coming.)  Budget deficits became a part of the Greek government.  For they were also Keynesians.  Who believed in the value of running deficits.  And accruing debt.  They devalued their currency.  Which helped make their exports cheaper.  And it monetized their debt.  A policy of constant ‘but manageable’ inflation made old debt worth less.  And easier to pay off.  Just as inflation made people’s savings accounts worth less over time.  But running budget deficits year after year increased their outstanding debt.  Starting slowly at first.  Then growing greater.   Prior to 1984 Greek debt as a percentage of GDP was below 40%.  By 1998 it was above 60%.  By 1990 it was above 80%.  By 1994 it was above 100%.  By 2010 it was above 140%.  By 2011 it was above 160%. 

The Keynesians don’t see a problem with this.  Because they believe if you keep depreciating the currency the older debt just goes away.  It’s like redeeming a $100 savings bond from 1875.  Back then $100 was a lot of money to the government.  Today it’s the loose change they drop from their pockets that isn’t worth bending down to pick up.  Metaphorically, of course.  In time with steady inflation those old debts simply become chump change.  And there’s something else Keynesians love about inflation.  It’s a hidden tax.  Sometime it’s not possible politically to raise taxes.  So they can use inflation to bump people into higher tax brackets.  Making them pay a higher percentage of their income to the government.  Which brings us to another Greek problem.

At the Heart of the Greek Debt Crisis is the Welfare State

Greece is a welfare state.  Like other welfare states they have to fund that welfare with taxes.  So they have high tax rates.  Because it’s what the people want.  That welfare state.  Which requires those high tax rates.  But they have a problem.  People don’t like paying taxes.  Especially the Greeks.  Who have taken avoiding paying taxes to an art.  Which plays a big problem in the Greek debt crisis.  People demanding all of that government spending.  Yet refusing to pay the taxes to pay for it.  Causing great problems.  Especially when they joined the common currency.  The Euro.

The common currency changed things.  They could no longer depreciate their currency.  Because it wasn’t their currency anymore.  It was the Eurozone’s currency.  Joining the Euro was like giving a bunch of people credit cards and telling them they had to restrict their purchases so that their annual deficit and total debt fell below certain percentages of their income.  And those numbers to join the Euro were as follows.  Their deficit had to be below 3% of GDP.  And their debt had to be below 60% of GDP.  If all the members kept within these limits they would maintain their good credit rating.  And be able to use their ‘credit cards’ responsibly.  And not shock the European Central Bank when they opened the credit card statement at the end of the accounting period.

It appears that Greece massaged their numbers with some creative bookkeeping to meet the requirements to join the Euro.  And to stay within the currency union they may have misreported their economic numbers.  (When the crisis began the Greeks officially reported that their deficit was 5% of GDP.  Which exceeded the allowable 3% but was salvageable.  After some outside audits they revised their 2009 deficit up to 15.6% of GDP.  Making the crisis more of an apocalypse).  Why did they do this?  Because they wanted to keep spending.  But they couldn’t depreciate their currency anymore.  The economy was in recession which higher tax rates wouldn’t help.  Not to mention all of the tax evasion.  So that left borrowing as their only avenue to sustain that excessive government spending.  Sort of like trying to solve the problem of having your credit cards cancelled for nonpayment by getting new credit cards to use to accumulate even more debt that you can’t repay.  They’ve gotten one bailout package already.  And a second one is theirs if they commit to some austerity.  Which the people have rejected.  At least those rioting in the streets.  And considering how generous those benefits had been it’s hard to blame these people.  For life as they knew it is over for them.  Thanks to irresponsible government spending that made them dependent on the government.

So there are a lot of factors that caused the Greek debt crisis.  But at its heart is one thing.  The welfare state.  For if there was no excessive government spending they wouldn’t have had those large deficits.  Debt.  Or debt crisis.

www.PITHOCRATES.com

Share

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

Some say the Germans should Remember that Austerity gave them Hitler and should therefore Forgive some Greek Debt

Posted by PITHOCRATES - February 19th, 2012

Week in Review

There are more Nazi comparisons in the continuing saga of the Greek debt crisis as people keep picking on Germany.  The strongest Eurozone state.  And the only one who can bail out the weaker ones (see Germany has forgotten the lessons of war reparations by Jeremy Warner posted 2/17/2012 on The Telegraph).

While on the subject of historical parallels, there’s another which has not yet been given sufficient an airing. This was the vexing question of German war reparations after the slaughter of the First World War, brilliantly identified by John Maynard Keynes at the time in his polemic, “Economic Consequences of the Peace”, as fundamentally unfair on the Germans. Keynes branded the Treaty of Versailles a “Carthaginian Peace”.

True.  The Treaty of Versailles did treat the Germans unfairly.  A word commonly bandied about at the time in Germany was humiliated.  And betrayed.  Even stabbed in the back.  Because the Germans didn’t start that war.  Everyone was eager to go to war.  And nearly everyone did thanks to those entangling alliances that George Washington warned us about.  And another thing.  The Germans didn’t lose the war.  No one did.  And no one won the war.  It ended in an armistice.  Much like the Korean War.  And yet during the treaty process they identified Germany as the sole culprit that caused the war.  And the allies all tried to recoup their losses and rebuild their empires by bleeding Germany dry.

Part of Germany’s purpose during interminable attempts to renegotiate these debts on less oppressive terms was to demonstrate that the German economy was in no position to pay – ergo, the creditor was at some stage going to have to take an almighty hit. Indeed, it is sometimes argued that the Weimar hyperinflation was deliberately engineered in order to demonstrate this fact beyond doubt. There can be no other explanation for the bizarrely ruinous policies of deficit financing pursued by the Bundesbank at that time. No sane central banker could possibly have sanctioned such a strategy…

Given its history, it is quite strange that Germany has such difficulty in grasping this reality. It is sometimes said that German attitudes to the economy and the current crisis are instructed by experience of Weimar inflation and its catastrophic consequences. Yet it wasn’t hyperinflation that brought Hitler to power, but rather the depression of the early 1930s, which in Germany’s case was greatly exaggerated by the pro-cyclical austerity the government of the time insisted on applying to the problem. Those who who [sic] don’t learn from the past are doomed to repeat it.

The Weimar hyperinflation played a part.  But what really motivated Hitler was the Versailles Treaty.  Hitler was a veteran of WWI.  He served bravely.  Was promoted to corporal.  Suffered temporary blindness from a gas attack.  And he knew the Germans weren’t beaten.  Exhausted?  Yes.  War weary?  Yes.  But militarily defeated?  No.  It was the humiliation of the Versailles Treaty that drove Hitler.  So much so that when his panzer armies conquered France he met the French in a special rail car to sign the instrument of surrender.  The same rail car the Germans signed the humiliating Versailles Treaty.

Many Germans rallied around Hitler because they felt the same way.  Germany had grown to be the dominating European power.  And that treaty did what Germany’s enemies couldn’t do.   Change the balance of power in Europe.  To reverse the German successes of the last century or so.  This is what brought Hitler to power.  Vengeance.  To right the wrongs done to Germany.  Had they not been so wronged it is unlikely that a gifted orator would have risen to inflame the masses.  For there may have been no hyperinflation without those punishing reparations in the first place.  And without that economic crisis the world wouldn’t even know the name Adolf Hitler.  (Probably.  Unless a prosperous Weimar Germany liked and bought his art.  Then instead of remembering him as a crazed mass murderer we would remember him as an artist.)

In contrast nobody wronged Greece.  They got into this mess on their own.  By irresponsible government spending.  And the cure for irresponsible spending is responsible spending.  Not forgiving debt so they can keep spending irresponsibly.  German hyperinflation resulted from unjust war reparations that destroyed the German economy.  The Greek crisis resulted from irresponsible spending that destroyed the Greek economy.  Spending is the problem.  It needs to be cut.  So they stop running deficits.  And stop growing their debt.  But cutting government spending is easier said than done.  For once the government makes the people dependent on government benefits the people tend to not want to give them up.  But they must.  It’s the only way to fix the underlying problem.  Irresponsible spending.  And forgiving debt not only misses this central point.  It encourages more of the same.

www.PITHOCRATES.com

Share

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

The Germans are the Atlas of the Eurozone and the French may be Adding to their Burden

Posted by PITHOCRATES - December 4th, 2011

Week in Review

The French and the Germans are carrying the weight of the Eurozone.  Sort of like a family.  Where the Germans are the hard-working adults.  And the French are the successful children with good jobs but living over their means.

Children being children, they want more of the same good times.  The parents, who have experienced true hard times, believe more in thrift and hard work.  So it’s natural that the French and Germans have different views on how to  handle Greek debt.  The French say let’s just print more Euros and monetize it away.  The Germans say, what?  Are you crazy (see A Culture Clash by Veronique de Rugy posted 11/28/2011 on The New York Times)?

First, the perceptions of the consequences of monetizing the Greek debt differ across the Rhine River. It is well known that Germans hate inflation. It is deeply rooted in their psyche. Part of Germany’s official theory is that Hitler came to power because of the disastrous consequences of the hyperinflation of 1922-1924 during the Weimar Republic. The French, on the other hand, have no such fears. On the contrary, ignoring how inflation chipped away their capital, my parents’ generation often fondly remembers paying their house “grace à l’inflation” during the 1970s.

Second, the official government debt and deficit numbers of France and Germany are substantially different. The Organization for Economic Cooperation and Development projects Germany’s debt at 87.3 percent of G.D.P. with a deficit of 2.1 percent of G.D.P. —possibly sustainable levels. However, France’s levels of debt and deficit are higher and unsustainable (debt of 97.3 percent of G.D.P. and a deficit of 5.6 percent of G.D.P.).

Third, attitudes toward reforming social programs differ too: in recent years. Germany has engaged in significant structural reforms to tackle the rigidity in the labor market as well as demographic pressure on the private and public pension system. France, however, has been reluctant to change any “acquis sociaux,” France’s famous social entitlements.

With higher levels of debts and no will to reform entitlement programs, sooner or later France is likely to need a European Central Bank “bailout” to keep paying its bills (and French banks may also be in big trouble). The need for a rescue plan makes France more inclined to set a precedent. However, Germany, after 60 years of desperately trying to avoid inflation, is reluctant to pay that bill.

It’s going to get tough in the Eurozone.  For Germany, that is.  Not only are they the responsible adults living a life of thrift and hard work, they’re children may soon be moving back home.  This on top of trying to save the rest of the Eurozone.

Poor Germans.  The Atlas of the Eurozone.  The only question is will they reach their limit?  And shrug off this crushing weight?

www.PITHOCRATES.com

Share

Tags: , , , , , , , , ,

Big Trouble for the Euro as Massive Greek Debt may be too much for the German People to Endure

Posted by PITHOCRATES - September 11th, 2011

Loans aren’t Gifts, you have to Pay them Back

Tax. Borrow. Print. And spend. The social democracies of Europe have been doing it for years. Thanks to central banking. And fiat money. And a little of John Maynard Keynes. You can keep interest rates artificially low. Deficit spend at will. Sell bonds forever and ever. And even print money. That’s Keynesian economics. Liberal Democrats in America were so enamored with the Europeans that they followed their example. And with government having the power to monetize debt, what could go wrong?

Apparently, a lot. Standard and Poor’s just downgraded U.S. sovereign debt. Citing high debt. And growing deficits. Leading them to believe that the U.S. may have trouble paying back what they’ve borrowed. Saying the U.S. government was living beyond their means. Just because they were spending more money than they had.

You mean we can’t do whatever we want? That’s right. You can’t. Because debt has consequences. You can’t keep borrowing more every year. Because people loan money (i.e., buy bonds) expecting you to pay back that loan. Yeah, I know. Crazy talk. But true nevertheless. Loans aren’t gifts. You have to pay them back.

The Root Problem within the Eurozone is Excessive Government Spending, Deficits and Debt

The U.S. has some financial problems. Record deficits. And record debt. Used to finance ever growing government spending. Yes, things may be bad in America, but they pale in comparison to the problems they have in the Eurozone (see German Dissent Magnifies Uncertainty in Europe by Liz Alderman posted 9/11/2011 on The New York Times).

Despite repeated pledges by Chancellor Angela Merkel to keep Europe together, the cacophony of dissent within her country is becoming almost deafening. That is casting fresh doubt — whether justified or not — over the nation’s commitment to the euro.

“The German electorate is not in the mind-set to undertake actions it sees as subsidizing less worthy nations,” said Carl Weinberg, the chief economist of High Frequency Economics in Valhalla, N.Y. “As a result, the government is moving in a very isolationist way to try to establish a fortress Germany that’s economically secure despite the risks in its European Union partners.”

This weekend, Der Spiegel reported that the German government was starting to prepare for a Greek insolvency and was devising various responses to handle a potential default, including allowing Greece to abandon the euro and return to the drachma. The government in Berlin would not comment, but such reports only add to the doubts bedeviling the euro monetary union.

The root problem within the Eurozone is excessive government spending, deficits and debt. Especially in Greece. Where they’ve borrowed heavily to pay for a very generous public sector. And state benefits.

There were strict requirements to join the monetary union. To change their currency to the Euro. The Euro Convergence Criteria required an annual government deficit of 3% of GDP. Or less. And total debt of 60% of GDP. Or less. Deficit and debt above these limits endangered a nation’s financial stability. And the common currency. The Euro. Which would spread one country’s irresponsible ways to the other countries in the Eurozone.

And that’s exactly what happened. Greece ‘fudged’ their numbers. So while they passed themselves off as fiscally responsible they were anything but. Their deficit and debt far exceeded the Euro Convergence Criteria. And when the global financial crisis of 2008 hit, it hit Greece hard. A couple of years later, with their economy depressed, S&P downgraded their sovereign debt. Increasing their borrowing costs. Which they couldn’t afford. So they had to turn to the international community for help. And it came. With a price. Austerity. Which the Greek people didn’t like.

Because of the common currency, Greece’s problems were now Germany’s problems. Because they were the strongest economy in the union. And the German people are growing tired of picking up the tab for Greece. And they’re not alone.

Finland, the Netherlands and Austria have all spoken with dissonant voices on the Greek bailout, revealing deep divisions among Europe’s strongest countries about how far they should go to save their weaker neighbors.

Continued fears over the state of European banks, and French ones in particular, have also roiled financial markets, especially after Christine Lagarde, the managing director of the International Monetary Fund, warned that European banks needed substantial additional capital.

Meanwhile, fears over Greece are only likely to intensify this week, after Mrs. Merkel’s finance minister, Wolfgang Schäuble, warned that Germany, for one, would not approve new financial assistance to help Athens continue to pay its bills through Christmas unless the Greek government fulfilled the conditions of its first bailout.

Can you blame them? Would you want to loan more money to a family member that continues to spend beyond their means? People want to help others. But they don’t want to finance the irresponsible ways that caused their problems in the first place. Austerity isn’t fun. But others are doing it. As they try to adjust their budgets to live within their means.

Outside of Greece, some things have improved, if only haltingly. Italy’s lower house of Parliament is expected to approve a tough new fiscal package in coming days.

France, Portugal and Spain are adopting measures to make it easier to balance budgets, moves intended to reassure investors about their commitments to fiscal prudence.

Which is not helping Mrs. Merkel. For if she continues to try and save the Euro her party may lose power.

Still, Mrs. Merkel must contend with a stark divide between her support for European unity and a German public that sees no reason, in the majority’s view, to pour good money after bad into the indebted countries of southern Europe. Her Christian Democrat Party has now lost five local elections this year. Yet even as many Germans complain bitterly about their southern neighbors, few in business and politics are ready to let the euro zone fall apart.

After all, if the weakest countries were to revert to their original currencies, a German-dominated euro would soar as investors flocked to it as a haven, devastating the business of exporters who have relied on its stability and relatively affordable level against other major currencies.

Then again, if she doesn’t save the Euro, her export economy may tank. A weak Greece is helping to keep the Euro undervalued. And you know what an undervalued currency does. It makes your exports cheap.

Any American who vacationed in Canada understands this well. Back when the U.S. dollar was strong, it was nice crossing into Canada. When you exchanged your strong American dollars for Canadian dollars, you got a lot more Canadian dollars back. In other words, the American dollar bought more in Canada than in the U.S. So people took their vacations in Canada. Which made the Canadian tourism industry boom.

This is the value of a weak currency. When your currency is weak, goods and services in your country, or goods exported out of your country, are cheaper. And the weaker nations in the Eurozone are keeping the Euro undervalued. And German exports strong. But it comes with a price. The taxpayers are basically subsidizing the export industry. By subsidizing the Greece bailout.

In other words, the Germans are damned if they do. And damned if they don’t.

The More the Debt the More the Crisis, the Less the Debt the Less the Crisis

Governments embrace Keynesian economics because it gives them power. It facilities their deficit spending. Legitimizes it. They and their Keynesian economists will dismiss growing debts. Because they’re no big deal. You see, their policy of continuous inflation shrinks that debt in real terms. In other words, as you devalue the currency, old debts are worth less. And easier to repay years later.

But there’s a catch. You need a growing GDP for this to work. When the economy stagnates, tax revenues fall. And if those debts are too big you just may not be able to service those debts. And you know what can happen? Greece. So too much debt can be a bad thing.

And it’s a dangerous game to play. Because as that debt grows so must taxes to service that debt. So they increase tax rates. But higher tax rates work against growing GDP. Flat or falling GDP means less tax dollars. Which leads to more borrowing. So the solution to the problem is more of what caused the problem. Which makes the original problem bigger. It’s a vicious cycle. Until the cycle ends in a credit downgrade. And financial crisis.

Keynesians can say what they want. But one thing they can’t deny is this. If these countries had no debt then they would have no financial crisis. Some countries have less debt and are not in crisis. While the countries in crisis have excessive debt. See the pattern? The more the debt the more the crisis. The less the debt the less the crisis.

Even Keynesians can’t deny this. Then again, Keynesians could. For they do live in denial.

www.PITHOCRATES.com

Share

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

Debt Limit Talks just Theatre, Obama Determined to Emulate Greek Spending and Debt

Posted by PITHOCRATES - July 18th, 2011

The Debt Limit hasn’t Stopped the Debt from Growing

The bond ratings agencies are getting nervous.  About the inevitable default of Greece.  And the possibility that the U.S. won’t be able to accumulate the unsustainable debt like the Greeks have (see Moody’s suggests U.S. eliminate debt ceiling by Walter Brandimarte posted 7/18/2011 on Reuters).

Ratings agency Moody’s on Monday suggested the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders…

“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Moody’s analyst Steven Hess wrote in the report…

In the United States, Moody’s said the debt limit had not effectively curbed the rise in government debt because lawmakers regularly raise it and because that limit is not related to the level of expenditures approved by Congress.

They have a point.  The Economist noted (see Down to the wire posted 7/18/2011 on The Economist) “Congress has acted a total of 91 times since June 1940 to either raise, extend or alter the definition of the debt limit…”  So it would seem that the debt limit is a limit in name only.  It hasn’t stopped the debt from growing.  As their little chart shows.  So why have it?

A Debt Default will be Bad, so will continued Out of Control Spending

Because, apart from World War II, the public debt hasn’t exceeded 100% of the GDP (see The Economist chart referenced above).  George W. Bush took it close to World War II heights to pay for two costly wars (Iraq and Afghanistan) and an expensive Medicare drug plan.  Obama has taken it beyond World War II levels.  At about 140% of GDP.  And Obama wants to borrow more, taking it to 150% of GDP.  Or beyond.  The European Central Bank is forecasting Greek debt to peak at 161% of GDP.  So you can see why having a debt limit is a little more important now.  Which makes the Moody’s recommendation a bit puzzling considering their concerns over Greece (see Senate Throws Obama a Debt Lifeline by Chris Stirewalt posted 7/18/2011 on FOX NEWS).

The bond-rating agencies have spelled out the two scenarios that would result in a downgrading of U.S. creditworthiness: either an unconditional increase to federal borrowing that shows Washington sprinting toward the fiscal abyss or an unbreakable stalemate on the debt ceiling.

A debt default will be bad.  But so will be continued out of control spending.  So it makes little sense solving one problem by making another problem bigger.  Besides, the U.S. has the money to service its debt.  The only question is will Obama service it?

But, here again, Obama is the one in charge of deciding who gets paid in the event of a shortfall. While his administration might send scare letters to senior citizens as a bargaining tactic with Republicans, it’s unlikely that the president would tell pensioners that they can’t have the money they paid into the system during their working lives.

Imagine the president keeping open national parks or green energy stimulus projects while telling America’s oldsters that they aren’t getting checks. Not going to happen.

Yes, if Social Security checks don’t go out to seniors, it will be because Obama chose not to send them.  And speaking of Social Security, this brings up another point.  That it’s a Ponzi scheme. 

The money we paid into the Social Security isn’t sitting in some lockbox collecting interest.  Like those Social Security statements we get imply.  The government spends that money, our money, as soon as they get it.  Which is why they viciously attack any plans to privatize Social Security.  They want your money now.  While you’re living.  And after you die.  For if we privatize Social Security, our heirs would get our unspent retirement money.  Not the government.  As the system is now designed.

This is just another good reason not to give the government more money.  They’re just going to blow irresponsibly.  Like using our retirement money deducted from our paychecks to pay for national parks.  Or green energy.

Obama and the Democrats don’t want Deficit Reduction

Washington can’t curb it’s appetite to spend.  Doesn’t want to.  And they don’t try to hide this fact (see Obama officially threatens to veto ‘Cut, Cap and Balance’ by Sam Youngman posted 7/18/2011 on THE HILL).

The White House on Monday warned President Obama will veto GOP legislation to “Cut, Cap and Balance” spending and the budget…

The administration lambasted the “Cut, Cap and Balance” proposal as setting out “a false and unacceptable choice between the federal government defaulting on its obligations now or, alternatively, passing a Balanced Budget Amendment that, in the years ahead, will likely leave the nation unable to meet its core commitment of ensuring dignity in retirement.”

The White House also blasted some of the cuts Republicans have suggested, saying the proposal would “undercut the federal government’s ability to meet its core commitments to seniors, middle-class families and the most vulnerable, while reducing our ability to invest in our future.

“[The bill] would set unrealistic spending caps that could result in significant cuts to education, research and development and other programs critical to growing our economy and winning the future,” the SAP said. “It could also lead to severe cuts in Medicare and Social Security, which are growing to accommodate the retirement of the baby boomers, and put at risk the retirement security for tens of millions of Americans.”

Business as usual.  Scare the old people.  So they can spend more.  This is an admission that there will be no deficit reduction.  Obama and the Democrats don’t want it.  It’s all just theatre.  To amuse the public.  And buy time.  For they plan to spend, spend and spend.  On programs that are ‘critical’ to winning the future.  Despite the fortune we’ve spent already on these programs that have won jack squat so far.

The American Taxpayer paying for Irresponsible Governments Here and Abroad

So it’s on to Athens.  Push that debt up to 160% of GDP.  I mean, what really can happen that’s so bad (see Gloomy Forecast for Europe’s Banks by Jack Willoughby published 7/16/2011 on BARRON’S)?

Sean Egan, co-founder and president [Egan-Jones Ratings], has a stunning prediction for Barron’s readers: Forget about things getting better in Europe, he says; they will actually get worse. And who might be one of the patsies in all this? The American taxpayer, who could feasibly be stung as the Federal Reserve aids an ailing European Central Bank already depleted by too many bailouts. The big question: Will Europe, worn down by bailout after bailout, finally be forced to bail out the bailer—the ECB?

Oh.  As bad as things are in Europe they’re going to get worse?  And the American taxpayer may ultimately pay for these bailouts?  Lovely.  Just when you thought things couldn’t get any worse.  Not only will the American taxpayer pay for their own irresponsible government.  But Europe’s as well.

Atlas can’t Shoulder the Weight of the World Anymore

That debt limit seems more important than ever.  This out of control spending has to stop.  Before it’s too late.  Because we can’t afford our debt and Europe’s debt.   America can’t be Atlas and shoulder the weight of the world on its shoulders.  At least, not anymore.  Not with the Obama administration running things.

www.PITHOCRATES.com

Share

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