Class Warfare Escalates in France to pay for Out of Control Government Spending

Posted by PITHOCRATES - July 8th, 2012

Week in Review

Once again a government is asking the rich to pay their fair share.  Well, not asking so much.  More confiscating their wealth.  In the name of fairness (see Socialists in France Announce New Taxes by STEVEN ERLANGER posted 7/4/2012 on The New York Times).

France’s new Socialist government announced on Wednesday billions of euros in tax increases and new taxes, to be borne by businesses and the wealthy, in a revision of the 2012 budget designed to meet promised deficit targets in a period of nearly stagnant growth…

For this year alone, the government announced about $9 billion in higher taxes, with about $7.6 billion more to come next year. A freeze on government spending is expected to save $1.8 billion.

So that’s $16.6 billion in new taxes and only spending cuts of $1.8 billion.  That’s $9.22 in new taxes for every dollar cut in spending.  When the Democrats snookered Ronald Reagan into increasing taxes they dangled $3 in spending cuts for each dollar in new taxes.  A deal he accepted and lived to regret.  Because governments just don’t cut spending.  Especially if they get the new taxes up front.  For Reagan it was about the reverse of the deal they offered.  There was $3 in new taxes for every $1 in spending cuts.  Guess the French are much more receptive to paying taxes than the Americans.  Or should I say, they are much more receptive to forcing higher tax rates on those who pay taxes.

Among the main new taxes is a special surcharge on the assets of individuals with more than $1.62 million of global wealth, which is expected to bring in $2.87 billion; the tax is expected to be made permanent next year, when there will also be a new tax bracket of 75 percent on incomes of more than $1.25 million a year…

There will also be a one-time tax on oil stocks, which is expected to raise $688 million and will hit refineries and gasoline stations, which supposedly have benefited from higher oil prices. About $1.13 billion is to come from ending a tax exemption for overtime income, a major effort by former President Nicolas Sarkozy to raise take-home pay, and there will be a new tax on dividends and stock options…

The figures are based on assumptions that the economy will grow by 0.3 percent this year, 1.2 percent in 2013 and then by 2 percent each year after that, which some economists find overly optimistic.

Taxing wealth.  Ouch.  This isn’t taxing capital gains on your investments.  This is taxing the value of your investments.  Even if those investments lose money.  Which means the rich may end up paying for the privilege of losing money in France.  It’s a good thing Europe is bilingual.  It’ll help the French rich as they settle in their new home.  Britain.  So those overly optimistic tax revenue figures will bring even in less revenue.  Making the French economy worse.  And the deficit bigger.  Requiring even deeper spending cuts later.

The auditors urged the government to cut spending more than raise taxes, because the latter hurts economic growth, but the prime minister, Jean-Marc Ayrault, insisted that the key to growth was investment, not austerity. Still, spending cuts would seem to be inevitable to meet the 2013 target. For its 2013-15 budget, the government said it would reduce operating costs. It promises to balance the budget by 2017.

France’s government accounts for 56.6 percent of gross domestic product, one of the highest in the euro zone. It is projected to fall to only 56.2 percent this year and decline slowly after that.

Companies have complained that already thin profit margins are being hit and that France is losing competitiveness in a global market. The auditors said the same, and urged structural changes to better calibrate social welfare benefits to deal with France’s aging population and reduce the debt.

It’s the spending that’s too high.  Taxes aren’t too low.  In fact, taxes are too high.  They’ve transferred over half of private sector wealth to the government.  Over half!  That is an incredible burden on the private sector.  Which will simply collapse as they add the full weight of pension and health care costs of their aging population to their burden.  There will simply be no more wealth to tax.  Which will require draconian spending cuts.  Or a return to subsistence farming.

We may be witnessing the end of the European social democracy.  Which will end as all democracies end.  When the people learn that they have the key to the treasury.  And can vote themselves benefits.  When they learn this all spending restraint is gone.  And politicians pander for votes by promising to spend ever more irresponsibly.  Never worrying about the mess they’re making.  Leaving that to future generations.  Well, that future generation is here.  It’s why the Eurozone is suffering a sovereign debt crisis.  Because all of this social spending has come to a head.  And they can no longer sustain it.  But they still refuse to cut spending.  Instead, they escalate the class warfare.  And when that fails, as it will, then comes the subsistence farming.

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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.

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Newly Found Oil Reserves may break the Cycle of Oppression due to Poverty and Corruption in East Africa

Posted by PITHOCRATES - April 15th, 2012

Week in Review

East Africa is plagued by poverty, political corruption, lack of infrastructure, poor health conditions, AIDS epidemics, high infant mortality rates and everything else that goes with impoverished, corrupt countries.  Somalia is home to pirates that are the scourge of the high seas.  Ethiopia’s recurring famines are well known.  Uganda had Idi Amin.  Who terrorized his people with murder, rape and torture.  South Sudan came into being after a bloody civil war.  Where tribal civil wars continue within the new South Sudan.  As they do throughout much east Africa.  Because there are no advanced economies to support a prosperous middle class.  Just a ruling elite terrorizing the impoverished masses who survive on subsistence farming.  But that may all be changing (see Eastern El Dorado? posted 4/7/2012 on The Economist).

IN ENERGY terms, east Africa has long been the continent’s poor cousin. Until last year it was thought to have no more than 6 billion barrels of proven oil reserves, compared with 60 billion in west Africa and even more in the north. Since a third of the region’s imports are oil-related, it has been especially vulnerable to oil shocks. The World Bank says that, after poor governance, high energy costs are the biggest drag on east Africa’s economy.

All that may be about to change. Kenya, the region’s biggest economy, was sent into delirium on March 26th by the announcement of a big oil strike in its wild north. A British oil firm, Tullow, now compares prospects in the Turkana region and across the border in Ethiopia to Britain’s bonanza from the North Sea. More wells will now be drilled across Kenya, which also holds out hopes for offshore exploration blocs.

President Obama continually tries to tell the American people that we have the smallest oil reserves in the world yet we consume the lion’s share of the world’s oil production.  But that’s not true.  There’s a lot of oil out there.  But you have to drill first to find it.  And until you do you can’t prove these reserves.  So no one counts them.  Including our president.  But it doesn’t stop anyone from looking for oil and natural gas.  If they are not forbidden to do so.  Like they are in America wherever the government has a say in the matter.  People once thought east Africa had no energy.  But it didn’t stop them.  Who believe in the policy of ‘drill baby drill’.  And in ‘drill and ye shall find’.  Which they did.  And they found.  Oil and gas all over that once thought barren land.  Because they just kept drilling, baby.

Kenya’s find raised less joy in Uganda, where oil was first struck in 2006…

South Sudan, for years the largest oil producer in the region and locked in an oil dispute with Sudan, now wants to send crude out through Kenya on a pipeline to a proposed new port in Lamu (see map). Such a channel could also serve Ethiopia, which shares Kenya’s joy about their joint oil prospects. But their winnings pale next to those farther south. Tanzania has done well out of gold, earning record receipts of $2.1 billion last year, a 33% increase on 2010. It will do even better from gas. The past month has seen the discovery of enormous gasfields in Tanzanian offshore waters. That of Britain’s BG Group is big, Another, by Norway’s Statoil, is bigger. Statoil’s recent gas find alone is estimated to hold almost a billion barrels of oil equivalent (boe).

Happily, Tanzania’s gasfield extends south to Mozambique, where Italy’s Eni last month unveiled a find of 1.3 billion boe, matching similar finds by an American firm, Andarko. With plans to build a liquefied natural gas (LNG) terminal, Mozambique could be a big exporter within a decade. At least the vast and impoverished south of Tanzania and north of Mozambique will be opened up to much-needed investment.

Oil and natural gas everywhere.  Finally a chance for these impoverished lands to develop a middle class.  Who can develop a rule of law.  And government of the people by the people for the people.  Like in all Western countries.  Where the quality of life and life expectancy is higher than in these impoverished east African countries.  Which they can have, too.  If they harness their energy resources.  Create jobs.  And provide the energy a modern economy requires.

Yet the region is not just excited about fossil fuels; a parallel push towards alternative energy is under way. Several east African countries are keen to realise the Rift Valley’s geothermal prospects. One of the world’s largest wind farms is being built in Kenya not far from the new-found oil in Turkana. Its backers say it will produce 300MW, three times the total output of Rwanda.

That is a drop in the bucket for Ethiopia. Its rivers, plunging from well-watered highlands into deep canyons, have hydropower potential. Meles Zenawi, the prime minister, has ordered the construction of a series of dams at a total cost of over $8 billion. The jewel is the $4.7 billion Grand Ethiopian Renaissance Dam on the Blue Nile. This should generate 5,250MW when finished, increasing electricity production in the country fivefold, providing a surplus for export and allowing Ethiopia to open up as a manufacturer.

Wind farms.  Well, when you have no energy that 300 mega watts will be a lot.  But when they build that dam which will produce 5,250 mega watts they can shut down those novelty wind mills.  And put that land to better use.  Perhaps building better homes for that budding middle class.  Businesses.  And schools.  For that dam will be able to modernize their infrastructure.  And bring electricity, and the modern conveniences we all take for granted, into their homes.  Including cable TV.  The Internet.  And smart phones.  Things few subsistence farmers enjoy.

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