Slow Learners

Bribery and Electoral Suborning

Since we have entered an election year, political bribery is in full swing.  At his first major announcement, the Labour leader, David Cunliffe announced new government spending that will cost well over $1 billion dollars per year.  Will the electorate be seduced by this bribe?  We will have to wait and see. 

New Zealand is just emerging from a long, dogged recession.  In the early days of the Global Financial Crisis (which hit just after our recession began in earnest) we were at risk of having a run on our banks.  The country was in a dangerous position of rapidly rising fiscal deficits at a time when no-one was lending.  Credit had dried up.  How come?  Because the previous Labour government had spent all the fiscal surplus and had committed to spending way beyond that in various electoral bribes, middle class welfare and unaffordable programmes, so that our deficit was inevitably going to become a black necklace around the nation’s throat. 

We can still hear the gleeful tones of the then Minister of Finance, Dr Michael Cullen as he taunted the Opposition with a peculiar channelling of Mother Hubbard  that the fiscal cupboard was now bare.  He had “spent it all”, he chortled.
  Apart from his reckless spending on Kiwi Rail, buying it back at a price no-one with a smidgen of financial prudence would have ever approved, the biggest new spending was upon Early Childhood Education (also known as over-engineered, gold plated, daycare centres) and Working For Families (a middle class welfare programme). 

They say that socialism eventually runs out of other people’s money.  Election bribery was in such full swing that not only had Labour run out of other people’s money, it had started spending money no-one had, thereby debt-enslaving our children and grandchildren. 

Through the last six difficult years the government has worked to reduce wasteful spending, increase its effectiveness, and return the nation to a fiscal surplus (before starting to pay down the billions of accumulated debt).  We are now just on the cusp of a surplus.  Economic growth is picking up pace.  Employment is starting to rise.  The hard and difficult climb is coming to an end. 

Labour’s response?  Reckless bribes of new spending to drive the country back into deficit and to start the cycle of spend, boom, bust, recession/depression all over again, making the struggles of the last six years a waste of time.  The question before us now is, Has the electorate learned its lesson, or will it be seduced and suborned by the bribes?  We will see. 

Cunliffe is denying that his bribery will increase the deficit.  His reckless new spending is going to be paid for by raising taxes, he says.  Oh, don’t worry.  It’s only the “rich” who are going to pay these new, higher taxes–but we won’t talk about that until after the election.  Two problems: Cunliffe has already defined households earning $150,000 per year as being worthy recipients of his new welfare bribes–so clearly, they are not rich in Cunliffe’s world.  So, a very, very small percentage of taxpayers are going to have to pay huge tax increases to pay the bill for the new spending.  And then there is the airily announced and long promised Labour capital gains tax, which is a fig.  Such taxes are very costly and complex to administer, and raise relatively little revenue.  We already have capital gains tax in New Zealand, but it is rarely enforced for those very reasons. 

Here is the most odious of the egregious bribes:

Most parents of newborns will get $60 a week until that baby turns 1, while those on middle and lower incomes will continue to receive the payment until the child turns 3.  Mr Cunliffe said the party had set the income threshold relatively high so that it would be near-universal, although its primary aim was to help address child poverty. (NZ Herald)

Cunliffe is either too dumb to consider, let alone understand, the perverse consequences of ill-conceived government policies, or he is too reckless to care.  The worst poverty occurs in the underclass, which is ridden with solo-mothers, dependant upon government welfare.  One of the easiest ways for such folk to achieve an increase in income is to fall pregnant and have another child. You get more of what you pay for.  Under Labour’s bribe, every new child born will increase a household’s income by over $3,000 per year. 

The perverse outcome?  A rapid increase in the numbers of solo mothers with four or more children with multiple anonymous fathers leading to further social dislocation and much worse child poverty, suffering, and degradation.  Cunliffe’s policy will exacerbate child poverty, not alleviate it.  He appears ignorant of human nature and its motivations–or, more likely, he foolishly tells himself that, “this time, it will be different”. 

The real issue is whether the electorate is going to be seduced or offended by such crass, reckless bribes.  We will see.

Fundamental Dishonesty

Having One’s Cake and Eating It Like a Famished Mongol

We appreciate the work of Mark Steyn in constantly putting before us the sheer size of the US fiscal deficit.  If ever there was a case of people turning a wilful blind eye, this is it.  Steyn refuses to allow us to ignore the quantum of the deficit and the doom it represents–or the fundamental dishonesty that surrounds the political debate.

Kindly Note the Impending Bankruptcy

The Perils of Pauline
Mark Steyn
National Review Online

Last year, our plucky heroine, the wholesome apple-cheeked American republic, was trapped in an express elevator hurtling out of control toward the debt ceiling. Would she crash into it? Or would she make some miraculous escape?

Yes! At the very last minute of her white-knuckle thrill ride to her rendezvous with destiny, she was rescued by Congress’s decision to set up . . . a Super Committee!

Those who can, do. Those who can’t, form a committee. Those who really can’t, form a Super Committee — and then put John Kerry on it for good measure. The bipartisan Super Committee of Super Friends was supposed to find $1.2 trillion dollars of deficit reduction by last Thanksgiving, or plucky little America would wind up trussed like a turkey and carved up by “automatic sequestration.
 Sequestration sounds like castration, only more so: It would chop off everything in sight. It would be so savage in its dismemberment of poor helpless America that the Congressional Budget Office estimates that over the course of a decade the sequestration cuts would reduce the federal debt by $153 billion. Sorry, I meant to put on my Dr. Evil voice for that: ONE HUNDRED AND FIFTY THREE BILLION DOLLARS!!! Which is about what the United States government currently borrows every month. No sane person could willingly countenance brutally saving a month’s worth of debt over the course of a decade.

So now we have the latest cliffhanger: the Fiscal Cliff, below which lies a bottomless abyss of sequestration, tax-cut-extension expiries, Alternative Minimum Tax adjustments, new Obamacare taxes, the expiry of the deferment of the Medicare Sustainable Growth Rate, as well as the expiry of the deferment of the implementation of the adjustment of the correction of the extension of the reduction to the proposed increase of the Alternative Minimum Growth Sustainability Reduction Rate. They don’t call it a yawning chasm for nothing.

As America hangs by its fingernails wiggling its toesies over the vertiginous plummet to oblivion, what can save her now? An Even More Super Committee? A bipartisan agreement in which Republicans agree to cave and Democrats agree not to laugh at them too much? That could be just the kind of farsighted reach-across-the-aisle compromise that rescues the nation until next week’s thrill-packed episode when America’s strapped into the driver’s seat of a runaway Chevy Volt careering round the hairpin bends on full charge, or trapped in an abandoned subdivision overrun by foreclosure zombies.

I suppose it’s possible to take this recurring melodrama seriously, but there’s no reason to. The problem facing the United States government is that it spends over a trillion dollars a year that it doesn’t have. If you want to make that number go away, you need either to reduce spending or to increase revenue. With the best will in the world, you can’t interpret the election result as a spectacular victory for less spending. Indeed, if nothing else, the unfortunate events of November 6 should have performed the useful task of disabusing us poor conservatives that America is any kind of “center-right nation.” A few months ago, I dined with a (pardon my English) French intellectual who, apropos Mitt Romney’s stump-speech warnings that we were on a one-way ticket to Continental-sized dependency, chortled to me, “Americans love Big Government as much as Europeans. The only difference is that Americans refuse to admit it.”

My Gallic charmer is on to something. According to the most recent (2009) OECD statistics: government expenditures per person in France, $18,866.00; in the United States, $19,266.00. That’s adjusted for purchasing-power parity, and yes, no comparison is perfect, but did you ever think the difference between America and the cheese-eating surrender monkeys would come down to quibbling over the fine print? In that sense, the federal debt might be better understood as an American Self-Delusion Index, measuring the ever widening gap between the national mythology (a republic of limited government and self-reliant citizens) and the reality (a 21st-century cradle-to-grave nanny state in which, as the Democrats’ convention boasted, “government is the only thing we do together”).

Generally speaking, functioning societies make good-faith efforts to raise what they spend, subject to fluctuations in economic fortune: Government spending in Australia is 33.1 percent of GDP, and tax revenues are 27.1 percent. Likewise, government spending in Norway is 46.4 percent and revenues are 41 percent — a shortfall but in the ballpark. Government spending in the United States is 42.2 percent, but revenues are 24 percent — the widest spending/taxing gulf in any major economy.

So all the agonizing over our annual trillion-plus deficits overlooks the obvious solution: Given that we’re spending like Norwegians, why don’t we just pay Norwegian tax rates?

No danger of that. If (in Milton Himmelfarb’s famous formulation) Jews earn like Episcopalians but vote like Puerto Ricans, Americans are taxed like Puerto Ricans but vote like Scandinavians. We already have a more severely redistributive taxation system than Europe in which the wealthiest 20 percent of Americans pay 70 percent of income tax while the poorest 20 percent shoulder just three-fifths of one percent. By comparison, the Norwegian tax burden is relatively equitably distributed. Yet Obama now wishes “the rich” to pay their “fair share” — presumably 80 or 90 percent. After all, as Warren Buffett pointed out in the New York Times this week, the Forbes 400 richest Americans have a combined wealth of $1.7 trillion. That sounds a lot, and once upon a time it was. But today, if you confiscated every penny the Forbes 400 have, it would be enough to cover just over one year’s federal deficit. And after that you’re back to square one. It’s not that “the rich” aren’t paying their “fair share,” it’s that America isn’t. A majority of the electorate has voted itself a size of government it’s not willing to pay for.

A couple of years back, Andrew Biggs of the American Enterprise Institute calculated that, if Washington were to increase every single tax by 30 percent, it would be enough to balance the books — in 25 years. If you were to raise taxes by 50 percent, it would be enough to fund our entitlement liabilities — just our current ones, not our future liabilities, which would require further increases. This is the scale of course correction needed.

If you don’t want that, you need to cut spending — like Harry Reid’s been doing. “Now remember, we’ve already done more than a billion dollars’ worth of cuts,” he bragged the other day. “So we need to get some credit for that.”

Wow! A billion dollars’ worth of cuts! Washington borrows $188 million every hour. So, if Reid took over five hours to negotiate those “cuts,” it was a complete waste of time. So are most of the “plans.” Any “debt-reduction plan” that doesn’t address at least $1.3 trillion a year is, in fact, a debt-increase plan.

So given that the ruling party will not permit spending cuts, what should Republicans do? If I were John Boehner, I’d say: “Clearly there’s no mandate for small government in the election results. So, if you milquetoast pantywaist sad-sack excuses for the sorriest bunch of so-called Americans who ever lived want to vote for Swede-sized statism, it’s time to pony up.”

Okay, he might want to focus-group it first. But that fundamental dishonesty is the heart of the crisis. You cannot simultaneously enjoy American-sized taxes and European-sized government. One or the other has to go.

— Mark Steyn, a National Review columnist, is the author of After America: Get Ready for Armageddon. © 2012 Mark Steyn

Living Within One’s Means

 Fiddling While Rome Burns

Columnists like Mark Steyn have been repeatedly calling attention to the mammoth threat of the US deficit.  It was bad under Bush’s tenure (the compassionate conservative, you remember); it is not immeasurably worse under Obama’s tenure.  It has been the most signal “accomplishment” of his four profligate years in the White House.  The United States is at the tipping point; it will likely never recover.

Here’s a summary of the problem, from The Weekly Standard:

In the wake of the Treasury Department’s newly released summary of federal spending for 2012, it’s now possible to detail just how profligate the Obama years have been.  Here’s the upshot:  Under Obama, for every $7 we’ve had, we’ve spent nearly $11 (or, to be more exact, $10.95).  That’s like a family that makes $70,000 a year — and is already knee-deep in debt — blowing nearly $110,000 a year.

Of course the numbers are much bigger than that of the average household.

Let’s take a look at the scorecard, based on official government figures.  In fiscal year 2012 (which ended on September 30), the federal government acquired $2.449 trillion in tax revenue and other receipts.  It spent $3.538 trillion — 44 percent more than it had available to spend.  The resulting deficit was $1.089 trillion.

There is a similar scorecard for fiscal years 2009-11.

So in all, under Obama, the federal government has acquired $6.846 trillion in tax revenues and other receipts, and it has spent $10.711 trillion — 56 percent more than it has had available to spend. 

But it gets worse.  The biggest spending increase has yet to come–from legislation already passed by Obama and the Democratic controlled Congress and Senate.

Moreover, Obama has amassed this historic record of fiscal profligacy even before his centerpiece legislation has really taken effect.  If it’s not repealed first, the colossally expensive Obamacare is poised to present grave new challenges to our fiscal solvency — and to our liberty — once it would become a reality on these shores in early 2014.  

The quality of the spend is also very poor.  In the 2011 fiscal tax year, the Federal Government took in $2.303 trillion in tax revenue; it paid out $1.03 trillion on 83 means tested Federal welfare programmes. Forty five percent of tax revenue going out in welfare programmes. As we all know, welfare programmes create a culture of dependency which is almost impossible to eradicate.  The demands and expectations usually go one way–upwards.

Here is a YouTube clip summarising just how bad things are.

If Mitt Romney is elected, he has a huge challenge.  His biggest will be persuading the country to go along with necessary austerities.  If Obama is re-elected the eventual end of America as a super-power would be inevitable. Even lots of Democrats understand this.  But the radical wing of the party is now in control–and Obama has been one of the most radical of all.  His one saving grace is that he has been politically so incompetent as a legislator and working with Congress.

How Did that Stimulus Work Out?

False Messiahs Struck Down Yet Again

Unbelievers are always looking for messianic saviours.  Rejecting the Messiah of God, the Lord Jesus Christ they frantically cast around for a substitute.  Then when times get tough, the demand can rise to the level of panic.  Almost inevitably–virtually without exception–the saviour is some organ or act of government.  Funny that.   “In government we trust” is the religious mania of the day. 

When the United States led us into the global financial crisis the people bowed and prayed for a saviour they had made.  Enter the Federal Government.  It would expropriate an extra one trillion dollars of its citizen’s money which it did not have (“no worries, mate–we will borrow it so your children and grandchildren can pay it off”).  It would then spend this borrowed money on grand schemes to create lots and lots of  jobs. 

The problem is that in God’s world, that is, the real world, false saviours get exploded and struck down.
The Living God is a jealous God and will not tolerate idols and pretenders in His presence and in His world.  Not only has the Big Spend Up failed, it has left the US worse off than before.  This from Michelle Malkin who reports on an ex-post analysis by an economist at the Ohio State University:

The Democrats’ trillion-dollar “American Recovery and Reinvestment Act,” however, keeps piling up waste, failure, fraud and debt. Who benefited most? Big government cronies. 

According to Investor’s Business Daily this week, a new analysis by Ohio State University economics professor Bill Dupor reported that “(m)ore than three-quarters of the jobs created or saved by President Obama’s economic stimulus in the first year were in government.”

Dupor and another colleague had earlier concluded that the porkulus was a predictable jobs-killer that crowded out non-government jobs with make-work public jobs and programs. Indeed, the massive wealth redistribution scheme “destroyed/forestalled roughly one million private sector jobs” by siphoning tax dollars “to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment.” . . . 

Nowhere is the gulf between Obama/Biden rhetoric and reality on jobs wider.  Remember: Obama’s Ivy League eggheads behind the stimulus promised that “(m)ore than 90 percent of the jobs created are likely to be in the private sector.” These are the same feckless economic advisers who infamously vowed that the stimulus would keep unemployment below 8 percent — and that unemployment would drop below 6 percent sometime this year.

Letter From America: Too Stupid to Survive?

What’s Your Plan?

The “Buffett Rule” is just another pathetic sleight of hand.

By Mark Steyn
April 14, 2012
National Review Online

In the end, free societies get the governments they deserve. So, if the American people wish to choose their chief executive on the basis of the “war on women,” the Republican theocrats’ confiscation of your contraceptives, or whatever other mangy and emaciated rabbit the Great Magician produces from his threadbare topper, they are free to do so, and they will live with the consequences. 

This week’s bit of ham-handed misdirection was “the Buffett Rule,” a not-so-disguised capital-gains-tax hike designed to ensure that Warren Buffett pays as much tax as his secretary. If the alleged Sage of Omaha is as exercised about this as his public effusions would suggest, I’d be in favor of repealing the prohibition on Bills of Attainder, and the old boy could sleep easy at night. But instead every other American “millionaire” will be subject to the new rule — because, as President Obama said this week, it “will help us close our deficit.”

Wow! Who knew it was that easy?

A-hem. According to the Congressional Budget Office (the same nonpartisan bean-counters who project that on Obama’s current spending proposals the entire U.S. economy will cease to exist in 2027) Obama’s Buffett Rule will raise — stand well back — $3.2 billion per year. Or what the United States government currently borrows every 17 hours. So in 514 years it will have raised enough additional revenue to pay off the 2011 federal budget deficit. If you want to mark it on your calendar, 514 years is the year 2526. There’s a sporting chance Joe Biden will have retired from public life by then, but other than that I’m not making any bets.

Let’s go back to that presidential sound bite:
“It will help us close our deficit.”

I’m beginning to suspect that the Oval Office teleprompter may be malfunctioning, or that perhaps that NBC News producer who “accidentally” edited George Zimmerman into sounding like a racist has now edited the smartest president of all time into sounding like an idiot. Either way, it appears the last seven words fell off the end of the sentence. What the president meant to say was:

“It will help us close our deficit . . . for 2011 . . . within a mere half millennium!” [Pause for deafening cheers and standing ovation.]

Sometimes societies become too stupid to survive. A nation that takes Barack Obama’s current rhetorical flourishes seriously is certainly well advanced along that dismal path. The current federal debt burden works out at about $140,000 per federal taxpayer, and President Obama is proposing to increase both debt and taxes. Are you one of those taxpayers? How much more do you want added to your $140,000 debt burden? As the Great Magician would say, pick a number, any number. Sorry, you’re wrong. Whatever you’re willing to bear, he’s got more lined up for you.

Even if you’re absolved from federal income tax, you too require enough people willing to keep the racket going, and America is already pushing forward into territory the rest of the developed world is steering well clear of. On April Fools’ Day, Japan and the United Kingdom both cut their corporate-tax rates, leaving the United States even more of an outlier, with the highest corporate-tax rate in the developed world: The top rate of federal corporate tax in the U.S. is 35 percent. It’s 15 percent in Canada. Which is next door.

Well, who cares about corporations? Only out of touch dilettante playboys like Mitt Romney who — hmm, let’s see what I can produce from the bottom of the top hat — put his dog on the roof of his car as recently as 1984! That’s where your gran’ma will be under the Republicans’ plan, while your contraceptiveless teenage daughter is giving birth on the hood. “Corporations are people, my friend,” said Mitt, in what’s generally regarded as a damaging sound bite by all the smart people who think Obama’s plan to use the Buffett Rule to “close the deficit” this side of the fourth millennium is a stroke of genius.

But Mitt’s not wrong. In the end, a corporation doesn’t pay tax. The marble atrium of Global MegaCorp’s corporate HQ is indifferent to the tax rate; the Articles of Incorporation in the bottom drawer of the chairman’s desk couldn’t care less. Every dollar of “corporate” tax has to be fished out the pocket of a real flesh-and-blood human being, whether shareholder, employee, or customer.

And that’s the problem. For what Obama’s spending, there aren’t enough of them, or us, or “the rich” — and there never will be. There is only one Warren Buffett. He is the third-wealthiest person on the planet. The first is a Mexican, and beyond the reach of the U.S. Treasury. Mr. Buffett is worth $44 billion. If he donated the entire lot to the government of the United States, they would blow through it within four and a half days.

Okay, so who’s the fourth-richest guy? He’s French. And the fifth guy’s a Spaniard. Number six is Larry Ellison. He’s American, but that loser is only worth $36 billion. So he and Buffett between them could keep the United States government going for a week. The next-richest American is Christy Walton of Walmart, and she’s barely a semi-Buffett. So her $25 billion will see you through a couple of days of the second week. There aren’t a lot of other semi-Buffetts, but, if you scrounge around, you can rustle up some hemi-demi-semi-Buffetts: If you confiscate the total wealth of the Forbes 400 richest Americans it comes to $1.5 trillion, which is just a little less than the Obama budget deficit for a year.

But there are a lot of “millionaires,” depending on how you define it. Jerry Brown, California’s reborn Governor Moonbeam, defines his “millionaire’s tax” as applying to anybody who earns more than $250,000 a year. “Anybody who makes $250,000 becomes a millionaire very quickly,” he explained. “You just need four years.” This may be the simplest wealth-creation advice since Bob Hope was asked to respond back in 1967 to reports that he was worth half a billion dollars. “Anyone can do it,” said Hope. “All you have to do is save a million dollars a year for 500 years.”

It’s that easy, folks! Like President Obama says, all you have to do to pay off his 2011 deficit is save $3.2 billion a year for 500 years.

He thinks you’re stupid. Warren Buffett thinks you’re stupid. Maybe you are. But not everyone is. And America’s foreign debtors understand that “the Buffett Rule” is just another pathetic sleight of hand en route to the collapse of the U.S. dollar, and of American society shortly thereafter.

When he’s not talking up his buddy Warren, the Half-Millennium Man has been staggering around demonizing Paul Ryan’s plan, which would lead, he says, to the end of the weather service, air-traffic control, national parks, law enforcement, and drinkable water. Given what’s at stake, you might think then that the president would have an alternative plan. But he has none, save for his proposal to pay off the 2011 federal deficit by the year 2526. The Obama No-Plan plan means the end of everything. That really ought to be the only slogan the Republicans need this fall:

What’s your plan?

And all you hear are crickets chirping.

But don’t worry, they’re federally funded crickets, chirping at a research facility in North Carolina investigating whether there’s any correlation between chirping crickets and the inability of America’s political institutions to effect meaningful course correction.

Hey, relax. The Buffett Rule will pick up the tab.

— Mark Steyn, a National Review columnist, is the author of After America: Get Ready for Armageddon. © 2012 Mark Steyn

Douglas Wilson’s Letter From America

Basic Math as Dark Horse

Culture and Politics – Politics
Written by Douglas Wilson
Tuesday, January 17, 2012

I have made this economic point before, but it appears to me that I need to keep making it. This is because we live in a time when we will all need to be reminded, regularly and at periodic intervals, that red ink does not really exist. Related catastrophes do, but I should explain myself.

We are in the same position as two drunk guys who were out on the town, and on a friendly bender.
Because one of them was sloshing full of the milk of human kindness, he promised the other guy that he would write him a check on the morrow for a million dollars, or perhaps two million. He promised this, not because he had the money, or because the money existed in any fashion, but because he was drunk, friendly, and magnanimous. The other guy believed him for the same drunk reason, and adjusted all his mental plans for his financial future accordingly.

The federal obligations to the unfunded big ticket entitlements like Medicare and Social Security (that nobody appears to want to deal with honestly) add up to something between 80 and 100 trillion. This does not include other related sinkholes — like the state pension plans, for example. For purposes of comparison, the total net worth of the entire U.S. is around 70 trillion.

These entitlements are in a different category altogether than the annual bundle of lies called the federal budget. The annual deficit is a shooting star that lights up the night sky, making you almost want to say, “Isn’t that cute?” The entitlements are an asteroid the size of Rhode Island that’s going to land on New York.
The entitlements embody a staggering amount of unkeepable promises. And the reality is that unkeepable promises won’t be kept. Let us go over this principle again. That which cannot be done won’t be done, that which cannot happen won’t happen, that which is not sustainable will not be sustained, and that which cannot go on will not go on. You get the drift.

Ron Paul has many good idea when it comes to annual budgetary spending, but even he does not have a plan for the entitlements. He wants to have an “adult conversation” about them, but you cannot have an adult conversation with an asteroid the size of Rhode Island. The only adult conversation I can envision just now is, “Fire on the mountain, run, boys, run.”

But in this diminishing sea of candidates, who cannot or will not say what must be said, we are indeed fortunate in the arrival a dark horse candidate. Like many horses, including the dark ones, he has an odd name. Basic Math is the dark horse candidate who is going to successfully bring in a true austerity program. And unlike all the other candidates, he doesn’t even need to get elected to do his thing.

So we do not have to worry about the consequences of paying out all those entitlements. It is not going to happen. The money doesn’t exist, and there is no conceivable way that amount of money is going to come into existence. Life will go hard for some when this realization sets in. The only question is “who will that “some” be?” The odds are that these people will be, to return to my first metaphor, those who stayed drunk the longest.