While attention was focused on the Boston bombing, Gosnell, and gay marriage, Greece just got another bailout. This is in exchange for further “austerity.”
What sort of “austerity” is Greece practicing? The sort that involves deficit spending at 10% of GDP, which is up from 9%. It was supposed to be cut to 7.5%.
So Greece wants more money because it can’t even keep to its previous promises on its fake austerity goals.
Let me explain it once again: Real austerity is cutting spending until it matches incoming receipts.Not reducing the rate of deficit spending. Not raising taxes so politicians can continue to spend.
No country in the EU (at least outside the Baltics) has practiced real austerity. That Forbes piece on the Baltic nations includes a lot of good advice that EU nations are largely ignoring:
Don’t run up big debts. It is a lot easier to manage when things go bad if you aren’t overextended to start. Observed Rosenberg: “Estonia’s experience shows that prudent policies during the boom may not avoid a bust, but they can put the country into a better position to deal with shocks.”
Don’t engage in an orgy of “stimulus” spending. That will run up big debts without generating long-term growth. When budgets eventually are cut, as they will have to be, the economic loss and political pain will be even greater.
Make tough decisions early. People typically are ready to act after the crisis hits. In the case of Latvia, argued Asmussen, by acting swiftly “most of the required painful budgetary decisions could be passed before the so-called ‘adjustment fatigue’ kicked in.”
Maintain fiscal responsibility. Otherwise any progress will be transitory. Growth is the natural result of reform. Delaying reform exacerbates the problem while prematurely terminating reform short-circuits the recovery.
Emphasize budget cuts. Expansive and irresponsible public outlays usually contribute to economic crisis. Moreover, the state as well as citizens should sacrifice after a crash. The answer is to cut expansive and irresponsible public outlays. In fact, economists Alberto Alesina and Silvia Ardagna found that “spending cuts are much more effective than tax increases in stabilizing the debt and avoiding economic downturns. In fact, we uncover several episodes in which spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions.”
Finally, don’t rest on one’s laurels. There always is more to do. Even nations which have implemented serious reform programs, like the Baltic States, could make further improvements.
As far as I can tell, none of the core EU states (and certainly none of the PIIGS) has tried this approach since the 2008 recession hit. They keep trying Neo-Keynesian pump-priming and deficit spending to keep both the Euro and their unsustainable welfare state float, and they keep experiencing endless recession. Their fake austerity comes in slightly reducing the amount of their deficit spending enough to pretend they’re in compliance to keep the bailouts coming. Ireland hasn’t practiced real austerity. Neither has Portugal, Spain, or Italy (though Italy has come closest).
The shell game of bailouts and fake austerity will continue as long as the Eurocrats can keep getting away with it.
The Week of Extreme Busyness continues (though the weekend has gotten slightly less busy), but here’s a semi-random LinkSwarm to end your work week with.
Thanks to ObamaCare’s electronic billing provisions, doctors “see fewer patients per shift than they did previously, and spend less time with each one.”
Grad student sues over university giving her a C+ in a class. Oh, and she also attend the university for free. Why not just hang a sign around your neck saying “No employer should ever hire me, I’m a lawsuit waiting to happen”?
CalPERS: the pension fund that ate California. A tale filled with lies, waste, and outright corruption that’s even worse than I thought (and I thought it plenty bad).
Via the indispensable Will Franklin comes this eye-opening comparison of welfare in California vs. Texas. “As you can see, California is practically in a quadrant unto itself, indicating a lot of people receiving a lot each in welfare benefits. Meanwhile, Texas is situated precisely in the opposite corner of the graphic, indicating that a low percentage of Texas’ residents are receiving welfare, and among those who are receiving welfare, they’re receiving smaller benefits than those living essentially anywhere else in the country.” Read the whole thing. And get a gander at the chart.
Jerry Brown gets voters to approve a measure that cuts California public employee union pensions a tiny, weensie bit. The result? “California Public Employees’ Retirement System is essentially going to defy the order that pensions will be calculated based on base pay by declaring enhancements and bonuses are part of base pay.” And some unions are suing to opt out. And Brown isn’t even willing to defend the reforms in court.
“The highest-paid 10 percent of Southern California Edison employees earned at least $418.8 million in combined total compensation during 2011, and charged at least $11.8 million to their expense accounts, according to a report the public utility filed with the state. SCE’s most recent annual report showed 19 executives and other SCE employees received more than $1 million in total compensation during 2011, and at least 130 others received $300,000 or more in total compensation.”
Instead of going out and doing the heavy lifting myself on a Texas vs. California update, Victor Davis Hanson [[Corrected. - LP]] has done another of his California is totally screwed pieces, and it’s a cornucopia of facts on California’s decline.
A few tidbits:
Salinas just named an elementary school after a serial cop killer
“Hundreds of thousands of the working and upper-middle class, mostly from the interior of the state, have fled — maybe four million in all over the last thirty years, taking with them $1 trillion in capital and income-producing education and expertise. Apparently, they tired of high taxes, poor schools, crime, and the culture of serial blame-gaming and victimhood.”
“One of every three welfare recipients lives in California.”
Profile of Jim DeMint’s replacement, new South Carolina Senator Tim Scott: “One of the most threatening places to be in politics is a black conservative…there are so many liberals who want to continue to reinforce a stereotype that doesn’t exist about America. That somehow, some way, if you’re a Republican you’re a racist and if you’re black, there’s no chance for you in society.”
35 years ago, the Chicago Sun-Times exposed the city’s corruption in the Mirage tavern series. Does anyone think Chicago is any less corrupt today? Why don’t they have the balls to do something like that now? (Hat tip: Dwight.)
Judging from the Fiscal Cliff votes, the United States appears to be eager to follow in the footsteps of Greece and California, rushing to unsustainable spending, crushing debt loads and inevitable bankruptcy, rather than following the lead of Texas and the Red State model of debt-free limited government and free enterprise. So let’s see where the two states are, shall we?
Via Reason comes a link to the website Pension Tsunami, which contains much of interest for those charting California’s decline.
One method California cities are using to continue funding their heroin outrageous pension spending habit is issuing Pension Obligation Bonds, where they sell bonds to pay for pension obligations and then invest them. Indeed, some that got burned by the tactic in the 1990s (like Oakland) are trying again. “Bonds issued in 1997 were, on average, underwater in 2007, even before the stock market crash…’That’s like a compulsive gambler telling you that he has to bet it all on red to make up for his past losses.’”
“Bankruptcy is the best bet most cities have for getting out of their crushing health and retirement obligations to public workers….Government employee compensation, mostly for health and retirement, is at the heart of nearly all the current and looming municipal bankruptcies across the country.”
Over at TPPF, Chuck Devore wonders why Californians don’t stage a tax revolt. “In the meantime, Texas will be more than happy to receive into its welcoming arms people who want to work hard, invest, and create jobs.”
“Good afternoon, and welcome to the Lipsky Extreme Lobbying Seminar. And by ‘Extreme,’ I mean both our proven seminar methods and the profits you’ll be raking in after you get out of here.”
“Is that why we’re wearing the shock collars?”
“Got it in one! Immediate, painful correction is necessary for maximum learning in minimum time. You’ll learn more here in three hours than three years of law school. Now, on to the topic at hand: Emergency funding bills. Today’s example: the relief bill for Superstorm Sandy. Now, let me ask you bright boys and girls a question: What should go in an emergency relief bill. Mr. Smith?”
“Uh, emergency relief for victims of AGGGHHHHHHHHHHH!!!!!”
“Sorry, Mr. Smith, but Mr. Shock Collar says you’re mistaken. Anyone else? Mr. Dewey?”
“Whatever a lobbyist client pays for?”
“Ding ding ding! Correct on all counts! Now, can someone give me an example of an ideal item to put in an emergency spending bill? Mr. Smith?”
“Uh, $5 million for emergency power generAGGHHHHHHHHHH!”
“Sadly, it appears that Mr. Smith is a slow learner. Ms. Cheathum?”
“$150 million for Alaskan fisheries?”
“Correct! Mr. Howe?”
“$188 million for Amtrack?”
“Excellent! Mr Smith?”
“$20 million for tearing down flood damaged AGGGGGGHHHHHHHHHHH! Why does learning have to be so painful???”
“Pain is just stupidity leaving the body. Mr. Solitary?”
“$600 million for a global warming slush fund?”
“Brilliant! That’s thinking big! Mr. Smith, care to give it one last try?”
“$188 million for hurricane cleanAGGGHHHHHHHHHH I mean tunnels! Random tunnels!”
“I’m glad to see that my proven learning methods have finally gotten through to Mr. Smith. Class dismissed.”
I hope you’ve been enjoying your mythical Mayan Apocalypse.
But there’s a real, slow motion apocalypse that’s been going on all around you, and nobody is panicking about it, at least not in the open. I’m not talking specifically about the fiscal cliff, which is only a symptom of the problem rather than the problem itself.
The real apocalypse is out-of-control federal spending, and the tsunami of debt it’s creating. And I don’t feel “apocalypse” is too strong a word. Excessive debt destroys economies. When the money printing presses run unchecked for years on end, hyperinflation is the inevitable result.
The only reason we’re not suffering from hyperinflation right now is that Europe is sucking worse than we are. The Spanish economy is failing. The Greek economy has already failed. Were it not for that, it’s likely our huge budget deficits and the Fed’s printing presses would have already caused the Euro to replace the dollar as the world’s reserve currency. And, as Mark Steyn is fond of pointing out, Germany’s economy is big enough to bail out Greece and Spain. No one’s economy is big enough to bail us out.
Obama and the Democratic Party has wagered our future on the proposition that they can run trillion dollar deficits for years on end without destroying the value of the American dollar. If they’re right, they deserve to win, since everything we know about economics is wrong, and we can just print dollars until we’re all rich.
But the fundamental laws of economics haven’t been repealed. A reckoning is coming, and it’s going to destroy savings, economies and lives. And professional politicians, the Democratic Party, lobbyists and their mainstream media enablers would prefer to talk about anything else but the looming catastrophe. No wonder they want to talk about gun control and “the war on women.” Anything to keep the con game going until they’ve sucked the body politics dry. Just keep that deficit spending heroin coming.
The only question about that reckoning is exactly when it’s coming, and exactly how bad it will be. If we’re lucky, it will only be as bad as Argentina 2001. If we’re not, then we’re talking Weimer Germany 1921-23.
“Why would you leave $25 million on the table?” Oh gee, I don’t know, but maybe because you have to pay back $34 million on your risky $2.5 million loan? Math, liberal! Do you speak it?
Speaking of TPPF, they linked to this Dallas Fed report, which shows that the Texas economy continues to hum along. “Texas added 22,900 jobs in October, lowering its unemployment rate in October to 6.6 percent, down from 6.8 percent in September and 1.3 percent below the national average of 7.9 percent.”
With the election less than two weeks away, time for a roundup of how the champions of their respective political models (Texas for Red States and California for Blue States) are doing:
Moody’s: “we expect…more bankruptcy filings and bond defaults among California cities, reflecting the increased risk to bondholders as investors are asked to contribute to plans for closing budget gaps.”
It’s all part of California’s Fifty Shades of Golden electoral masochism. “Not surprising, the most productive of California’s citizens are leaving in droves. For those who want to prosper, the safeword is “Texas.’”
The guy from California who under-reported unemployment to make the numbers look better? Obama donor. This is my shocked face.
California has actually carried out some pension reforms (like capping annual benefits at $132,000), but its pension plans are still underfunded by $165 billion.
California got $411 million in the National Mortgage Settlement. So how much of that actually went to help people with their mortgages? None of it. “Think of California’s persistent budget deficit as a great white shark devouring every source of cash in its path.”
The total personal income (TPI) in Texas reached $1.07 trillion dollars in the second quarter of this year, according to the U.S. Bureau of Economic Analysis. That’s an increase of 71 percent from the state’s corresponding total 10 years earlier, $626.7 billion.
Here’s another way of looking at it: Texas accounted for 8.02 percent of the nation’s TPI this year, up 1.10 percentage points from 6.92 percent in 2002.
That’s nearly five times larger than the runner-up, Florida, which increased its share of national TPI by 0.23 points in a decade. Just four other states registered gains better than a tenth of a point.
Texas has the best unemployment rate among the five biggest states, at 6.8%. California, at 10.2%, has the worst.
