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Slow Motion EuroZone Trainwreck Continues

Monday, December 19th, 2011

It didn’t take long for cracks to start appearing among national politicians who are not nearly so sanguine over the prospect of Anschluss II as their counterparts in Brussels.

The French people are not wild about it either. But French politicians only pay slightly more attention to the French people than they do to the American government, which is to say: precious little.

The Portuguese threaten nuclear default.

Did the announcement calm markets elsewhere? Not so much:

Some of the world’s most powerful investment banks were downgraded by ratings agency Fitch as Germany’s cherished European fiscal compact appeared to be unraveling. The banks that were downgraded [Wednesday] night include US banks Bank of America and Goldman Sachs, Barclays and France’s BNP Paribas. Switzerland’s Credit Suisse and Germany’s Deutsche Bank were also cut.

Even France is in danger of a downgrade.

Of course, all this supposes that the new EuroPact will actually accomplish something. Fitch Ratings is not so sure. After warning of rating downgrades on “Belgium, Cyprus, Ireland, Italy, Slovenia and Spain,” they come to the bracing conclusion that “a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach.”

And now for the section of the roundup in which I quote whopping large chunks of Ambrose Evans-Pritchard on the whole thing.

First, the EU would like the UK to throw more money into the black hole. The UK is telling them to get stuffed:

Euro rage is reaching new heights over Britain’s latest outrage.

Our refusal to pony up a further €31bn we cannot afford, to prop up a monetary union that was created against our wishes and better judgment, and with the malevolent purpose of accelerating the great leap forward to a European state that is inherently undemocratic.

It is being presented as treachery, Anglo-Saxon perfidy, and the naked pursuit of national self-interest.

Let me just point out:

1) The UK never agreed to such a commitment in the first place. The line was written into the December 9 summit communiqué in an attempt to bounce Britain into handing over the money.

2) The UK does not consider the rescue machinery to be remotely credible as constructed.

3) The eurozone has the means to tackle its own debt crisis, if it is willing to use them. These include fiscal pooling and the mobilisation of the ECB.

As eurozone politicians never tire of reminding us, their aggregate debt levels are lower than those of the UK, US, or Japan. They are right. So get on with it and stop begging.

Euroland is of course entitled not to deploy eurobonds or the ECB if these mean a) a breach of the German constitution b) violate the ECB’s mandate. But that is entirely their choice. Both the Grundgesetz and the ECB mandate can be changed.

It was EMU members who created this dysfunctional currency. They are now trying to shift the consequences of their error onto others rather than taking the minimum steps necessary to fix the problem at root.

Second, his pointing out that the proposed treaty actually accomplishes very little:

The leaders of France and Germany have more or less bulldozed Britain out of the European Union for the sake of a treaty that offers absolutely no solution to the crisis at hand, or indeed any future crisis. It is EU institutional chair shuffling at its worst, with venom for good measure.

[snip]

And what for? All this upheaval for a mess of pottage, a flim-flam treaty? The deal is not a “lousy compromise”, said Angela Merkel. Well, actually that is exactly what it is for eurozone politicians searching for a breakthrough.

It tarts up the old Stability Pact without changing the substance (although there will be prior vetting of budgets). This “fiscal compact” is not going to make to make the slightest impression on global markets, and they are the judges who matter in this trial by fire.

Yes, there is more discipline for fiscal sinners, but without any transforming help. Even the old “Marshall Plan” of the July summit has bitten the dust.

There is no shared debt issuance, no fiscal transfers, no move to an EU Treasury, no banking licence for the ESM rescue fund, and no change in the mandate of the European Central Bank.

In short, there is no breakthrough of any kind that will convince Asian investors that this monetary union has viable governance or even a future.

Germany has kept the focus exclusively on fiscal deficits even though everybody must understand by now that this crisis was not caused by fiscal deficits (except in the case of Greece). Spain and Ireland were in surplus, and Italy had a primary surplus.

As Sir Mervyn King said last week, the disaster was caused by current account imbalances (Spain’s deficit, and Germany’s surplus), and by capital flows setting off private sector credit booms.

The Treaty proposals evade the core issue.

Ironically, the actual text of the new agreement has all sorts of things (like requiring a Balanced Budget Amendment to national constitutions) that, had it been in place and enforced 15 years ago might have prevented the situation in the first place. But if the nations of Europe had been capable of balancing their budgets, they wouldn’t have needed a Euro-fueled spending spree to keep their welfare states solvent in the first place.

For the PIIGS, growth is neither possible nor enough: “There is at this point no conceivable policy scenario which somehow makes Italy and Greece grow by as much as 2% a year for the next few years.”

Fed says no Euro bailout. But one might wonder at the firmness of their resolve. Especially since the head of the IMF says they need funds from outside the EU. Because who doesn’t love throwing good money after bad?

European bank walks are starting to turn into bank jogs.

Gold prices have plunged since the Euro treaty was announced. A sign the worst has passed? No, quite the opposite: Europe’s banks are selling their gold reserves in an attempt to stay solvent.

Let’s see if I’ve got this straight: EuroZone members, threatened by sovereign default on their bonds, are giving money backed by those same bonds to the IMF, which will use the money to prop up the EuroZone in order to prevent EuroZone countries from defaulting on their bonds. In order to help readers understand the genius of this maneuver, I have slightly altered a graphic from a recent movie to explain the concept:

(Hat tips: Insta, Ace, and The Corner, plus no doubt a few I’ve forgotten.)

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Posted in Budget, Economics, Foreign Policy, Welfare State | 1 Comment »

European Union to Become SuperDuper European Union

Friday, December 9th, 2011

Let me see if I can get this straight:

UK Prime Minister David Cameron, objecting to the Deutschland Uber Alles renegotiation of the Maastricht Treaty, is now causing the creation of a new SuperDuper Europe, with Germany reoccupying the Rhineland taking leadership of the whole shebang, finally erasing the rest of the continent’s reluctance at receiving orders from Berlin?

I mean, when even the Europhillic New York Times says that “Twenty years after the Maastricht Treaty, which was designed not just to integrate Europe but to contain the might of a united Germany, Berlin had effectively united Europe under its control,” maybe the citizens of those stodgy old entities we used to call “countries” should consider the possibility that they might may be making a mistake. I am especially surprised that the non-Euro-using generalgouvernement Poland gave in so readily, as their previous experiences with rule from Berlin have been less than exemplary.

But what’s sacrificing the last of your country’s vestigially sovereignty compared to the glorious dream of saving the Euro?

Assuming, of course, that forging this Pact of Steel (including a 500 billion Euro bailout fund) actually saves the Euro, which is a dubious proposition at best. And at least one U.S. general says we should be prepared for civil unrest if Euro ends up exploding anyway.

The irony, of course, is that David Cameron, the wetest Tory Wet PM since Neville Chamberlain, refused to give in to another Eurotreaty British citizens wouldn’t get a chance to vote on less than two months after refusing to allow a vote on the previous EU treaty British citizens were not allowed to vote on. It would be ironic if Cameron actually ended up pulling the UK out of the EU because, in a moment of weakness, he actually exhibited rare and uncharacteristic streaks of firm principle and common sense.

Will the citizens of Europe actually get a chance to vote on this Reich closer European integration? Doubtful. Ireland’s Taoiseach is being “cagey” about a vote. (Translation: Fark no, you peasants won’t get a vote.) I doubt any of his brothers in Europe’s Permanent Ruling Class will feel any less “cagey.”

Through a thousand small steps, from committees and working groups and consultations and emergency decrees, Eurocrats have done their very best to remove power for all important decisions from the hands of the people and entrust it into their own well-greased palms. And also, not so coincidentally, to avoid taking the blame for the ruin their cradle-to-grave welfare states, and the huge and ever-growing debts necessary to pay for them, have made of Europe’s once free nations and productive economies.

Other Eurozone news, some possibly stale and out of date:

  • Jim DeMint says the best way for us to help Europe is not to help Europe.
  • Portugal’s economy is shrinking.
  • Moody’s downgrades French banks.
  • Problem: Possibility of sovereign debt default means bond downgrades. Solution: Create a bailout fund. problem: Downgrade of bailout fund. Solution: ?????
  • Europe’s Coming Inflation:

    For years, Europeans loved to lecture Americans on the both the safety and soundness of the continent’s banking system as opposed to our own, and how their economic system worked so much better than ours. Well, one lesson of the 2011 financial crisis is that many of their banks are probably in worse shape than the US banks were in 2008.

    At least our banks’ troubled investments were tied to real estate, which may rebound once our economy improves. Their banks are holding debt tied to some of the world’s least productive, no-growth countries.

    Why so underproductive? Most of the evidence points to the failure of the European welfare state.

    Europeans loved to lecture Americans on how government-run health-care and cradle-to-grave entitlements provided such safety and comfort for the masses. People supposedly didn’t mind paying higher taxes because it enhanced their standard of living.

    Until, of course, it didn’t enhance anything — and Greece, Italy, Spain and Portugal face the collapse of their safety nets because they can’t borrow to pay for them anymore, even as unemployment is rampant. (Meanwhile, France is not far behind.)

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    Posted in Budget, Economics, Foreign Policy, Welfare State | 1 Comment »

    LinkSwarm for December 4, 2011

    Sunday, December 4th, 2011

    I’ve been sick this weekend, so here are a few random link of interest before they get positively antique:

  • Dear White Working Class Voters: we don’t need you any more. Love, the Democratic Party.
  • WILLisms provides more information on Texas job growth vs. the rest of the nation.
  • Mark Steyn on Hugh Hewitt. He’s not overly impressed with Newt Gingrich.
  • Good: Teen births are falling. Bad: out-pf-wedlock births are rising in every demographic.

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    Posted in Democrats, Economics, Elections, Texas | No Comments »

    Ten Days to a EuroZone Collapse?

    Monday, November 28th, 2011

    So says a piece in the Financial Times, here excerpted from behind the paywall.

    Things are moving very fast indeed on the Euro front:

  • U.S. banks stop lending to European governments. While this is good news, the possibility that the Fed may rescue Europe is very, very bad news. Our own life raft is barely treading water, and now liberals want us to invite a dying elephant to climb aboard.
  • And not the Fed, then the IMF, which America also funds to a large extent.
  • This article from Der Spiegel is a good roundup on consensus wisdom, which boils down to the rest of Europe wondering why Angela Merkel won’t just give in and pay their bills.
  • There’s word she might even do it, but only if she can get France, Finland, the Netherlands, Luxembourg and Austria to join Germany in issuing “elite” Eurobonds. I mean, what’s another trillion in taxpayer equity flushed down the toilet in comparison to the beautiful dream of European integration?
  • Even Poland wants Germany to take a more active role, something that has not traditionally brought Poland tidings of comfort and joy.
  • Daniel Hannan at NRO provides a nice summary of the state of play:

    From the beginning, the Brussels elites made it clear that, to adapt Abraham Lincoln, their paramount object was to save the Union. Never mind if that meant imposing epochal poverty and emigration on the southern members, and unprecedented tax rises on the northern. Never mind if it meant toppling the elected prime ministers of Italy and Greece and replacing them with Eurocrats (respectively a former European Commissioner and a former vice president of the European Central Bank — two perfect specimens of the people who caused the crisis in the first place). They were prepared to pay any price to keep the euro together — or, more precisely, to expect their peoples to pay, since EU employees are generally exempt from national taxation.

  • How expensive will a Euro bank bailout be? Keep in mind that at one point during the 2008 meltdown, Morgan Stanley owed Uncle Sam $107 billion. With a B. For one bank.
  • In the mid-1990s, Bulgaria got a good look at a currency meltdown first-hand. They only recovered by adopting a currency board for the Lev (which is exactly what Steve H. Hanke and Kurt Schuler had suggested in 1991.)
  • The British Foreign office is already planning for a Euro collapse.
  • A general strike shuts down Portugal.
  • Finally, one Irish commentator puts things in purely mercenary terms:

    The only beneficiaries of the State’s assumption of [Anglo Irish Bank]’s liabilities are taxpayers in the countries whose banks were the reckless lenders to Anglo. Anglo, for all the guff at the time of the bank guarantee, had no systemic importance to the Irish economy. Irish taxpayers had no moral or other liability for its debts.

    The sole reason for saving it was the ECB’s insistence that no euro zone bank should fail. Had Anglo failed, the costs would have been borne primarily by European banks and consequently by European taxpayers.

    So the undertaking by the Irish State to stump up €47 billion to pay those private debts is an act of extreme (if extremely demented) euro-altruism. We are Europe’s ragged-trousered philanthropists, bailing out the euro with money we don’t have and that our European partners are kindly lending us at penal interest rates.

    And this single act of insane generosity wipes out every red cent we’ve got from Europe since 1973.

    [snip]

    And for what? For less than nothing. For a moment of panic, a daft notion, a stupid indulgence in bluster and bravado. Some bleary-eyed fools decided, in the middle of the night, that they could bluff the markets by throwing all the chips we might ever have on to the table. It didn’t take long for the markets to realise that their hand contained nothing better than a pair of deuces.

    But the gamble failed for Europe too. There might be some kind of (very expensive) pride in being able to say that little Ireland took the hit to save the euro zone, like the starry-eyed gal who takes a bullet for the outlaw in a corny western. But we saved nothing. All we managed to do was to buy the euro zone leaders more time in which to delude themselves that there was no real crisis.

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    Posted in Budget, Economics, Foreign Policy, Media Watch, Welfare State | No Comments »

    Could All Of Europe Declare Bankruptcy?

    Tuesday, November 22nd, 2011

    That’s the option being openly talked about:

    Europe may need to pull a Chapter 11 – a US-style bankruptcy, which would permit a market shutdown and Euro Zone reorganization before reopening for business.

    The EU desperately needs a break from market pressures in order to allow the political apparatus to really gather its forces and finally move Europe and its debt crisis ahead of the curve. Here we are just a couple of weeks after the feeble attempt to apply an EFSF plaster on the problem and we’re already back to Square One: the EU debt crisis has reached the point at which none of the readily available tools or institutions are sufficient to match the magnitude of the crisis. This dictates the need for an out-of-the-box solution.

    EU policy makers played the extend and pretend game for as long as they could – but now the writing is on the wall: popular outrage is on the rise and putting increasing pressure on the political process – as we are seeing increased demonstrations and grass-root activity taking over both the political agenda and the media. And markets are now balking as empty promises and now a real lack of funds are seeing bond yields beginning to spike out of control. The self-reinforcing cycle of downgrades and austerity and recession are taking us to the very brink of a full scale Crisis 2.0.

    Or, alternately, the EU could just jetison all that inconvenient democracy to keep the Ponzi scheme going just a little bit longer, trying to hide the fact that Europe has run out of money.

    Says Walter Russell Mead: “Right now the world’s largest economic bloc is running around like a chicken with its head cut off.”

    So how could Europe possibly display the terminal bankruptcy of the high tax, high spending, highly unionized, cradle-to-grave welfare state, European/Blue State social model? How about if EU staffers went on strike?

    Dear Greek Citizens: I hope you weren’t so foolish as to believe that the Swiss bank accounts containing the money you earned actually belong to you, do you? You’re going to have to return them to Greek banks so we can steal them. Love, the EU.

    The Euro may have been great for Greek elites, but not necessarily great for average Greeks.

    How are things in the rest of Europe? In Spain, unemployment is 22.6%.

    The EU may crack before the Euro.

    China is not coming to the rescue, as China is suffering from the same demographic maladies afflicting Europe: “A population that is no longer growing very fast and is quickly aging. The proportion of the population that depends on the state for pensions and medical care is overwhelming the proportion that works and pays taxes to the state.”

    Plus, Chinese rating agencies just downgraded Greek debt.

    The IMF has quitely changed its rules to make it easier to bail out Europe. With your tax dollars.

    (Hat tips: Ace, Insta, and the usual suspects.)

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    Posted in Budget, Economics, Welfare State | No Comments »

    Some Occupiers Are More Equal Than Others

    Sunday, November 20th, 2011

    I haven’t been covering Occupy [Place Name Here] because other people have been doing such a bang-up job of it, and because, objectively, it simply isn’t important. But the latest development is too tasty not to mention.

    A few weeks ago, when it turns out there was $500,000 just sitting in a bank to support OWS, the “leaderless movement” suddenly found out that they had leaders, who appeared without all that pesky “democracy” and “consensus” they kept talking about:

    On Sunday, October 23, a meeting was held at 60 Wall Street. Six leaders discussed what to do with the half-million dollars that had been donated to their organization, since, in their estimation, the organization was incapable of making sound financial decisions. The proposed solution was not to spend the money educating their co-workers or stimulating more active participation by improving the organization’s structures and tactics. Instead, those present discussed how they could commandeer the $500,000 for their new, more exclusive organization. No, this was not the meeting of any traditional influence on Wall Street. These were six of the leaders of Occupy Wall Street (OWS).

    Occupy Wall Street’s Structure Working Group (WG) has created a new organization called the Spokes Council. “Teach-ins” were held to workshop and promote the Spokes Council…

    According to Marisa Holmes, one of the most outspoken and influential leaders of OWS, the NYC-GA started receiving donations from around the world when OWS began on September 17. Because the NYC-GA was not an official organization, and therefore could not legally receive thousands of dollars in donations, the nonprofit Alliance for Global Justice helped OWS create Friends of Liberty Plaza, which receives tax-free donations for OWS. Since then, Friends of Liberty Plaza has received over $500,000. Until October 28, anybody who wanted to receive more than $100 from Friends of Liberty Plaza had to go through the often arduous modified consensus process (90% majority) of the NYC-GA—which, despite its well-documented inefficiencies, granted $25,740 to the Media WG for live-stream equipment on October 12, and $1,400 to the Food and Medical WGs for herbal tonics on October 18.

    At the teach-in, Ms. Holmes maintained that while the NYC-GA is the “de facto” mechanism for distributing funds, it has no right to do so, even though she acknowledged that most donors were likely under the impression that the NYC-GA was the only organization with access to these funds. Two other leaders of the teach-in, Daniel and Adash, concurred with Holmes.

    Ms. Holmes also stated at the teach-in that five people in the Finance WG have access to the $500,000 raised by Friends of Liberty Plaza. When Suresh Fernando, the man taking notes, asked who these people are, the leaders of the Structure WG nervously laughed and said that it was hard to keep track of the “constantly fluctuating” heads of the Finance WG. Mr. Fernando made at least four increasingly explicit requests for the names. Each request was turned down by the giggling, equivocating leaders.

    The leaders of the Structure WG eventually regained control of the teach-in. They said that they too were unhappy with the Finance WG’s monopoly over OWS’s funds, which is why they wanted to create the Spokes Council. What upset them more, however, was the inefficient and fickle General Assembly. A major point of the discussion was whether the Spokes Council and the NYC-GA should have access to the funds, or just the Spokes Council….

    When my turn came to speak, I brought up the plans of “the leaders of the allegedly leaderless movement” to commandeer the half-million dollars sent to the General Assembly for their new, exclusive, undemocratic, representational organization. Before I could finish, the facilitators and other members of the OWS inner circle started shouting over me. Amidst the confusion, the human mic stopped projecting what I, or anybody was saying. Because silence was what they were after, the leaders won.

    Eventually one of the facilitators regained control of the crowd and explained that I was speaking “opinions, not facts,” which is why I would not be allowed to continue. He also asserted untruthfully that I had gone over my allotted minute. Notably, the facilitators and members of the OWS inner circle regularly ignore time restrictions.

    This reaction shouldn’t surprise anyone. It is reasonable to expect any undemocratic organization to be co-opted eventually by a vocal minority or charismatic individual. On Friday, October 29, the proposal to create the Spokes Council was put to the NYC-GA for a fifth time, and finally received a 90% majority. The facilitators assisted the process by denying two vocal critics of the Spokes Council their allotted time to speak against it.

    So who is party of the shadowy “Finance Working Group”? Well, one of them is “Pete Dutro, 34, a tattoo artist and former software project manager who dropped out of an NYU finance degree program to join the occupation.”

    It must be a real hardship for Dutro to give up his education to handle all that money while sleeping in a park. Or it would be, if he weren’t using that money to stay in a $700 a night hotel.

    Fritz Tucker, the Occupy participant quoted so extensively above, said of the funding takeover that “I felt like I was watching a local production of Animal Farm.” Having already deployed that metaphor, one wonder what he would have left to say about Mr. Dutro’s swanky hotel. If you put that in a novel, your editor would make you take it out because the symbolism was too heavy-handed.

    From the very first Occupy Wall Street has struck me as a movement ginned-up by Obama’s left-wing allies, using a mixture of the usual circus who attend any left-wing rally plus some paid stooges and naive joiners, designed to distract attention from Obama scandals like Fast and Furious and Solyandra, and created out of a sense of “Tea Party Envy” on the left. But while Tea Party and Occupy Wall Street tentatively agree on one big economic problem (namely, crony capitalism), their approaches to solving it are radically different. The Tea Party wants to get rid of the cronyism, but the Occupy Wall Street crowd wants to keep the cronyism, but get rid of the capitalism.

    In some ways you have to admire the efficiency of the operation. After all it took more than 200 years of the Republic before people like Nancy Pelosi and John Kerry were able to pervert democratic institutions the system enough to reap the full benefits of crony capitalism, but Pete Dutro has managed to go from misplaced idealism to outright looting in under two months!

    Despite the risible “99%” posturing, Occupy Wall Street is being run by, and for, the Democratic Party and their left-wing fellow travelers: ACORN, unions, the MSM. (Has any Occupy [Place Name Here] protester ever called for smaller government and less spending?) Which is why its ironic that the only people it’s actually inconveniencing are those who live and work in the hearts of very large metropolitan areas, i.e. largely the same Obama-voting urban liberal elite who already seemed to believe in the risible class war tripe peddled by the Occupy Wall Street crowd. All it’s doing now is eating up municipal budgets and alienating independent potential Obama voters.

    A few more random Occupy Wall Street tidbits:

  • Here’s a handy chart for which crimes have been committed at which occupy sites.
  • Dark Knight creator Frank Miller weighs in in a nice juicy that has the panties of various leftist comics fans in a knot. “’Occupy’ is nothing but a pack of louts, thieves, and rapists, an unruly mob, fed by Woodstock-era nostalgia and putrid false righteousness. These clowns can do nothing but harm America.” However, I wonder if it’s he jabs at Occupy that has really steamed them as much as his jab at that most sacred of victim groups, radical Islam. Given Wiscon’s disinviting of Elizabeth Moon over the very mildest of criticisms of Islam, I’m guessing the latter.
  • Being creatures of the left, the Occupy [Place Name Here] crowd have never complained about Obama’s extensive ties with Goldman Sachs.
  • Here’s a hedge fund manager offering up talking points for Occupy Wall Street. However, since he’s discussing the various government distortions of the market that lead to the current situation (he even mentions Solyndra!), I feel confident in predicting that none of the current Occupy crowd will take him up on it.
  • Mark Steyn’s essay on Occupy.

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    Posted in Crime, Democrats, Economics, Obama Scandals | No Comments »

    Greeks Will Not be Allowed to Vote on Their Own Future

    Thursday, November 3rd, 2011

    The scheduled referendum on the bailout of Greece as been canceled.

    Once again, the glorious dream of European integration is far to important to let details like the consent of the governed interfere…

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    Posted in Budget, Economics, Foreign Policy | No Comments »

    Rick Perry’s Tax and Spending Reform Plan: Solid on Taxes, Timid and Unserious on Spending

    Wednesday, October 26th, 2011

    So Rick Perry unveiled his tax and spending reform plan. (His Wall Street Journal piece provides a brief overview.) It’s a serious compilation of a variety of solid conservative ideas for reforming the federal government. Serious, that is, in every area except spending.

    But before we get to the sour let’s look at the sweet. There is a great deal to like in Perry’s proposals:

  • Repealing ObamaCare (though this is pretty much a requirement for every Republican office-seeker these days)
  • Repealing Dodd-Frank (which has held down the economy in many ways great and small)
  • A 20% flat tax is a vast improvement over the labyrinth complexities of our special-interest-group-carve-out-ridden Swiss cheese of a tax code. Also, you have to admire this graphic, which should have liberal knees jerking:

  • Eliminating the tax on dividends and long term capital gains is a big win that will help revive the economy and restore global competitiveness.
  • As is eliminating the death tax (although if it were possible to entirely fund the government from an estate tax rather than an income tax, that would be preferable, but it isn’t).
  • Eliminating corporate loopholes and tax breaks is also a great idea, but at this point it’s just a vague notion. Just about any candidate of any party could say the same thing, and without a list of the actual loopholes to be eliminated it’s fairly meaningless. This is also an area where few proposals survive contact with congress.
  • Reducing the corporate tax rate to 20% is a great idea, and one long championed by many free market economists.
  • The Perry plan has a lot of good ideas for reducing the regulatory burden on American business. A moratorium on all pending legislation, automatic sunset provisions, and a full audit of all regulations enacted since 2008 should go a long way toward undoing the Obama regulatory burden and getting American business and hiring back on track.

    • So outside of the budget provisions, there is an awful lot for conservatives to like about the Perry plan.

    Even when it comes to the budget section, there’s a lot of conservative red meat: a non-tax hike balanced budget amendment, an end to baseline budgeting and concurrent resolutions (which bake bigger government into the process), and an end to earmarks. All solid initiatives, though the problem here is less presidential will than getting them through congress.

    So, given all that, what am I complaining about?

    What makes the Perry budget timid and unserious is his proposal to “balance the budget by 2020.” Given the way Washington works, a promise to balance the budget eight years from now is a promise to never balance the budget. It’s tea so weak it might as well be water. A balanced budget target that far out means that Congress can keep putting off difficult decisions by passing bills that place imaginary savings in out years where they will soon be rendered moot by the next congress. It’s once again a chance to sell out budget discipline for a handful of magic beans.

    It’s, yet again, kicking the can down the road.

    It’s also a big step back from the Ryan plan, which demanded a balanced budget in the 2015 timeframe. This was the plan seen by conservative Republicans and Tea Party activists as the minimum necessary for a serious reduction in the federal budget deficit. Given serious action wasn’t taken for it this year, it’s reasonable to push it that deadline out one more year to 2016, but pushing the target out beyond that amounts to preemptive surrender.

    While Perry’s $100 billion first year down-payment would be an improvement over the weak, phony-baloney deficit reduction enacted as part of the debt limit deal, it’s a ridiculously small cut for the $1 trillion+ Obama deficits being racked up each fiscal year.

    Bad as it is as policy, the Perry 2020 date is utterly disasterous as an opening position for negotiations with congress. Perry is going to have to set hard, early deficit targets to have any chance of taming the Leviathan, and then use his veto pen early and often if he doesn’t get them. The truth is that Democrats will scream bloody murder at any attempt at deficit reduction, so the next President might as well (to use the classic Ronald Reagan analogy) “throw long.” Every debt ceiling vote will have to come with both serious budget cuts and the other budget-taming proposals in the Perry plan. Democrats may still filibuster, but then they’ll have to deal with the crushing realities of living under a budget that actual matches spending to revenues. Even with a Republican House and Senate, to actually balance the budget the next President will need to push relentlessly to pass the most stringent budget that can muster 51 senator votes via reconciliation. Setting a 2020 date does nothing to prepare the media and ideological battlespaces for those difficult choices.

    Out-of-control federal spending is at the heart of almost all our economic problems, and the single biggest factor behind Tea Party discontent. Thus it has to be at the top of the next President’s agenda. Despite many other solid economic idea, the Perry plan doesn’t meet the test for serious deficit reduction. The shame is that Perry accomplished real spending reform in Texas. To impose such discipline on the out-of-control federal budge will be an order of magnitude more difficult. But to achieve real spending reform, you first have to campaign for it. Setting a goal for a balanced budget at the end of a theoretical Perry presidency’s second term rather than the first actually hampers that goal.

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    Posted in Budget, Economics, Elections, Republicans, Texas | 4 Comments »

    LinkSwarm for October 25, 2011

    Tuesday, October 25th, 2011

    Have a nice cup of randomness:

  • Post-Gadhafi Libya will be run as an Islamic state under Sharia law. Thanks a lot for that great foreign policy triumph, Obama.
  • This Islamsists also came out on top in the election in Tunisia. Maybe the Arab Spring version of democracy will turn out to be the same kind that came to Post-Colonial Africa in the 50s and 60s: One Man, One Vote, Once. Liberals were big cheerleaders then, too.
  • Mickey Kaus points out that propping up public sector employment is a lousy idea even in Keynesian. But it’s a great idea if you want to keep Democrats in power as part of an ever-expanding government, thus providing even more opportunities for graft and kickbacks, as well as back-scratching campaign contributions from public sector unions. Which is probably the real reason Matthew Yglesias is so gung-ho for the idea. Or, as Alpha commenter Peter Schaeffer notes below Yglesias’ original post: “This isn’t about stimulating the economy, but providing slop to the public sector trade unions that dominate the Democratic party.”
  • NPR host fired for overtly acting as a liberal mouthpiece rather than covertly. Which is why the host of All Things Dismembered stepped down because of her husband’s job with the Obama campaign. Maybe NPR staffers need a refresher on their “We all work for the Democratic Party, but here’s how to hide it” orientation course…
  • Why people are moving to the South: “Ask transplanted business owners and they’ll tell you they like investing in states where union bosses and trial lawyers don’t run the show, and where tax burdens are low. They also want a work force that is affordable and well-trained. And that doesn’t see them as the enemy.”

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    Posted in Budget, Democrats, Economics, Jihad, Media Watch, Welfare State | 1 Comment »

    Scenes from the EuroZone Summit

    Sunday, October 23rd, 2011

    There have been high level Euro rescue talks going on all weekend. How are they faring? Not well.

    Just when the eurozone governments thought it could not get worse for Europe’s single currency, it did.

    Shell-shocked EU finance ministers meeting in Brussels on Saturday were already reeling from the worst Franco-German rift for over 20 years and a fractious failure to resolve the problems that have brought Greece, and the euro, close to the brink.

    But then a new bombshell hit as a joint report by the EU and the International Monetary Fund (IMF) warned that, without a default, the Greek debt crisis alone could swallow the EuroZone’s entire €440 billion bailout fund – leaving nothing to spare to help the affected banks of Italy, Spain or France.

    Of course, the problem with following this story from abroad is how the news of the summit gets distorted like some intercontinental game of telephone, especially when filtered through the dulcet-toned hearing aids of welfare state boosters. Thus this overly enthusiastic piece in left-wing newspaper The Guardian, citing that a deal was near based on unnamed “EU diplomats” becomes this blipvert in the left-wing Daily Beast stating that a deal had been reached, becomes this Fark thread in which clueless liberals crow that no one should ever have doubted the soundness of either the Euro or the glorious European welfare state. And also that ratings agencies are evil.

    And yet, as of right now, this “done deal” to rescue the Euro has yet to materialize. How strange!

    Somehow, how France (a country running a a $90+ billion dollar budget deficit) and Germany (a country whose ruling party has lost every local election since it started shoveling money down the Greek bailout chute), were to magically comes up with some €1.6 trillion Euros (the difference between the current bailout fund and the super-sized fund required to backstop the Euro following the inevitable Greek default) is nowhere specified. After all, it was hard enough for Chancellor Angela Merkel to get Germany’s contribution to the fund boosted from €123 billion to €211 billion in the first place.

    As a result of all this happy, confident talk of how the Euro will never be allowed to falter? Moody’s downgraded Spain’s credit rating. They also threatened to do the same for France, especially if they decided to throw more taxpayer money into the Greek debt maw.

    The Good Ship Europe bears its load of bailout guarantees straight for the center of the Greek Debt crisis.

    And if you’re the EU, how do you prevent your debt from being downgraded? A.) Stop borrowing so much, B.) Increase your emergency reserves, or C.) Make it illegal for bond rating companies to downgrade your debt?

    Yeah, that will work.

    How badly awry has the Eruo project gone? The problem with this Hoover Institute piece on is what not to quote from it:

    The champions of the European Union once touted it as a “bold new experiment in living” and “the best hope in an insecure age.” But these days “fear is coursing through the corridors of Brussels,” as the B.B.C. reported in September. Such fear is justified, for the nations of Europe are struggling with fiscal problems that challenge the integrity of the whole E.U.-topian ideal. Greece teetering on the brink of default on its debts, E.U. nations squabbling about how to deal with the crisis, debt levels approaching 100 percent of GDP even in economic-powerhouse countries like Germany and France, and European banks exposed to depreciating government bonds are some of the signposts on the road to decline.

    A monetary union comprising independent states, each with its own peculiar economic and political interests, histories, cultural norms, laws, and fiscal systems, was bound to end up in the current crisis. All that borrowed money, however, was necessary for funding the lavish social welfare entitlements and employment benefits that once impressed champions of the “European Dream.” Yet, despite the greater fiscal integration created by the E.U., sluggish, over-regulated, over-taxed economies could not generate enough money to pay for such amenities. Now, the president of the European Council, Herman Van Rompuy, admits, “We can’t finance our social model.”

    This financial crisis means the government-financed dolce vita lifestyle once brandished as a reproach to work-obsessed America is facing cutbacks and austerity programs immensely unpopular among Europeans otherwise used to amenities like France’s 35-hour work week, or Greece’s two extra months of pay, or England’s generous housing subsidies that cost $34.4 billion a year. No surprise, then, that from Athens’ Syntagma Square to Madrid’s Puerta del Sol, austerity measures attempting to scale back government spending have been met with strikes, demonstrations, boycotts, and protests, some violent, on the part of citizens for whom such government entitlements have become human rights. In fact, such transfers of wealth have been formalized as rights in Articles 34 and 35 of the E.U.’s Charter of Fundamental Human Rights.

    The Euro crises will likely lead to another recession in the U.S. That is, if you think we ever came out of the Obama recession in the first place, which we didn’t.

    Europe’s private sector shrank for the first time in two years last month.

    Again: The question of a Eurozone collapse is not “if,” it is “when.” And how much of the losses European banks can put taxpayers on the hook for.

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    Posted in Economics, Foreign Policy, Waste and Fraud, Welfare State | 1 Comment »

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