Posts Tagged ‘Welfare State’

Groundhog Day on the Aegean

Monday, February 23rd, 2015

Greece two weeks ago: “We will not negotiate this people’s pride and dignity.”

Greece today: “Yes, Master! We’d love to grovel some more if you continue tossing pennies into our cup!”

“As far as we can tell, the Greek government hasn’t achieved even a single one of its aims so far. The bailout was extended by four months, but in spite of a few cosmetic changes to the wording accompanying it (e.g. the ‘troika’ has been renamed ‘the institutions’), it is still precisely the same bailout agreement as before.”

This is an event completely unforeseen by everyone except anyone paying the slightest bit of attention to previous installments of Greek Bailout Kabuki. For all the bluster, it’s not like Greece had many options other than to get down on all fours and really lick boot, since it was slated to run out of cash tomorrow.

Naturally anyone who was foolish enough to believe Syriza’s promises (the technical term for such people is “rubes”) is hopping mad. “It’s as if [Greek PM Alexis] Tsipras, [Greek Finance Minister Yanis] Varoufakis and the others are telling me: ‘We believe that you are stupid…and you will believe whatever lie we tell you.'” The fact Syriza was elected at all is pretty much testament to the well-grounded accuracy that belief. That, and, oh, every single piece of news out of Greece since the Euro debt crisis struck, as long as that lie involved Greece continuing to spend money like drunken sailors with a stolen credit card and never having to pay their debts back.

The open secret, of course, is that Greece will never repay its debt. “We have to be realistic here. Greek debt is now 175 percent of gross domestic product (GDP); it’s higher than it was when this whole business first started.” (Well, by one measure. Another puts Greek debt at 317% of GDP.) Yeah, that’s what happens when you continue to run huge deficits even under your “austerity” budgets.

As I previously wrote:

I’m sure Syriza would love to implement their pie-in-the-sky big spending socialism, but their real goal is to lie to the Greek people long enough for the EU to write at least one more check, and lie to the EU about implementing reform long enough to cash it. Since Syriza only recently came to power, they probably want keep the farce rolling long enough to feather their own nests with Euros before engineering a grexit. After all, center-right parties got their turns at the public graft trough; why not the far left?

And back on December 29 I wrote:

So we’ll see another election, and if Syriza wins we’ll see another round of demands for more bailouts and debt writedowns, with Greece threatening yet again to exit the Euro. We’ve seen this movie before. The most likely outcome is that another cabal of EU-phillic insiders in the Greek government will engineer a last-minute cave-in to demands from Brussels and Frankfurt, ram another toothless austerity measure through parliament in exchange for still more credit (and perhaps even a small symbolic measure of debt forgiveness), dissolve the government again following the inevitable public outrage, then have the Greek bureaucracy ignore even those woefully inadequate reforms, setting the stage for the farce to repeat itself in another 12-18 months, or until mean old Aunt Angela finally cuts up the credit card.

Behold The Amazing Person’s uncanny powers of prophecy! Like Groundhog Day, it’s gotten remarkably easy to predict exactly what’s going to happen. Different people may occupy the Prime Minister’s office, but all them invariably wake up to the political equivalent of Sonny & Cher singing “I Got You Babe.”

It looks like the only I thing I was off on was the piddling four month extension rather than twelve, and the fact that Syriza didn’t even get the tiny fig-leaf of symbolic debt reduction. I guess that request for reparations from Germany rubbed Angela Merkel the wrong way. Too bad Greek PM Alexis Tsipras failed to heed Basil Fawlty’s eminently sensible advice…

Texas vs. California Update for February 19, 2015

Thursday, February 19th, 2015

Time for another Texas vs. California roundup:

  • U.S. bankruptcy judge presiding over the Stockton case says pensions are not sacred and can be cut in bankruptcy. “CalPERS has bullied its way about in this case with an iron fist insisting that it and the municipal pensions it services are inviolable. The bully may have an iron fist, but it also turns out to have a glass jaw.”
  • Public employee pensions: Stealing from the young and poor to give to the old and rich. (Hat tip: Pension Tsunami.)
  • California’s entrepreneurs still think the business climate sucks. “In the 2014 survey, 63.5 percent called the small business climate poor, with just 10 saying it’s good. This year 60 percent still consider the business climate poor with 16.5 percent finding it good.”
  • By contrast, low oil prices won’t torpedo Texas’ economy. “Texas’ economy today is more resilient to oil price fluctuations thanks to industrial diversification and pro-growth policies.”
  • California’s combined capital gains tax rate is the third highest. Not third highest in the U.S., third highest in the world, lower only than Denmark and France.
  • How environmentalists made California’s drought worse.
  • Two unions are on different sides of a proposed sale of six struggling Catholic hospitals to a private company.
  • Defense contractor “Advantage SCI, LLC announced today that the company will relocate its headquarters to Alexandria, Virginia (Fairfax County in Old Town Alexandria) from El Segundo, California, after recognizing the high costs related to worker’s compensation, liability, and taxes that plague businesses in California.”
  • Coffee roaster Farmers Brothers is leaving California for either Oklahoma or Texas.
  • More on the Farmer Brothers relocation. “After surviving depressions, recessions, earthquakes and wars, Farmer Brothers is leaving California, finally driven out by high taxes and oppressive regulations.”
  • California Democrats file bills to force the state to get 50% of its energy from renewable energy by 2030. They’re basically putting up yet another big red sign to manufacturers: “We’ll make it impossibly expensive for you to do business here.”
  • Why health care in California is less affordable than elsewhere.
  • The mess that is California’s homeowner earthquake insurance.
  • California property owners aren’t wild about being forced to sell their land for the high speed rail boondoggle.
  • Arlene Wohlgemuth on why Texas should avoid the siren song of Medicare expansion. (Also, best wishes to her for a speedy recovery from her motorcycle accident.)
  • California’s top lifeguard pulls in a cool $236,859 in total compensation. (Hat tip: Pension Tsunami.)
  • “Lewd yoga dentist filed for bankruptcy.” A San Diego dentist, which is my pretext for including it here, but really, how could I not link a headline like that?
  • Greece Declares Independence From Reality

    Monday, February 9th, 2015

    Newly installed Greek Prime Minister Alexis Tsipras gave a speech in which he basically declared “Screw your stupid economic reality! We’re still giving everyone a free unicorn!”

    Remember that Greece is not just broke, but deeply in debt, has a declining economy, only a few weeks of money left, and the specter of a possible bank run for of people wanting to get ahead of a Euro-exit.

    So naturally Tsipras is promising Greeks a T-bone in every pot.

    “Syriza’s pledges to the electorate include a freeze on pension cuts, a property tax overhaul, free electricity to those who have been cut off, reinstating jobs and raising the minimum wage.”

    “‘The (bailout deal) has been abolished by popular mandate,’ Tsipras said. I’d love to see someone try that “abolished by popular mandate” as a reason to stop making their car payments.

    “We will not negotiate this people’s pride and dignity.” Yes, because spendthrift wastrels can have all the pride and dignity they can eat.

    The EU is is not amused. How can they, when Syriza’s policies seem completely disconnected from reality?

    In a lengthy list of policy actions, Tsipras also said the government plans to restore the tax-free threshold for individual workers to 12,000 euros a year and gradually raise the minimum wage to 751 euros a month through 2016. Both measures would breach the conditions of the bailout.

    Tsipras said he’s committed to maintaining balanced budgets and wants to negotiate terms that will make Greece’s debt sustainable.

    That’s like saying “I’m absolutely committed to eating eating a 72 oz steak every day, and to losing weight!”

    Oh, and he’s also demanding reparations from Germany for World War II. Good luck with that.

    Is Tsipras really that disconnected from reality? Well, he is a far-leftist (which in the context of Europe and Greece means that he probably makes Obama look like Dick Cheney). But a little further down in that Bloomberg piece, you get this:

    Behind the public rhetoric, the Greek government has shifted to a more cooperative tone in recent conversations with the troika, according to an official representing the creditors. Greece has been told it needs to ask for a formal extension of its existing bailout deal in order to receive financing, said the official, who asked not to be named because the discussions are private.

    It’s probably your classic “Clevon Little holding a gun to his own head” bluff. I’m sure Syriza would love to implement their pie-in-the-sky big spending socialism, but their real goal is to lie to the Greek people long enough for the EU to write at least one more check, and lie to the EU about implementing reform long enough to cash it. Since Syriza only recently came to power, they probably want keep the farce rolling long enough to feather their own nests with Euros before engineering a grexit. After all, center-right parties got their turns at the public graft trough; why not the far left?

    Will the EU call their bluff? The whole purpose of the bailout regime was for insiders and bankers to dump their exposure to Greek default onto the taxpayer, something that’s largely been accomplished. These days I suspect very few of Europe’s banks hold much Greek debt (some of whcih may have ended up in various pension funds, where unrealistic promises and chronic underfunding may force managers to chase extremely risky bonds for the high yields). A grexit would put an economic hurt on Europe, but probably not one that would last terribly deep or long. A Greek economic collapse following leaving the Euro would be terrible for Greece, but would probably prod the other PIIGS into continuing to get their economic houses into something resembling order.

    How bad would a grexit be for Greece? Really, really, really bad. The modern European cradle-to-grave welfare state is unsustainable, and attempts to keep the goodies flowing even after the state is bankrupt will ruin more than one nation. It’s just that Greece managed to get there first.

    The farce is going to end very, very badly for average Greeks, but it always was. The only question is just how many bodies will be on the floor at the end of the final act…

    Greece’s Insoluble Problem

    Thursday, February 5th, 2015

    Greece’s left-wing Syriza party was swept into power by promising voters they could have their cake and eat it too. The problem is that not only is there no cake to eat, but Greek already owes more money than it can repay on all the cake they’ve already eaten.

    The European Central Bank announced that it will no longer accept junk-rated Greek bonds as collateral. That may be why Greece’s new finance minister is already backtracking on election promises:

    His party, Syriza, told voters it would demand a debt reduction; now Mr. [Yanis] Varoufakis says it will settle for a debt restructuring. Syriza said it would end austerity; Mr. Varoufakis now says he will run a primary budget surplus even if that means dropping other commitments in the party’s campaign manifesto.

    Will Syriza keep promises made to the EU and the ECB any more than they kept their promises to Greek voters? Of course not. Greece is addicted to excessive government spending the way a junkie is addicted to heroin. In this sense, Syriza’s willingness to shamelessly lie to both voters and Eurocrats is what makes them the embodiment of modern Greece.

    Running an actual budget surplus, as Varoufakis is almost pledging, would go a long way toward solving Greece’s problems. (My understanding is that he means Greece will have a budget surplus before debt payments are taken into account, which means they’ve really slowed down the rate at which they’re digging their own grave…) But neither Greece’s voters nor its ruling class want the nation to live within its means. As I have noted time and time again, Greece has never practiced real austerity, which is cutting government outlays to match receipts. Greece’s budget deficit was 12.2% of GDP in 2014. (If it seems like I repeat a lot of this information in many of my updates on Greece’s debt crisis, it’s because I do, mainly because MSM reports seem to omit mention of these centrally crucial facts…)

    Greece’s participation in the Euro has harmed it by distorting its economy and making its export uncompetitive. That’s a problem, but that’s not Greece’s central problem, which is a dogged unwillingness to live within its means. It’s that addiction to deficit spending that has Syriza talking of defaulting on its debts. And it’s addicted to deficit spending because the modern European cradle-to-grave welfare state is unsustainable.

    But here’s the kicker: Neither leaving the Euro nor defaulting solves Greece’s central problem, or even provides temporary relief.

    Leaving the Euro doesn’t solve the problem, because Greece’s debts will still be denominated in Euros. Creditors who hold Greek debt won’t be content to be paid in devalued drachmas, so Greece will still be on the hook for what they’ve already spent.

    Defaulting will only make their predicament worse, because then no one will be willing to lend Greece money to continue their ruinous deficit spending.

    Doing both and printing drachmas to continue spending will only result in hyperinflation. The Greeks can ask Venezuela how that’s working out for them.

    If any Greek political party pledged to undertake real reform, reign in the Greek welfare state and end deficit spending, it’s escaped my attention. I suspect Greeks will have to experience a lot more economic pain, and no small measure of ruin, before undertaking the only obvious path to fiscal stability.

    Texas vs. California Update for January 29, 2014

    Thursday, January 29th, 2015

    To a certain extent, this Texas vs. California roundup is incomplete, since we’re hot and heavy into the new legislative session and I haven’t had a chance to fully digest the proposed budget numbers yet. By the Legislative Budget Boards numbers, they’re only projecting a 1.5% increase in the 2016-2017 biennium budget over 2014-2015. But see the first link…

  • Setting the story straight on the Texas budget. TPPF uses a different baseline…
  • California’s public employee unions would prefer that you not know how well they’re compensated.
  • How California’s public employees use sick leave to spike their pensions.
  • Supreme Court may take on California union mandatory dues case.
  • Though not nearly as bad as California, Texas state and local public employee pensions are also in need of reform.
  • California’s Kern County declares a fiscal emergency over dropping oil prices. “Collapsing crude prices are squeezing the finances of Kern County, home to three-fourths of California’s oil production.” Thankfully, oil and gas extraction is a lot more widespread in Texas.
  • The City of Sacramento’s unfunded liabilities have reached $2.3 billion. (Hat tip: Pension Tsunami.)
  • “Fresno? No one goes to Fresno anymore!” Except for job growth percentage, that is, where Fresno outpaced Silicon Valley.
  • Remember the Newport Beach police department firing a whistler-blower? Via Dwight comes a followup: “A husband and wife who sued Newport Beach and its police department for alleged retaliation and wrongful termination have settled their lawsuits for $500,000, according to city officials.”
  • “Physician-assisted suicide has returned to California’s political agenda.” Well, why not? California’s ruling Democrats have been attempting fiscal suicide for well over a decade now…
  • Toyota breaks ground on its new Texas headquarters.
  • A public school in California is having a Hijab Day.
  • Far-Left Syriza Wins Huge Victory in Greece

    Sunday, January 25th, 2015

    Greece’s far left-wing Syriza Party has won a big victory there, claiming about half the seats in Parliament.

    What does it mean? I took a stab at analyzing it before. Even with a majority, there’s a good chance Syriza will have to continue meeting the EU’s demands (which means pretending to impose austerity measures) if they want mean old Aunt Angela to keep loaning them money. Remember: Greece has never practiced real austerity. Not once since the European Debt Crisis hit has Greece balanced its budget, and its deficit for 2014 was 12.2% of GDP.

    But even the fake austerity imposed has been too much for the Greek people, who collectively want a cushy welfare state but don’t want to pay the sky-high taxes required to pay for it. Promising people something for nothing has been the left’s popular electoral strategy for more than a century, but reality can only be held off for so long. Germany is not due for a federal election, so it’s entirely possible Merkel might still underwrite another bailout or two if Syriza is willing to continue the farce. A Greece shorn of the Euro would still be broke and badly in debt, and newly Drachma-backed securities would likely be toxic investments for all but the most speculative of bond traders. (Perhaps Syriza should investigate how well that printing money thing is working out for Venezuela.) “Forgive our debts or we won’t let you give us more loans!” is a proposition Merkel would probably find quite easy to refuse, and I suspect the risk of a Greek exit from the Euro is already priced into European markets. If Syriza insists on anything more than (possibly) a token debt haircut, the EU will probably be willing to call their bluff.

    It’s generally best for the driver of a 1974 Ford Pinto to avoid engaging in a game of chicken with a Tiger tank…

    In Which I Point To Hot Air’s Venezuela Update and Say “What He Said”

    Thursday, January 22nd, 2015

    It was about time to do another update on Venezuela’s failing socialist economy when I dropped by Hot Air and saw that Ed Morrissey had already done all the heavy lifting for me:

    “The currency in what should be the richest country in South America has collapsed, as well as its economy, under the dual weight of falling crude prices and the Chavista socialism that has been choking the country for more than a decade.”

    More:

    Venezuela’s Chavista policies have always ignored economic reality. Socialism is a fantasy economic system, especially as implemented by Hugo Chavez and Nicolas Maduro.

    The difference between Venezuela and the nanny-state petro-economy in Norway is that the latter preserves itself by respecting private property and foreign investment. From the beginning, Hugo Chavez attacked both, nationalizing oil production and criminalizing private investors as part of his “Bolivarian” revolution. When it did that, it chased off the talent needed to run oil production and the investment needed for all other kinds of goods and services. For a short period of time, their oil revenue allowed it to succeed in ignorance. When that failed, Chavez and now Maduro reacted to those predictable consequences by predictably imposing all sorts of rationing mechanisms which only decreased incentives for production and investment, especially in the legitimate economy. Now that the price of oil has collapsed, so has the official Venezuelan economy — and a populace used to a high standard of living now endures massive shortages and ever-increasing oppression to cover it up.

    Morrissey, in turn, quotes a big chunk of this Matt O’Brien piece in the Washington Post:

    Venezuela’s government is running a 14 percent of gross domestic product deficit right now, a fiscal hole so big that there’s only one way to fill it: the printing press. But that just traded one economic problem—too little money—for the opposite one. After all, paying people with newly-printed money only makes that money lose value, and prices go parabolic. It’s no wonder then that Venezuela’s inflation rate is officially 64 percent, is really something like 179 percent, and could get up to 1,000 percent, according to Bank of America, if Venezuela doesn’t change its byzantine currency controls.

    What he said. Er, both of them.

    Texas vs. California Update for January 21, 2015

    Wednesday, January 21st, 2015
  • The working poor benefit from a lower cost of living in red states.
  • Five of the top ten U.S. cities in economic growth in 2014 were in Texas: Austin, Houston, Ft. Worth. Dallas and San Antonio. (There were also two in California: San Francisco and San Jose.)
  • The Texas Comptroller has released the Biennial Revenue Estimate 2016-2017, which estimates $113 billion in general revenue-related funds available. The report details also notes that “In the past six years, Texas created two-thirds of all net new jobs in the U.S.”

  • By contrast, with the California budget more or less temporarily balanced, Democrats want to start spending like drunken sailors with a stolen credit card again. Legislative analyst: You don’t want to do that.
  • The average CalPERS pension is up to five times comparable Social Security payouts.
  • Jerry Brown says he wants to tackle California’s pension crisis. Good luck with that. While Brown has occasionally been willing to buck his party, and may feel he has nothing to lose in his last term, there’s no reason to believe the Democrat-dominated state House and Senate share his sentiments. I predict a few cosmetic measures passing combined with a whole lot more can kicking until actual default looms. (Hat tip: Pension Tsunami.)
  • “Central Valley farmers say farming is doomed in their areas.” California’s water regulations are driving them out of business.
  • Stockton’s bankruptcy judge: screw secured debtors, we’ve got to start paying retirees.
  • Key figure in CalPERS pension fraud case apparently committed suicide. Hmmm…..
  • California’s Set Seal retail chain files for bankruptcy.
  • John G. Westine of California convicted of 26 counts of mail fraud in a phony Kentucky oil well scheme.
  • Bankruptcy lawyers gone wild!
  • Texas vs. California Update for January 6, 2014

    Tuesday, January 6th, 2015

    Here’s your first Texas vs. California update of 2015:

  • Real personal income increased by 1.4% in Texas in Q3, the most of any state. And that with the oil bust just starting to bite, which I’m guessing helps explain why South Dakota’s personal income decline by .2%. (Well, that and getting six inches of global warming in September….)
  • Texas was the number one magnet state in the country for people moving here yet again.
  • “The real reason for the tuition increase is that the UC system needs funds to bail out the mismanaged pension system that covers retired employees of its ten campuses.”

    This is all the result of the regents’ irresponsible oversight. In 1990, UCRP had 137 percent of the assets it needed to meet its obligations, so regents suspended employer and employee contributions to the pension fund. State legislators also stopped allocating money to UCRP. This “pension contribution holiday” lasted 20 years. To top it off, during this period, university officials boosted pension benefits a half-dozen times. By 2012, more than 2,100 UC retirees were each collecting six-figure pensions for life.

    (Hat tip: Pension Tsunami.)

  • Former Pasadena (California) employees arrested on 60 count, $6 million embezzling charges. (Hat tip: CalWatchdog.)
  • More on outrageous California pensions: “In 2013, an assistant fire chief in Southern California collected a $983,319 pension. A police captain in Los Angeles received nearly $753,861.” (Hat tip: Pension Tsunami).
  • California’s doomed high speed rail boondoggle breaks ground today.
  • More on the same theme from Twitter:

  • Opponents of California’s statewide plastic bag ban have gathered 800,000 signature for a referendum to overturn it, which will also keep the law from going into effect on July 1.
  • California charity hospitals to be sold to for-profit company to keep them open.
  • Texas vs. California Update for December 17, 2014

    Wednesday, December 17th, 2014

    Time for another Texas vs. California update:

  • California’s unfunded health care obligations for retired employees hits $72 billion. (Hat tip: Pension Tsunami.)
  • Meanwhile, the state comptroller says that California’s unfunded pension liabilities has hit $198 billion. (Ditto.)
  • California may extend benefits to illegal aliens taking advantage of Obama’s amnesty.
  • Speaking of which, both California and Texas are on the hook for providing education for illegal alien children. “Today, those figures are $14.4 billion for California and $8.5 billion for the Lone Star state.”
  • California will go broke if it doesn’t adopt pension reform.
  • Lessons for California from Texas’ boom.
  • Costa Mesa police union tries to pin false DUI charge on City Councilman. Hilarity ensues. (Hat tip: Dwight.) And what caused the police union to go after him? Pension reform.
  • Pension spiking widespread in Cosa Contra County. (Hat tip: Pension Tsunami.)
  • California’s high speed rail boondoggle won’t work with the current tracks.
  • Health industry software company vitaTrackr announces relocation of its headquarters from Baltimore to Austin.
  • Builders FirstSource announces expansion in San Antonio and Conroe.