Archive for category Welfare
Applaud Inequality And the Freedom to Stretch Its Limits!
Posted by Tom in Corporate Welfare, Entitlements, Freedom, Government Regulation, Individual Freedom, National Character, Poverty, Socialism, Welfare on December 17, 2011
So much is being made of OWS’s dichotomy, the 99% versus the 1%, by the mainstream media, the unions and Obama, that it has become mind numbing. Today Charles Blow in his NYT op-ed, Inconvenient Income Inequality, even analogizes it to global warming! In it he pitied the ignorant public for its declining opinion the country is divided into “haves” and “have nots.” He then goes on to prove that income inequality is increasing and concludes that Americans are the equivalent of climate change deniers! So much for the intellectual level of the NYT editorial staff.
The suppressive equality argument that a desperate president is trying to sell to distract attention from his miserable performance in office is falling flat on its face. Why, you ask? Because it is against the very core of human nature. Man by nature wants to grow, to improve, to succeed. That nature demands the hope that this core need can be met by individual effort. Essential to that hope is the freedom enshrined in law to pursue dreams, to succeed and yes to fail. Obama’s equality argument dims that hope, puts a lid on that freedom, turns success into something to be condemned. He has traveled the country railing against the successful.
Ryan Streeter posits a kinder opinion for the OWS misfits’ protests in his Indystar post, How to succeed by merit. He suggests that what the protestors really oppose is unearned wealth: “America isn’t a land divided by the 99 percent and the 1 percent. It’s a land divided by those who earn their success day after day and those who don’t. This class distinction has nothing to do with how rich or poor you are. It has everything to do with what kind of person you are.”
Streeter contrasts Steve Jobs with Bernie Madoff then gives examples of unearned success: lottery winners, Fannie and Freddie executives, unionized public employees, ineffective tenured teachers, spoiled rich kids, and too-big-to fail corporations. Trying to put a good face on and ascribe good intentions to “the bearded misfit sitting in a festering tent on public property” Streeter suggests that what he really objects to is this “unearned success.”
In a hopeful conclusion he argues: “It’s time to stop protesting a false premise and focus instead on promoting earned success. Do we need to end too-big-too-fail policies? Yes. Do we need to end harmful welfare programs? Yes. But most of all, we need to encourage earned success in our own homes. That’s where the real change begins.”
Now I would submit that income inequality is good. It sets the ever changing level to which to aspire. The lower views the higher status as something to be strived for and eventually attained. Even if not in his current generation so long as his children will be in positions to continue to improve. Challenge to improve is key to success; the lower the position on the income scale the greater the challenge.
The beauty of inequality is that it exists all up and down the income scale. It causes challenge, effort and either success or failure up and down the ladder. Those close to the top want to leapfrog into the number one position. And once that is attained someone below will always be striving to leapfrog again.This in turn promotes an aggregate rise in the standard of living for the whole of society. It’s Adam Smith’s “invisible hand” at work.
So we should reject Obama’s socialistic, big-government equality hogwash and promote freedom to succeed with fewer limits and less government.
Supply Side Analysis of Obama’s Latest Stimulus Plan
Posted by Tom in Congress, Deficit, Democrats, Economics, Employment, Fiscal Policy, Politics, Welfare on November 4, 2011
Obama’s incessant campaign call for the past months had been to demand the “Republican Congress” PASS IT NOW. The “It” is, of course, another stimulus plan, excuse me, “jobs bill;” you see the word “stimulus” has, by fiat, been stricken from the Democrat’s lexicon–must be something to do with the pejorative connotation generated by the last stimulus! Anyway, the new stimulus consist of: 1. Temporary payroll tax cuts, 2. Temporary extension of unemployment benefits to two years, 3. Additional debt to finance public sector jobs, and 4. Higher taxes on “the rich.” That this is an insincere reelection effort on his part can be of little doubt, since he knows it would not pass even his Democratic controlled Senate, much less the House.
Stimulus by whatever name it is called should, nonetheless, be subjected to economic analysis and Art Laffer, that infamous supply-sider, has obliged in the current issue of National Review. Laffer calls it a “four point plan for failure.” His article is worth a summary here, with full attribution:
Payroll tax: This is broad-based but effects only the moderately paid workers; it stops at a bit over $100,000 of annual compensation. Broad-based, low-rate taxes are generally good since there is little incentive to avoid them, so a reduction in these taxes presents little incentive to work or not to work, to hire or not to hire. Laffer points out that a reduction in this tax will not effect the decision makers typically earning over the $100K limit and much of that in dividends and capital gains. Laffers point is that cutting the payroll tax, temporarily, will not effect hiring or seeking employment. In other words, it doesn’t effect any job creation.
Extending unemployment benefits to almost two years: Laffer uses a time tested analogy to the Department of Agriculture payments: pay farmers to grow and they grow; pay them not to grow and they don’t grow. Simple: people respond to economic incentives. Obama wants to pay people not to work for almost two years. Obviously, they will take the money. And, by the way, not look very hard for that next job. In short, this is a big negative to job creation.
More deficit stimulus spending: Here we get in to the so-called Keynesian multiplier: the recipients of the extra federal dollar will spend a portion of it thereby creating new jobs which induce more spending thus more new new jobs. This “marginal propensity to consume” gives us the “multiplier;” or $1 divided by $1 minus that marginal propensity to consume. So if the marginal propensity to consume is only 50 cents, the multiplier effect is $2 for ever $1 borrowed! Thus the Keynesians have magically created money!
Wow! What’s missing here? Well, to get that dollar of federal largess, the federal government must take that dollar from someone else. In this case it must take not only that dollar, but it must run that dollar through the federal bureaucracy, then it must pay interest on that dollar because it borrowed the dollar. In short, the economic effect is to rob Peter, waste part of the loot on bureaucracy and interest, and pay Paul the balance. The economic effect is not neutral but is NEGATIVE. It destroys jobs, the jobs that would otherwise be created by Peter via his spending or investment! Look no further for proof than Obama’s last stimulus expenditures.
To cap off the point Laffer offers the “Slutsky equation:” This aggregates the deficit financed stimulus, both debits and credits. “By taking resources from those who produce and giving resources to those who don’t produce, government reduces the incentives to work for both parties. Output, employment, and production will fall.”
Higher taxes on “the rich:” It’s hard to tell if Obama wants to raise revenue or merely redistribute income with this effort. If raising income is the goal, increasing tax rates at the highest brackets will have the opposite effect; lowering tax rates on that bracket however will raise revenue. The simple reason is that those earners in the highest tax brackets have the ability to minimise marginal taxes by converting income to capital gains, deferring income, and shifting income; and they have access to tax accountants, investment advisors and attorneys to help in this process. If, on the other hand, he merely wants to redistribute income or wealth, he succeeds in his election tactic of creating class warfare but he fails in his so-called job creation purpose. And this for the same reason suggested by the “Slutsky equation.” Taking money from the producers and giving it to the non-producers has a negative effect on both; it’s a double disincentive!
In sum, our President is a campaigner who has a negative record on which to run. He has created a straw man with his rants against the “Republican Congress” failing to mention the Democrat controlled Senate which is fully one-half of that Congress. And he has come up with a sure-to-fail stimulus plan which he will use to deflect voter attention away from his abysmal record.
Is Papandreou the Only European Leader With Balls?
Posted by Tom in Economics, Entitlements, Europe, Financial Crisis, Socialism, Welfare on November 2, 2011
Is Greek Prime Minister George Papandreou the only European leader with “balls?” With Germany and France continuing to kick the can down the road and none of the nations calling for a referendum on the can kicking, it seems that the Greek Prime Minister is the only one with any sense. He has called for a referendum from the voters on whether to accept the latest edition of the European bank bailout. These are the same voters who have been rioting. The same voters who have been sucking money out of Germany. The same voters who are accustom to handsome entitlements while cheating on their taxes. Politically, Papandreou is smart in letting the socialists rioters make their own democratic decision. Admittedly, it will not be a well informed decision. But then, in a socialist nation, how could it be?
The point for Europe, America, Asia and the world is the same: the sooner a real resolution is reached, the sooner a real recovery can commence. The contrary example is the real estate market in the U.S. where reaching the market bottom has been forestalled by Obama and the socialist left. The result has been the stagnation and real estate depression that we now witness. By the Greek call for a referendum, Papandreou has cut to the chase. And done so where democracy was born!
Economically, socialism doesn’t work, the European welfare state doesn’t work, and need I say that the American welfare state will not work? We cannot borrow and regulate ourselves into prosperity as Obama would have us believe.
Europe is broke. We are almost as broke. We have the advantage in that our fiscal policy and monetary policy are structured under one federal government. Europe, on the contrary, is a mess simply because it lacks that structure.
Hopefully the can kicking will stop and serious plans will be made to reorganize Europe so that it or its component nations can prosperously function in this economically interdependent world in which we live.
Sinking With Europe?
Posted by Tom in Economics, Europe, Fed, Financial Policy, Fiscal Policy, Foreign Policy, Monetary Policy, Welfare on November 2, 2011
The following is a republication of Jerry O’Driscoll’s op-ed in today’s WSJ, Why We Can’t Escape the Eurocrisis. The article also had lead position in today’s Real Clear Politics.
Why We Can’t Escape the Eurocrisis
EU and U.S. debt are interlinked through the banking system.
By GERALD P. O’DRISCOLL JR.
When is a bailout not a bailout? When the bailor is short of funds. The recently announced debt plan in the European Union comes up short in almost all respects.
The debt crisis is not just an EU problem, but a trans-Atlantic financial crisis. The overwhelming debt problems on either side of the pond are interlinked through the banking system.
First to the EU. The underlying dilemma is that governments have promised their citizens more social programs than can be financed with the tax revenue generated by the private sector. High tax rates choke off the economic growth needed to finance the promises. Economic activity gets driven into the underground economy, where it often escapes taxation.
Nowhere is this truer than in Greece, which has a long history of sovereign defaults in the 19th and 20th centuries. There is a bloated public sector, and competitive private enterprise is hobbled by regulation and government barriers to entry. Successive Greek governments ran chronic budget deficits, and the Greek banks lent to the government. Banks in other EU countries, such as France, lent to the Greek banks.
In Greece and elsewhere in the EU, the banks support the government by purchasing its bonds, and the government guarantees the banks. It is a Ponzi scheme not even Bernie Madoff could have concocted. The banks can no longer afford to fund budget deficits, yet they cannot afford to see governments default. Governments cannot make good on their guarantees of the banks.
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Details differ by country. In Ireland, problems began with an overheated property sector that brought down the banks. The economy went into depression, which threw the government’s budget into deficit. Further aggravating the deficit was the government’s decision to guarantee bank deposits, converting private, financial-sector debt into public-sector debt. The details differ from Greece, but the linkage between the government and the banks is the common factor.
France’s growth is weak to nonexistent. Germany’s economy has performed well since the recession, but concerns are growing regarding its banks’ exposure to greater EU risk. And U.S. banks and financial institutions are exposed to EU banks through funding operations, issuance of credit default swaps and unknown exposure in derivatives markets.
The Federal Reserve has engaged in currency swaps with the European Central Bank to support the dollar needs of EU banks. The ECB deposits euros (or euro-denominated assets) with the Fed and receives dollars in return. It promises to repay dollars plus interest.
The Fed maintains they cannot lose money because the ECB promises to repay the swaps in dollars. And yet, with the world awash in greenbacks, it is unclear why the Fed and the ECB even needed to engage in these transactions—except that it suggests funding problems at some EU banks. And if neither EU banks nor the ECB can secure enough needed dollars in global markets, there is a serious counterparty risk to the Fed. The ECB can print euros but not dollars. Sen. Richard Shelby (R., Ala.), ranking member of the Senate Banking Committee, was correct to raise concerns about the Fed’s policy last week. Losses on the Fed’s balance sheet hit the U.S taxpayer, not EU citizens.
The sad fact is that there is not enough money in the EU to pay off the public debts incurred by the governments. Most countries have long since squeezed as much tax revenue from their citizens as they can. That is why they have toyed with a tax on financial transactions, the one remaining untaxed activity in all of Europe.
Greece is the first of other sovereign defaults to come. With last week’s bailout, the EU leaders might have bought time, perhaps a year. But at some point, the ECB will cave and monetize the debt, leading to euro-zone inflation.
The debt calculus changed dramatically this week with the announcement of a Greek referendum on the bailout agreement next January. If voters reject the agreement, the ultimate outcome is unpredictable.
Americans must not be smug about the suffering of Europeans—our financial system is thoroughly integrated with theirs. Moreover, the International Monetary Fund will most likely be involved in the event of future bailouts and will likely need large funds from its members, which ultimately means the taxpayers.
And, of course, the U.S. has its own large and growing public debt burden. We have not gone as far down the road to entitlements, but we are catching up. If you want to know how the debt crisis will play out here, watch the downward spiral in the EU.
Meanwhile, expect more volatility in financial markets. U.S. traders in particular simply have not grasped the enormity of the EU debt crisis.
Mr. O’Driscoll, a senior fellow at the Cato Institute, is a former vice president of the Federal Reserve Bank of Dallas and later Citibank.
Individual Responsibility and Death
Posted by Tom in Entitlements, Individual Freedom, Law, Morality & Religion in the Public Square, Nationalized Health Care, Subsidiarity, Welfare on September 17, 2011
Jonathan Cohn’s TNR post, Why We Don’t Let People Die, treats Wolf Blitzer’s question whether Ron Paul was prepared to let an uninsured 30-year old with cancer die just because he could not afford the treatments. Paul talked about individual responsibility and some of the audience shouted “yes.”
Cohn points out that “As a practical matter, few of us are prepared to allow a somebody die when life-saving treatment is available, just because that person isn’t prepared to pay the bills.” He goes on to point out that hospitals cannot legally refuse emergency medical treatment and that doctors are obliged to render aid under their professional oath.
He treats individual responsibility, “whether it’s the responsibility to stay healthy, the responsibility to seek timely medical care, or the responsibility to make the right choices about health insurance.” And he points out that luck, misfortune plays a significant role in medical problems and their outcomes.
Cohn concludes: “My definition of a decent society is one that protects people not only from bad luck, but also, in some circumstances, from their own bad judgment.”
It’s hard to fault his good will but not his argument. His problem is the fallacy of equating “society” to “government.” Society is composed of individuals, families, neighborhoods, communities, synagogues, churches, mosques, social service organizations, and charitable organizations. Society has moral obligations and norms. Society enforces social obligations with association and ostracization.
Government is the political direction and control exercised over the actions of the members, citizens, or inhabitants of communities, and societies. Government creates legal obligations and regulations. Its laws and regulations are frequently broad and of the “one size fits all” variety. Government enforces these obligations with civil and criminal penalties. What it extracts, it extracts at the point of a gun.
What is a social obligation is not necessarily a government obligation. Cohn misses the principle of subsidiarity, that matters ought to be handled by the smallest, lowest or least centralized competent social unit closest to the particular issue. Families, charities, social groups, hospitals can handle the case of the 30 year old with cancer who can’t afford treatment. Those groups close to the problem can make case-by-case judgments on the cancer patient’s misfortune or bad judgment. In short, they, better than the government can handle Cohn’s “in some circumstances” hedge. Likewise those groups can better handle the obese patient or alcoholic that refuses a life style change, which is the side of universal health care or health insurance that Cohn doesn’t mention.
The money that government doesn’t extract by legislating and enforcing universal health care or health insurance is money that subsidiary social groups will have to provide the necessary care in appropriate cases.
S&P Downgrade Is Merely a Symptom
Posted by Tom in Budgets, Deficit, Entitlements, Europe, National Debt, Welfare on August 8, 2011
Despite today’s worldwide market plunge and the pundits attributing it to the loss of the U.S. AAA rating, that loss is only a symptom of the underlying disease: major deficits for as far as the eye can see, resulting accumulated debt as an increasing percentage of GDP, and staggering unfunded (and undisclosed) liabilities. The U.S. is basically headed toward bankruptcy. If downgrades continue bond purchasers will demand more returns which in turn increase the deficits and debt.
On a macro basis we have two major customer economies in the dumps, Europe and the U.S., and one major exporter and lender, China, all suffering. Europe is of greater concern than the U.S., even though neither has cogent plans for a solution; it’s just that the U.S. has a better political structure to affect an eventual solution.
So, forgetting about the market, the real economy is facing a recession. Joe Morabito CEO of an international executive relocation business reports that the typical summer peak time has turned into a downer. Gene Humphrey CEO of a chip technology company reports that industry leaders are forecasting a downturn for the next two quarters because consumers have retreated from the market. This is “real economy” evidence that we are looking at a probable double dip, a second recession.
Politically, the parties blame one another. But the tea party gets the most blame. In fact, the tea party should get the most credit. Someone must yell from the rooftops STOP, CUT BIG GOVERNMENT!
Serious cuts in entitlements must start now. Gen involved. Call your representatives Convince your neighbors. Save your grandchildren.
From the Greatest to the Worst Generation?
Posted by Tom in Entitlements, National Character, National Debt, Welfare on August 6, 2011
Our fathers came home from WWII where they lost friends and limbs; they worked in jobs and completed their educations. They married their sweethearts and raised their families. Attended their churches or synagogues. They did not go on welfare. Healthcare was something they only used when necessary and when they used it, they paid for it. They saved mainly for their family but also for retirement. A family car was a luxury and there was only one. They read the newspapers and maybe a magazine. They were intent on providing a good life for their children, insisting on education. They were charitable, giving to those in need. They participated in the community social organizations, churches, county and city governments. As products of the depression, they were frugal and believed others should also be such. While superlatives are often misplaced, they were indeed a very great generation, a humble, independent, family oriented and charitable generation.
They paid taxes on their incomes; there were few who did not. They did not expect to receive social security, Roosevelt’s first insurance entitlement. They did not go on the dole, get welfare. There was no such thing as Medicare, Medicaid, or Obamacare.
Contrast my generation, now the so-called millennials and boomers, those born to that WWII generation: We were reared, nurtured, educated, helped and pushed to succeed. Pride and joy of the “greatest generation” we were urged to be greater yet. Our parents wanted better for us. They sacrificed to better our lot. We were the beneficiaries of their family focus and their support and charity. We enjoyed the benefits of their hard work and sacrifice.
Our military challenge, Viet Nam, paled in significance to Germany, Japan and Korea. Some of us honorably served, others ducked service. “Deferees” and “Dodgers” joined protestors to pillar the returning vets who courageously fought in an unpopular war. We lost our parents’ concept of patriotism and service. We were children of the sixties, the protesting, free-loving, pot-smoking, flower children, free of morality and constraint.
We are the pampered. We demand a government that provides everything, minimum wages, unemployment compensation, welfare, Medicaid, Medicare, Social Security, and yes now Obamacare! Fully half the population pays no taxes and likes it that way. Others should pay. What others do not pay we insist the government borrow. That borrowing has increased to 40 cents of every dollar spent. In essence we are borrowing money that we cannot repay. We will leave that debt to our children.
How do we rate vis a vis the next generation, no the next several generations? What will our children and grandchildren say about us? It’s patently obvious that we are borrowing money that we cannot pay back, to fund entitlements, to promote dependency for fully half of the population. We are loading this unsustainable debt on our children and grandchildren! We are in effect stealing from future generations! Will we be called the worst generation? Don Brookins’ video DOORBELL suggests the answer:
You can bet on it!
Class Warfare: Politics of Victimhood
Posted by Tom in Democrats, Economics, Entitlements, Justice, National Character, Socialism, Welfare on August 6, 2011
Barack Hussein Obama is the master of class warfare; his background is community organizing, pitting sub class against sub class and class against class. As such he doesn’t relate to all classes, his politics are dependent on his ability to divide and thus to create more dependency, pushing victimhood, resentment and class warfare.
Kyle Meintzer alerts us to this in Bill Whittle’s video Rich man, poor man?. Bill uses Heritage Foundation data to show that while the rich get richer, the “poor” get richer also. In fact, the definition of poor is suspect. But Obama and the Democrats need to expand the definition of poor just to keep up with those becoming non-poor, and this, just to buy votes. Enough said, here’s the video:
Marco Rubio On Fire
Posted by Tom in Budgets, Congress, Deficit, Democrats, Entitlements, Fiscal Policy, Welfare on August 1, 2011
Ron Tomsic sent this. We need more Rubios is leadership positions.
Greece For Dummies
Greece is a socialist country with plenty of entitlements.
Few Greeks work producing products or services which outsiders want to buy, other than the Greek ruins. Therefore there is little income and profits that can be saved and reinvested for future growth.
Even fewer Greeks pay taxes to generate government revenue with which to pay entitlements. Without tax revenue, borrowing is the only source of funds.
So, the Greek socialist government issued sovereign debt in the form of Euro bonds at low Euro interest rates and used the borrowed money to pay the entitlements.
European banks, mainly the French and German banks, bought the bonds and treated them as rock solid assets on their balance sheets. After all, those bonds were “sovereign debt” with the full faith and credit of the national government.
Comes the recession which followed the worldwide financial crisis and with it hard times for all of Europe.
Now when it comes time to repay the Greek debt, Greece has no money, no tax revenue, so it borrows more money form the ECB, EU and the IMF. (NB: U.S. taxpayers contribute to IMF loans!)
This doesn’t sit well with the German workers whose taxes are going to subsidize Greek welfare benefits freely given to socialist Greek freeloaders.
So this time the lenders want assurances that Greece will eventually be able to repay the new loans, thus the ECB, EU and IMF impose conditions to the loans, mainly that the socialists entitlements be cut back, this so the government won’t need so much money in the future.
Well cutting entitlements doesn’t sit well with Socialists freeloaders, so the Greek citizens protest, clash with police, and riot.
Conclusion:
- Greek freeloaders are protesting because hard-working Germans won’t continue to support Greek slothful lifestyles.
- The EU continues to bail out Greece because if Greece defaults, the European banks collapse because their balance sheets are under water with all the bad Greek paper.
- If the European banks fail, there will be another worldwide financial crisis and a run on the Euro with a potential disintegration of the European Union.
- Finally, Greece as one of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) is only the first bubble to pop. It doesn’t look good for Europe.
Now that you’ve endured, Greece For Dummies, I submit a more intelligent level of discourse is in order. For that please enjoy Daniel Mitchell’s Cato post, Should American Taxpayers Finance Another Big Fat Greek Bailout?