Late last year, Spanish voters kicked out a socialist government and elected a new government led by the supposedly conservative People’s Party.
Is that translating into smaller government and more freedom? Doesn’t look that way. It seems that Spanish right-of-center politicians are just as useless and statist as the faux conservatives in Germany, France, and the United Kingdom.
The ballots haven’t even gotten cold and the new government is proposing a bevy of new taxes. Here are some of the grim details from Tax-news.com, including a class-warfare increase in the top tax rate.
…the incoming Spanish government, headed by Mariano Rajoy, is to introduce higher taxes from 2012 contrary to the party’s pre-election pledge. …The government has announced numerous tax hikes worth EUR6.2bn, for introduction in 2012, including income tax increases across the board, ranging from a 0.75% increase in the tax rate applicable on income of EUR9,500, to a 7% hike for those earning above EUR300,000. Savings income will also be subject to higher taxes under the proposals. Personal savings of up to EUR6,000 will be subject to a 2% rate; with additional rates of 4% on savings income up to EUR24,000 and 6% above this threshold.
By the way, all these tax hikes are in addition to an increase last year in the value-added tax, which was boosted from 16 percent to 18 percent.
Could it be, though, that tax increases are necessary because Spain has already cut spending? As you might imagine, that’s a joke.
According to OECD data, government spending jumped from 39.2 percent of GDP in 2000 to 45.6 percent of GDP in 2010. Equally relevant, EU data shows that government spending almost doubled in the past 10 years.
In other words, Spain is screwed. The new government is just as bad – or perhaps even worse – than the previous government. I wrote two years ago that Spain was in trouble because of over-spending and I see no reason to change my analysis now. Actually, I have changed my analysis. Spain is going down the toilet even faster.
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Will the now indolent European majority be given further voting rights to the wallets of the few remaining productive and innovative forces remaining in the Old Continent? Or will those few remaining productive forces be set free?
That is Europe’s existential question – which will come to a head in the next five to ten years. That is what will determine if the half-billion Europeans survive in a world where three-billion emerging world people have finally found some, albeit partial but long awaited, economic freedom.
Talk to Europeans in the streets and you quickly realize which option they have in mind…
Once you step on the banana peel of HopNChange it’s too late… voters have been seduced to the down spiral of decline by the cumbaya of communal shortcuts to prosperity throughout modern history… the movie plays again.
At least, in the past, a fragmented Europe allowed the few nations who rejected the sirens of collectivism to excel (that has been the core European strength of competing small European states throughout modern history). No longer so in a unified Europe planning to impose universal mandatory collectivism. By unifying, Europe killed the one thing (competition of values, systems and political philosophies) that has been the core element of its success in the past six or so centuries. But European fools still see the world through the old prism of two world wars past. “If we don’t integrate into a super welfare state of transfers, Germany will invade Poland”, … like Indonesia will invade Australia.
Living under a flat effort-reward curve, Europeans are now producing at levels much below their taken for granted three to six times world average standard of living. Something’s gotta give and Europeans will spiral down into decline. Trying to predict what will give is like trying to predict where the first bubble will form on a pot set to boil – a notoriously difficult prediction to make. But what is known with certainty is that a pot set on a flame will boil, …and… a people living under a flat effort-reward curve will reduce production and decline. The rest is details and distractions of the typical cacophony of smoke and mirrors politics.
This is HopNChange ten-twenty years later… this is what you see in Spain.
The indolent are now a desperate majority so there is no solution but decline. The people will never allow anyone with real solutions to come to power. Just Paul Krugman style delusional promises of turning five loaves and two fish of motivation into prosperity equal to three-four times the world average. The delusion of outcompeting three billion people in the emerging world through the flat effort-reward curve of the Welfare State. Lemmings tied to the railroad tracks.
The dream that someone else, someone smarter, someone more competent, or someone simply harder working will either be convinced, tricked or coerced to work for you so that you can maintain a standard of living four-six times the world average always ends badly… but, as you can see, rays of that delusional hope remain alive deep into the decline process and down into despair.
What you see is the vicious cycle of despair, i.e. the end of the welfare state: A flat effort-reward curve leads to low production and lifetime choices of mediocrity? Solution of despair: Make the effort-reward curve even flatter! “Just one more last layer of redistribution and things will turn around. Just one more last layer of redistribution and things will be finally fair, we — the public — will be happy, we promise, one last time! We are just a hairline from turning this thing around back on the road to prosperity, regaining the motivation that will make us create products and services that are competitive on a worldwide scale”.
Mark your calendars dear Americans, because this is HopNChange ten-twenty years later… this is your Spain moment in history…