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Archive for the ‘European Commission’ Category

I wrote the other day that Americans, regardless of all the bad policy we get from Washington, should be thankful we’re not stuck in a hellhole like Venezuela.

But we also should be happy we’re not Europeans. This is a point I’ve made before, usually accompanied by data showing that Americans have significantly higher living standards than their cousins on the other side of the Atlantic.

It’s now time to re-emphasize that message. The European Commission has issued its annual report on “Taxation Trends” and it is – at least for wonks and others who care about fiscal policy – a fascinating and compelling document.

If you believe in limited government, you’ll read the report in the same way you might look at a deadly traffic accident, filled with morbid curiosity and fear that you may eventually suffer the same fate.

But if you’re a statist, you’ll read the report like a 14-year old boy with his first copy of a girlie magazine, filled with fantasies about eventually getting to experience what your eyes are seeing.

Let’s start by giving the bureaucrats some credit for self-awareness. They openly admit that the tax burden is very onerous in the European Union.

The EU remains a high tax area. In 2012, the overall tax ratio, i.e. the sum of taxes and compulsory actual social contributions in the 28 Member States (EU-28) amounted to 39.4 % in the GDP-weighted average, nearly 15 percentage points of GDP over the level recorded for the USA and around 10 percentage points above the level recorded by Japan. The tax level in the EU is high not only compared to those two countries but also compared to other advanced economies; among the major non-European OECD members for which recent detailed tax data is available, Russia (35.6 % of GDP in 2011) and New Zealand (31.8 % of GDP in 2011) have tax ratios exceeding 30 % of GDP, while tax-to-GDP ratios for Canada, Australia and South Korea (2011 data) remained well below 30 %.

Here’s a chart from the report showing that taxes consume about 40 percent of economic output in EU nations. And while Americans correctly view the internal revenue code as very burdensome, taxes “only” consume about 25 percent of GDP in the United States.

EU Report Total Tax

Other nations with comparatively modest tax burdens include Canada (CA), Australia (AU), South Korea (KR), and Switzerland (CH).

But it’s important to understand that not all nations in the European Union are identical.

Just as there are high-tax states and low-tax states in America, there are high-tax countries and low-tax countries in Europe. Surprisingly, France was not the worst nation.

…the ratio of 2012 tax revenue to GDP was highest in Denmark, Belgium and France (48.1 %, 45.4 % and 45.0 % respectively); the lowest shares were recorded in Lithuania (27.2 % of GDP), Bulgaria (27.9 % of GDP) and Latvia (27.9 % of GDP).

I’m surprised, by the way, that Sweden isn’t among the highest-taxed nations. I guess they’ve made even more progress than I thought.

Now let’s drill down into the report and look at some of the specific data.

But you may want to stop reading now if you get easily depressed.

That’s because it’s time to look at a chart showing what’s happened to income tax rates. Specifically, this chart shows the average top tax rate on personal income, both for Eurozone (nations using the euro currency) and European Union nations.

As you can see, the average top tax rate has jumped by almost four percentage points for euro nations and by about two percentage points for all EU nations.

EU Report Personal Income Tax

This is very unfortunate. Tax rates were heading in the right direction when there was vigorous tax competition inside Europe. But now that high-tax nations have been somewhat successful in forcing low-tax jurisdictions to become deputy tax enforcers, that positive trend has halted and policy is moving in the wrong direction.

But not in all regards.

Tax competition also has been compelling governments to lower corporate tax rates. And while that trend has abated, you can see in this chart that politicians haven’t felt they have leeway to push rates higher.

EU Report Corporate Income Tax

Though I am very concerned about the OECD’s campaign to undermine corporate tax competition.

If they’re successful, there’s no doubt we’ll see higher corporate tax rates.

Let’s now look at some more depressing data. This chart shows that a continuation in the trend toward higher rates for value-added taxes (VATs).

EU Report VAT

I’ve warned repeatedly that the VAT is a money machine for big government and the EU data certainly supports my position.

But if you want evidence from other parts of the world, there’s some IMF data that clearly shows how politicians use the VAT to expand the burden of government.

Last but not least, let’s now draw some conclusions from all this information.

At the beginning of the column, I mentioned that Americans should not copy Europe because bigger government translates into lower living standards.

Simply stated, there’s a negative relationship between the size of government and economic performance.

So let’s look at another piece of data to emphasize that point. The bureaucrats at the OECD just did a report on the U.S. economy and they produced a chart showing that the current recovery is very anemic. We haven’t recaptured lost economic output, which normally happens after a downturn. Indeed, we haven’t even returned to normal growth levels.

But that’s not news to regular readers. I’ve shared powerful data from the Minneapolis Federal Reserve showing the failure of Obamanomics.

What is noteworthy, though, is comparing Europe to the United States. As you can see from these two charts, euro nations have flat lined. And if you look at the vertical scale, you can see that they were growing a lot slower than the United States to begin with.

Dismal European Economy

In other words, we’re not doing very well in the United States.

But compared to Europe, we’re Hong Kong.

Two final caveats: First, I always like to stress that economic performance is impacted by a wide range of policies. So while I think that rising tax burdens and higher tax rates are hurting growth in Europe, there are other factors that also matter.

Second, any analysis of fiscal policy should also include data on the burden of government spending. After all, a nation with a low tax burden will still suffer economic problems if there’s a large public sector financed by red ink.

And one big warning: Obama wants to make America more like Europe. If he succeeds, we can expect European-style stagnation.

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What’s the defining characteristic of our political masters?

Going all the way back to when they ran for student council in 6th grade, is it a craven desire to say or do anything to get elected?

Is it the corrupt compulsion to trade earmarks, loopholes, and favors in exchange for campaign cash?

Or is it the knee-jerk desire to buy votes by spending other people’s money?

The answer is yes, yes, and yes, but I want to add something else to the list.

One of the most odious features of politicians is that they think they’re entitled to all of our money. But it goes beyond that. They also think they’re doing us a favor and being magnanimous if they let us keep some of what we earn.

Think I’m joking or exaggerating?

Consider the fact that the crowd in Washington says that provisions in the internal revenue code such as IRAs are “tax expenditures” and should be considered akin to government spending.

So if you save for retirement and aren’t subject to double taxation, you’re not making a prudent decision with your own money. Instead, you’re the beneficiary of kindness and mercy by politicians that graciously have decided to give you something.

And the statists at the Washington Post will agree, writing that folks with IRAs are getting “a helping hand” from the government.

Or if you have a business and the government doesn’t impose a tax on your investment expenditures, don’t think that you’re being left alone with neutral tax policy. Instead, you should get on your knees and give thanks to politicians that have given you a less-punitive depreciation schedule.

And the Congressional Budget Office, the Joint Committee on Taxation, and the Government Accountability Office will all agree, saying that you’re benefiting from a “tax expenditure.”

The same attitude exists in Europe. But instead of calling it a “tax expenditure” when taxpayers gets to keep the money they earn, the Euro-crats say it is a “subsidy” or a form of “state aid.”

Speaking at the European Competition Forum in Brussels, EU commissioner Joaquin Almunia said he would investigate whether moves by national governments to tailor their tax laws to allow companies to avoid paying tax had the same effect as a subsidy. Subsidising certain businesses could be deemed as anti-competitive, breaching the bloc’s rules on state aid. …The remarks by the Spanish commissioner’s, who described the practice of “aggressive tax planning” as going against the principles of the EU’s single market, are the latest in a series of salvos by EU officials aimed at clamping down on corporate tax avoidance. …He added that the practice “undermines the fairness and integrity of tax systems” and was “socially untenable.”

Needless to say, Senor Almunia’s definition of “fairness” is that a never-ending supply of money should be transferred from taxpayers to the political elite.

The head of the Paris-based Organization for Economic Cooperation and Development wants to take this mentality to the next level. He says companies no longer should try to legally minimize their tax burdens.

International technology companies should stop considering it their “duty” to employ tax-dodging strategies, said Angel Gurria, head of the Organization for Economic Cooperation and Development. …The OECD, an international economic organization supported by 34 member countries including the U.S., U.K., Germany and Japan, will publish the results of its research on the issue for governments to consider within the next two years, Gurria said.

And you won’t be surprised to learn that the OECD’s “research on the issue” is designed to create a one-size-fits-all scheme that will lead to companies paying a lot more tax.

But let’s think about the broader implications of his attitude about taxation. For those of us with kids, should we choose not to utilize the personal exemptions when filling out our tax returns? Should we keep our savings in a regular bank account, where it can be double taxed, instead of an IRA or 401(k)?

Should we not take itemized deductions, or even the standard deduction? Is is somehow immoral to move from a high-tax state to a low-tax state? In other words, should we try to maximize the amount of our income going to politicians?

According to Mr. Gurria, the answer must be yes. If it’s bad for companies to legally reduce their tax liabilities, then it also must be bad for households.

By the way, it’s worth pointing out that bureaucrats at the OECD – including Gurria – are completely exempt from paying any income tax. So if there was an award for hypocrisy, he would win the trophy.

P.S. Switching topics to the NSA spying controversy, here’s a very amusing t-shirt I saw on Twitter.

The shirt isn’t as funny as the Obama-can-hear-you-now images, but it makes a stronger philosophical point.

P.P.S. Let’s close with an update on people going Galt.

I wrote with surprise several years ago about the number of people who were giving up American citizenship to escape America’s onerous tax system.

But that was just the beginning of a larger trend. The numbers began to skyrocket last year, probably in part the result of the awful FATCA legislation.

Well, we now have final numbers for 2013.

Expats_1998_2013

What makes these numbers really remarkable is that expatriates are forced to pay punitive exit taxes before escaping the IRS.

Which is why there are probably at least 10 Americans who simply go “off the grid” and move overseas for every citizen who uses the IRS process to officially expatriate.

Not exactly a ringing endorsement of Obamanomics.

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I’m not a big fan of the European Commission. For those not familiar with this entity, it’s sort of the European version of the executive-branch bureaucracy we have in Washington. And like their counterparts in Washington, the Brussels-based bureaucracy enjoys a very lavish lifestyle while pushing for more government and engaging in bizarre forms of political correctness.

But just as a stopped clock is right twice a day, it appears that the European Commission is right once every century. Or perhaps once every millennium would be more accurate. Regardless, here are parts of a story I never thought would appear in my lifetime.

Olli Rehn: “Taxes shouldn’t be any higher than this”

According to the UK-based Independent, the European Commission – or at least one European Commissioner – now realizes that there’s such a thing as too much tax.

Tax increases imposed by the Socialist-led government in France have reached a “fatal level”, the European Union’s commissioner for economic affairs said today. Olli Rehn warned that a series of tax hikes since the Socialists took power 14 months ago – including €33bn in new taxes this year – threatens to “destroy growth and handicap the creation of jobs”.

Wow, that sounds like something I might have said.

But even though I endorsed him, Hollande has ignored my advice.

President Hollande has kept his electoral promise to attack French deficits and accumulated debt. He has done so, however, almost entirely by tax increases rather than by cuts in a state apparatus which swallows 56.6 per cent of the country’s GDP.

It’s worth noting, by the way, that tax hikes haven’t worked. Deficits today are still far higher than they were before the financial crisis. Yet the crazy French are not slowing down.

it has emerged that final budget plans for 2014 will include at least €6bn in tax rises. This figure does not include the impact of a programmed rise in the basic rate of VAT from 19.6 per cent to 20 per cent from January next year. …Mr Hollande’s 75 per cent “temporary” tax on incomes over €1m – also blocked by constitutional objections – may also finally take effect in 2014.

Geesh, no wonder even European bureaucrats are saying enough is enough.

Just like the IMF said that Greece had reached the tipping point where taxes were too high.

Just like the United Nations acknowledged the Laffer-Curve insight that taxes can be too high.

Just like the OECD admitted that better tax policy leads to more taxable income.

Just like the European Central Bank found big Laffer-Curve responses to changes in tax policy.

Hmmm…, makes you begin to think there’s a pattern and that people finally understand the Laffer Curve. Though let’s not get too optimistic since this common-sense observation about tax rates, taxable income, and tax revenue has not had any impact on the pro-tax bureaucrats at the Joint Committee on Taxation in Washington. But that’s a separate story.

I feel guilty about writing something favorable about the European Commission, so I want to close with some information showing that this bureaucracy is on the wrong side more than 99 percent of the time. Which should surprise anyone since it is headed by a former Maoist (who is eminently forgettable – other than the fact that he is unintentionally engaged in a contest to see who can be the most laughable European bureaucrat).

Let’s look at some highlights from the past few years.

European Commission bureaucrats lash out at credit rating companies for warning that governments may not be able to pay their bills.

European Commission bureaucrats squander millions of dollars on empty political correctness as they publish calendars that omit Christmas.

European Commission bureaucrats pissed away millions of dollars to create a green-skinned “Mr. Fruitness” superhero.

European Commission bureaucrats wasted money on comic books portraying themselves as super heroes.

But let’s set aside their perks and boondoggles and instead look at the bad policies generated by this army of paper pushers.

The European Commission pushes for tax harmonization because it is “unfair” for some nations to have lower taxes.

The European Commission advocates gender quotas at private businesses.

The European Commission is hostile to entrepreneurship and supports ever-higher levels of regulation and red tape.

The European Commission supports higher taxes as a “solution” to overspending by national governments.

The European Commission has decided that taxpayer-funded vacations are a human right.

The European Commission finances killing ducks at the absurd price of $750 each.

In other words, the crowd in Brussels is just as wasteful as the folks in Washington. And just as profligate as the people in Paris. And just as reckless as the group in London. And…well, you get the idea.

P.S. While the purpose of this post is to congratulate the European Commission on a rare bit of sanity, it’s worth noting that there’s another bureaucracy in Brussels called the European Parliament. I don’t think they’ve ever displayed any evidence of sanity. But since it doesn’t have much power, it also has little opportunity to do really stupid things. That being said, they enjoy a level of pampering that must make American lawmakers green with envy.

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It is reported that Henry Kissinger, commenting on the Iran-Iraq war, said something to the effect that, “Too bad both sides can’t lose.” I imagine lots of people felt the same way when two of the world’s worst murderers, Hitler and Stalin, went to war in 1941.

I have the same attitude about the fiscal fight in Europe. On one side, you have “austerity” proponents of higher taxes. On the other side, you have Keynesians who think a higher burden of government spending will produce growth.

Since I want lower spending and lower taxes, I have a hard time cheering for either group. As I say in this John Stossel interview, “there’s nobody in Europe who’s actually advancing that position that…the transfer of resources from the private sector to the government…is what hurts your economy.”*

But at least the fight is entertaining, especially since former allies at the International Monetary Fund and European Commission are now in a public spat.

Here are some blurbs from a New York Times report.

…tensions…have now burst into the open with an unusual bout of finger-pointing over policies that have pushed parts of Europe into an economic slump more severe than the Great Depression and left the Continent as a whole far short of even Japan’s anemic recovery. The blame game [was] initiated by a highly critical internal I.M.F. report released this week in Washington… Speaking Friday at an economic conference in his home country of Finland, Mr. Rehn, the usually phlegmatic commissioner of economic and monetary affairs, sounded like a put-upon spouse in a messy breakup. “I don’t think it’s fair and just for the I.M.F. to wash its hands and throw dirty water on the Europeans,” he said. He was responding to assertions by the I.M.F. that the European Commission, the union’s executive arm, had blocked proposals back in 2010 to make investors share more of the pain by writing down Greece’s debt and, more generally, had neglected the importance of structural reforms to lift Europe’s sluggish economy. Simon O’Connor, Mr. Rehn’s spokesman, said the report had made some valid points, but he derided as “plainly wrong and unfounded” a claim that the commission had not done enough to promote growth through reform.

The most accurate assessment is that neither the IMF nor the European Commission have done much to promote growth. But that’s not changing now that the IMF is migrating more toward the Keynesian camp (jumping out of the higher-tax frying pan into the higher-spending fire).

A “hands-off” approach would have been the right way for the IMF and European Commission to deal with the fiscal crisis in Greece and other nations. Without access to bailout funds and having lost access to credit markets, profligate governments would have been forced to immediately balance their budgets.

This wouldn’t necessarily have produced good policy since many of the governments would have raised taxes (which they did anyhow!), but a few nations in Southern Europe may have done the right thing by copying the Baltic nations and implementing genuine spending cuts.

Let’s finish up this post by speculating on what will happen next. I’m actually vaguely hopeful in the short run, largely because governments have exhausted all the bad policy options. It’s hard to imagine additional tax hikes at this stage. Heck, even the IMF has admitted that nations such as Greece are at the point on the Laffer Curve where revenues go down.

Moreover, many of these governments have slowed the growth of spending in the past couple of years, and if they can maintain even a modest bit of fiscal discipline over the next few years, that should boost growth by shrinking government spending as a share of economic output.

But continued spending restraint is vital. The burden of government spending is still far too high in the PIIGS nations, even when merely compared to pre-crisis spending levels.

P.S. Paul Krugman has been the main cheerleader for the spend-more Keynesian crowd, but he has an unfortunate habit of screwing up numbers, as you can see from his work on Estonia, the United KingdomFrance, and the PIIGS.

P.P.S. I’m not a fan of the euro, but Europe’s common currency shouldn’t be blamed for the mess in Europe.

P.P.P.S. You can read my thoughts here on the Rogoff-Reinhart kerfuffle, which deals with many of the same issues as this post.

*To be fair, there are a few policy experts who understand that Europe’s problem is excessive government spending. Even European voters seem to recognize that spending needs to be cut. The challenge is getting a corrupt political class to make good choices.

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Very few people are willing to admit that they favor protectionism. After all, who wants to embrace a policy associated with the Great Depression?

But people sometimes say “I want free trade so long as it’s fair trade.” In most cases, they’re simply protectionists who are too clever to admit their true agenda

In the Belly of the Beast at the European Commission

There’s a similar bit of wordplay that happens in the world of international taxation, and a good example of this phenomenon took place on my recent swing through Brussels.

While in town, I met with Algirdas Šemeta, the European Union’s Tax Commissioner, as part of a meeting arranged by some of his countrymen from the Lithuanian Free Market Institute.

Mr. Šemeta was a gracious host and very knowledgeable about all the issues we discussed, but when I was pontificating about the benefits of tax competition (are you surprised?), he assured me that he felt the same way, only he wanted to make sure it was “fair tax competition.”

But his idea of “fair tax competition” is that people should not be allowed to benefit from better policy in low-tax jurisdictions.

Allow me to explain. Let’s say that a Frenchman, having earned some income in France and having paid a first layer of tax to the French government, decides he wants to save and invest some of his post-tax income in Luxembourg.

In an ideal world, there would be no double taxation and no government would try to tax any interest, dividends, or capital gains that our hypothetical Frenchman might earn. But if a government wants to impose a second layer of tax on earnings in Luxembourg, it should be the government of Luxembourg. It’s a simple matter of sovereignty that nations get to determine the laws that apply inside their borders.

But if the French government wants to track – and tax – that flight capital, it has to coerce the Luxembourg government into acting as a deputy tax collector, and this generally is why high-tax governments (and their puppets at the OECD) are so anxious to bully so-called tax havens into emasculating their human rights laws on financial privacy.

Now let’s see the practical impact of “fair tax competition.” In the ideal world of Mr. Šemeta and his friends, a Frenchman will have the right to invest after-tax income in Luxembourg, but the French government will tax any Luxembourg-source earnings at French tax rates. In other words, there is no escape from France’s oppressive tax laws. The French government might allow a credit for any taxes paid to Luxembourg, but even in the best-case scenario, the total tax burden on our hypothetical Frenchman will still be equal to the French tax rate.

Imagine if gas stations operated by the same rules. If you decided you no longer wanted to patronize your local gas station because of high prices, you would be allowed to buy gas at another station. But your old gas station would have the right – at the very least – to charge you the difference between its price and the price at your new station.

Simply stated, you would not be allowed to benefit from lower prices at other gas stations.

So take a wild guess how much real competition there would be in such a system? Assuming your IQ is above room temperature, you’ve figured out that such a system subjects the consumer to monopoly abuse.

Which is exactly why the “fair tax competition” agenda of Europe’s welfare states (with active support from the Obama Administration) is nothing more than an indirect form of tax harmonization. Nations would be allowed to have different tax rates, but people wouldn’t be allowed to benefit.

For more information, here’s my video on tax competition.

And if you want information about the beneficial impact of “tax havens,” read this excellent column by Pierre Bessard and watch my three-part video series on the topic.

P.S. The Financial Transaction Tax also was discussed at the meeting, and it appears that the European actually intend on shooting themselves in the foot with this foolish scheme. Interestingly, when presented by other participants with some studies showing how the tax was damaging, Mr. Šemeta asked why we he should take those studies seriously since they were produced by people opposed to the tax. Since I’ve recently stated that healthy skepticism is warranted when dealing with anybody in the political/policy world (even me!), I wasn’t offended by the insinuation. But my response was to ask why we should act like the European Commission studies are credible since they were financed by governments that want a new source of revenue.

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I’ve written many times about the foolishness of bailing out profligate governments (or, for that matter, mismanaged banks and inefficient car companies).

Bailouts reward bad past behavior, encourage bad future behavior, and make the debt bubble bigger – thus increasing the likelihood of deeper economic problems. At the risk of stating the obvious, there’s a reason for the second word in the “moral hazard” phrase.

But I’m not surprised that politicians continue to advocate more bailouts. The latest version is the “eurobond,” sometimes referred to as “fiscal liability sharing.”

It doesn’t matter what it’s called, though, since we’re talking about the foolish idea of having Germany (with a few other small nations chipping in) guaranteeing the debt of Europe’s collapsing welfare states. Here’s how the New York Times described the issue.

When European leaders meet on Wednesday to discuss the troubles of the euro zone, France’s president will press the issue of euro bonds, his finance minister said in Berlin on Monday. …Pierre Moscovici, France’s newly appointed finance minister, traveled to Berlin for talks with his counterpart, Wolfgang Schäuble. In a news conference after the closed-door meeting, both characterized the exchange as friendly and productive, but Mr. Moscovici acknowledged that the two men, and their governments, had real differences of opinion over pooling obligations to use the credit of the strongest European countries to prop up the weaker ones, an approach achieved through euro bonds.

The good news is that the German government is opposed to this idea.

Steffen Kampeter, was much more forthcoming in reiterating German opposition to any such proposal. Mr. Kampeter called the joint bonds “a prescription at the wrong time with the wrong side effects,” in an interview with German public radio. “The government has repeatedly made clear that collective state borrowing — that is, euro bonds — are no way to overcome the current crisis,” said Georg Streiter, a spokesman for Ms. Merkel on Monday. “It is still the case that the government rejects euro bonds.” …German policy makers say, euro bonds would be comparable to the United States’ agreeing to pay off Mexico’s debts, almost like a blank check for nations that are in trouble for overspending in the first place. “Euro bonds are not where the keys to heaven lie,” said Michael Hüther, director of the Cologne Institute for Economic Research, because it would “mix up risk” and act as a disincentive for less competitive economies to reform.

The bad news is that the Germans support other bad policies instead.

Ms. Merkel has signaled flexibility on some of Mr. Hollande’s ideas, including more financing for the European Investment Bank and redirecting unspent European Union funds to try to fight unemployment.

And even when Merkel opposes bad policies, she indicates she will change her mind if one bad policy is mixed with another bad policy!

…the German government is staunchly opposed to euro bonds until deeper integration and harmonization of budgetary and public spending policies have been achieved.

If Ms. Merkel genuinely believes that political and fiscal union will solve Europe’s problems, she’s probably ingesting illegal substances. Centralization of European government will have the same unfortunate pro-statist impact as centralization of American government in the 1930s and 1960s.

Integration and harmonization simply means voters in the rest of Europe will take German funds using the ballot box.

Not surprisingly, all of the international bureaucracies are on the wrong side of this issue. The NY Times story notes that the European Commission is using the fiscal crisis to push for more centralization.

The European Commission floated the idea of bonds issued jointly by euro zone governments in November, suggesting that such “stability bonds” could be created “in parallel” with moves toward closer fiscal union, rather than at the end of the process, as the German government prefers, to “alleviate tension” in sovereign debt markets. “From an economic point of view this makes sense,” a commission spokesman, Amadeu Altafaj, said Monday. “But at the end of the day this is a political decision that has to be taken by the member states of the euro area.” Mr. Altafaj added that “any form of common debt issuance requires a closer coordination of fiscal policies, moving toward a fiscal union, it is a prerequisite.”

And the Financial Times reports that the Organization for Economic Cooperation and Development, which is reflexively supportive of bigger government and more intervention, has endorsed eurobonds.

Mr Hollande…won backing from the OECD, which in its twice-yearly economic outlook specifically called for such bonds…“We need to get on the path towards the issuance of euro bonds sooner rather than later,” Pier Carlo Padoan, the OECD chief economist, told the Financial Times.

The fiscal pyromaniacs at the IMF also are pushing to make the debt bubble bigger according to the FT.

Christine Lagarde, the IMF chief, also called for more burden-sharing. Though she stopped short of explicitly backing euro bonds, she said “more needs to be done, particularly by way of fiscal liability sharing” – a thinly veiled reference to such debt instruments.

What makes this particularly frustrating is that American taxpayers provide the largest share of the subsidies that keep the IMF and OECD afloat. In other words, we’re paying for left-wing bureaucrats, who then turn around and push for bad policies that will result in bigger bailouts in the future.

Episodes like this make me understand why so many people believe in conspiracy theories. Folks watch something like this unfold and they can’t help but suspect that people in these governments and international bureaucracies want to deliberately destroy the global economy.

But as I’ve noted before, it’s not smart to believe conspiracies when corruption, incompetence, politics, ideology, greed, and self-interest provide better explanations for bad policy.

If the Europeans want to hit the self-destruct button, I’m happy to explain why it’s a bad idea, and I’m willing to educate them about better alternatives.

But I damn sure don’t want to subsidize their foolishness when they do the wrong thing.

P.S. It’s very appropriate to close this post with a link to this parody of Hitler complaining about debt crisis.

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It seems that there’s nothing but bad news coming from Europe. Whether we’re talking about fake austerity in the United Kingdom, confiscatory tax schemes in France, or bailouts in Greece, the continent seems to be a case study of failed statism.

But that’s not completely accurate. Every so often I highlight good news, such as Switzerland’s successful spending cap, Sweden’s shift to the right on spending, Germany’s wise decision not to be Keynesian, and Portugal’s admission that “stimulus” doesn’t work.

Admittedly, the good news from Europe is oftentimes merely the failure to do something bad. But I’ll take victories in any form.

And that’s why I’m happy that Austria and Luxembourg are blocking a misguided European Commission plan to undermine financial privacy in order to increase double taxation of income that is saved and invested.

Here are some cheerful passages from a story in the EU Observer.

“Completely unjustifiable … grossly unfair … a mystery” – the European Commission and the Danish EU presidency have given Austria and Luxembourg a tongue-lashing for protecting tax evaders. The harsh words came after the two countries on Tuesday (15 May) blocked the commission from holding talks with Switzerland on a new savings tax law designed to recoup some of the estimated €1 trillion a year lost to EU exchequers in tax fraud and evasion. Tax commissioner Algirdas Semeta in a press conference in Brussels said: “The position that Austria and Luxembourg have taken on this issue is grossly unfair. They are hindering 25 willing member states from improving tax compliance and finding additional sources of income.” …Danish economic affairs minister Margrethe Vestager took his side. “It is a mystery why we shouldn’t move on making people pay the taxes that they should pay,” she noted. She described Austria and Luxembourg’s decision as “unfortunate.” For their part, Luxembourg and Austria have declined to publicly explain why they are against the move. Semeta on Tuesday indicated they object to “automatic transfer” of tax data between EU countries and Switzerland, even though the alternative is trusting Switzerland to decide which data it gives and which it withholds. He added that automatic exchange is becoming the international gold standard in the field, with “the US moving in the same direction.”

The quote from the Danish economic affairs minister is especially nauseating. It’s not the “taxes that they should pay.” It’s the “taxes that greedy politicians demand.”

Good tax policy is predicated on the notion that there should not be a bias against income that is saved and invested. This is because double taxation undermines capital formation and thus reduces long-run growth.

Yet European politicians, like many of their American counterparts, are drawn to class warfare tax policy and can’t resist trying to penalize the “evil rich.”

So let’s tip our proverbial hats to Austria and Luxembourg. This is probably just a short-term victory over the unrelenting forces of statism, but let’s enjoy it while it lasts.

P.S. This European kerfuffle is a fight over tax competition vs. tax harmonization. To understand why financial privacy and fiscal sovereignty are desirable, watch the four-part video series at this post.

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Europe is in shambles. Nations are going bankrupt. There are riots in the streets. So you would guess that the folks at the European Commission are focused on some big issues.

But you would be wrong.

The eurocrats in Brussels have much bigger fish to fry. They’re addressing the unmitigated horror of inadequate female representation in corporate boardrooms and contemplating continent-wide quotas.

I’m not kidding. Here are some excerpts from the New York Times report.

Frustrated that her previous efforts to get more women into the top echelons of European business have not yielded stronger results, Viviane Reding, the senior justice official in the European Union, was to announce a new effort Monday that could result in legislation requiring that women occupy up to 60 percent of the seats on corporate boards. …E.U.-wide rules were now needed, she said. “Personally, I don’t like quotas,” Ms. Reding said. “But I like what the quotas do. Quotas open the way to equality and they break through the glass ceiling.” Countries that have quotas “bring the results,” she said. Ms. Reding has long campaigned for major changes in European boardrooms and had given industry “a last chance” to improve its record on placing women in top management.

Isn’t that nice. She doesn’t like quotas, but she has no choice because she gave industry a “last chance” to engage in gender bean counting and they didn’t comply.

I wonder if it’s ever occurred to this über-bureaucrat that it’s not her job to tell private companies who to hire, fire, or promote?

"Nice business you have, shame if anything happened to it"

As an aside, the New York Times manages to demonstrate its bias by directly implying that “genuine equality” only exists if boardrooms have equal numbers of men and women.

Having now concluded that self-regulation has failed, Ms. Reding has set her sights on legislation that could, if enacted, drastically speed up a revolution in the position of women in the workplace that began many decades ago but has so far failed to deliver genuine equality in many areas of business.

Has it ever occurred to the reporter that “genuine equality” exists when everyone has an equal chance and government doesn’t put a thumb on the scale? But regardless of what he thinks, doesn’t good journalism mean keeping his opinions to himself?

Maybe I’m just too old fashioned.

Let’s return to the meat of the story and the actions of Ms. Reding. In this passage, I like how she blames “society” because companies didn’t kow-tow to her voluntary suggestions.

In the announcement to be made Monday, Ms. Reding will call for a new round of consultations with governments, trade unions, companies and civil groups. The move comes a year after she called on companies to take voluntary steps to increase the representation of women on boards to 30 percent by 2015 and to 40 percent by 2020, by replacing departing male directors. …Ms. Reding said that the severe economic downturn in Europe that has pressured companies to focus on their bottom lines was not responsible for the failure of her voluntary initiative. “It is really a question of society,” she said.

The story continues with discussion of the onerous plans being concocted by Ms. über-bureaucrat.

Ms. Reding said that the consultations, beginning Monday and ending on May 28, would determine the proportion of women that should be on boards under any E.U.-wide legislation; whether quotas should apply to state-owned companies as well as publicly listed ones; whether both executive and nonexecutive boards should be covered by the rules; and what sanctions should apply to companies that do not meet the objectives, and if there are circumstances where exceptions are necessary.

Unfortunately, the private sector in Europe has the same cringing approach as their counterparts in the United States. Instead of boldly saying that corporate boards are a private matter for shareholders to decide, representatives from big companies accept the intrusion and merely complain about implementation.

…the European Round Table of Industrialists, a forum for the chairmen and chief executives of major multinational companies, has warned that big divergences among sectors and national traditions meant any measures should remain voluntary. “Societal changes take time,” said Carlo Bozotti, the chief executive of STMicroelectronics, a semiconductor company, and the head of a group at the Round Table looking at the issue. “There is no one-size-fits-all solution for industrial companies from multiple sectors, of various structures, and from diverse cultural backgrounds,” he said.

The article concludes with an assertion that “gender-diverse” boardrooms lead to better economic performance. That may very well be true, but it suggests that shareholders are deliberately sacrificing income and wealth in order to retain something akin to an old boys’ network. That seems rather implausible, to say the least.

There is plentiful evidence from business consulting firms including McKinsey & Co., and from Catalyst, a nonprofit research group, that companies with gender-diverse management teams experience higher growth in their share prices, better-than-average operating profits, and outperform their rivals in terms of sales, return on investment capital and return on equity, according to the report. That research showed that women asked more questions and made fewer reckless decisions, proving that “women are not a cost, women are a benefit,” Ms. Reding said.

I want to close with a semi-optimistic note. As crazy as it is for Ms. Reding to try to dictate the number of men and women in corporate boardrooms, at least she’s not complaining about discrimination based on looks or height and trying to get government involved in those areas. At least, not yet.

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I’m not a big fan of the European bureaucracy. Indeed, I was semi-serious when I stated that Brussels was the “most statist place on the planet.”

Which is why I greatly enjoyed this speech by the head of Ryan Air, who ripped the bureaucrats a new you-know-what while speaking at an event sponsored by the European Union.

All the good stuff – including a great Reagan quote – is in the first 3:35, so don’t be put off by the video’s length.

And if you want examples to help you understand why folks like Mr. O’Leary are so critical of the European Commission, just click here, here, and here.

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I don’t often have reason to praise the White House. But the Administration occasionally winds up fighting on the right side when dealing with the statists on the other side of the Atlantic Ocean.

I lauded the Obama Administration two years ago when the Treasury Department was fighting against a scheme from the Europeans to impose a tax on financial transactions.

And now it’s time to praise the White House again. In this case, they are fighting against a proposal by the European Union to impose an emissions tax on airliners. And even though the proposed tax is similar to the cap-and-trade scheme supported by Obama, the Administration is on the right side, as noted in this AP story.

The House voted Monday to exclude U.S. airlines from an emissions cap-and-trade program that the European Union plans to impose on all airlines flying to and from the continent beginning next year. With the legislation, which passed by voice vote, lawmakers joined the airline industry and the Obama administration in opposing the EU Emissions Trading Scheme scheduled to go into effect on Jan. 1. The bill now goes to the Senate, where there is currently no companion legislation. The measure directs the transportation secretary to prohibit U.S. carriers from participating in the program if it is unilaterally imposed. It also tells other federal agencies to take steps necessary to ensure that U.S. carriers are not penalized by the emissions control scheme. …The U.S. aviation industry says the cost between 2012 and 2020 could hit $3.1 billion. It says it is unfair that a flight from the United States, for example from Los Angeles, would have to pay for emissions for all parts of flights to Europe, including time spent over the United States and the Atlantic. “It’s a tax grab by the European Union,” Transportation Committee Chairman John Mica, R-Fla., said. “The meter starts running the minute the plane departs from any point in the U.S. until it reaches Europe.” …That drew fire from Krishna R. Urs, the U.S. deputy assistant secretary of State for transportation affairs, who repeated the U.S.’s “strong legal and policy objections to the inclusion of flights by non-EU carriers” in the EU program.

Individual nations have the right, of course, to impose tax on activities that take place inside national borders. And a group of nations, such as the European Union, has the right to impose taxes on things that take place within their combined borders.

In this case, however, the EU wants to levy the tax based on miles flown inside the United Stats and over international waters. This type of extraterritorial tax grab should be strongly resisted.

Fiscal sovereignty is a very important principle, one that is necessary to preserve tax competition and constrain the greed of the political class.

As such, even though the Obama Administration often is guilty of supporting schemes to impose bad US tax law on a worldwide basis, I’m glad they are fighting this European Union tax grab.

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Almost two years ago, I wrote that bailing out Greece was misguided because it would dig the debt hole deeper.

More recently, I wrote an I-told-you-so post that looked at my four original predictions and patted myself on the back for being accurate (not that it took any special insight to conclude that bailouts would make things worse).

But now it’s time for a turbo-charged I-told-you-so post. The UK-based Telegraph has a remarkable story about the chaos in Europe. This passage is a good summary of the circular firing squad.

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.

And to understand how the situation is so dire, here are some additional details.

Compounding the trauma, Christine Lagarde, the French finance minister turned IMF chief – and one of the few key players who appeared to be enjoying herself in her new headmistress-like role – issued a grim warning to her former European peers. The IMF would no longer be willing to pick up a third of the total bill for rescuing Greece, a contribution worth €73 billion, unless European banks were prepared to write off 50 per cent of Greek debt. “It was grim. The worst mood I have ever seen, a complete mess,” said one eurozone finance minister.

But here’s the key passage of the entire article, where the German Finance Minister correctly complains that the crisis is now three times as costly thanks to previous bailouts.

According to insiders, Wolfgang Schaeuble, Germany’s finance minister, could not resist taking an “I told you so” approach – he had been, after all, the first to call for an “orderly” default for Greece 18 months ago, at a time when the cost of such a move was less than one third of the price today. “Schaeuble is a man who does not mince his words, whose reputation for harshness and arrogance is well earned. He was, frankly, unbearable,” said one diplomat.

This is similar to the point I made in my post about whether the bailouts would work. But as I noted above, there was nothing profound about my predictions. Sort of like predicting water runs downhill.

The amusing part of the story is the infighting among Europe’s politicians.

Interpersonal relations between eurozone leaders have hit an all-time low, reflecting sharp disagreements between Germany and France over using the ECB to bailout the euro and presenting an additional obstacle to finding a “grand solution” to Europe’s debt crisis. Nicolas Sarkozy’s “two faced” personality has been cited as a major factor in his dysfunctional relationship with Angela Merkel. …A row between the pair in Frankfurt on Wednesday overshadowed leaving-do celebrations to mark the end of Jean-Claude Trichet’s nine years as the head of the ECB. “Their shouting could be heard down the corridor in the concert hall where an orchestra was about to play the EU’s anthem, Ode to Joy,” said an incredulous EU official.

And the depressing part of the story is how one of the chief Euro-crats is trying to use the crisis as an excuse for more centralization in Brussels.

Herman Van Rompuy, the EU president who is regarded by many as too close to Berlin, angered many countries when he made confidential proposals for the creation of a European finance ministry. His plan, which has considerable backing from the growing body of EU bureaucrats who see a unified EU treasury as the only solution to the problem of countries spending more than the euro can stand, would mean a centralised body able to override national budgets and enforce cuts on profligate governments.

I doubt this terrible idea will be approved, but the final outcome won’t be pleasant.

The worst-case scenario is that American taxpayers somehow will get suckered into participating in a bailout. The Senate has voted against subsidizing the failure of European socialism, but Obama has said he wants American taxpayers to participate in a bailout and the White House may use the Fed or some back-door mechanism to unilaterally link America to Europe’s sinking ship.

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I’ve joked on many occasions that bipartisanship occurs in Washington when the evil party and the stupid party come up with an idea that is simultaneously malicious and misguided.

The international version of two-wrongs-don’t-make-a-right occurs whenever the French and the Germans conspire on economic policy. The latest example is a joint proposal for “economic governance” for eurozone nations. Here are some blurbs from the BBC’s report.

The French and German leaders have called for “true economic governance” for the eurozone in response to the euro debt crisis. Speaking at a joint news conference, German Chancellor Angela Merkel and French President Nicolas Sarkozy urged much closer economic and fiscal policy in the eurozone. …They also advocated a tax on financial transactions to raise more revenues.

I don’t pretend to have any predictive ability, but I’ll bet dollars-to-donuts that “true economic governance” will lead to more spending and higher taxes. Why? Because “economic governance” is just a sanitized way of describing a cartel of governments.

When politicians don’t have to worry as much about jobs and capital migrating to jurisdictions with less oppressive tax law, they will behave in a predictable fashion by raising tax rates. In other words, the weakening of tax competition is a recipe for bigger, more expensive government.

Indeed, the tax on financial transactions is a perfect example. Any one nation would be unlikely to impose this perverse levy for fear of losing business to neighbors. But if there’s a one-size-fits-all eurozone government, then bad policy becomes more feasible.

The only good news is that Merkel hasn’t totally lost her mind. Perhaps because her de facto socialist party is not doing well in the polls against the de jure socialist party in Germany, she is temporarily resisting the idea of “eurobonds.”

Ms Merkel again played down the chances of introducing “eurobonds” – jointly guaranteed debts of the 17 eurozone governments – as a solution to the crisis. The idea has been advocated by the Italian finance minister, Giulio Tremonti, as well as billionaire investor George Soros as a way of providing cheap financing to struggling governments while also incentivising them to put their finances in order.

The more profligate European governments like eurobonds for the same reason that California and Illinois would like to jointly issue debt with Texas. It’s a way for the spendthrift to free ride off the frugal.

And speculators like eurobonds because their holdings can dramatically rise in value when downside risk gets transferred to taxpayers (nothing wrong with speculation, by the way, so long as losses aren’t socialized).

Eurobonds might temporarily calm European markets, but only by setting the stage for a bigger collapse in the near future when the Germans are pulled underwater by their reckless neighbors.

For those who want more information, this video is a primer on the importance of jurisdictional competition.

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Allister Heath is one of the best economic columnists in Europe and his analysis of Europe’s fiscal situation is rather grim. But Americans can’t be smug. This is where the Bush-Obama policies, combined with demographics, are leading America.

Here’s Allister’s analysis of where things stand in Europe.

Gold hit £1,000 an ounce today for the first time, as equities fell, Club Med government bond yields jumped, spreads increased and the fear and loathing in the credit markets intensified – and all of that in response to the EU’s banking stress tests on Friday night, which were supposed to reassure investors that all was well. What a farce. The tests’ preposterous lack of credibility – they didn’t even envisage the possibility that a government could go bust – have been greeted with the contempt they deserved.

In other words, feckless behavior and grotesque dishonesty from the political class have made a big mess. So what’s going to happen? Allister clearly is a believer in Mitchell’s Law, so he expects the politicians and bureaucrats to use the crisis they created as an excuse to impose additional bad policies.

…the most likely outcome is that the EU will eventually find a way (by bending or rewriting rules) to federalise the debt of failed, bankrupt states: they will issue vast amounts of EU-backed bonds (say €1 trillion, as an order of magnitude) and tell all financial institutions, including insurers and pension funds, that they wish to buy every single government bond from bankrupt countries that they are willing to sell, probably at the discount to face value being priced in at that particular time by the markets. The authorities would give holders an ultimatum: sell now, or bear all future losses. It may be that such an arrangement will not be ready on time for Greece, which could yet be left to go bust and be thrown out of the euro. But regardless of the details, a giant euro-bond would transfer the default risk from private institutions stupid enough to trust Club Med governments (or who were forced, for regulatory reasons, to hold their bonds) to all European taxpayers. This could damage the credit rating of more solvent countries – but even if it doesn’t, it would be tantamount to a massive bailout. In return, the EU would want its pound of flesh: the weaker Eurozone countries would be turned into quasi-protectorates. Such a plan would further discredit capitalism (even though the people who caused the crisis were over-spending politicians) and it would rob the EU of its legitimacy in the eyes of both Southern Europeans (who would lose their independence) and Northern Europeans (who would pay for the south’s greed, stupidity, mismanagement and economic illiteracy).

Allister closes with a very accurate observation about why bureaucrats and politicians enjoy a good crisis.

The EU has always worked on the basis that every crisis is good because it invariably provides an excuse to centralise powers. But the present nightmare could prove to be a bridge too far and herald the beginning of the end for the entire project. Fun and games are about to start.

Yes, they are. And American politicians are playing the same game – more government, less freedom, more government. Lather, rinse, repeat.

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It’s hard to imagine how we would get through life without necessities like bacon and duct tape. But have you ever thought about how the free market gives you so much for so little?

Here’s a video that should be mandatory viewing in Washington. Too bad politicians didn’t watch it before imposing government-run healthcare.

And since we’re contemplating the big-picture issue of whether markets are better than statism, here’s some very sobering polling data from EurActiv.

A recent survey has found deep pessimism among European Commission staff on a wide range of issues, including the course of European integration over the past decade and the likelihood of success of the EU’s strategy for economic growth. Some 63% partially or totally agreed that “the European model has entered into a lasting crisis”.

This is remarkable. Even the statist über-bureaucrats of the European Commission realize the house of cards of big government is collapsing, yet politicians in Washington still want to make America more like Europe.

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I’m not a big fan of the rating agencies. I’ve warned in TV interviews that they generally wait too long before downgrading profligate governments.

So when the rating agencies finally catch up to everyone else and lower their outlook for failing welfare states such as Greece and Portugal, one would think that this would be seen as a useful – albeit late – warning sign. But European politicians are not very happy about this development. At the risk of mixing metaphors, they want everyone to keep their heads buried in the sand and to continue complimenting the emperor on his new clothes.

Here are some excerpts from a BBC report.

The European Commission has strongly criticised international credit ratings agencies following the downgrade of Portugal by Moody’s. The Commission said the timing of the downgrade was “questionable” and raised the issue of the “appropriateness of behaviour” of the agencies in general. Earlier, Greek Foreign Minister Stavros Lambridinis said the agencies’ actions in the debt crisis had been “madness”. Ratings agencies have downgraded Greece and Portugal many times recently. …German Finance Minister Wolfgang Schaeuble told a news conference that he wanted to “break the oligopoly of the ratings agencies” and limit their influence. …”The timing of Moody’s decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation,” said Commission spokesman Amadeu Altafaj. “This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies.” Commission President Manuel Barroso added that the move by Moody’s “added another speculative element to the situation”.

This is not the first time this has happened, by the way. Back in January, I mocked the President of the European Council for whining that “bond vigilantes” had the nerve and gall to demand higher interest rates to compensate for the risk of lending money to incontinent governments.

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Veronique de Rugy of the Mercatus Center has a very good – but somewhat depressing – analysis of the fiscal crisis in Greece. She basically concludes that bailouts will continue because nobody in Europe is willing to do the right thing.

This got me thinking about what I expect to happen. Here are the options, along with my (admittedly wild) guesses about their likely implementation. They add up to more than 100 percent because I think the Greek government (aided and abetted by their German and French enablers) will adopt more than one of these options.

Indeed, the only option that is completely unrealistic is doing the right thing and reducing Greece’s bloated public sector.

My CYA disclaimer is that these are the probabilities for the next two years.

    New Bailouts – 40 percent chance of additional funds from European taxpayers (via the European Union) and/or from world taxpayers (via the IMF).

    Default to Private Bondholders – 25 percent chance
    of default (a.k.a., restructuring) of at least some portion of the money owed to private investors. This number would be higher if it wasn’t for the next options.

    Restructuring of Prior Bailouts – 50 percent chance of an indirect bailout by restructuring existing loans from the European Commission and/or IMF.

    Indirect Bailout from the ECB – 80 percent chance of additional purchases of Greek government bonds by the European Central Bank.

    More Tax Increases – 65 percent chance of additional significant tax hikes. I’m tempted to make this 100 percent, but I think even the Europeans realize that Greece is probably on the wrong side of the Laffer Curve. As such, more tax increases would reduce revenues for the government.

    Leave the euro – 10 percent chance that the government will abandon the common European currency. It may seem like I’m not giving enough consideration to this option, particularly since going back to the drachma would give the government the ability to screw bondholders with inflation. Veronique’s article explains why this might not be an attractive option, but I’ll add one further point. The European elite passionately favor centralization and the common currency is a symbol of centralization. As such, they will provide endless amounts of bailout money before allowing something that would be interpreted as a violation against their secular religion of “ever closer union.”

    Real Spending Cuts – .0001 percent chance of meaningful reductions in the burden of government spending. Why do the right thing when you can get taxpayers from Germany, Netherlands, and other nations to subsidize your corrupt fiscal regime?!?

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I’ve been writing too much about the Ryan budget, the government shutdown, and other fiscal policy issues. Time for some wholesome politician bashing.

But I’m not going to pick on the U.S. Congress, which is one of my favorite targets. Instead, we’re going to cross the ocean and mock the political elite of the European Parliament (a.k.a., the Potemkin-Village legislature). These lawmakers don’t really have any real responsibility. They largely exist to give faux democratic legitimacy to the decisions of the European Commission.

But they have figured out how to butter their own bread. They are provided lavish pay and benefits in exchange for very little work. And they get all sorts of perks that might cause even American politicians to blush with embarrassment.

For example, they automatically get to travel in business class, courtesy of the long-suffering taxpayers of Europe. And when somebody has the gall to suggest that this is a waste of money, the politicians link arms and defend their privileged status.

Here are some excerpts from a report in the EU Observer.

MEPs have said parliament’s budget should be increased by 2.3 percent next year, at the same time rejecting a proposal for euro-deputies to take more economy class flights in future. …In adopting the report on Wednesday, MEPs also rejected an amendment to save money by ensuring flights under four hours were carried out on economy class, citing procedural reasons. At present, MEP travel is reimbursed to the level of a business class flight or a first class rail ticket. The rejected amendment would have saved between €15 to €20 million a year… A parliamentary source defended the decision. “Most MEPs agree that economy-flex tickets are okay, but they think the budget procedure is not the way to do this,” the official said on condition of anonymity.

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Why hasn’t Europe fought World War III? Could it be because the Soviet Union eventually collapsed? Could it be that the NATO, the western military alliance, was effective? Could it be the mutually assured destruction kept the peace? Could it be that America’s commitment to defend Europe was a deterrent?

But all those reasons focus on the role of the Soviet Union. Let’s cast the net wider and ask why World War III, or even smaller wars, didn’t begin with fights among Western European nations. How did long-time rivals France and England avoid war? Why did the Germans not launch another war on the continent? Did these things not happen because civilization finally triumphed? Because the peoples of Europe finally got sick of fighting? Because Western European nations were focused on the danger from the Soviet Union? Because the large U.S. military presence as part of NATO helped keep the peace?

I’m not a foreign policy expert, so I’m sure this is not even close to being a comprehensive list of potential explanations. But it turns out that all of my guesses are wrong. Or they’re wrong if we choose to believe French Finance Minister Christine Lagarde, who says the creation of a pan-European bureaucracy in Brussels has been the key to peace. Moreover, we are supposed to believe that the only way to keep the peace is to impose more harmonization, more centralization, and more bureaucratization on the unwilling peoples of Europe.

You may think I’m being satirical, but this is not a joke. Ms. Lagarde was being interviewed on BBC. She was asked about plans to further erode national sovereignty and transfer more power to Brussels, and whether the people of Europe (rather than just the political elite) should get to choose whether this happens. Here’s a summary of her  mind-blowing statement from Open Europe.

…when asked whether people had ever voted for this convergence she replied, “The European project has been around for over fifty years and it was built on the back of a situation where people were at war…The European project is something we all believe in because we want peace to be maintained.”

To be fair, I don’t actually think Ms. Lagarde is stupid. There’s no way she thinks the so-called European Project, or any of its bureaucratic creations (European Commission, European Parliament, European Court of Justice, etc), deserves credit for keeping the peace. But she obviously thinks the people of Europe are a bunch of stupid peasants and serfs. Or she thinks they are so powerless, thanks to the anti-democratic structure of the European Union and the housebroken European media, that she can say something utterly absurd and be confident that there will be no adverse consequences.

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The contest between the United States and Europe for dumb public policy is always hard to judge. The Europeans tend to make more policy mistakes, though Obama certainly is giving them some stiff competition. America, by contrast, is prone to really inane bouts of political correctness. But perhaps the Europeans are catching up in that area.

Here’s something, for example, that sounds like it could have happened in San Francisco. The European Commission (the über bureaucracy of the European Union) sent out 3 million calendars to kids that mentioned significant holidays for the Muslim, Sikh, and Hindu religions, but omitted Christmas. Here’s an excerpt from the U.K.-based Guardian.

Italy has demanded that the European Commission recall millions of diaries that are being distributed to schoolchildren throughout the EU because they do not mention Christmas but they do give the dates of other religions’ festivals, such as Ramadan, the Islamic month of fasting, and Sikh, Hindu and Chinese feast days. …A Commission spokeswoman said it had “realised the absence of some important European religious holidays, in particular Christmas”. …But she gave no indication that Brussels would accede to Frattini’s demand to recall the diaries, which, according to the Italian daily Corriere della Sera, was contained in a letter to the commission’s president, Jose Manuel Barroso. …Some 3 million copies of the latest edition of the Europe Diary have been sent to schools. The commission’s spokeswoman said its main purpose was “inform young Europeans as consumers and citizens on issues like rights, choices as consumers [and] climate change”. …The commission…spokeswoman said it had cost €5.5m (£4.6m).

Being a fiscal policy wonk, I don’t worry too much about the War on Christmas. Yes, political correctness is nauseating, but it’s not as if the government is actually using coercion to stamp out Christmas. When I read stories like this, what catches my attention instead are disturbing details such as the hefty price tag of $7.2 million. Why is the European Commission squandering so much money on calendars? And once a decision has been made to waste money, why leave out Christmas? And why did they include extraneous material such as global warming propaganda?

Perhaps the moral of this story is that governments – and international bureaucracies such as the EC – have an amazing ability to squander money. Sometimes they waste money for PC reasons, sometimes for vote-buying reasons, and sometimes for corruption. All we know for sure is that taxpayers get lumps of coal in their stockings.

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I’m working on a serious blog post about European fiscal developments, but my research on that issue has alerted me to a couple of stories about President Jose Manuel Barroso that cry out for immediate mockery and abuse. Mr. Barroso, for those that don’t follow the exciting world of international bureaucracy, is the President of the European Commission. This is not an elected position (perish the thought of letting voters have a say in such matters!). Instead, he’s the chief bureaucrat of the sprawling Brussels-based euro-bureaucracy. The first story is from the EU Observer, which reports that the European Parliament actually wanted to fine members that didn’t suffer through Barroso’s Castro-esque three-hour speech on the state of the European Union. Amazingly, the MEPs didn’t file a human rights protest against this proposed form of torture, but they did stage an internal revolt and the authorities backed down.

European parliament authorities have bid a hasty retreat from a tentative proposal to fine for non-attendance of today’s State of the Union speech after the idea was met with derision and anger by MEPs. A meeting yesterday (6 September) evening of parliament president Jerzy Buzek and the 14 vice presidents of the EU assembly abandoned an idea to check up on just who was listening to European Commission president Jose Manuel Barroso’s speech and the ensuing debate. …The original proposal agreed by the assembly’s political groups late last week envisioned three electronic checks over the three hour slot and a small fine for MEPs whose absence was registered twice. A short debate on the issue before the presidential meeting already showed the way the wind was blowing. UK Liberal MEP Baroness Sarah Ludford called the idea a “massive own goal” adding: “You have damaged the reputation of the European Union and indeed President Barroso.”

Mr. Barroso obviously is not happy about the fact that nobody knows who he is or cares what he has to say, because the next story is from the Telegraph, which reports that Barroso’s staff is being dramatically expanded in an effort to “boost his media and political profile.” But this is not just an example of how international bureaucrats waste taxpayer money. There’s also a very offensive and reprehensible plan to corrupt journalists by paying the expenses of reporters traveling with Europe’s deservedly-invisible chief bureaucrat.

Jose Manuel Barroso, the former Portuguese prime minister, will also have a photographer and television producer available 24 hours a day, as well as the services of a team of four speechwriters to call on at all times, under the new strategy to boost his media and political profile. The new measures to “personalise” his image were revealed in a leaked letter written by Viviane Reding, the Justice Commissioner, who is in charge of EU communications. ….The EU has already come under fire for spending more than €8 million euros on entertaining, “training” and “informing” individual journalists last year, and devoted particular attention to those from Ireland in the run up to that country’s referendum on the Lisbon Treaty. …The package of measures include a team of eight staff to update his website, monitoring and rebuttal of blogs criticising the EU, rapid verbatim transcripts of all the Commission president’s public remarks – and, from next month, a plan to pay the costs of reporters travelling with Mr Barroso or other commissioners to “important meetings abroad”.

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Actually, I wish that were true. But I’m slightly amused to see that I’m ranked as the 244th most-influential person in the world of global finance according to the FCI500 Index put together by Financial Centres International. George Soros ranks 262 and Paul Krugman is way down at 407. I don’t actually deal with money, of course. My role in this field is to fight for tax competition, largely by seeking to derail the tax harmonization schemes of international bureaucracies such as the Organization for Economic Cooperation and Development, European Commission, and United Nations. Here are the top 10 and three other people you will recognize.

1 Mario Draghi - Governor Banca d’Italia
2 Timothy Geithner – Secretary of the Treasury US Department of the Treasury
3 Barney Frank – Congressman United States House of Representatives
4 Dominique Strauss-Kahn – Managing Director International Monetary Fund
5 Josef Ackermann – Chairman of the Management Board and the Group Executive Committee Deutsche Bank AG
6 Nout Wellink - President De Nederlandsche Bank
7 Zhou Xiaochuan- Governor People’s Bank of China
8 Michel Barnier – Commissioner for the Internal Market and Services European Commission
9 Jean-Claude Trichet – President European Central Bank
10 Stefan Walter – Secretary General Basel Committee on Banking Supervision







244 Daniel J. Mitchell – Senior Fellow The Cato Institute


262 George Soros – Hedge Fund Manager Quantum Mutual Funds.





407 Paul Krugman – Columnist and Economist New York Times

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If misery loves company, we can be very happy with these two stories about over-compensated bureaucrats from outside our borders. The first comes from Europe, where the Daily Telegraph reports that pension costs are skyrocketing for bureaucrats with the European Commission and other European Union entities. With the average pension being more than $88,000 per year, that’s hardly a surprise. This adds injury to injury since EU bureaucrats already get paid much more than workers in the productive sector of the economy.

Internal estimates, seen by The Daily Telegraph, show huge cost increases as growing numbers of officials in an expanded EU qualify for retirement, often at a younger age than the taxpayers who fund their generous pensions. Over the next three years alone, the cost of EU civil service pensions is expected to rise by 16 per cent to an annual bill for taxpayers of £1.3 billion. … EU officials are allowed to retire at the age of 63, younger than Britons who have just had their retirement age increased from 65 to 66 by 2016. …According to unpublished Commission figures, the pension bill will by 2040 risen 97 per cent to over £2 billion, with a British contribution of over £350 million. …The average annual pension pocketed by the 17,471 retired eurocrats benefiting from the scheme is £57,194, while the highest ranking officials can pocket pensions of over £102,000.

Our second story comes from the Cayman Islands, where bureaucrats (as well as some politicians) have figured out the double-dipping scam, getting a lucrative pension while still receiving a salary. But the Cayman Islands at least deserve credit for limiting the damage. All bureaucrats hired after 1999 participate in a mandatory savings system, thus limiting the long-run risk for taxpayers.

A significant number of employees in the Cayman Islands Civil Service receive a monthly pension as well as a salary, according to records obtained by the Caymanian Compass. There are 65 people who have retired from the civil service under the defined benefit pension programme – which means they are receiving a monthly pension while continuing to work in government, according to information from a Freedom of Information request made by the Compass. Those workers are typically employed on a fixed-term contract and, therefore, also receive a salary. …There were 171 employees working in the civil service who were age 60 or over at the date the Compass made its open records request. The ability of civil servants and Cayman Islands legislators to ‘double dip’ is not to the liking of at least one lawmaker, who raised the issue in the Legislative Assembly in June. North Side MLA Ezzard Miller told the assembly that a change in the parliamentary pensions law in recent years has allowed elected officials to receive the same benefit as civil servants – to retire while continuing to serve in the assembly. In essence, Mr. Miller said, those lawmakers can “get a double dip” – continue to receive their salaries while earning a pension at the same time. …Cayman Islands civil servants who joined the service after mid-April 1999 no longer receive defined benefit pension payments. In other words, the newer civil service employees will receive a lump sum payment from their pension funds rather than a monthly pension.

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I never thought “penile implant” was a term I would use on this blog, but that’s because I never thought I would read a story about taxpayer funding of the procedure. The only good news is that this is a story about fringe benefits for the politicians and bureaucrats in Brussels, so European taxpayers are being raped (no pun intended) rather than American taxpayers. But phallic implants are just the tip (no pun intended) of the iceberg. European taxpayers also provide unlimited viagra, heroin replacement drugs such as methadone, and mud baths to the euro-crat elite. Even American politicians haven’t figured out how to bilk taxpayes like this (or, if they have, they are clever enough to keep the information hidden).

EURO MEPs can claim for viagra on their health insurance – and the taxpayer picks up the bill. All Brussels officials and politicians can get the sex aid drug for free if needed. They can even claim for heroin replacement methadone under the European Commission scheme. Other free options include willy implants, the UK Independence Party discovered. Marta Andreasen, an MEP for the party, said: “It is utterly bonkers what British taxpayers are funding for Eurocrats. “Surely if they want these things, they should be able to pay themselves. It is a total waste of taxpayers’ cash.” …Last year it was revealed MEPs receive public funding for massages and feng shui. Other perks which qualify include mud baths, hydromassage and mild electric shock treatment. The TaxPayers’ Alliance last night blasted the wasteful perks in Brussels. Spokesman Matthew Sinclair said: “Taxpayers expect to see their money spent on providing essential services, not Viagra. The Government should insist on a better deal from Brussels.”

P.S. I’m very proud of myself for resisting the impulse to make jokes about “stimulus.”

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Jim Glassman has a thorough article in Commentary explaining that Europe is in deep trouble both because high tax rates discourage work and production and because excessive handouts encourage sloth and dependency. This should be a common-sense observation, but most politicians get votes by convincing voters they can have comfortable lives without producing. The inevitable result is what happened in Greece, though the negative effects of that debacle are being postponed (but also magnified) by the European bailout. Considering what’s happening, it’s hard to have any optimism about the long-term result. Here’s a long excerpt, but the whole article is worth reading since the same thing will happen in America if the Bush-Obama policies are not reversed.

Prosperity, it seems, can bring sloth, which in turn disrupts the virtuous cycle, though not immediately. There is a period, which I believe we are in right now, where the disruption is not apparent, where it can be obscured through government monetary and fiscal manipulation. But eventually, a simple rule will prevail: you can’t live well if you don’t work. It is hardly surprising that work produces well-being, and if work diminishes, then well-being, even in the most advanced economy, will slow down, stop, or shift into reverse gear. “Decadence,” with its connotations of self-indulgence and decline, is not too strong a word for the response we have seen to economic success, especially in much of Europe, over the past few decades. …In 2004, the year he won the Nobel Prize, Edward Prescott, an economist at the Federal Reserve Bank of Minneapolis, published a paper titled “Why Do Americans Work So Much More than Europeans?” The data were stunning. Prescott found that the average output per adult between 1993 and 1996 in the United States was 75 percent greater than in Italy, 49 percent greater than in the United Kingdom, and 35 percent greater than in France and Germany. “Most of the differences in output,” he wrote, were “accounted for by differences in hours worked per person and not by differences in productivity.” …Prescott showed that these differences are of fairly recent origin. During the period from 1970 to 1974, Europeans—including the French, Germans, and British—generally worked more than Americans. At that time, however, Europeans were less productive than Americans, so their overall output per person was about the same as it was in 1993-96: around one-third below the U.S. level. So, as Europeans became more efficient (producing more goods and services per hour of work), they cut back on their hours, choosing leisure over work. And the gap has widened. By the time Prescott won his Nobel Prize, Americans were working 50 percent more than the French. …In his paper, Prescott fingered the culprit: high taxes. “The surprising finding,” he wrote, “is that this marginal tax rate [difference between Europe and the U.S.] accounts for the predominance of differences at points in time and the large change in relative labor supply over time.” Taxation rates on the next euro of income became so high that people were discouraged from working—especially with the enticements of early retirement. But this explanation is incomplete. Why are taxes so high in Europe? Certainly not to maintain a strong defense but rather to pour money into a welfare state that provides lavish support to retirees, perennial students, and others who aren’t working. In other words, Europeans have chosen to have workers support non-workers in their leisure. …A financial crisis can pull the covers away to give us a clear look at what’s underneath, and the current crisis has exposed Europe as a fool’s paradise. “The fundamental cause of the financial crisis,” wrote the George Mason University economist Tyler Cowen on his blog, Marginal Revolution, “is people and institutions thinking they are more wealthy than they are.” …The same with nations. Europe supported its welfare state with borrowed money, a practice that can be perfectly healthy as long as both welfare state and debt are modest and loans can be serviced by diligent workers. Europe, however, is not nearly as wealthy as it thought it was, or as wealthy as its national way of life indicated. Take Greece. …Greece joined the European Union in 1981 and the eurozone—the continent’s monetary union—in 2001. Since the second event, especially, Greece has been behaving as if it were truly rich. The secret was borrowed money. At the end of 2009, the country had a public debt equivalent to 114 percent of its GDP. That’s on top of the 3 percent of GDP that the European Union contributes as direct aid each year. Meanwhile, Greece consistently violated the EU’s rules for minimum deficit and debt levels. The Greeks, however, lived better and better, with an official retirement age of just 58. Only three-fifths of adult Greeks under age 64 were in the work force. …Default can impose needed fiscal discipline on a government. But in an age of financial magic and euro-solidarity, default for a European nation is not a burden that has to be borne—at least not yet. On the brink of not being able to pay its debts earlier this year, Greece was bailed out with $100 billion in loans from the 15 other eurozone countries and about $50 billion from the International Monetary Fund. This year, the Greek government will make interest payments amounting to 15 percent of GDP on its loans (the U.S. pays less than 3 percent). With Portugal and Spain and perhaps Italy heading for similar trouble, Europe announced it would guarantee debts up to $955 billion. There are two problems with such bailouts. First, they do little or nothing to end the leisure-seeking practices, encouraged by high marginal tax rates and labor regulations, that led to the near-defaults in the first place. Greece may promise austerity as a condition for being saved, but don’t count on delivery. Second is the matter of moral hazard—the tendency of insurance against calamity to provide an incentive toward behavior that produces calamity. I warned of the dangers of moral hazard during the current financial crisis in an article in this magazine last year, and, unfortunately, we are seeing those predictions being realized. Much pain was caused by the crisis, but much was mitigated as well by government policies that kept profligate banks and other businesses alive that should have disappeared—and, of course, Washington took the occasion of the crisis to increase the size of its own welfare state. What the eurozone nations have done in bailing out Greece and pre-bailing Portugal and the others is to introduce a heaping helping of moral hazard that may seem nourishing at first but that inevitably will cause severe indigestion, or worse. …While the United States is not Europe, many of our states clearly have aspirations in the same decadent direction. With high marginal tax rates and regulations that discourage work, California this year is running a deficit of $20 billion, and a recent study found that the pension shortfall for government workers is $500 billion. Investors were recently paying about $300,000 to buy credit default swaps—that is, an insurance policy—on each $10 million in California municipal bonds. That’s a rate 50 percent higher than on bonds issued by Kazakhstan. As a monetary union, the United States may face a decision similar to that of the eurozone nations: should the federal government bail out California? If it does, we will have entered a fool’s paradise on this side of the Atlantic as well.

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It’s aggravating and maddening to send tax dollars to Washington and watch them get wasted on pork-barrel projects and inefficient programs. Imagine how much worse it would be, though, to send tax dollars to an international bureaucracy and be utterly helpless to stop the worst kinds of boondoggle spending. That’s how taxpayers from European nations must feel when they discover, as the Daily Mail reveals, that the European Commission bureaucrats squandered close to $20 million to conclude that fruit is a healthy food and to create a “Mr. Fruitness” superhero character.

EU bureaucrats have squandered millions of pounds on a study which reached the unsurprising conclusion that fruit is good for you. An astonishing 13.8million euros – some £11.7million – has been spent on research involving 200 scientists which found that ‘two apples a day keep cholesterol at bay’. Much of the money went on developing and promoting a green-skinned EU superhero called Mr Fruitness designed to persuade children to eat more fruit. …The multi-million pound project called IsaFruit lasted four years. …The website set up to publicise Mr Fruitness…describes him as ‘a superhero with special powers that come from the nutritional substances in fruit – vitamins and others; key components of an intelligent and conscious diet’.

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The Wall Street Journal correctly pulls aside the veil and exposes the dubious gimmick that European politicians used to declare that banks are reasonably health. To put it bluntly, they assumed no government would ever default, which really means that the stress test was a fraud or German taxpayers are now on the chopping block to bail out every other nation.

Two months ago, credit markets in Europe nearly went off the rails over concern about what a sovereign debt default in Greece would do to the Continent’s banks. After last night’s release of the result of a Europe-wide stress test, we’re not much wiser. The EU’s committee of national bank regulators repeatedly says that its stress test includes a “sovereign shock” scenario. But crucially, “a sovereign default was not included in the exercise,” in the dry language of the committee’s summary report. This means the test only looked at government debt held in trading portfolios, while ignoring any government bonds listed as held to maturity. Earlier this month, regulators made it clear that they opposed testing the consequences of a sovereign debt default on European bank balance sheets. The German magazine Der Speigel reported that regulators felt including sovereign default in the tests might imply that the EU’s €750 billion ($960 billion) bailout fund wasn’t guaranteed to work. In other words, bank regulators in Europe think Greece, Spain, Portugal and the rest are too big to fail. Germany and France will always save them in the end, so the consequences of a default don’t even need to be considered.

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If misery loves company, then American and English taxpayers can enjoy a bonding experience after reading this story about excessive pay for bureaucrats in Brussels. According to the Daily Telegraph, at least 1,000 (and probably more than 2,000) of these euro-crats earn more than the U.K. Prime Minster.

More than one thousand EU officials earn more than the Prime Minister, according to research carried out by the The Daily Telegraph. …Included in the overall total are Herman Van Rompuy, the EU president, Baroness Ashton, Europe’s foreign minister, José Manuel Barroso, the European Commission President along with six vice-presidents and 19 commissioners. This group of 28 people, who are all unelected, earn £57,000 to £103,000 more than Mr Cameron and include the three best paid politicians, Mr Van Rompuy, Mr Barroso and Lady Ashton, in the western world. Among the 995 European civil servants, who are on the AD14 to AD16 grades earning £146,267 to £179,703, are at least 90 unelected British EU officials earning more than the Prime Minister. The Commission has admitted that the true numbers cannot be calculated and could be at least twice as high. After tax relief and generous perks are taken into account it is likely that over 2,000 officials are earning more than Mr Cameron. …Research and information requests have also found that there are 19 European Parliament assistants, or researchers to MEPs, who earn £75,752 a year. Another 12 assistants, eligible along with EU officials for low tax rates, pocket £70,217 a year. A British MP in the House of Commons earns just £65,738.

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It’s been amusing, in an I-told-you-so fashion, to follow the fiscal crises in Greece, Spain, and other European welfare states.And I feel like a voyeuristic ghoul as I observe the incredibly misguided bailout policies being adopted by the political elites (who are trying to bail out the business elites who made silly loans to corrupt nations in Southern Europe). But I’m not sure how to describe my emotions (dumbfounded fascination?) about the latest bad idea emanating from Europe – to have a fiscal federation that would give bureaucrats in Brussels power over national budgets. It’s quite possible that this would result in some externally-imposed discipline for a basket case such as Greece, so it would not always lead to terrible results. But most of the decisions would be bad, particularly since the Euro-crats would use new powers to curtail tax competition in order to enhance the ability of governments to impose bad tax policy in order to seize more money. Moreover, fiscal centralization would exacerbate the main problem in Europe by creating a new avenue – cross-border subsidies - for people who want to mooch by getting access to other people’s money. The Wall Street Journal Europe has a good editorial on the issue:
Of all the possible responses to Europe’s sovereign debt woes, the notion of centralizing fiscal authority in Brussels may well be the most destructive. But that was exactly what European Central Bank President Jean-Claude Trichet proposed in testimony before the European Parliament Monday. Mr. Trichet’s idea is that an independent body within the European Commission should have broad power to sanction national governments for fiscal or macroeconomic policies that threatened the stability of the euro. This would amount, in Mr. Trichet’s words, to the “equivalent of a fiscal federation” for the euro zone. Mr. Trichet has spent nearly 40 years as a civil servant in one form or another, which may explain his belief that Europe’s budgetary problems can be solved by technocrats. …Fiscal centralization would also undermine competition between different fiscal and macroeconomic policies within the euro zone. That would delight some countries, and probably some at the European Commission as well. During this crisis, French Finance Minister Christine Lagarde has criticized Germany for becoming too competitive for the euro zone’s own good. And a decade ago, France was among the euro-zone countries that attacked Ireland for lowering its corporate income-tax rate to 12.5% to attract investment. …Ireland’s 12.5% corporate tax rate was an experiment that contributed to a lowering of rates around the world in the succeeding years.

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I hope the title to this blog post is completely wrong, but the news out of Europe is very grim. Politicians have been over-spending and going deeper and deeper into debt. This negatively affects the private sector in the usual ways (higher taxes, unproductive allocation of resources, etc), but also creates instability in the financial sector since many banks and other institutions have naively lent lots of money to corrupt and inefficient governments. And as this story from the Telegraph indicates, the European Central Bank has been forced to surrenders its independence and is now monetizing government debt. In theory, the ECB is taking other steps to compensate, but the problem is so large (and the political willingness to solve the problem by radically shrinking government is so small) that it is difficult to see a good ending to this saga.

Fitch Ratings has warned that it may take massive asset purchases by the European Central Bank to prevent Europe’s sovereign debt crisis escalating out of control. …The ECB agreed to start buying Greek, Portuguese, and Irish bonds in April to help buttress the EU’s `shock and awe’ package, known as the European Financial Stability Facility. Total purchases so far have been €47bn (£39bn). It has focused its firepower on Greece, mopping up some €25bn of government bonds. This has prevented a collapse of the Greek debt market but at the high political price of letting banks and funds dump their holdings onto the EU taxpayer. ECB council member Jose Manuel Gonzalez-Paramo said it was “not entirely correct” to assume that the ECB was the sole buyer of the debt. “We will continue buying bonds until the situation has stabilized,” he said. …Fitch said European banks must refinance nearly €2 trillion of long-term debt by the end of 2012 in an unfriendly market. “There’s an awful lot of debt coming due in 2011 and 2012, and that is becoming a concern,” said Bridget Gandy, the agency’s banking expert.

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President Andrew Jackson is believed to have said that “One man with courage makes a majority.” Well, let’s hope this statement also applies to women. The incoming Prime Minister of Slovakia, Ms. Iveta Radicova, has the power to stop the corrupt and misguided European bailout scheme. At one point, Irish voters had the power to stop more centralization, bureaucratization, and harmonization in Brussels. Then the President of the Czech Republic had the opportunity to derail the movement to a socialist superstate in Brussels. In both cases, the forces of statism eventually prevailed. The bailout is a different issue, but the underlying issues are the same. Should nations have both the sovereign right to determine their own policies and should they also have the responsibility of dealing with the consequences of those actions? Here’s a blurb from the EU Observer about whether Slovakia will save Europe from the political elites:

The emerging new leadership in Slovakia has said the country will not contribute its share of the €110 billion rescue package for Greece. In addition, Bratislava is likely not to add its signature to the €750 billion eurozone support mechanism – something that could put the entire project on ice. …”It would be a serious blow to the EFSF and the euro area’s ability to stand behind its members [if a member does not sign],” a senior eurozone official told this website. He explained that all 16 signatures on the document – which specifies provisions on how to issue loan guarantees if necessary – are required to bring the emergency mechanism to life. …Conservative politician Iveta Radicova, the likely next prime minister, described the bloc’s €750 billion rescue fund during the pre-election debates as “bad, dangerous and [the] worst possible solution.” On Tuesday (15 June), Ms Radicova also re-iterated that she is against Slovakia providing any financial support to Greece.

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