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Posts Tagged ‘Government Spending’

Whenever there’s a fight over raising the debt limit, the political establishment gets hysterical and makes apocalyptic claims about default and economic crisis.

For years, I’ve been arguing that this Chicken-Little rhetoric is absurd. And earlier this week I testified about this issue before the Oversight and Investigations Subcommittee of the House Financial Services Committee.

By the way, when I first showed up, my placard identified me as Ms. Mitchell.

Since I work at a libertarian think tank, I reckon nobody would object if I wanted to change my identity. But since I’m the boring rather than adventurous kind of libertarian, I guess it’s good that I wound up being Dr. Mitchell.

More important, here’s some elaboration and background links to some of the information from my testimony.

America’s long-run fiscal problem isn’t debt. That’s just a symptom. The real challenge is a rising burden of government spending, largely because of demographic change and poorly designed entitlement programs.

Measured as a share of economic output, the tax burden already is above historical levels. Moreover, taxes are projected to rise even further, so there is zero plausible evidence for the notion that America’s future fiscal crisis is the result of inadequate tax revenue.

International bureaucracies such as the IMF, BIS, and OECD show America in worse long-run shape than Europe, but the U.S. is actually in a better position since a spending cap easily would prevent the compounding levels of debt that are driving the terrible long-run outlook in the United States.

It’s good to have debt limit fights today if such battles enhance the possibility of averting a future Greek-style economic calamity.

Arguments against using the debt limit as an action-forcing event usually are based on the bizarre claim that an inability to borrow more money would cause a default and wreck the “full faith and credit” of the United States. Nonsense. Treasury would be able to avoid default in the absence of a higher debt limit for the simple reason that tax receipts are far greater than what’s needed to pay interest on the debt.

This last point is worth some extra attention. I’ve been arguing for years that debt limit fights are harmless since there’s no risk of default. I even explained to the Senate Budget Committee a few years ago that it would be easy for the Treasury Department to “prioritize” payments to ensure that bondholders would never be adversely impacted.

The Obama Administration routinely denied that it was sufficiently competent to engage in “prioritization” and even enlisted the then-Fed Chairman Ben Bernanke to dishonestly fan the flames of economic uncertainty.

Well, thanks to the good work of the Subcommittee on Oversight and Investigations, we now have a report outlining how the White House was prevaricating. Simply stated, of course there were and are contingency plans to prioritize in the event of a standoff on the debt limit.

By the way, I didn’t get the chance to mention it in my oral testimony, but my full written testimony addressed the silly assertion that any delay in a government payment is somehow a “default.”

I will close by noting the utterly disingenuous Administration tactic of trying to…make it seem as if delaying payments of things like crop subsidies and Medicaid reimbursements is somehow equivalent to default on interest payments.

One final point. Let’s imagine that we’re four years in the future and political events somehow have given us a Republican president and a Democratic Congress. Don’t be surprised if the political parties then reverse their positions and the GOPers argue for “clean” debt limits and make silly claims about default and Democrats argue the opposite.

That’s why I’m glad I’m at the Cato Institute. I can simply tell the truth without worrying about partisanship.

P.S. Here are some jokes about the debt limit, and you can find some additional humor on the topic here and here.

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The left is very clever about accepting “compromise,” so long as the result is a larger burden of government.

This is one of the reasons why I’m so concerned about Senator Cruz’s proposal for a value-added tax. Even though he wants a VAT for good reasons (to finance lower tax rates and also to reduce the tax bias against saving and investment), my fear is that the statists will say yes, then quickly use the VAT to finance a big expansion of the welfare state.

Which is exactly what happened in Europe.

Some folks think I’m being paranoid, to which there are two responses. First, there’s the old joke that even paranoid people have enemies.

But the second and more serious response is to point out that lots of statists openly say they want a VAT to make government bigger.

Indeed, some of these folks already are semi-embracing Cruz’s VAT because of their desire to have a new source of revenue for Washington. Consider, for instance, these excerpts from an editorial in USA Today.

The VAT is a kind of national sales tax used by virtually every other nation in the world because it can raise lots of money …partly because deficits are set to explode again as Baby Boomers retire, the VAT is back. Texas Republican Ted Cruz, winner of the Iowa GOP caucuses, is proposing a VAT… The concept has a lot going for it. …Cruz’s plan is flawed, but he’s on to something. A more progressive, phased-in VAT deserves to be part of any future conversation

You don’t have to read between the lines to understand that the editors at USA Today want a VAT to expand the public sector. The editorial even favorably cites Senator Cardin and former Treasury official Michael Graetz.

Do they want a VAT for the same reasons as Senator Cruz?

Not exactly. Senator Cardin acknowledges that the VAT could lead to a spigot of new tax revenue (“enacting a consumption tax could mean enacting a new and easy-to-adjust lever to raise taxes irresponsibly”), but he claims to have a mechanism that supposedly will guard against ever-higher tax burdens.

The Progressive Consumption Tax Act addresses this concern with a circuit breaker that returns overages from the PCT to taxpayers when revenues exceed predetermined levels.

This is a joke. The politicians in Washington get to set the “predetermined levels,” so it goes without saying that those levels will go from predetermined to redetermined in a blink of an eye, just as we’ve seen in other nations.

And what about Michael Graetz’s plan? Well, here are a few excerpts from an article he wrote.

…tax increases will be necessary to…address the nation’s unsustainable fiscal condition fairly… With this plan in place, our ability to raise additional revenue would be increased…

To be fair, Graetz is not a leftist. He basically wants a VAT because it’s a less-destructive way of financing bigger government.

I agree. It’s highly likely that a $100 billion VAT hike would do less damage than a $100 billion increase in income taxes, but why on earth would anyone want higher taxes to fund bigger government, particularly when we know sensible entitlement reforms could fix the nation’s long-run fiscal problem?

No wonder Avik Roy, writing for Forbes, is so worried about a VAT.

Sen. Ted Cruz…favors replacing the corporate income tax with what Cruz calls a “business flat tax,” and what Canadians and Europeans call a “value-added tax.” But the real debate isn’t about terminology; it’s about whether or not Cruz’s approach would drive an explosion of government taxes—and spending—over the mid- to long-term.

One reason it’s a money machine is that it’s actually a hidden tax on wages and salaries.

…businesses would no longer be able to deduct the cost of labor. As my colleague Ryan Ellis has detailed, that amounts to a “16 percent wage tax withheld at the employer level under the Cruz plan.”

And that creates a very large tax base, so any increase in the tax rate transfers a lot of money from the private sector to Washington.

…the most important problem with the Cruz plan is how Democrats would take advantage of it. Cruz envisions a VAT tax rate of 16 percent. But his plan would hand progressives a simple tool to raise taxes to far higher rates in the future. …the vast majority of federal revenue will hit voters indirectly, because it will come from businesses. From a political standpoint, Cruz’s plan would pave the way to higher tax rates in the future. …every one percent increase in the VAT would yield $1.6 trillion in new revenue over a decade. The temptation for a Democratic president and Congress to raise VAT rates to higher levels will be enormous.

And Avik echoes one of my concerns, warning that a VAT will greatly undermine and perhaps even kill any opportunity for genuine entitlement reform.

Under Cruz’s tax system, there would be absolutely no pressure on Washington to reform Medicare and Medicaid. Why reform entitlements when you can simply increase the “business flat tax” rate from 16 percent to 17 percent to 18 percent to 19 percent? This is exactly what has happened in Canada and Europe, where VAT rates started out low, and have gone up and up over time.

I should point out (as he does in his column) that Avik supports Marco Rubio, so he has a political motive to trash the VAT.

Indeed, he even makes some anti-VAT arguments that strike me as unfair, so I’ve omitted them from this analysis.

But the parts I have shared are completely accurate and they are more than adequate to make a very powerful case against giving Washington a new source of revenue.

Let’s close with some wisdom from the 1980s. I wrote that one of America’s worst presidents wanted a VAT to expand the welfare state. And I also mentioned that one of the best presidents in American history was on the right side of the issue. And it’s worth listening to the Gipper’s wisdom on this issue.

P.S. Here’s a short update to my recent post about the craziness of Keynesian economics. You may recall that the economic illiterates at the International Monetary Fund said diverting money from the private sector to finance government outlays on refugees would be good for growth.

Well, we now have estimates of how much will be spent on this so-called stimulus.

Shelter, medical care and integration policies for refugees will cost the German state €22 billion in 2016, and €27.6 billion in 2017.

Gee, according to the perpetual motion machine of Keynesianism, maybe the German government should put the entire population on welfare and the economy will really boom.

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If pessimism was an Olympic event, I used to think I might be favored to win a medal. After all, growing levels of dependency outside of Washington and rampant corruption inside of Washington sometimes lead me to conclude that America is doomed to a Greek fiscal future.

But compared to some people, maybe I’m just an amateur Cassandra. Or even a Pollyanna.

Holman Jenkins of the Wall Street Journal has an ultra-pessimistic column today arguing that “many of us believe the entitlement programs need to be reformed” but worrying about “Republicans who pose as ‘conservative’ defenders of Social Security and Medicare.”

And part of his column is rather convincing since he points out that Donald Trump has criticized Republicans who favor reform.

…the meaning of Trumpism…goes like this: “…Every Republican wants to do a big number on Social Security, they want to do it on Medicare, they want to do it on Medicaid. And we can’t do that. And it’s not fair to the people that have been paying in for years and now all of the sudden they want [it] to be cut.” Mr. Trump is a political harbinger here of a new strand of populist Republicanism.

To be fair, Trump’s comments aren’t necessarily anti-reform. One could argue that he’s simply saying that benefits for existing retirees and older workers shouldn’t be adversely impacted.

But since “The Donald” hasn’t expressed any support for reforms that would create better and more viable options for younger workers, Jenkins is probably right to be pessimistic.

But he also argues that Tea Party-type Republicans are opposed to reform.

The tea party animus toward ObamaCare is…means-tested new entitlements…are viewed as a threat to the traditional, universal, “earned,” middle-class retirement programs of Social Security and Medicare. …The unspoken tea party stance of defending the good old-fashioned entitlements of “real” Americans is increasingly, in dog-whistle terms, what differentiates one Republican from another.

While it’s almost certainly true that there’s more animosity to redistribution-oriented programs such as Obamacare than there is to so-called earned entitlements, I think Holman misreads the Tea Party crowd.

Based on my speeches to – and other interactions with – these activists, I have never detected any measurable hostility to Social Security reform and Medicare reform. Fixing those programs may not be at the top of their agenda, but they’re not on the wrong side.

Moreover, I work closely with folks on Capitol Hill and I almost never hear about any meaningful opposition from Tea Partiers. And since House GOPers have approved budgets with genuine entitlement reform for five consecutive years, there’s been plenty of time for opposition to materialize.

Jenkins also is glum because Governor Christie, who has openly expressed support for reform, hasn’t fared well. And he notes that Senator Rubio has rejected reforms that would harm current seniors.

Chris Christie, who went nowhere in Iowa, did himself no favor by dragging Social Security and Medicare into every debate, however much those programs need to be addressed. Marco Rubio was just as quick to modify any implication that Republicans therefore are entitlement reformers: “We are talking about reforms for future generations. Nothing has to change for current beneficiaries. My mother is on Medicare and Social Security. I’m against anything that’s bad for my mother.”

I’m not a political expert, so I won’t pretend to know why Chris Christie didn’t get many votes in Iowa, but I don’t think it’s right to label Marco Rubio as an opponent. He’s been very upfront about supporting much-needed structural reform of Medicare and Medicaid. He simply doesn’t want to change the rules for existing retirees and older workers.

You can argue that such a condition makes it harder to save money in the short run, but I’m more concerned about dealing with the long-run fiscal challenge (as seen in these IMF, BIS, and OECD numbers). So Rubio’s position doesn’t strike me as a problem. Indeed, I think he’s pushed the envelope in the right direction, particularly since he comes from a state with so many seniors.

And since Ted Cruz also has said similar things about entitlement reform, that means both top-tier GOP candidates (other than Trump) are willing to do the right thing to restore fiscal sanity.

To be sure, maybe I am being naively optimistic. Perhaps Rubio or Cruz will win and will decide to kick the can down the road, even with a GOP Congress that might be primed for reform.

If that happens and we miss what may be a once-in-a-lifetime opportunity for genuine entitlement reform, I’ll be very unhappy and Holman Jenkins will have demonstrated that pessimism is a much smarter assumption when contemplating the actions of politicians.

In which case my already-low opinion of politicians would drop to a record depth. And it also might be time to escape to a country that still has some sensible people and is less likely to suffer fiscal collapse.

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If everyone has a cross to bear in life, mine is the perplexing durability of Keynesian economics.

I thought the idea was dead when Keynesians incorrectly said you couldn’t have simultaneously rising inflation and unemployment like we saw in the 1970s.

Then I thought the idea was buried even deeper when the Keynesians were wrong about simultaneously falling inflation and unemployment like we saw in the 1980s.

I also believed that the idea was discredited because Keynesian stimulus schemes didn’t work for Hoover and Roosevelt in the 1930s. They didn’t work for Japan in the 1990s. And they didn’t work for Bush or Obama in recent years.

Last but not least, I figured Keynesian economics no longer would pass the laugh test because of some very silly statements by Paul Krugman.

He stated a couple of years ago that it would be good for growth if everyone thought the world was going to be attacked by aliens because that would trigger massive military outlays.

He also asserted more recently that a war would be very beneficial to the economy.

Equally bizarre, he really said that the terrorist attacks on the World Trade Center would “do some economic good” because of the subsequent money spent on rebuilding.

Wow. I guess the moral of the story is that we should destroy lots of wealth because it’s good for prosperity. Just like we should eat more cheeseburgers to lose weight.

So you can see why I’m frustrated. It seems that evidence and logic don’t matter in this debate.

But maybe this latest example of Keynesian malpractice will finally open some eyes. The International Monetary Fund recently published a study asserting that higher spending on refugees would be good for European economies.

I’m not joking. Here are some excerpts from that report.

In the short term, the macroeconomic effect from the refugee surge is likely to be a modest increase in GDP growth, reflecting the fiscal expansion associated with support to the asylum seekers… In the short term, additional public spending for the provision of first reception and support services to asylum seekers, such as housing, food, health and education, will increase aggregate demand. …Relative to the baseline, the level of GDP is lifted by about 0.05, 0.09, and 0.13 percent for 2015, 2016, and 2017, respectively (solid line in the chart below, representing the response of EU GDP as a whole). For the first year, the output impact is entirely due to the aggregate demand impact of the additional fiscal spending.

To understand the implications of what the IMF is claiming, let’s review some basic facts, all of which presumably are uncontroversial.

First, we know that economic output is the result of capital and labor being mixed together to produce goods and services.

Second, we know that growth occurs when the amount of output increases, which implies increases in the quantity and/or quality of labor and capital.

Third, we know that the influx of migrants to Europe will lead governments to divert additional resources from the private sector to finance various programs.

Now let’s think about the IMF’s assertion. The bureaucrats are basically arguing that letting governments take a bigger slice of the pie somehow is going to increase the size of the pie.

If you’re wondering how this makes sense, welcome to the club.

The only way this analysis possibly could be true is if governments finance the additional spending by borrowing from foreigners. But even that’s not really right because all that’s increasing is domestic consumption, not domestic output.

In other words, it’s like running up your credit card to live beyond your means when the real goal should be increasing your income.

But maybe you don’t want to believe me, so let’s look at some other voices.

The top economist of Germany’s Finance Ministry, Ludger Schuknecht, writes in the Financial Times about the perils of never-ending Keynesianism.

…after decades of attempts to fine-tune the economic cycle by running fiscal deficits and cutting interest rates at times of weak demand, many economies are fragile. …Government deficits and private-sector debt are at high levels in emerging markets, and many western ones too. Ageing populations are weighing on public finances. …Traders gamble on continued bailouts. …Yet this lesson goes largely unheeded; policymakers are urged to pile more debt on the existing mountain. …The work of repairing public sector balance sheets has ground to a halt almost everywhere. …Public debt in many countries is now well above 100 per cent of gross domestic product. …nations lacking resilience increasingly rely on support from others… This creates a new form of moral hazard: since countries that behave recklessly will be bailed out, they have little incentive to reform. …talk of global safety nets is futile, and focusing…on stimulus is outright frivolous.

I’m not a huge fan of German fiscal policy. Tax rates are too high and the burden of government spending is excessive. Heck, they’ve even figured out how to use parking meters to tax prostitutes!

But at least the Germans aren’t big believers in Keynesian pixie dust (and you won’t be surprised to learn Krugman goofed when trying to claim Germany was a Keynesian success story).

In any event, Schuknecht realizes that there’s a point beyond which more spending and more so-called stimulus is simply impractical.

Which is basically the main point in a column by Daniel Finkelstein in the U.K.-based Times. He’s writing about the attacks on “austerity” and is unimpressed by the financial literacy (or lack thereof) on the part of critics.

If I went to…buy a new sweater and decided not to get one because it was too expensive, would I be making an ideological statement about shopping? …Or would I just be, like, putting up with my old sweater for the time being while I saved up a bit of money? …Apparently my innocent view that it is a good idea to be able to pay for the goods you purchase makes me a small-state neo-liberal Tory free market fundamentalist. Which seems quite a complicated description for just wanting things to add up. …Between 2000 and 2006, Gordon Brown and Tony Blair engaged in a structural increase in public spending without a matching increase in taxation. You cannot do this for ever. …one thing is clear. Two plus two has to equal four. However unpopular that is.

By the way, if you read the entire piece, it’s rather obvious that Mr. Finkelstein is not a “small-state…free market fundamentalist.”

He simply understands that an ever-expanding public sector simply doesn’t work.

Which reminds me of a very wise observation by Tyler Cowen.

…at the popular level, there is a confusion between “austerity is bad” and “the consequences of running out of money are bad.”

In other words, this issue is partly about the putative value of Keynesian economics and partly about whether nations get to the point where Keynesian policy simply isn’t practical.

To cite an example, Switzerland or Hong Kong have what’s called “fiscal space” to engage in Keynesianism, while Greece and Italy don’t.

Of course, one of the reasons that Greece and Italy don’t have any flexibility is that politicians in those nations have rationalized ever-larger public sectors. And now, they’ve finally reach the point Margaret Thatcher warned about: They’ve run out of other people’s money (both in terms of what they can tax and what they can borrow).

Meanwhile, Hong Kong and Switzerland are in good shape because they generally have avoided Keynesian stimulus schemes and definitely have policies to constrain the overall size of the public sector.

For further information, here’s my video on Keynesian economics.

P.S. But if you want more cartoons about Keynesian economics, click here, here, here, and here.

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The Congressional Budget Office has just released its new 10-year fiscal forecast and the numbers are getting worse.

Most people are focusing on the fact that the deficit is rising rather than falling and that annual government borrowing will again climb above $1 trillion by 2022.

This isn’t good news, of course, but it’s a mistake to focus on the symptom of red ink rather than the underlying disease of excessive spending.

So here’s the really bad news in the report.

  • The burden of government spending has jumped from 20.3 percent of GDP in 2014 to 21.2 percent this year.
  • By the end of the 10-year forecast, the federal government will consume 23.1 percent of the economy’s output.

In other words, the progress that was achieved between 2010 and 2014 is evaporating and America is on the path to becoming a Greek-style welfare state.

There are two obvious reasons for this dismal trend.

Here’s a chart that shows what’s been happening. It shows the rolling average of annual changes in revenue and spending. With responsible fiscal policy, the red line (spending) will be close to 0% and have no upward trend.

Unfortunately, federal outlays have been moving in the wrong direction since 2014 and government spending is now growing twice as fast as inflation.

By the way, don’t forget that we’re at the very start of the looming tsunami of retiring baby boomers, so this should be the time when spending restraint is relatively easy.

Yet if you’ll allow me to mix metaphors, bipartisan profligacy is digging a deeper hole as we get closer to an entitlement cliff.

Now let’s shift to the good news. It’s actually relatively simple to solve the problem.

Here’s a chart that shows projected revenues (blue line) and various measures of how quickly the budget can be balanced with a modest bit of spending restraint.

Regular readers know I don’t fixate on fiscal balance. I’m far more concerned with reducing the burden of government spending relative to the private sector.

That being said, when you impose some restraint on the spending side of the fiscal ledger, you automatically solve the symptom of deficits.

With a spending freeze, the budget is balanced in 2020. If spending is allowed to climb 1 percent annually, the deficit disappears in 2022. And if outlays climb 2 percent annually (about the rate of inflation), the budget is balanced in 2024. And if you want to give the politicians a 10-year window, you get to balance by 2026 if spending is “only” allowed to grow 2.5 percent per year.

In other words, the solution is a spending cap.

Here’s my video on spending restraint and fiscal balance from 2010. The numbers obviously have changed, but the message is still the same because good policy never goes out of style.

Needless to say, a simple solution isn’t the same as an easy solution. The various interest groups in Washington will team up with bureaucrats, politicians, and lobbyists to resist spending restraint.

P.S. A final snow update. Since my neighbors were kind enough to help me finish my driveway yesterday, I was inspired to “pay it forward” by helping to clear an older couple’s driveway this morning (not that I was much help since another neighbor brought a tractor with a plow).

It’s amazing that these good things happen without some government authority directing things!

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This isn’t intentional, but there’s been a European theme to this week’s posts. I wrote yesterday about economic chaos in France, and the previous day I wrote about the grim consequences of Italian statism.

Today, we’re going to look at Greece. In the past, I’ve explained that Greece is special, albeit in a bad way. But I’ve also asserted that Greece could be rejuvenated and could deal with its debt with the right reforms.

Heck, Greece could even renege on its debt and still enjoy an economic renaissance if it adopted the right policies. That’s the message of this short video narrated by Garett Jones of George Mason University

So the $64 question (actually, the $231,199,453,552 question according to the latest projection of Greek debt) is whether Greece will do the right kind of reform.

Unfortunately, it appears that all the bailouts have subsidized bad policy. Writing for National review, a journalist from Greece explains that his government is adding more and more taxes onto an overburdened private sector.

…the new austerity measures, which are often amusingly termed reforms, are for the most part tax increases — which may not be popular, but which conform to SYRIZA’s ideological creed. The new package agreed to by SYRIZA and Greece’s creditors is about 90 percent new taxes or tax increases and 10 percent reforms. The tax increases have the benefit of protecting SYRIZA’s core constituency, which is the public-sector employees. Despite the collapse of public revenue and the overall dismal economic outlook, the SYRIZA government plans to increase the salaries of public-sector employees (by as much as 8 percent) and carry on with 45,000 new hires in 2016. Meanwhile, in the private sector, SYRIZA has increased taxes on all sorts of things and is planning to double the taxation of farmers. It has increased business taxes and also demanded the pre-payment of business taxes. It has increased the VAT on almost all goods, and it is defining affluence down so as to increase income taxes for a greater number of taxpayers. And although Greece has probably the highest social-security contributions in Europe, SYRIZA is planning to increase these contributions even more, despite the fact that pensioners now outnumber those who are still employed in the private sector.

More pensioners that private-sector employees?!?

Wow, even I’m shocked by that factoid. There definitely are far more people riding in the wagon than pulling the wagon when you add up pensioners, bureaucrats, and welfare recipients.

So you can understand why Greece is almost surely doomed.

Especially when you consider that many of the people leaving Greece are the productive ones (i.e., those who normally would be pulling the wagon). Here are some passages from a story in the New York Times from last year.

From 2010 to 2013, about 218,000 Greeks emigrated, according to an estimate from the Greek statistics agency. Nearly half of them went to Germany. …Resentments against Germany — Greece’s most powerful creditor — quickly fade when it comes to the prospect of a regular paycheck. Many of those leaving Greece are highly educated professionals and scientists seeking greater opportunity and better pay. An estimated 135,000 Greeks with post-secondary degrees have left since 2010 and are working abroad, according to Lois Labrianidis, an economic geographer and official in Greece’s Economy Ministry. “We think this is human capital that is crucial for the development of the country,” Mr. Labrianidis told me recently, calling the departures a “major blow.” …While much of the attention on recent Greek emigration has focused on the highly educated, I’ve been surprised by the number of working-class Greeks I’ve met who left due to financial desperation.

But there’s one group of people who aren’t leaving.

You probably won’t be surprised to learn that they are the bureaucrats. As noted in this report from the U.K.-based Telegraph, their privileged position is zealously protected by vote-buying politicians.

The other thing most people in the area seem to agree on is that the biggest impediment to progress is the size of Greece’s public sector. The country has a population of 10 million, of which 2.5 million are pensioners, one million are government employees and two million work in the private sector. A further 1.7 million are unemployed. The rest are children or students. “So you can see why the current situation is unsustainable,” says Tryfon. “The only solution is for the public sector to be cut back. But every government since the crisis has chosen to raise taxes, while doing little to stimulate the private sector because they only want to protect votes.” “…Public sector employees and pensioners are the first to get paid and the only ones to get paid on time. We need investment into the private sector, but there is no motivation for companies to come to Greece…” a company would be nuts to invest in a politically unstable country, creaking under debt and crippled by an incredibly punitive tax regime. “What business will invest in a Greece when it takes six months to set up a company compared to Cyprus where it takes 15 minutes?” asks Dimitris Karkavitsas, an investment banker-turned-strawberry farmer. …the young engineer, says everyone who tries to make it in the private sector gets strangled. “The tax is killing us,” he says. …In the meantime, the public sector remains a massive beast.

Moreover, when you set up a company in Cyprus, there’s never a risk that you’ll be required to provide disgusting forms of DNA  as part of bureaucratic requirements.

Yet rather than be outraged by overpaid and meddlesome bureaucrats, I suspect most Greeks probably think how they can get on that gravy train. Which explains why, in an interview, I said the Greeks shouldn’t be allowed to “loot and mooch their way through life.”

Until and unless they learn that lesson, the nation is doomed to societal collapse.

P.S. Another sign of Greece’s moral and fiscal bankruptcy is that pedophiles can get disability payments.

P.P.S. To offset the grim message of today’s column, let’s also enjoy some Greek-related humor.

This cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations.

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When I wrote back in 2012 that France was committing fiscal suicide, I should have guessed that President Hollande would get impatient and push for even more statism.

Sure enough, the BBC reports that France’s President has a new plan. The ostensible goal is to reduce unemployment, but the practical effect is to expand the size and scope of government.

President Francois Hollande has set out a €2bn (£1.5bn) job creation plan in an attempt to lift France out of what he called a state of “economic emergency”. Under a two-year scheme, firms with fewer than 250 staff will get subsidies if they take on a young or unemployed person for six months or more. In addition, about 500,000 vocational training schemes will be created.

Needless to say, if subsidies and handouts were the key to job creation, France already would have full employment.

In reality, real jobs are created when employers think that new employees will produce profits. But that’s a difficult hurdle in a country like France.

Though, in the interest of fairness, I should acknowledge that Hollande claims this plan will not involve a net increase in the burden of government spending.

Mr Hollande said money for the plan would come from savings in other areas of public spending. “These €2bn will be financed without any new taxes of any kind,” said President Hollande, who announced the details during an annual speech to business leaders.

Though I suspect that this claim is about as believable as Obama’s laughable assertion that government-run healthcare would lower premiums and allow people to keep their health plans.

But the strangest part of the BBC story involves Hollande’s contortions on labor market policy. See if you can decipher this passage.

The president also addressed the issue of labour market flexibility. “Regarding the rules for hiring and laying off, we need to guarantee stability and predictability to both employers and employees. There is room for simplification,” he said. “The goal is also more security for the company to hire, to adapt its workforce when economic circumstances require, but also more security for the employee in the face of change and mobility”.

I gather Hollande wants people to believe he has some sort of magic wand that will magically give companies flexibility while also guaranteeing workers stability.

Put me in the skeptical column. I would be stunned if France actually liberalized its calcified labor markets. The unions are too powerful and too shortsighted to realize that employers will always be reluctant to hire unless they know they have the ability to fire.

Besides, why would unemployed people, particularly those with low skill levels, want jobs when redistribution programs make idleness comparatively attractive?

Meanwhile, those with high skills will continue to escape the country.

So the bottom line is that France’s slow-motion economic suicide will continue. Hollande’s foolish policies simply mean the day of reckoning will come a bit sooner.

Let’s close with something that’s both revealing and amusing. One of America’s movie stars, Will Smith, had a very interesting wake-up moment on French TV.

I wonder what Mr. Smith would say if he knew that some French taxpayers actually have faced tax burdens of more than 100 percent (though Hollande, with his infinite mercy, then decided that the upper limit should be 80 percent).

P.S. My friend Veronique de Rugy (an escapee from France) warns Americans about the dangers of adopting the policies of her former country in this video.

P.P.S. Sadly, American statists have been urging European-type statism in the United States for decades. To see where that leads, check out these cartoons from Michael Ramirez, Glenn Foden, Eric Allie and Chip Bok.

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