How the Left Analyzes Greece
I find the Left's opinions on Greece to be fascinating. After all, Greece is essentially the logical end result of all of their love for deficit spending, so what kind of cognitive dissonance is necessary to write about Greece on the Left? This kind:
OK, but they're spending too much money. Surely they know they have to cut back?
Sure, but the deals on offer are pretty unattractive. Europe wants to forgive half of Greece's debt and put them on a brutal austerity plan. The problem is that this is unrealistic. Greece would be broke even if all its debt were forgiven, and if their economy tanks they'll be even broker.
But that's the prospect they're being offered: a little bit of debt forgiveness and a lot of austerity.
Well, them's the breaks.
But it puts Greece into a death spiral. They can't pay their debts, so they cut back, which hurts their economy, which makes them even broker, so they cut back some more, rinse and repeat. There's virtually no hope that they'll recover anytime in the near future. It's just endless pain. What they need is total debt forgiveness and lots of aid going forward.
I certainly agree that Greece is now in a death spiral, but this analysis is just amazing. The only way for other countries to avoid sharing Greece's fate is to, very simply, spend within their means. If they do, problem avoided. If they don't, and get hooked on deficit spending, then Greece is their future, the only question is when.
So what does Drum do? He calls the spending withing their means strategy "unrealistic" and "brutal austerity." So he occupies a long post lamenting what a totally SNAFU'd situation Greece is in, but takes off the table the only possible approach for other counties to avoid the same fate. And in fact advocates a strategy that will push a few others over the cliff sooner, or even cause a few to jump on their own (after all, if the punishment for spending your way into financial disaster is to get, as Drum recommends, all your debt forgiven and years of aid payments, why the hell would anyone want to be fiscally responsible?)
And it is amazing to me that he calls forgiving half their debt, the equivalent in the US of our creditors erasing about $7 trillion, as "a little bit of debt forgiveness" while cutting government spending a few percent of GDP is "a lot of austerity."
His solution, of course, is not for Greece to face up to its problems but to transfer the costs of its irresponsibility to others and then remain nearly perpetually on the dole.
His mistake is to assume Greece faces endless pain. It does not. History has shown that countries that are willing to rip off the bandage quickly rather than over a few decades can recover remarkably quickly if sensible policies are put in place. Heck, the Weimar Republic, which had inflation so bad people got paid 3 times a day so their family could buy something before the money became worthless a few hours later, got its house in order in a matter of months.
ElamBend:
not a single mention of moral hazard
November 1, 2011, 9:25 pmJAB:
It really is amazing to see the Left's perspective on Greece. I hear from my many lefty friends that Greece is proof 'austerity' does not work when arguing for more 'stimulus' here. Taking this to it's logic conclusion, Greece need only increase spending further to turn things around.
A 2nd Lefty angle is that there is some sort of social justice argument for forgiving Greek (and southern Euro) debt because they are an historically poorer region. Lefties in northern Euro parliaments are making these arguments, including Germany where their potential total exposure is 1x GDP.
An amazing window into the thought process of the left. It seems sincere. Just not logical.
November 1, 2011, 11:53 pmMJ:
No mention of Iceland, which slashed its debt in exchange for an array of spending cuts and tax increases. It is now in a much better position financially and is returning to some semblance of a normal economy. Austerity is bitter medicine, but it is most certainly not suicide.
November 2, 2011, 12:22 ama_random_guy:
Not to mention: just who is supposed to give them aid? The other European countries, all of which are also deep in debt? How about the US, with its current budget surplus? Money has to come from somewhere, it doesn't grow on trees.
Even if you could just bail Greece out of their current difficulties, why would you want to? If they suffer no consequences, they have every reason to continue spending like drunken sailors - why not? Your aid money would be gone in a flash...
November 2, 2011, 2:32 amMe:
Anyone notice the assumption that economies are driven by government spending?
November 2, 2011, 4:02 amBuckaroo:
Re: Me -
Indeed, the noticeable assumption is that economies are driven only by government spending. I think this is part of the worldview from which all else springs: that if government doesn't do it, it never happens. And the government should be the only source of spending (after all those awful profit-making enterprises have been swept away)
It could be said that once the government comprises that much of your nation's economy, you're already screwed. It has grown too large to retain such quaint ideas as "consent of the governed", even if the governed still want to believe in the idea.
November 2, 2011, 4:12 amMesa Econoguy:
Kevin Dumb, like the rest of the deranged and economically illiterate left, is arguing from historical ignorance.
Austerity and variations thereof has been tried multiple times quite successfully, most notably in the UK following the British sovereign debt downgrade in the 1990s, and Canada who enacted spending cuts and tax increases in a roughly 6-1 ratio.
November 2, 2011, 5:47 amDrTorch:
This is just complete ignorance of the 1st Law of Thermodynamics. Just where is that debt forgiveness supposed to come from? Where is the continuing aid supposed to come from? Because if this works for Greece, it will work for everybody, so where is this money fountain that will solve all the world's woes?
Wait, scratch that, they believe the money fountain is the US Treasury Printing press. So it's also ignorance that there must be a scarcity to money that reflects the scarcity of goods and services that are valuable b/c they are needed or wanted.
That's a lot of ignorance for people who want to write about a subject.
November 2, 2011, 5:55 amPanzersage:
"If Greece has been irresponsible, so were the German banks that happily loaned out the money."
I seem to recall a very different tune from many liberals a few short months ago. They went on about how evil German Banks were because they were uninterested in loaning money to the needy Greeks without condition. That the Greeks needed the money and it was only the bankers unwillingness to cooperate that was keeping them from getting their act together with just a little more money to see them through the hard time.
November 2, 2011, 6:50 ammorganovich:
"His solution, of course, is not for Greece to face up to its problems but to transfer the costs of its irresponsibility to others and then remain nearly perpetually on the dole."
yup, that's the left in a nutshell.
November 2, 2011, 7:01 ammorganovich:
"I seem to recall a very different tune from many liberals a few short months ago. They went on about how evil German Banks were because they were uninterested in loaning money to the needy Greeks without condition. That the Greeks needed the money and it was only the bankers unwillingness to cooperate that was keeping them from getting their act together with just a little more money to see them through the hard time."
the german banks, especially the landerbanks put huge pressure on germany to bail out this mess for a different reason: they had written large volumes of CDS's on greek debt.
they needed a way to rig the game so that a 50% write off was "voluntary" and not considered a default so they would not pay out. this is a disaster for markets. if the rules about what a touchdown is can be changed when you are 6 inches from the goal line, who the hell wants to play?
europe is cutting its own throat and is too stupid to see it.
November 2, 2011, 7:05 amBertha Minerva:
These Qs about where all the magic money to shore up Greece's economy are only part of the problem. Spain, Portugal, Italy, and Ireland are next in line and I assume they'll want a deal as good as Greece's.
November 2, 2011, 8:45 amme:
Folks, a bit more differentiation please. Kevin Drum makes it very publicly clear that he lacks (a) any in-depth understanding of the Greek crisis and (b) creativity to come up with solutions that would even have a theoretical chance of working. Good to know, but, really: anyone at all surprised about that?
That said, making the "deficit spending by the Left" the issue (so we'll all just have to have Right guvernment into office and all will be well) is a sad sign of not being much in touch with reality. If you look at past budgets and do the math, Reagan and Bush were among the most prolific deficit spenders in US history. Remember who pioneered "Too big to fail". The sad truth is that politicians of all colors love to spend money they don't have in an attempt to exert direct first-order control over processes that cannot be controlled that way.
November 2, 2011, 8:48 amGoneWithTheWind:
To the left brutal austerity equals fewer government and union jobs and lower pay for the remaining jobs. But it was exactly the excessive hiring/spending and the outrageous wages and benefits that caused the problem.
November 2, 2011, 9:12 amSam L.:
We don't know that "austerity doesn't work in Greece" because there has been no austerity in Greece. (See Riots, Greece, etc.) Also, SNAFUed is, I think, incorrect; FUBARed is more apt.
November 2, 2011, 9:14 amPlungerman:
JAB; You had me LOL-ing right out loud, so to speak, with " 'austerity’ does not work". I'm always fascinated with people's ability to phrase and rephrase ordinary language in such a way as to set their minds at ease. This is right up there with "Arbeit Macht Frei".
Has anyone pretended to ask how many economics students are out there in Occupy Wall Street?
P
November 2, 2011, 9:34 amTed Rado:
There will be no end to these sorts of problems as long as politicians are not punished for spending money they don't have to buy the vote. Under the current arrangement, someone else many years down the road must face the music for money spent today. In one's personal life, if you piss away money, you will pay the consequences. This encourages frugality. Not so on the political scene.
One solution is a balanced budge ammendment with NO loopholes. Here in Oklahoma, the state must balance the budget. Consequently, we have weathered the storm better than most. I am sure there are other workable approaches.
Perhaps a rule that any member of Congress whose tenure is accompanied by an increase in government debt loses his pension. If the debt increase is above some specified amount, he goes to jail.
If screwing up the USG's finances is not enough, the USG encourages people to do the same via all sorts of government programs designed to encourage indolence, irresponsible behavior, and wild spending. Are we collectively a bunch of morons or what?
The first law of thermodynamics states (simplistically)
November 2, 2011, 11:47 amthat you can't take out what you didn't put in. Apparently, our chief thermodynamicist, Obama, has repealed this law. He should get another Nobel prize.
IGotBupkis, Unicorn Fart Entrepreneur:
>>> If they don’t, and get hooked on deficit spending, then Greece is their future, the only question is when.
As arg and MEg note, this is a musical chairs competition with *zero* chairs at the end. At some point, someone winds up with no chair to sit on.
>>> That said, making the “deficit spending by the Left” the issue (so we’ll all just have to have Right guvernment into office and all will be well) is a sad sign of not being much in touch with reality.
me, you're the one not in touch with reality. This problem is already acked and being dealt with -- it's what the Tea Party movement is all about. When The Left gets a clue and has its own vaguely comparable Tea Party, THEN, and ONLY THEN, will it deserve consideration for anyone's vote.
Unless and until The Left has a group, with electable candidates, who favor lefty social issues while also promoting fiscal responsibility (a very tall order, I'd suggest, but that's another discussion) then that is the time when lefty candidates will be worthy.
Right now, the Tea Party is the only group that acks the fiscal responsibility issue that purportedly was what a large part of the Contract With America was about. While the CoA GOP was certainly more responsible than the Dems have been or are, they, as you note, still fell far short of the desirable level of fiscal responsibility that was asked and called for.
November 2, 2011, 12:19 pmme again:
Don't know if anyone has seen this, but it's spot on...
http://www.youtube.com/watch?v=tfbIZ1L9z3c
November 2, 2011, 12:23 pmIGotBupkis, Unicorn Fart Entrepreneur:
>>> One solution is a balanced budge ammendment with NO loopholes.
The problem with this, Ted, is that there is always a giant loophole as long as the governments are not constrained to use GAAP in their accounting. Failure to impose that requirement only leads to chicanery with the books such as that of New York State (which HAS a BBA) using money from its bonding agency to "buy" Attica Prison (in order to deal with a budget shortfall back in the EARLY 1990s) which the State then leases back from them in order to use as a prison. To date, now, roughly 20 years later, they STILL have paid nothing on the original principle borrowed. Gee what a surprise.
Any private business tried that crap, the Corporate Officers would be under indictment (see "Madoff, Bernie" and "Lay, Kenneth").
That's because private business is required by law to use GAAP. The same demands need to be placed on the government at all levels, with open books available in various locations and at various levels of government (Some proviso for black box accounting for certain national security issues is admittedly required, but this can and should be required to be opened after a certain reasonable period of time, say, at 20 years old, with no statute of limitations on criminal sanctions for abuse of position in these cases -- and perhaps regular independent-but-closed-book auditing).
November 2, 2011, 12:32 pmMal:
Have you read Matt Ridley lecture?
"Scientific heresy"
http://www.bishop-hill.net/blog/2011/11/1/scientific-heresy.html
November 2, 2011, 2:56 pmme:
@IGotBupkis. I must have missed the resounding rejection of the Reagan and Bush deficit spending by the Tea party. Can you point me at some articles? All I seem to find is a whole lot of the usual tripe along the lines of "the other guys are the problem, trust us".
November 2, 2011, 3:04 pmDouglas2:
@me
Here you go:
November 2, 2011, 3:35 pmhttp://www.newsmax.com/InsideCover/ScottRasmussenReportspollster/2010/09/18/id/370770
A_Nonny_Mouse:
They need what I need -- to WIN THE LOTTERY!
Woopsie -- there's not a lottery big enough to fix Greece, is there? And if/ when they finally admit they can't cut enough or tax enough to make it work, do they get tossed out of the EU? That might be the best outcome for the Greeks(*): Default on everything, and go back to being a sovereign, but poor, nation. Sadly, hairdressers would no longer be able to retire at 55 with a guaranteed pension, but once the new reality sets in, the Socialists and Anarchists would either shut up or move elsewhere to agitate for "we want everything and somebody else has to pay for it".
(*) Admittedly it would be bad for the EU. Domino effect and all, reverberating through Spain, Italy, Portugal, and so on. Tough taters, Brussels! I don't happen to believe that the EU *SHOULD* survive. There SHOULD NOT BE cadres of unelected bureaucrats foisting ever-more-intrusive regulations upon European citizens, especially since those "just plain folks" have no input into the process and have no recourse against the social experimentation the Leftist policymakers impose on them. One-world-ism should die- here and now.
November 2, 2011, 4:13 pmepobirs:
Drum is, as ever, an idiot. How is telling hair dresser they aren't going to retire at the absurdly young age of 50 a drag on the economy? Greece is full of such nonsense that make us, a much richer country, look like ogres from our expectations from the work force. (At least in the private sector. The public sector is another story.)
November 2, 2011, 4:28 pmJohn the River:
The rest of Europe has to bankrupt themselves to support Greece until it's their turn to go on the dole...R I G H T. Leftists have absolutely no idea how wealth is created, no idea at all.
November 2, 2011, 4:59 pmGermany is reported to be printing Deutsche Mark's, not German Euro's but the old German Marks. Everyone in Europe is obviously expecting Germany to foot all the bills, somehow, but I think Germany has gone as far down that road as they plan to go.
Andrew Hofer:
It isn't the equivalent of $7T of US debt forgiveness, btw. Only private sector debt will be "voluntarily" forgiven, and since so much Greek debt is already held in the official sector (EFSF, ECB, IMF) the "50%" haircut amounts to about a 28% reduction. I'm in agreement with your sentiments otherwise.
November 2, 2011, 6:01 pmKD:
Just to voice another opinion here, all money does originate from the federal government. The private sector does the enormously important job of directing resources to their best ends via price, but they don't create the money. I value my Mac more than the 1,000 dollars so I happily exchange with Apple and they build more great devices etc...
But think for a moment where that money first came from. There aren't any dollar mines, Apple didn't create it, they just find better and better ways to entice us to give our money to them. The only entity that can create dollars is the US government. If you don't believe me try printing them in your basement and see how that works out. The other bit of evidence is that private sector net savings (minus the foreign sector) is equal to the penny to the government deficit each and every year to the beginning of the dollar as a currency. It's just basic math, google the relationship and you'll see.
Greece's problem (and Spain's and Italy's etc.) right now is that it is a currency taker meaning that it's like California. They can't create money and so they can run out of it. The US government is totally different and is in no risk of going broke. It would be like worrying that United could run out of frequent flier miles. The government's role is to manage the currency responsibly to allow for private sector savings while not allowing the economy to overheat into inflation or contract into depression. Only one guess about which one we and the world are closer to now...
Inflation is a real threat and with mismanagement it could happen, but it's hard to argue that there's a surplus of money chasing around too few employees or goods right now. The private sector as a whole is trying to save right now which means less spending and a contracting economy. If we balanced the budget tomorrow there would be a crushing depression as the only way for the private sector to net save and deleverage would be massive unemployment and cutbacks. Nobody is saying that deficit spending is a free lunch, but it is the way to manage aggregate demand to keep financial problems from taking down the real economy.
November 2, 2011, 8:49 pmstuhlmann:
"I find the Left’s opinions on Greece to be fascinating. After all, Greece is essentially the logical end result of all of their love for deficit spending"
I think you have it wrong here. The Left is more than willing to raise taxes (on others anyway) to pay for higher government spending. Deficit spending isn't required. It is the Right that loves deficit spending. It allows them to fight foreign wars without raising taxes. Who increased the deficit more while in office - Bush or Clinton?
November 3, 2011, 2:47 amAnon:
"The Left is more than willing to raise taxes (on others anyway) to pay for higher government spending."
Wrong.
FY2011 - federal revenue is $2T. Spending is $3.82T. That's a $1.6T deficit. Raise all taxes on everyone, every corporation, etc. by 50%, and you are still in the hole. FY2012, not quite so bad, but only because projected revenues are $2.6T -- good luck with that, IRS.
And don't forget, a 50% tax rate increase is not going to get you a 50% increase in tax revenue.
And they need to keep being raised a couple percent a year, every year, to cover the current projected costs of existing programs.
And that's just federal spending. How 'bout state and local?
November 3, 2011, 6:42 amAnon:
To be clear, neither party is serious about the deficit. The Left won't mention the amount taxes have to be raised on everyone, and the Right won't mention how much has to be cut (i.e., cut *everything* by 50%).
November 3, 2011, 6:43 amAWM:
I wouldn't normally partake of ad hominens but I really don't understand why people give Kevin Drum's economic arguments the time of day. He's just a partisan liberal apparatchik and so his articles simply parrot the party line dressed up as some sort of meaningful analysis of economic issues de jour.
On the other hand, I suppose it does give everyone else the opportunity to make these sort of blog posts rubbishing that thinking, so it does have some value then...
November 3, 2011, 8:01 amAnon:
I have given up on Kevin Drum and Ezra Klein. I had hopes for each, but no longer bother to click the links.
The JournoList scandal should have killed EK's career, BTW.
November 3, 2011, 10:06 amDan:
No debt forgiveness for Greece. It just encourages them and other countries to be irresponsible. They need to be kicked out of the euro zone, along with Portugal, Italy, Iceland and other countries that are dragging it down. They should never have been let in in the first place.
I'm pretty sick of basket cases like Greece swinging so much weight on equity markets around the world. It certainly doesn't make one feel confident about investing in stocks to know that the irresponsible spending and fat public pensions of a second-rate country like Greece can bring world stock markets to the brink of a huge sell-off.
November 3, 2011, 1:49 pmIGotBupkis, Paranomasty Specialist, Level 12:
@me:
1) I certainly decried the expenditures of the previous eras. Part of the arguments FOR those expenditures is how seriously they affected certain key ratios -- Spending vs. GDP, the Public Debt as a percentage of GDP, etc. NONE of those numbers was unusually bad under either Reagan or Bush. I still don't like them, but there is a key difference between spending money you can reasonable claim the ability to pay back and money there is no way in hell you'll be able to pay back, as it has gotten under The Great Big 0.
2) I can pretty much assure you that the reaction in 2006 and 2008 was exactly the sort of reaction you are concerned with -- the existing GOPers were dissatisfied with a lot of the actions of the GOP having been given control over all levels of the Legislative and Executive branches. They were not officially the TP at that point, but that was certainly the reason there were so many disaffected Republican voters. They expected that the GOP should use its power to act to downsize the government, to cut back on expenses, and to fix SS and Medicare. They saw NOTHING happen at all along those lines.
I personally didn't vote for any Democrat because, as the last two decades have passed, they have gone further and further into the loony left field, to the point where what any rational person would have agreed was "middle of the road" only 15 years ago now seems to about a quarter of the populace as "radical conservativism". They can't see the motr with the telescope at Mount Palomar. It is now almost impossible to find an actual middle-of-the-road person who self-denominates as "liberal" or "Democrat". Most of the actual motr types are RINOs.
3) This, also, is a good commentary about your complaints, and includes examples where the TP have taken on RINOs or Republicans promoting some concept that might as well be a RINO idea:
November 3, 2011, 4:03 pmhttp://www.chattanoogan.com/articles/article_205383.asp
IGotBupkis, Paranomasty Specialist, Level 12:
>>> Inflation is a real threat and with mismanagement it could happen
KD, you conflate money with wealth. They are not the same thing. Ideally, the money supply is exactly equal to the current value of all assets, public and private, in the USA. That, is, "Money==Wealth". In actual fact, you pretty much have to make educated guesses as to what the actual value of the wealth in America is. And value is a kind of slippery thing, too. So there are often differences between the money supply and the amount of wealth actually extant, and/or the perception of wealth.
All money is is a "placeholder" for that wealth, allowing it to be readily transferred without actually taking the needed steps to physically transfer control ("barter"). The government is, indeed, the source of the money as you suggest, but it is, in no sense whatsoever, the source of wealth. While it is possible for the government to encourage the creation of wealth, it generally is a poor effectant of it.
So the government's role as the source of money is, generally, to keep the two in sync, nothing more. When it fails to do so, it tends to create either inflation, or deflation (both of which generally act as a brake on the economy, the latter more so than the former).
That said, when a large proportion of US Debt is held outside the control of the US citizenry, then inflation may actually be our salvation. It forces those externals to USE, rather than hold, our debt, lest the inflation reduce it to a distinct fraction of its actual value. Yes, that does affect US citizens, as well, but not to the same degree that it would, say, China.
We were in this situation before, as of the middle 1980s -- Japan, in that case, had a lot of the external debt ... and when they started spending, the prices of everything jumped quite a bit. They wound up buying stuff that was often way overpriced, and, in many cases, wound up losing their shirts and selling it back later at a substantial loss. Offhand, one of the few companies that handled it well was Sony, when they bought Columbia.
China has been sitting on US$ -- paper IOUs -- for quite a bit, now. And when they start spending, you can bet that, unless they are particularly careful, the influx of cash is going to drive the price of the things they buy up rapidly, and the effect on their purchasing power will diminish accordingly.
By actually threatening inflation, the Fed may manage to force China to start buying, and buying quickly, which will drive the prices of those things they seek to buy -- large value US assets -- up substantially (and, keep in mind, at THIS point the Fed can act to control inflation at the individual level by contracting the money supply in sync with the influx of cash from outside). Thus, they may wind up losing money by buying overpriced assets, just as Japan did. Japan still hasn't recovered, as much because their politicians were stupid enough to listen to the neoKeynesians rather than the Monetarists or the Miseans, both the latter of whom are far closer to a functional understanding of economics than any neoKeynesian idiot (see "Krugman") could ever hope to be.
My overall point is, this whole mess is remarkably complex, and if you think you've got a full handle on all the ramifications, you're dreaming. At this point, I am of the opinion that OUR Rich Bastards are much smarter and more savvy in the way the market works than THEIR Rich Bastards. And that will have a more substantial shield on the impact of these issues than people at the level of the individual can begin to grasp.
November 3, 2011, 4:28 pmNot Sure:
"But think for a moment where that money first came from. There aren’t any dollar mines, Apple didn’t create it, they just find better and better ways to entice us to give our money to them. The only entity that can create dollars is the US government."
Money is not wealth. The government can print all the pieces of paper with pictures of dead presidents it wants, and it won't increase the amount of wealth in the country by the tiniest bit.
November 3, 2011, 5:38 pmTed Rado:
I am astonished how many people believe that those who are diligent and prudent should bail out those who are not. I am a retiree who lives within my modest means and has no financial worries. Those who live "high off the hog" or invest their money foolishly have no right to expect me to subsidize them. I have a distant relative, who spends money like a drunken sailor, who asked me to pay off his debts. This mindset (whoever has the money should pay the bills) is killing our society and undermining the work ethic. This problem clearly exists with nations as well as individuals.
I had my first job when I was 13 and never got a dime I didn't earn until I retired. I see no reason why others cannot do the same.
November 3, 2011, 6:10 pmDub:
There is another option that needs exploration- just don't pay. Therefore no pesky debt service payments and no future credit worries. One simply lives within one's means. Problem Solved!!!!!!
November 4, 2011, 7:04 amme:
Time to spin up the discussion once more:
"History has shown that countries that are willing to rip off the bandage quickly rather than over a few decades can recover remarkably quickly if sensible policies are put in place. Heck, the Weimar Republic, which had inflation so bad people got paid 3 times a day so their family could buy something before the money became worthless a few hours later, got its house in order in a matter of months."
The response to the Great Depression in Germany differed from Roosevelts New Deal rather drastically: Germany removed the "cancer of democracy" and the world got to enjoy WWII. Also note that Germany managed to get most of its war reparation debt forgiven in the conference of Lausanne (not unlike debt forgiveness for the Greeks right about now). History is full of interesting recipes, but I doubt that following the sensible policies put into action in Germany in 1932/1933 would be a good example for the US to follow. Discuss.
November 4, 2011, 2:37 pmIGotBupkis, Corrector of Inaccurate Information:
>> The Left is more than willing to raise taxes (on others anyway) to pay for higher government spending.
No, they aren't. They're willing to raise taxes to pay for STILL MORE government spending. Anytime taxes get raised, the budgets go up at least 1:1 to match.
The problem is, once you get to 100%, you can't raise taxes any more so deficits are inevitable.
Further, in actuality, raising taxes at some point leads to reduced intake, a proven fact. So, in truth, well before you reach 100% taxation, you'll wind up with no additional income to match the additional spending. Because that aspect of the tax-income curve is one thing lefties just cannot grasp no matter how many times it occurs. It cannot penetrate their tiny widdle bwains.
November 4, 2011, 6:10 pmme:
What's even worse: more taxation usually isn't just a matter of some rates being slightly elevated. It's a matter of hundreds of pages of laws and administrative BS that folks need to wade through to figure out how to deal with, and additional impediment to business and sustained growth. This, more than anything, would be the hugest benefit of uniform simplified taxation (think a single, fixed percentage tax on any transaction with federal, state and municipial taxes fixed for a year and limited to up to, say, 4% each). I know the savings from simplifying my life alone would make that worth it to me)
November 4, 2011, 6:20 pmemilper:
"Heck, the Weimar Republic, which had inflation so bad people got paid 3 times a day so their family could buy something before the money became worthless a few hours later, got its house in order in a matter of months."
it helps if the only problem is wanting to get rid of debt in your own currency ... for Germany inflation was not the disease, it was the cure
November 5, 2011, 5:10 amme:
Good point - it occurs to me that the hyperinflation of the early twenties is what Warren could have meant earlier. Note though, that that solution is fundamentally not available to Greece (they do not control their own currency).
November 5, 2011, 11:25 amepobirs:
KD, you've got it way wrong. The government does not make money. It makes currency. There is a critical difference. And keep in mind that the government monopoly on currency production was not part of the founders' design. Back when the dollar was measured against a commodity like gold, it was no big deal for a bank to print currency. THey were subject to audits for the purpose of proving they had the gold or silver to back up their issued currency.
The problem with the combination of the government monopoly and the lack of a commodity backing the currency is that the government can print currency all day long but doesn't have the wealth to back it up. Instead they sell debt and threaten us all with ruin.
November 6, 2011, 6:53 pm