Category Archives: Government

Happy Days Are Here Again In … La-La Land

Britain, Debt, Economy, Government, Inflation

Across the pond, U.K. Chancellor of the Exchequer George Osborne is singing from the Bush and Obama hymn sheet. A neo- Keynesian naturally, Osborne is intent on excessive spending as a model of economic growth. What better way than a housing bubble to bring about that brief burst of spending before the bust?

Tightening credit conditions and foreclosures signal to this man (counter-intuitively, of course) that it is time for the debt-laden borrower to borrow more money he can’t repay; that it is time for those who do not spend money they don’t have, to subsidize those who do.

It’s all good, promises Bloomberg.com:

Osborne yesterday pledged 3.5 billion pounds ($5.3 billion) to help buyers of new homes with loans of as much as 20 percent of the property’s value, broadening an existing program beyond first-time purchasers. He also announced a plan to guarantee as much as 130 billion pounds of new mortgages to fuel demand from purchasers with limited cash for a deposit.

At least the chancellor delivered a 2013 budget. At a glance, here are “the key points of Chancellor George Osborne’s Budget,” via BBC News (a doff of the hat to our friend in the UK):

FUEL, ALCOHOL AND CIGARETTES
September’s 3p fuel duty rise scrapped
April’s 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p
Annual inflation +2% rise in beer duty to be ended but “duty escalator” to remain in place for wine, cider and spirits
Cigarette duties unchanged – continuing to rise by inflation +5%

INCOME TAX
Limit at which people start paying tax to be raised to £10,000 in 2014 – a year earlier than planned

HOUSING
Shared equity schemes extended, with interest-free loans for homebuyers up to 20% of value of new-build properties
Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014

STATE OF THE ECONOMY
Growth forecast for 2013 halved to 0.6% from 1.2% in December
Office for Budget Responsibility watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.

BORROWING
Borrowing of £114bn this year, up from previous £108bn forecast
Borrowing set to fall to £108bn, £97bn and £87bn, £61bn and £42bn in subsequent years
Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.6% in 2016-17

SPENDING AND PAY
Most government departments to see budgets cut by 1% in each of next two years
Schools and NHS will be protected
£11.5bn in further cuts earmarked in 2015-16 Spending Review, up from £10bn
1% cap on public sector pay extended to 2015-16 and limits on “progression” pay rises in the sector
Military to be exempt from “progression” pay limits.
Proceeds of Libor banking fines to be given to good military causes, including Combat Stress charity

JOBS
600,000 more jobs expected this year than at same time last year
Claimant count to fall by 60,000

TRANSPORT AND INFRASTRUCTURE
An extra £15bn for new road, rail and construction projects by 2020, starting with £3bn in 2015-16

HELP FOR BUSINESS
Corporation tax to be cut by 1% to 20% in 2015
New employment allowance to cut National Insurance bills cut by £2,000 for every firm
450,000 small firms will pay no employer National Insurance
Government procurement from small firms to rise fivefold
Tax relief for investment in social enterprises
Stamp duty axed on shares traded on growth markets like Aim.
Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes

ENERGY AND THE ENVIRONMENT
Tax incentives for ultra low-emission cars
Pottery industry in Midlands to be exempt from climate change levy
Tax allowances for investment in shale gas

INFLATION
2% Bank of England inflation target to stay in place
Bank remit to be changed to focus on growth as well as inflation

PENSIONERS
Single flat-rate pension of £144 a week brought forward a year to 2016
Cap on social care costs confirmed

FAMILIES
20% tax relief on childcare up to £6,000 per child from 2015
£5,000 payments for those who lost money on Equitable Life policies bought before 1992. Extra money for those on low incomes

The Survivalist’s Guide to ‘Obammunism’ & Beyond

Classical Liberalism, Debt, Economy, Government, Healthcare, libertarianism, Political Economy, Regulation, Socialism, The State, Welfare

“The Survivalist’s Guide to ‘Obammunism’ & Beyond” is the current column.

“No statist lies are safe from his scrutiny,” writes Lew Rockwell about economist Thomas J. DiLorenzo’s latest book. What follows is an excerpt from my conversation with professor DiLorenzo about, ”Organized Crime: The Unvarnished Truth About Government,” and the timeless truths to which it speaks.

5. ILANA MERCER: You write: “At the heart of the U.S. government’s continued takeover of the health care sector of the economy was a law passed during the Obama administration that would eventually drive the private health insurance industry out of business and transform it into a de facto nationalized industry.” Elaborate. Since, as you repeatedly warn, the natural laws of economics cannot be repealed, what will these health care exchanges achieve? How will they invariably be funded? What will be the cost to business? To the millions who’re losing coverage? Who will ultimately fork out for the per-head fee imposed on medical plans?

THOMAS DILORENZO: The Obama version of health-care socialism forces insurance companies to cover people with expensive diseases without charging them higher rates to compensate for the additional risk. This effectively will force the insurance companies to pay out billions in health care costs, and then the Obammunists will impose price controls on the industry because that’s what socialists always do once they intervene in a market by forcing businesses to offer something for nothing, thereby driving demand through the roof. The price controls will cause massive bankruptcy, at which point the argument will be made that what is needed is “single-payer healthcare,” a euphemism for health-care socialism or government-run monopoly. In the meantime, they seem to be imposing hundreds of relatively small, hidden taxes to come up with the revenue to keep the scheme going.

6. MERCER: “The Obamacare Survival Guide” is a best-seller on Amazon. The market is producing survivalist literature to help Americans navigate the treacherous shoals of this law. What does it tell you? Like me, you must know plenty of Obama-heads (doctors too) who shrugged off the idea that further centralizing health care—a modest healthcare expansion totaling $2 trillion, I believe—would cost them anything at all. As The Lancet recently confirmed, in the UK’s National Health Service funding is inversely related to patient outcomes. You speak of “inputs” and “outputs.”

DILORENZO: I cited a study by the late Milton Friedman entitled “Inputs and Outputs in Medical Care,” published by the Hoover Institution some twenty years ago. In it the Nobel laureate economist showed that, historically, as government became more and more involved in health care by taking over hospitals and funding Medicare and Medicaid, inputs – in terms of money spent – skyrocketed while “output” in terms of patients served declined. He spoke of something called “Gammon’s Law,” named after a British physician named Max Gammon, who noticed that with healthcare socialism in England, increased “inputs” in the form of massive amounts of money spent always seemed to disappear “as though through a black hole” with little or nothing to show for it in terms of health care.

7. MERCER: You touch briefly on the “private component of GDP.” Free-market thinkers get that the private economy alone produces wealth. But no. GDP is a political construct, defined, tracked and manipulated by the D.C. political machine. Unpack the GDP gambit for us, down to its deceptive components.

DILORENZO: Including government spending in the definition of GDP was a creation of John Maynard Keynes, who defined it as C (Private Consumption) + I (Private Investment) + G (Government Purchases) + X-M (Net Exports). In so doing, Keynesians concluded that the most prosperous year in American economic history – 1946 – was actually a year of revival of the Great Depression with a precipitous drop in economic activity because of the huge decline in federal government spending after World War II. Of course, this was NOT a year of depression but an explosion of private investment, consumption, and job creation.

8. MERCER: About that elusive economic recovery: My colleague Vox Day (who sadly called it a day on WND) argued that, “The Great Depression 2.0 will be worse than its predecessor.” Day chalked that up to today’s unprecedented levels of debt, consumption and credit, private and public. It’s a hunch. But I think you’ll disagree.

DILORENZO: No one can predict something like this, especially since today’s economy is vastly different from the 1930s. Capital markets are much more sophisticated, for one thing, although government regulators by the thousands do their best to destroy them – and with them what’s left of American capitalism. Predictions like this always ignore the resilience of entrepreneurs. As the Austrian Business Cycle theory of Mises and Hayek contends, it is the boom period where all the damage is done in the form of “malinvestment” – in the latest bust this was mostly in real estate. During the recession or depression is when entrepreneurs are forced to become more efficient, more inventive, more creative – or else. This is how the Japanese recovered from something much worse than a depression – long years of war and the dropping of atomic bombs on their country – in a little over a decade.

More on “sequesteria,” tax loopholes and Obamacare, at www.ilanamercer.com, where the conversation with professor DiLorenzo continues.

Read the complete column, “The Survivalist’s Guide to ‘Obammunism’ & Beyond.”

UPDATED: GOP ‘Sequesteria’ & The GDP Gambit (When Debt = Growth)

Debt, Democrats, Economy, Federal Reserve Bank, Government, Republicans

Are you able to tease apart Republican “sequesteria” from the Democratic position on the effects of a miniscule decrease in the increase in US government spending, for this year?

I can’t.

The Democrats are adamant that a cut in oink-sector spending will destroy the chances of an economic recovery and will lower GDP.

It didn’t have to happen this way, lament the Republicans. Negotiations could have produced a better honed cutting instrument.

Note that the Republicans have never made relevant points such as that, “Government spending increases unemployment because it crowds out so much private sector job creation” (Thomas J. DiLorenzo, Organized Crime: The Unvarnished Truth About Government, p. 202).

Or, as Larry Kudlow put it, “When the government spending share of GDP declines, so does the true tax burden on the economy. As a result, more resources are left in the free-market private sector, which will promote real growth.”

Ask yourself why GDP would shrink if the burden of government is reduced slightly. Why would Gross Domestic Product be affected by a threat of a reduction in the parasitical sector–the sector (government) that doesn’t produce wealth, but only consumes it?

Could this paradox be a result of the way in which GDP numbers are crunched?

Indeed.

Gross domestic product (GDP) gauges economic activity based on spending, or “consumption,” which is not what creates wealth. Production creates wealth. (Gross domestic income (GDI) is a lesser-known calculation used by the Federal Reserve to gauge economic activity based on income.)

Official GDP numbers also chart—and include—the growth of government debt. As Vox Day has explained, “GDP counts spending but doesn’t subtract debt, so it’s like saying that you’re rich because you maxed out your platinum Mastercard. Until the debt is paid back, you can’t properly count it as economic growth. And almost all of the GDP growth over the last 20 years has been nothing but debt growth.”

The GDP is a political construct, defined, tracked and manipulated by the D.C. political machine.

GDP statistically conflates the growth of debt with economic growth.

When our economic definitional building blocks are thus perverted, it becomes easy to peddle the GDP hoax. And that hoax is that a reduction in state spending and debt is also a reduction in economic growth, and that reducing debt must be avoided at all costs.

As Ayn Rand would have advised, “Check your premises.”

UPDATE (3/3): “THE SEQUESTER ISN’T REALLY THERE.” Via the fabulous EPJ: Ron Paul on the Sequester:

The Fed is minting $85 billion a month in funny-money!

President Pain

Barack Obama, Constitution, Ethics, Government, IMMIGRATION

It is “almost an impeachable offense for Obama to make specific spending cuts to hurt us,” contended Judge Andrew Napolitano on Fox And Friends.

“The key word is PAIN. If the president is deciding how to spend money in order to hurt us,” said Judge Napolitano, “rather than in order to provide us with the services for which we have paid, and for which we have hired him—he is doing the opposite of what he has taken an oath to do.”

He has taken an oath faithfully to uphold the laws. In other words, to make the government work; don’t make it painful. Find a way to make it work on 2 percent less. He has, absolute, leeway as the chief executive. Leeway is integral to his office. As the head of the Executive Branch, the president can prioritize money and cuts. … Instead, he wants to cut in away that’ll make us stand inline five hours at the airport, and teach the Republicans a lesson. That’s the way the Constitution [should] work.

(VIA Myron Pauli.) The president’s first priority in causing you pain, just so you know who’s boss—he and family, after all, have a security detail for life—is to spring criminal aliens from jail.

Not only is this president an ass with ears, but he is also pain in the ass.