Is Austerity, Shrinking Wages, and Firing of Public Workers a Bad Thing?

Latvia's Real-Time Experience

By Mike "Mish" Shedlock

The socialists and the Keynesians would have you believe that austerity is a bad thing, and that firing government workers when unemployment is already high is the wrong thing to do.
Anyone believing those myths needs to consider Euro Countries (and the IMF) Can Learn from Latvia’s Economic Success.

 In 2008–09, Latvia lost 24 percent of its GDP. It was heading toward a budget deficit of 19 percent of GDP in 2009 without a program of radical austerity.
A new Latvian government came to power in March 2009, when GDP was in free fall. It told people how bad the situation was, and the various social partners responded by signing up to a truly radical austerity program. One-third of the civil servants were laid off; half the state agencies were closed, which prompted deregulation; the average public wage was cut by 26 percent in one year. But this was a socially considerate program. Top officials were hit more, with 35 percent in wage cuts, while in the end pensions were not cut. In particular, public servants were no longer allowed to sit on state corporate boards and earn more than from their salaries, a malpractice that is still common in many European countries. The government exposed high-level corruption. Yet, many schools and most of the hospitals were closed.

Doha: It’s Not the end of the world as we know it

That's Good

by Rob Lyons 

It’s like a fly banging its head against a window pane, desperately trying to get to the other side and uncomprehending as to why it never succeeds. Except this is a 17,000-strong swarm of flies taking part in its annual exercise in futility. Yes, there’s another UN climate conference going on, though you might well have missed it.

The eighteenth Conference of the Parties to the UN Framework Convention on Climate Change - there’s a good reason they call it COP18 - is taking place in Doha, the capital of Qatar. The small Arab state is, by some measures, the richest country in the world per head of population, a position built on the fact that it has the third-largest reserves of natural gas in the world. The conference has been running since 26 November and is due to end on Friday. But no one is predicting any kind of dramatic deal.

Which is a bit of a problem for those who run this peculiar show because another thing that ends soon is the Kyoto Protocol. Signed 15 years ago in Japan, the protocol aimed to reduce greenhouse gas emissions in 37 industrialised countries and the EU to a level five per cent below 1990 levels for the period from 2008 to 2012. There’s no sign of a replacement - which, to be meaningful, really needs to include big developing countries like China, India and Brazil - just endless talks about talks. At last year’s event - COP17 in Durban, South Africa - there was an agreement to negotiate a ‘protocol, legal instrument, or an agreed outcome with legal force applicable to all Parties’ by 2015, to take effect by 2020. As a Greenpeace representative bemoaned then: ‘Right now the global climate regime amounts to nothing more than a voluntary deal that’s put off for a decade.’

Why Finnish school lessons are useless

Finland may be at the top of the world’s education rankings, but that tells us more about Finnish society than its schools

by Eero Iloniemi 

Finland has once again topped an international education ranking table.

This time, the British education firm Pearson has rated Finland the world leader in education. The country has also traditionally had a strong showing in the OECD’s PISA rankings, so it must be doing something right, right? This success has even spawned a cottage industry dedicated to the so-called Finnish education miracle. One example of this is the book Finnish Lessons: What the World Can Learn From Educational Change in Finland? The book has been a bestseller (well, in the education section of the bookshop, anyway).

In the most recent education table, Britain did not do too badly, coming in at sixth. But what is it about Finland that makes its education system so table-rankingly excellent? It’s certainly not money. Spending on education in Finland is no higher than the OECD average.

Pearson itself explains Finland’s success by factors that are fairly difficult to quantify such as a pro-education culture and the quality of teachers. But other more easily verifiable factors also come into play although most are omitted by many educational experts.

For a start, given that South Korea (alongside Finland) has again finished in the top two, following its first place in the PISA rankings, it’s worth asking what the two countries have in common?

At first glance, not much it would seem. Koreans emphasise testing, discipline, homework and long school days. Finnish kids have one of the shortest school days in the world, are seldom tested, have little homework and address their teachers by their first name from their first day at school.

Yet closer examination shows similarities that are not revealed in the education studies.

Fedophilia

It's curable

by George Selgin

Although the movement to “End the Fed” has a considerable popular following, only a very tiny number of economists—our illustrious contributors amongst them—take the possibility seriously. For the rest, the Federal Reserve System is, not an ideal currency system to be sure (for who would dare to call it that?), but, implicitly at least, the best of all possible systems. And while there’s no shortage of proposals for reforming it almost all of them call only for mere tinkering. Tough though their love may be, the fact remains that most economists are stuck on the Fed.

This veneration of the Fed has long struck me as perverse. Its record can hardly be said, after all, to supply grounds for complacency, much less for the belief that no other system could possibly do better. (Indeed that record, as Bill Lastrapes, Larry White and I have shown, even makes it difficult to claim that the Fed has improved upon the evidently flawed National Currency system it replaced.) Further, as the Fed is both a monopoly and a central planning agency, one would expect economists’ general opposition to monopolies and to central planning, as informed by their welfare theorems and by the general collapse of socialism, to prejudice them against it. Yet instead of ganging up to look into market-based alternatives to the Fed, the profession for the most part has relegated such inquiries to its fringe.

Why? The question warrants an answer from those of us who insist that exploring alternatives to the Fed is worthwhile, if only to counter people’s natural but nevertheless mistaken inclination to assume that the rest of the profession isn’t interested in such alternatives because it has already carefully considered—and rejected—them.

Orderly and Humane?

An Endless Nightmare

By Peter Hitchens

Some time ago I decided to write a book about the damaging and deluded cult of national victory which has done this country so much damage since 1945. No doubt it will receive the usual mixture of abuse and  silence which most of my books receive. But I shall write it anyway, as it seems to me to be a truth urgently in need of being expressed, especially as we shall soon be marking the 70^th anniversary of the end of the supposedly ‘Good’ Second World War. It is now possible to have more-or-less grown-up attitudes towards the First World War, whose last remaining justification – that it was ‘The War to End All Wars’ - crumbled into dust and spiders’ webs in September 1939. But the 1939-45 conflict is still wreathed in delusions, delusions often employed to try to justify modern wars which are alleged to have comparably ‘good’ aims.

The belief in its goodness is in fact ludicrous. Our main ally (rejected at the beginning with lofty scorn, embraced later with desperate, insincere enthusiasm) was one of the most murderous tyrants in human history, whose slave empire we helped him to extend and consolidate, and to whom we afterwards handed thousands of victims, to whom we owed at least a life, though we knew he would murder them.

Our purpose in joining the war was not only not achieved, but the country whose independence we claimed to be ‘saving’ sank under successive waves of horror, cruelty, lawlessness, murder and despotism, to emerge 60 years later and many miles from where it had been when we ‘rescued’ it.

Dancing Around Genocide

At Human Rights Watch, a bitter behind-the-scenes battle over Iran's calls to annihilate Israel

By DAVID FEITH

Is promoting genocide a human-rights violation? You might think that's an easy question. But it isn't at Human Rights Watch, where a bitter debate is raging over how to describe Iran's calls for the destruction of Israel. The infighting reveals a peculiar standard regarding dictatorships and human rights and especially the Jewish state.

Human Rights Watch is the George Soros-funded operation that has outsize influence in governments, newsrooms and classrooms world-wide. Some at the nonprofit want to denounce Iran's regime for inciting genocide. "Sitting still while Iran claims a 'justification to kill all Jews and annihilate Israel' . . . is a position unworthy of our great organization," Sid Sheinberg, the group's vice chairman, wrote to colleagues in a recent email.

But Executive Director Kenneth Roth, who runs the nonprofit, strenuously disagrees.

Asked in 2010 about Iranian President Mahmoud Ahmadinejad's statement that Israel "must be wiped off the map," Mr. Roth suggested that the Iranian president has been misunderstood. "There was a real question as to whether he actually said that," Mr. Roth told The New Republic, because the Persian language lacks an idiom for wiping off the map. Then again, Mr. Ahmadinejad's own English-language website translated his words that way, and the main alternative translation—"eliminated from the pages of history"—is no more benign. Nor is Mr. Ahmadinejad an outlier in the regime. Iran's top military officer declared earlier this year that "the Iranian nation is standing for its cause that is the full annihilation of Israel."

EU Wants to Ban Youth Unemployment

More Nannycrat Insanity 

by Mike "Mish" Shedlock 

Youth unemployment is shockingly high in Greece, Spain, and Italy as shown by Europe's Most Tragic Graph by The Atlantic. 

Young workers in Greece and Spain are facing an absolutely egregious work drought, where half of high-school and college-graduates ready to find a job aren't finding one. And 55% isn't the ceiling. Both economies are shrinking and unemployment is a lagging indicator -- as Americans have learned, the rate can keep going up after an economy technically starts growing. This economic tragedy can easily become a social disaster as young promising people either leave their country to work somewhere else or else turn to illegal or violent activities to protest policies wrecking their economies or lash out against a country that's leaving them behind.

EU Wants to Ban Youth Unemployment
Looking for a reason for the rise of the neo-Nazis in Greece? Look no further than economic depression and over 50% youth unemployment. So what to do about it?

Courtesy of Google translate from German of Frankfurter Allgemeine, please consider EU Wants to Ban Youth Unemployment.

 The European Commission wants to oblige EU countries to all people under 25 to secure a job. How states are to implement the guarantee, it will not betray.

Disordered Liberty

No one likes doing homework, but the non-compulsory alternatives are autonomous, non-alienated illiterates

By MICHAEL WEISS

Soon after al-Bab, a rural town just north of Aleppo, was liberated from the Assad regime in the summer, citizens and off-duty Syrian rebels took to the streets and started cleaning up. They swept the sidewalks in the absence of any municipal sanitation, picking up chunks of concrete rubble left over from a punishing artillery assault that had ended just days earlier. For four decades, anything spontaneous required permission from the regime. This was an assertion of individual autonomy against a totalitarian state—destructive creation as its noblest.

The scene, which I witnessed on a trip to Syria in August, would have put a smile on James Scott's face. In "Two Cheers for Anarchism," his intriguing but occasionally silly book, Mr. Scott doesn't pretend to abide by a utopian antigovernment philosophy or to renew the prescriptions of 19th-century Russian anarchists who wanted to overthrow the czarist state. Rather, he argues for a return to "mutuality" and organic human cooperativeness. The bulk of his book is thus dedicated to criticizing the niggling little tyrannies of everyday life in free-market democracies, from superstores that have replaced more humane mom-and-pop enterprises to the attempts of agribusiness to impose factory-like standardization on nature itself. As if to account for the bagginess of such a project, Mr. Scott divides his book into a series of essay fragments loosely bound together by themes rather than a linear thesis.

The True Disciple of Saul Alinsky

What explains their hubris?

by Patrick J. Buchanan

Treasury Secretary Tim Geithner's opening bid to Speaker John Boehner, a demand for $1.6 trillion in new taxes, was not meant as a serious offer. It was an ultimatum couched in an insult. Translation:

"We won the election. We have the whip hand. Not only are you going to sign on to higher tax rates and higher tax revenues, we are going to rub your Tea Party noses in your coming capitulation."

That Boehner did not throw the offer back in Geithner's face and tell him, "Give me a call, Tim, when you're serious," suggests that the speaker feels he is holding a losing hand.

He wants a deal where the GOP agrees to higher revenues and the White House agrees to cuts in future entitlement outlays. But the Obamaites are looking to dictate terms. They want a triumph. If that means casting Boehner as the Neville Chamberlain of the GOP, so be it.

What explains their hubris?

Two years ago, Obama had to eat crow and extend the Bush tax cuts. Now it's payback time. And behind their arrogance lies a belief that the GOP cannot say no. For if the Bush tax cuts and the payroll tax cuts expire on Jan. 1, Americans will face the highest tax hike in history.

Serial Government Defaults In The Eurozone

Every country in the Eurozone has its own set of big fat lies  

By Wolf Richter  

At their meeting on Monday, Euro Group finance ministers had some hot topics to stew over. There was the thorny issue of who’d replace Euro Group President Jean-Claude Juncker, who has had it with this zoo—”I no longer have any illusions about Europe,” he’d muttered earlier [The Euro Will Blow Up Europe Instead Of Bringing It Together]. The bailout of Spanish banks was finalized; €39.5 billion would be transferred next week, a down payment. Primary beneficiaries: German and French banks.

And the new bailout of Greece got some finishing touches. The mechanics had already been decided. Interest rates would be lowered. There’d be no interest payments for the first ten years. Times to accomplish the austerity goals would be stretched out. Profits on Greek debt held by the “official sector,” as it’s called in the jargon of the euro bailout mania, would be repatriated. And so on. It was one heck of a sweet deal for Greece.

It followed the bond swap last March that had already whacked private sector investors with a 74% haircut on €206 billion in bonds. The first sovereign default in the Eurozone, albeit a “voluntary” one. It set the tone. Greek Finance Minister Evangelos Venizelos proclaimed afterwards in his victory speech: “We owed it to our children and grandchildren to rid them of the burden of this debt.”

Alas, private sector is a rubbery term in the Eurozone. Most of the bondholders that lost their shirts were banks, including banks in Greece, Spain, and Cyprus—and they’re now getting bailed out by the official sector. Their losses from the private-sector haircut are landing on the lap of the taxpayer.

Why would Obama willingly choose to go over the fiscal cliff?

Clearing the path towards Obama's long term objectives of complete socialization of the American economy

by Lance Roberts

Obama already knows that such an event would create an economic drag in the next year of nearly 4% as the various taxes and mandated spending cuts sap economic strength.  After four years of effort, bailouts, incentives and programs to keep the economy afloat - what incentive would there be to willingly go over the "cliff?"  It is an interesting question.

According to the American Council For Capital Formation here are the following impacts to the overall economy:

Real GDP- Increasing the current capital gains and dividend tax rates shows noticeable negative effects on the U.S. economy compared to the Baseline in the shorter run. In this simulation, real GDP growth decreases 0.1%, on average, per year, which equates to a $79.2 billion decrease per year over the 2013-17 time period. The results are similar in longer time period: Between 2013 and 2021 period, real GDP decreases $80 billion on average, per year.

Consumption Spending- Consumption spending is also weaker, averaging $155 billion lower per year between 2013-2021. Between 2013 and 2017 time period, the decrease in consumption is a little over $122 billion.

Employment- In the capital gains and dividend tax increase simulation, the job impact is worse between 2013 and 2017 period. The economy ends up losing 380,000 jobs on average per year. In the longer period, 2013-21, the loss is 344,000 per year. Nonfarm payroll jobs show a large loss of 561,000 persons in 2015 and then smaller losses in subsequent years.

Amsterdam proposes “scum villages”

Say, didn’t the Soviet Union and China try this out for a few decades?

BY ED MORRISSEY

Can we count just how many horrid 20th century chapters of humanity this might evoke?

In a move that sounds straight out of Orwell, Amsterdam allocated 1 million euros last week to a plan that would relocate trouble-making neighbors to camps on the outskirts of the city, the BBC reports.

The “scum villages,” as critics have called them, would lie in isolated areas and provide only basic services to their unwilling residents. According to details of the plan reported by Der Spiegel and the BBC, residents will live in “container homes,” under the watchful eye of social workers or police. The residents themselves might not make very good company. According to the BBC, they’ll include families that engage in repeated, small-scale harassment, like bullying gay neighbors or intimidating police witnesses.

Or perhaps just people whose political and social perspectives annoy the ruling class.  Say, didn’t the Soviet Union and China try this out for a few decades?  They called them “re-education camps,” as I recall, where people who didn’t cooperate properly with enforced collectivism were kept under the “watchful eye” of the police state.  In the Soviet Union, the Kremlin transformed Siberia into an internal-exile internment province.  In some areas of the world — notably North Korea — this practice hasn’t yet ended, either.

If law and order are breaking down in Amsterdam, start building a prison and bolstering law enforcement, but don’t try to pass it off as a social-welfare program. 

In respect to corruption, Greece ranks below Colombia and Liberia

Euro Crisis Feeds Corruption as Greece Slides in Rankings

By Patrick Donahue

The European debt crisis has given way to a new wave of corruption as some of the most hard-hit countries in the turmoil have tumbled in an annual graft ranking, watchdog group Transparency International said.

Greece, in its fifth year of recession and crippled by rounds of austerity, fell to 94th place from 80th -- ranking it below Colombia and Liberia, according to the group’s Corruption Perceptions Index. Ireland, Austria, Malta and Italy were also among member states in the single currency to slide.

 “Transparency International has consistently warned Europe to address corruption risks in the public sector to tackle the financial crisis, calling for strengthened efforts to corruption-proof public institutions,” the Berlin-based group said in a statement accompanying its annual report.

A resolution to the crisis entering its fourth year continues to elude European leaders as a German-led strategy of scaling back public deficits has retreated amid recessions and economic hardship. The crisis has been accompanied by scandals such as tax-crime allegations in Greece and Italian corruption investigations that brought down two regional governments.

What Went Wrong?

Moynihan, Zionism, and Racism

By SCOTT MCCONNELL

My early twenties are often hazy, but I remember one evening pretty well. A woman friend came over, and we watched the 1975 UN debate on the notorious Zionism=Racism resolution on TV. I felt the Arab charges against Israel were completely outrageous, an inversion of truth quite literally Orwellian in magnitude. U.S. Ambassador Daniel Moynihan was eloquent in rebutting them, reading a speech (I later learned) partially drafted by Norman Podhoretz. Next year when Moynihan ran for Senate, I remember pulling the lever for him (in the Democratic primary, v. Bella Abzug) with more conviction than I’ve mustered in a voting booth before or since.

Moynihan and Norman Podhoretz eventually drifted apart, but I’m sure the senator never regretted the words he spoke on that night. Once, many years later, when he came to the NY Post editorial page offices, he told a story–I don’t recall the subject–in which he  described a politician as “the most enthusiastic Zionist you could imagine, you’ve never seen such a Zionist” in tones which may, or may not, have exuded a whiff of mockery, you couldn’t be sure. In any case, in those days the idea that Zionism, the national liberation movement of the Jewish people, a phrase central to the speech, could be defined racist was about as absurd, and obscene, a thought as one could possibly imagine. At least so we thought.

What America Can Learn from Kutusov

From education to decentralization, the Russian who beat Napoleon teaches victory by retreat

By ALBERT JAY NOCK, June 1936

General de Caulaincourt’s memoirs, which have been published recently, give us a vivid sense of the strategy employed against Napoleon by Russia’s great deliverer, Prince Mikhail Illarionovich Kutusov-Golenishchev. It was much like the classical strategy of the Scythians, and even more like that which won for the Roman general, Fabius, the surname of Cunctator. The Russian policy was laid out on a grand scale. The French invaders were keen for battle, but “that devil Kutusov,” as Napoleon called him, persistently refused to accommodate them. Once in a while, to satisfy his subordinates, he went through the motions of taking a stand, as at Tarutino and Krasnoë, but always against his own judgment; and after Borodino, as Count Tolstoi remarks, “he alone did everything in his power to hold the Russian army back from useless fighting.” Technically, Napoleon won the battle of Borodino, and all Russia except Kutusov regarded it as a terrible defeat. He knew it was a great victory, and time proved that he was right. When Napoleon went forth to renew the battle next day, Kutusov was not there; nobody was there; the French found themselves standing in the middle of all outdoors with no one to tell them where Kutusov was, or even which way he had gone.

They pushed on past Mozhaisk to Moscow, and were disappointed again; no Kutusov, no army, nobody, a deserted city. Then the fire, then presently the Great Retreat, with Kutusov acting as a sort of escort or guard of honor, ushering Napoleon back over the border. There was little fighting, practically none except some occasional irregular warfare waged by roving bands of guerrillas and Cossacks; the armies never actually met. Some authorities have criticized Kutusov for dealing so gently with the erring, but the severest critic can hardly help noticing that not more than one per cent of the Grand Army lived to cross the frontier.

Egypt To President Morsi: No Dictators Allowed

Protesting a presidential power play

by Vivian Salama 

Amr Darrag is on a call when a second phone in his Cairo office begins to ring. He’s been awake since 6 a.m., and the stack of papers on his desk swells with every passing minute. A leader in Egypt’s Freedom and Justice Party, the political arm of the Muslim Brotherhood, Darrag is also part of the 100-member committee scrambling to draft the country’s new constitution—a pending document that has hit every possible bump in the road since Egyptians toppled President Hosni Mubarak last year.

“We have a couple more days until we finish our mission,” says Darrag, secretary-general of the Constituent Assembly. “Those who are not interested in stability in Egypt or want to keep the Muslim Brotherhood out of the scene are trying to stop us from issuing the constitution. The courts want to dismantle the assembly. The president had to stop these tricks or the country would fall into chaos.”

On Nov. 22, as Americans sat down to Thanksgiving dinner, Egypt’s first post-revolution president, Mohamed Morsi, issued a decree exempting all of his decisions from legal challenge. The move was a stunning power grab that quickly earned him the nickname “Egypt’s new pharaoh”—a title once bestowed upon his defunct predecessor. Hundreds of thousands of disbelieving Egyptians flooded city streets from Alexandria to Aswan with a familiar cry: “The people want the fall of the regime!” Tahrir Square came alive once again with tents and bullhorns and a howl so loud—so impassioned—that it was dubbed the “19th Day” of last year’s revolution. Angry female protesters returned in masses to Tahrir, resilient after months of deteriorating security that included repeated incidents of harassment and sexual assault.

Survival sometimes means collaboration. But it is no guarantee of success.

Behind the Iron Curtain 

Communist Polish Youth marching in Warsaw, 1955

By Anne Applebaum

Wanda Telakowska did not begin her career as a Marxist. At different times an art teacher, designer, critic, and curator, Telakowska had in the 1930s been best known for her association with a Polish artistic group called Ład, which connoisseurs of design history will recognize as a cousin of the British Arts and Crafts movement. Ład sought to make use of traditional, folk, and peasant craftsmen, who still thrived in parts of southern and eastern Poland, and to use their work as the basis for a new and authentically “Polish” vernacular design. The artists and designers associated with Ład believed that “contemporary” did not have to mean “modernist” or futuristic. Not everything had to be sleek or simplified in the machine age: folk designs for furniture, textiles, glass and ceramics could, they believed, be brought up-to-date, and even used as inspiration by industry.

By instinct and by training, Telakowska was no communist either. Many left-wing artists of the time, including the Bauhaus designers in Germany, spoke of sweeping away the past in the name of revolution, and starting from scratch. Telakowska, by contrast, retained a distinctly un-Communist, lifelong determination to find inspiration from the past. Nevertheless, after the war, she was determined to continue Ład’s work, and toward that end she joined the new Communist government. She quickly found that her project—which favored “authentic” peasant art over the slicker modernism of urban intellectuals—overlapped with some of the aims of the Communist Party. As one cultural bureaucrat pointed out, folk art was more likely to appeal to the Polish laborer: “Our working class is closely connected to the countryside and feels more connected to the culture of folk art than to the culture of intellectual salons.”

Will Egypt’s Liberals Ever Win?

They can, but they must forget Shariah and focus on painting Egypt’s Islamist president as just another Mubarak

By Tarek Masoud and Wael Nawara

After working with Egypt’s president, Mohammad Morsi, to broker a ceasefire between Israel and Hamas last month, President Barack Obama reportedly came away impressed by his fellow former university professor’s pragmatism and “engineer’s precision.” But whatever the Egyptian president’s intellectual gifts, a good memory is clearly not one of them. After having barely eked out in a victory in last June’s presidential election, with a significant assist from liberal and left-leaning revolutionaries who saw Morsi’s opponent as a throwback to the old regime, the new president has thumbed his nose at his erstwhile allies and his promises of democracy. On Nov. 22, he issued a decree granting himself extraordinary, unquestioned authority, and last week his allies in the constitutional assembly rammed through a draft constitution that includes expanded presidential powers, protections for the military, and a highly illiberal social agenda.

Egypt’s liberals—often rightly maligned as hapless and uncoordinated—have seized the opportunity presented to them by Morsi’s overreach, and surprised everyone with a series of massive protests in Tahrir Square. And elsewhere in Egypt, clashes between opponents of the president and his supporters have resulted in at least two deaths and the torching of several Muslim Brotherhood offices. But on Saturday, Morsi’s allies reminded us why the Muslim Brotherhood is so often referred to as Egypt’s most organized and popular force, convening a gargantuan rally of their own in front of Cairo University. Estimates of the size of the Islamist crowd—much of which was bussed in from outside of the city, and which at one point reportedly chanted, “Oh Badia [the Muslim Brotherhood’s leader], you command us and we obey!”—varied. The Brotherhood’s political wing claimed that more than 2 million people turned out to support the presidentbut independent observers pegged the number at closer to 200,000. After the demonstration, hundreds of Islamist activists besieged the country’s constitutional court to prevent the judges of that body from attempting to countermand the president’s actions. The man who once promised to be the president of all Egyptians has proven uncommonly adept at dividing them.

The recent century-long 3.4% GDP growth is dead, never to return. Never.

U.S. GDP on the road to zero growth by 2050

By Paul B. Farrell

Near zero economic growth by 2050? Yes, America’s economy is collapsing. Fast. Yes, the “most depressing forecast ever,” says InvestmentNews, trusted source for 90,000 professional financial advisers across America.

Actually it’s worse than depressing if you read the details in “On Road to Zero Growth,” the latest Quarterly Letter from Jeremy Grantham, founder and chief investment strategist for the $100 billion GMO money managers.

Yes, today’s fiscal-cliff drama is just a warm-up for what’s coming. America’s economic future is a disaster. We are going over a bigger game-changing economic cliff, into a long-term chasm. And it’s unavoidable.

Why? Because our myopic Congressional leaders and Fed chairman are focused on short-term fixes, piling on more monetary-stimulus debt, while avoiding America’s systemic long-term problems. Yes, we are our own worst enemy and nothing will keep us from driving down the road to zero growth and into painful austerity, just like the 1930s.

Listen closely: here’s Grantham’s overview of America’s economy from the late 1900s through 2050: “The trend for U.S. GDP growth up until about 1980 was remarkable: 3.4% a year for a full hundred years.” That powered the great American Dream. “But after 1980 the trend began to slip.” And unfortunately the economy is “not going back to the glory days of the U.S. GDP growth.”

Get it? A century of high-growth prosperity, then our GDP growth dropped “by over 1.5% from its peak in the 1960s and nearly 1% from the average of the last 30 years.”

Fiscal Cliff Debate Is About Size of Government, Not Taxing "the Rich"

No previous administration in the entire history of the nation ever finished the year with a trillion dollar deficit

By Thomas Sowell 

Amid all the political and media hoopla about the "fiscal cliff" crisis, there are a few facts that are worth noting.

First of all, despite all the melodrama about raising taxes on "the rich," even if that is done it will scarcely make a dent in the government's financial problems. Raising the tax rates on everybody in the top two percent will not get enough additional tax revenue to run the government for ten days.

And what will the government do to pay for the other 355 days in the year?

All the political angst and moral melodrama about getting "the rich" to pay "their fair share" is part of a big charade. This is not about economics, it is about politics. Taxing "the rich" will produce a drop in the bucket when compared to the staggering and unprecedented deficits of the Obama administration.

No previous administration in the entire history of the nation ever finished the year with a trillion dollar deficit. The Obama administration has done so every single year. Yet political and media discussions of the financial crisis have been focussed overwhelmingly on how to get more tax revenue to pay for past and future spending.

The very catchwords and phrases used by the Obama administration betray how phony this all is. For example, "We are just asking the rich to pay a little more."

This is an insult to our intelligence. The government doesn't "ask" anybody to pay anything. It orders you to pay the taxes they impose and you can go to prison if you don't.