Category: Current Affairs (Page 61 of 78)

From the Beaufort Observer.

Is he for releasing Guantanamo prisoners, or not?

Is he for higher taxes, or not?

Is he for Israel, or not?

This excerpt is a good summary of why higher taxes and ‘stimulus’ spending just don’t work:

Also, he said that Obama has plans to raise taxes on US companies by $190 billion. And there’s when I quit, just gave up. If Obama raises corporate taxes, who does he think will pay them? Big companies don’t pay taxes. They just add them to the product they manufacture and pass it on down the line, When Wal-Mart receives that product, they add on a bit for profit and an extra bit to cover the higher cost and then stack it on the shelves. Then Susie Shopper comes along and buys it, paying the accumulated taxes along with the store’s profit. Or maybe Susie doesn’t buy it ’cause the extra few cents make it too expensive for her budget.

When gas was so high last year, the price of Georgia peaches went up. The price went up because the price for the gas to run the truck to bring the peaches to the grocery store went up. I knew the reason – all of us shoppers knew it. Raising prices at one end of the process simply raises the cost of the product when it gets to the consumer. It doesn’t take a math genius to realize that raising taxes on companies will raise the price of the end product and consumers will have to pay that price to get the product. Maybe the President just never shopped for groceries. Maybe the President just doesn’t understand how things work after all.

I would add that there are two other things companies can do in response to higher taxes (and therefore less cash available to run their business).

1.  They can reduce the number of employess, which creates more unemployment. Which means a greater burden on the tax payer.

2.  They can reduce profits, which means less income for superannuation funds, which means more need for government support for retired people. Which means a greater burden on the tax payer.

The same observations apply equally in Australia.

My advice to President Obama and Kevin Rudd, and Gordon Brown: If you don’t understand something, leave it alone.

Ill-planned tinkering in the financial system caused this crisis to start with. More ill-informed tinkering is not going to get us out of it.

But of course.

Australian treasurer Wayne Swan says that tough measures to be introduced in tomorrow’s federal budget, are the fault of John Howard’s big spending policies.

When John Howard and Peter Costello’s government left office there was zero public debt, a substantial surplus (about $22 billion) lower taxes, record low unemployment, and higher real wages.

But it’s not our fault, say Rudd and Swan. It’s the wrong trousers. And they’ve gone wrong.

According to Swan ‘The opposition does not understand that the planned deficit is not a consequence of government spending.’  Ah. Right. OK then.

In February Peter Costello predicted the Labor government would never deliver a surplus budget. And of course was told he was a dinosaur, out of touch.

I agree with some of the measures to be introduced in tomorrow’s budget. The government shouldn’t be handing out money to people who don’t need it.

There is no reason why people on substantial incomes of $120,000 or more need me to subsidise their health care, or insurance, or home purchase, or baby clothes. Welfare and government support should be kept for those who really need it.

The Labor government is right to limit that kind of pointless spending – even though doing so is a breach of campaign promises.

But the savings will be minimal in terms of the overall budget. As will the increase in revenue from increasing the tax paid by the small percentage of successful people who already pay most, both in dollar terms and as a proportion of total taxes paid.

The real problem is massive and counter-productive ‘stimulus’ spending which will saddle ordinary Australian families with a debt amounting to between $10 and $15 thousand for every person living in this country.

If figures from the UK apply here, there will be another $10 to $15 thousand per person to meet Kyoto and ETS costs.

Rudd, Swan and their honchos are hopelessly divorced from reality.

One can only hope that some sort of cognitive dissonance will set in, and changes be made, before the Australian economy becomes a mess to rival the Augean Stables.

The Australia Federal Opposition (The Liberals, which means the conservatives, or would do if they had any backbone) is planning to offer an alternative to the government’s proposed emissions trading scheme.

Unless their proposed alternative is to scrap the whole stupid idea, they all deserve a kick in the pants, and we would be better off if the Wiggles were running the country.

We would definitely be better off if Chuck Norris was running the country, but he is probably too busy kicking someone else in the pants.

If you were trying to come up with another scheme as pointless and expensive as the ETS, you would have to imagine something like the government deciding that in order to save a newly discovered worm from extinction, it would completely fill in the Sydney Harbour with large concrete blocks.

The Liberals proposed alternative is like someone saying: ‘Hey no, concrete is the wrong colour, you should be filling up the harbour with shiny plastic blocks instead.’

This graphic from GlobeandMail shows the amount of  ‘stimulus’ spending in selected G20 countries in dollars and as a proportion of GDP. I have linked to GlobeandMail, but article content is subscription or pay per view.

Stimulus Spending as a Proportion of GDP

Australia’s spending is proportionally higher than the US (though not by much), which means the amount of debt incurred for each citizen is higher. Which you would expect to mean a longer recovery.

But in spite of this absurd level of ‘stimulus’ spending, and directionless economic policy by the current Federal government, Australasian Investment Review believes that Australia is better equipped to cope with the global recession than most other advanced nations.

Surely the previous government’s careful economic management and years of surplus budgets wouldn’t have anything to do with that?

Know-it-all Sir Bob Geldof is the former front man of the Boomtown Rats, a one hit wonder band from the seventies, and therefore qualifies (in his eyes) as an expert on foreign policy and development. Well, Leonardo De Crapio thinks he’s an expert on the science of global warming, so why not?

Two years ago Sir Bob called Australia ‘one of the meanest countries on the planet’ saying our level of foreign aid was amongst the lowest in the world, as a proportion of GDP.

That would be a moral issue worthy of consideration if there was any evidence that foreign aid, other than emergency aid, did the slightest bit of genuine good. If it could be shown, say, that countries which received development aid actually developed more than those that didn’t.

But as Fredrik Erixon, chief economist with Timbro, a Swedish think tank and book publisher, has shown, development aid to developing nations does not work. The more aid a country receives, the more likely it is to be locked into a cycle of increasing poverty. The graph below (taken from the BBC article linked above) shows that when aid received is high, economic growth is at its lowest. 

Aid to Africa and Growth Inversely Proportional

Kenyan economist James Shikawati explains why this is so in an interview with Der Spiegel. In essence, providing free food and clothes undermines any local industry, and encourages corruption and a passive expectation of rescue, which then leads to increasing resentment.

SPEIGEL: The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa’s problems. If the West were to cancel these payments, normal Africans wouldn’t even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

What works to bring nations out of poverty, as South Korea and Taiwan have demonstrated, is open trade, democratic government, and reward for effort and invention.

For related insights see Hal G.P. Colebatch’s article ‘Giving It Away’ in this month’s Quadrant magazine.

By Prime Minister Kevin Rudd.

My wife was stimulated at the same time.

Then we got a letter from the Tax Office telling us we had been stimulated, just in case we hadn’t noticed.

Most Australians will get a one-off stimulus ‘tax bonus’ of $900 from the Federal government.

I just don’t get it. How is it stimulating the economy to take money away from people who are earning it, working for it, producing something to get it, and handing it out willy-nilly to everyone?

It’s not free money, Mr Rudd.

I have been offering a stimulus special – a decent computer package for $900, with a tie-in to the education tax refund.

It has been going pretty well. But not as well, I suspect, as the ‘Let Us Stimulate You’ deal offered by the After Dark brothel in Sydney.

If experience is anything to go by, it will be liquor stores, brothels and gambling houses that benefit most.

But even if it wasn’t, you cannot spend your way out of debt. You don’t create jobs and increase production by taking extra money from productive people to give to people who are not. And you certainly don’t create any incentive to work, or to be responsible.