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And these guys are serious.

Recall that Cyprus is as bankrupt as Greece.  In order to bail out Cyprus (we’ve been over the legitimacy of bailouts elsewhere), the European Central Bank, European Commission, and the IMF have demanded a one-time tax on deposits: 9.9% on deposits over €100,000 ($131,000) and 6.75% on smaller deposits.

Nothing underhanded about any of this, either.  Uh, uh.  Because depositors, including many of the 3,500 British soldiers stationed in Cyprus, are complicit in the incompetence of the banks’ management.  Yeah.  That’s it.  We’ll go with that.

Finance Minister Michalis Serris already has taken steps to block depositors from taking their money out ahead of the tax:

We have taken immediate measures so that electronic transfers cannot take effect before banks reopen on Tuesday [today is a holiday in Cyprus.]

Chump change was recovered by depositors over the weekend via Cyprus’ cash machines, but the machines’ money stocks were limited and not replenished as they ran out.  Willy Sutton couldn’t have done it better.

A planned weekend vote by the Cypriot Parliament to pass this thing, however, was been postponed until today amid…concerns…that the Parliament may have more integrity than Serris and block the “agreement” with the ECB, the EC, and the IMF.

This is supposed to raise €5.8 billion ($7.6 billion).  Think about this, though.  Are the interest rates or investment rates of return that the Cypriot banks are paying on those deposits more or less than those taxes?  You get three guesses, and the first two don’t count.  For how long will those depositors leave their remaining money in those banks?  Again, three guesses, and the first two don’t count.

This is what happens when the wrong folks are left in charge of OPM.

Update: Cyprus’ legislative vote has been delayed until Tuesday afternoon.

Update again: Today (Tuesday) the Greek Parliament rejected any “tax” on private deposits by a vote of 36 “No,” 19 abstentions, and 0 “Aye.”

Magical Thinking

Well, that didn’t take long.  President Barack Obama already has failed his test.

The Progressives’ idea of a budget is out of the Senate Budget Committee, now, and on the Senate floor, where Senate Majority Leader Harry Reid (D, NV) will do his best to thrust it home with as little debate allowed as he can achieve.  Here’s the summary table (and scroll down a bit to this table; sorry you have to crane your neck); the whole thing can be viewed, in piecemeal form, on the Senate’s site:

Notice that.  Aside from continuing to gut Defense, overall spending continues apace, President Barack ObamaSenator Patty Murray (D, WA), the Budget Committee’s Chair, demands even more taxes from working Americans than he got in January, and our national debt explodes.

The Democrats want, with an absolutely straight face, to increase spending every year–$3.6 trillion in FY 2014, $4.05 trillion in FY 2016, and so on to $5.7 trillion in FY 2023, a 62% increase over the current level for FY 2013.

Reading the fine print in one of those piecemeal parts at the Senate site, we see that the Progressives want to create a(nother) $100 billion program aimed at generating new jobs, again by funding infrastructure work.  Of course, we know Obama already tried this, repeatedly, throughout his first term.  As he’s already confessed, “Shovel-ready was not as shovel-ready as we expected,” and as those earlier programs demonstrated, the jobs aren’t there at any time in his government programs.  This is magical thinking.

And it turns out Murray lied about those taxes, too, cynically understating them at “only” an additional $975 billion.  The Weekly Standard has this table, provided by a staffer for the Senate Budget Committee’s (Murray’s committee) minority membership:

Murray cynically understated Obama’s tax demands by fully one-third.  These $1.5 trillion in new taxes, combined with the $600 billion in new taxes Obama got at the start of the year, adds up to $2.1 trillion in new taxes being demanded in just these two and a half months.

Progressives just can’t stand to not raise taxes.  Their addiction to OPM is palpable.

And that debt.  The Progressives fully intend to explode it to $24 trillion by 2023, with annual interest payments running nearly to $800 billion.  This also assumes the market would be willing to buy such risky debt at those rates.  But then Obama denies, ostrich-like, that there’s any urgency to our debt fiasco.  This is more magical thinking.

All of this is predicated, too, on Obama’s/Murray’s pipedream of a GDP annual growth rate over the next 10 years of 4.2%-6.6% each year—rates we’ve never sustained in any 10 year period in our history.  With all of this taxing and spending taking money out of the private economy—the economy in which Americans actually live, work, and die—positing such rates is…wrong.

Matched with the $975 billion in claimed spending cuts, this isn’t even the balance about which he’s been yammering.  This is more…magical thinking.

This proposal is a disaster waiting to happen.

Obama’s Other Face

President Barack Obama is giving the appearance of wanting a bipartisan, compromise deal on our budget, deficit, and debt.  Is this real, this time, or just another version of the idle chit-chat and outright lies he’s passed off for the last five years?

The Wall Street Journal offers some metrics for assessing his behavior this time around.

  • Will he drop his demand for a tax increase outside of tax reform?  This has no chance of passing, and his continued insistence will poison the chance of any budget deal.  On tax reform he has willing GOP partners in Ways and Means Chairman Dave Camp and Ohio Senator Rob Portman, but the formula has to be lower rates in exchange for fewer loopholes.  Any additional revenue will have to come from the faster economic growth that will follow.
  • Will he agree to a flexible, generous guest-worker program on immigration?  The AFL-CIO wants a restrictive program with a political body determining when there is a labor shortage and how many visas can be granted in specific industries.  Anything close to the AFL-CIO plan won’t stop the flow of illegal immigrants coming to the US for work, but it ought to kill reform in Congress.
  • Will he put more than token entitlement reforms on the table?  As we wrote last week (“Obama’s Not So Grand Offer,” March 8), the President’s Medicare proposals don’t begin to solve the health-care spending problem.  Short of Paul Ryan’s premium-support plan, the only chance for reform worth the name is “comprehensive cost-sharing” that forces individuals to confront at least some of the costs of their own care.

These sound like a pretty good test to me.  It looks, from the Senate Democrats’ budget proposal, like he’s failed the test.

Sessions on Progressive Obstructionism

Senator Jeff Sessions (R, AL) in his closing remarks preparatory to casting his vote on the Jack Lew confirmation last Wednesday, had this to say on a related matter.

I would also like to place this [confirmation vote] in a wider context.

Today is the 1,400th day since Senate Democrats passed a budget.  Why has this gone on so long?  Because they decided it would be better to offer no solution, no plan to help struggling Americans, and instead to tear down anyone who dared to offer a plan to solve our nation’s economic problems.

This is the heart of the problem here in Washington right now.  We have one political party that sees the budget debate as exercise in political warfare, not problem-solving.

At the center of this strategy is the White House.

In his campaign for re-election, President Obama repeatedly said that he had a plan to “pay down our debt.”  He even ran a campaign ad saying: “I believe the only way to create an economy built to last, is to strengthen the middle class—asking the wealthy to pay a little more so we can pay down our debt in a balanced way.  So we can afford to invest in education, manufacturing, and home-grown American energy, for good middle class jobs.”

But this is all totally false.

Again, this was the strategy: offer a plan that does nothing to alter our dangerous debt course while pretending the opposite.

Then, once you’ve done that, attack anyone who dares to reduce the size of the bureaucracy.  Attack anyone who suggests Washington is too powerful.  Attack, attack, attack—while never offering anything to help Americans who are struggling every day.

After the White House budget was submitted in 2011, President Obama spoke at George Washington University and, with Congressman Paul Ryan sitting in front of him, and said:

“One vision has been championed by Republicans in the House of Representatives….  It’s a plan that aims to reduce our deficit by $4 trillion over the next ten years….  But the way this plan achieves [that goal] would lead to a fundamentally different America than the one we’ve known throughout most of our history….  This is a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit.  And who are those 50 million Americans?  Many are someone’s grandparents who wouldn’t be able afford nursing home care without Medicaid.  Many are poor children.  Some are middle-class families who have children with autism or Down’s syndrome….  These are the Americans we’d be telling to fend for themselves.”

Majority Leader Reid said of one Republican reform effort that it was “a mean-spirited bill that would cut the heart out of the recovery that we have in America today….  It goes after little children, poor little boys and girls….  We want them to learn to read.”

This is how the White House and Senate Democrat leaders approach the budget debate.  It’s the same strategy with the sequester.  And Republicans, candidly, have not done enough to stand up to these egregious slanders.  Voting against Jack Lew would be a vote against these dishonest tactics. Misrepresentation of fact.

The painful truth is, the White House strategy has been largely successful up until now.  President Obama and his Senate Majority have blocked fiscal reform and continued our path to fiscal disaster.

It is time that we pointed out that the establishment they are shielding from cuts—the big-government apparatus they are defending—is hurting people every day.  Their policies, their endless support of the bureaucracy, has created poverty and joblessness and dependency.  In cities like Baltimore, Detroit, and Chicago—governed almost exclusively by Democrats at every level—good, hardworking people are hurt every day by the policies of the Left.

  • In the city of Baltimore, one in three children live in poverty.  One in three Baltimore residents are on food stamps.
  • In Chicago, there were roughly 500 homicides in 2012.  Fifty-one percent of the city’s children live in a single-parent family.
  • In Detroit, almost one in three households had not a single person working at any time in the last 12 months.  The city’s violent crime rate is among the worst in the country.  More than half of all Detroit children live in poverty.

This should not happen.  These are the consequences of leftist policies.  We are fighting to create jobs, to create rising wages, to create opportunity, to help more people earn a good living and care for themselves financially.  We are trying to lift people out of poverty, to strengthen family and community.  And we are trying to protect the good and decent people of this country from a debt crisis.

What he said.

This is Nonsense

The fourth quarter 2012 GDP growth rate was revised last week from -0.5% to +0.1% (of course it was, says the cynic in me), because trade contributed more to our GDP than had been originally estimated.

But in the opening paragraph, the WSJ‘s authors demonstrate a fundamental misunderstanding of what GDP growth is:

…the meager showing underscored that government spending cuts are slowing the recovery’s momentum.

They pursue this misunderstanding (I’ll ignore their euphemistic “momentum”) by citing carefully unnamed economists.  Noting that the fourth quarter performance includes “federal government outlays that fell at a 14.8% annualized rate,” they say that their anonymous economists

say restrained federal spending will continue to be a drag on GDP growth during the first half of 2013.

No.  GDP is the production of goods and services in an economy, it is not the spending of government in that economy.  Government spending impacts the reported GDP figure tautologically: it’s a line item in the GDP calculation.  Growth in production, though, can come only from the private sector, the private economy, in which our businesses and our citizens operate.  It is here that those goods and services are produced; work for those businesses on that production occurs; and spending or saving the sales revenue and the wages of the labor occurs.

Growth cannot come from government, including government spending.  Government spending, instead, comes at the direct expense of private production and spending.  Government has no money of its own, it can only spend money that it takes from the private sector today in the form of taxes, or tomorrow in the form of taxes to repay today’s borrowing.

Thus, the failure of the present “recovery” is caused by government spending, as the last four plus years have demonstrated empirically (along with FDR’s profligate spending, which contributed to prolonging the Great Depression), not from a reduction in government spending.  For instance,

Real final sales—GDP less changes in private inventories—increased 1.7% in the fourth quarter.

That’s still appallingly weak, but it’s much faster than the overall GDP growth, demonstrating that government spending isn’t necessary for the private sector—the real economy—to grow.