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Tuesday, May 08, 2012

Musings After Midnight: France, the U.S., and the Definition of Insanity

Good evening, my friends. Or should I say, good morning! Here in the wee morning hours, well after midnight, we gather for these chats about the issues of the day.

Of course, the "chats" are rather one sided since you, the reader, are not allowed to engage in the conversation while it is being written. However, I hope you feel that you are, in fact, part of the conversation given the intimate nature of this discourse, the format of which is intentionally personal. I want you to feel that you are part of the give and take, mainly in that I am addressing myself directly to you in a manner that is personally and intimately candid, speaking directly from my heart and mind as the thoughts come. And this is not to mention that when I write these words I do so with the knowledge in mind that I am addressing specific issues with which I know you are grappling. I can hear in my mind your questions, your objections, your doubts, and even your validation of the points I make.

And then you are always welcome to have your say in the comment section. So you see, you are a part of this conversation each step of the way.

I wanted to address an issue that I know has been on the minds of many of you, and it is one that I have found myself mulling over with great concern, and that is  the French elections this past Sunday. President Sarkozy lost his reelection bid to a Socialist, mainly as an expression of deep concern on the part of the French electorate that the country faces the distinct likelihood of complete economic collapse.

Voters in most free nations routinely blame the top elected official for the economic status of the country, good or bad, whether such blame is deserved or not. In Sarkozy's case, it is a fate that was not deserved because he was, in fact, attempting to address a systemic problem that has swept through all of Europe--unbridled government spending, an unsustainable debt, and the lack of adequate revenue from which to draw in order to prop up the ever growing government nanny state.

Sarkozy implemented what any rational thinking person would do in such a circumstance. He implemented austerity measures designed to reign in the spending, roll back the expanse and extent of the nanny state, and attempt to insure that government spends no more than it takes in, just like any human being is forced to do when dealing with their own household.

But such policies do not come without pain. Those addicted to government programs will experience withdrawal when the money train is thwarted, and like all addicts they will kick and scream until the regular fixes are flowing freely again.

The French, thus, threw a tantrum over their predicament and placed someone in office who has assured them that their gravy train will be restored.

Of course, the new President has no concept of how these measures will be paid for. His views are abhorred by his EU counterparts who at the very least have recognized the source of the problem and have sought to reign in the out of the control spending that has characterized European nations for decades.

Turning a deaf ear to every sign and symptom of the disease that afflicts his nation and others in the EU, the new President has promised to kick up the government spending into high gear once again.

But with what? And how?

It is no secret that France and most of the nations of the EU are flat out of money. So how is this brave new world of socialist Utopia going to be financed.

Rational people must always remember that a Socialist must never be inconvenienced with cold hard fact. They don't know what to do with it and appear as if they are catapulted into a state of panic--and denial--when faced with it.

The truth is the man has no idea about what to do, except to continue to run up deficits and debt, which is the core of the problem that has led Europe to the brink of economic annihilation.

And this brings us to the definition of insanity.

When I was working in healthcare as a psychiatric and addictions chaplain, I was introduced to the definition of insanity as taught by those who treat persons who find themselves held in the death grip of dependency on dangerous substances. And it is the best definition of the word I have ever come across.

Insanity is doing the very same thing over and over, and expecting a different result each time.

Ever since the worldwide depression of the 1930s, Europe has done the very same thing over and over. It's manner of dealing with human problems and suffering is to let government handle it. Thus, you increase spending, and then you increase taxes to pay for it.

Spend and tax, tax and spend.

And surprisingly, a nation can exist for many years this way. But the key is that there must be an adequate tax base to pay for the government social programs. That is, enough citizens must make enough money and prosper enough so that government can extract enough tax revenue from them to pay for the expansion of goods and services to the populace.

But this constant upward spiral of taxation has a tipping point. Former Reagan economist Arthur Laffer identified this tipping point in his pinpoint precise observation of the problem that many have coined as 'the Laffer curve.'

The crux of Laffer's understanding of economics is that there is direct correlation between available taxable income and the rate of taxation that government imposes on its citizens. The higher the rate of taxation, after the tipping point, the less available income the citizens have at their disposal, which inevitably leads to a decrease in tax revenues.

Thus, the higher the government places the tax rate the less revenue the government receives from the taxpayers, although to some the concept seems to defy logic.

Reagan proved that Laffer was correct during the early 1980s when tax rates were dramatically lowered for all citizens across the board. Interestingly, in spite of lower tax rates, overall government revenues went up.

Europe proved the truth of the Laffer curve long ago. Thus, each time governments raise the tax rates on citizens to pay for an expansion of social programs, the actual net revenue that government receives decreases. This only exacerbates the problem of deficit spending and debt.

The result is a downward spiral leading to recession, then depression, and then ultimate economic collapse.

France has already seen the deadly effects of this policy. But, as is the case with all addicts, the insanity has become systemic. The nation continues to do what it has always done, but it expects a different result this time. Thus, the new Socialist President will do nothing but lead the nation further into the abyss.

Barack Obama and the Democrats who have been in charge of Congress during much of the past 6 years are the identical image of European politicians such as the new French President. Reckless taxing and spending led to the problem. But their proposals for fixing the problem is MORE reckless taxing and spending. Insanity, perhaps?

But don't blame the politicians entirely. The citizens who keep sending these people back to Congress year after year are also insane. They are doing the same thing they've always done while expecting a different result each time.

Have you ever stopped long enough to actually read and consider the massive tax increases Americans are set to face next year?

When ObamaCare was approved in 2009 by a House and Senate that were both under the control of Democrats, they decided that raising the revenue for the program would be deferred until after the 2012 elections.

Thus, in 2013, taxpayers are going to be hit with massive, drastic increases in taxes that will boggle the mind, create untold hardship, and cripple an economy that is already teetering on the edge of collapse. But even that will not be enough to pay for the program which is estimated to cost over 2 trillion dollars when it is all said and done.

Obama and the Democrats hope that they will be able to gain enough seats in Congress, maybe even retake control of the House, to insure that the Bush tax cuts will be allowed to expire. So, with the expiration of those tax cuts, plus the tax increases that are inherent in the ObamaCare program, the average middle class family in America is going to be hit with a freight train of at least 2000 to 2500 bucks PER YEAR in tax increases.

Are you able to afford that in this depressed economy?

And herein is the dirty little secret that is hidden in the Laffer curve. When government places such a heavy tax burden on the middle class, more and more are forced into bankruptcy, foreclosure, and other financial problems that can greatly hamper their ability to make an adequate living. In short, people go under. And when people go under they no longer have the income that the government can tax. Tax revenues plummet in spite of the tax and spending increases, and this leads to dramatic spikes in deficits and debt.

And so, my fellow Americans, unless we get rid of this insane crowd that has invaded our government in Washington, we are facing a trainwreck in 2013.

Which would be better in your opinion? Bite the bullet and cut spending and taxes dramatically so that in a few years we can get America back on a sound financial footing again, even though it may mean short term pain and self-denial? Or continue spending and taxing ourselves into oblivion so we can pay for massive social programs, although that will mean a downward spiral into an economic abyss so severe that not only will there be massive untold suffering on the part of this generation but many generations to come, including that of your grandchildren and great grandchildren?

I suppose your answer depends on whether or not you are insane...


Gary said...

Two caveats to your thesis:
1) In the US, many of the people voting for socialists not only pay no taxes but actually are given money ("Earned" Income Credit) at tax time. Therefore, raising tax rates is not a negative for them. They are thus voting for their own self-interest (i.e. getting other people taxed more so they get more benefits).
2) Socialists always make it sound like only the rich are going to be taxed. However, the only group with enough money (in aggregate) to make a difference is the middle class. This is where the real tax burden falls but the politicians pretend that this isn't so. (As an aside, the wealthy that can flee France are already doing so according to reports I have read. The rich, a la Saverin, can get around or away from the taxes, the middle class cannot.
Ultimately, people vote for what appears to them is their own best interests. Unfortunately, as you point out, economics cannot be legislated and the socialists always end up pauperizing everyone by destroying the economy. However, the good news is that equality increases (except for the politicians who always exempt themselves from the poverty they create).

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