RECOMMENDED READS: JACK HELLNER ON BUSH 41'S "VOODOO ECONOMICS".

Excellent piece by Jack Hellner over at American Thinker:

"Washington Post columnist Catherine Rampell, and many other supposed journalists, repeatedly write about economics as if they know what they are talking about. Problem is, they repeatedly show how ignorant they are.

Of all the things she could possibly say about the late President George H.W. Bush as his funeral goes on, she compliments the man for calling President Reagan’s tax cuts “Voodoo Economics." It's absurd. President George H.W. Bush fully embraced the Reagan Revolution as his loyal vice president and his legacy of greatness is at least partly connected to Reagan's.

But Rampell is still stuck on the campaign rhetoric of 1980, where Reagan and Bush competed for the Republican candidacy and Bush used the term 'voodoo economics' to unseat Reagan, something the voters didn't buy. Bush was apparently willing to forget about that, as he embraced being Reagan's running mate. But Rampell talks of that fleeting moment as if it were the only immutable truth. In the following column, Rampell says that it is crazy and ridiculous for anyone to claim that you could increase tax revenue by cutting taxes:



~ But Bush was end-of-an-era in another crucial way. He might well be the last Republican leader to acknowledge the fundamental fraud of Republican fiscal policy: that tax cuts do not pay for themselves.

Bush was referring to supply-side policies that claimed tax cuts for the rich would unleash so much growth they would generate enough revenue to fund themselves.



Characterizing Reaganomics as “voodoo” was colorful, yes, but it wasn’t crazy. Of course it was ridiculous to claim you could increase tax revenue by cutting taxes.

How little she remembers. The fact is, Ronald Reagan inherited an economic disaster when he came into office in 1981. We had double-digit inflation, double-digit interest rates and double-digit unemployment.

When Reagan took office, he along with Federal Reserve Chairman Paul Volcker worked to wring the double-digit inflation and double-digit interest rates out of the economy. That required double-digit interest-rate hikes and for awhile, it was bitter medicine. But he also worked to wring big government out of the economy. By 1984, he cut the top income tax rate from the punishing 70% to 28%. In fiscal year 1983, federal revenues were $601 billion. By fiscal 1989, they were $991 billion. I would say that all the people who do not acknowledge that Reagan’s supply-side, (or more derisively, 'trickle down' or 'voodoo') economics worked are the crazy ones. If not the liars.

The Bush II tax-cuts-and-government revenue example is even more recent, and possibly an even better example of supply economics at work. Rampell should be aware of that, too. Bush II inherited a recession and a collapsed stock market. In fiscal 2000, the government collected $2.03 trillion in revenues. For three straight years, revenues dropped, and by FY 2003, they were down to $1.72 trillion. Bush got his substantial tax cuts for individuals passed in May 2003 and by FY 2004 revenues were rising again. By FY 2007 they were up to $2.55 trillion. Revenues were up around 50% in four short years because of the tax cuts allowing people to keep more of the money they earned.

Why won’t Rampell and other stenographers report the truth instead of Democrat talking points?

Scroll over to 2018, which is the first year since 2005 that the U.S economy is expected to grow 3% for the year. It is not a coincidence that the results from both years occurred after substantial tax cuts. One of the best things President Trump and the Republicans did was to make the corporate tax cuts permanent to take out the uncertainty. They would have also made the individual tax cuts permanent except for the lack of support from any Democrats as the media, almost in unison, took the Democrats' position. If the Congressional Budget Office would just look at historical facts, they also wouldn’t have come up with the fictional $1.5 trillion "cost.""

While we are at it, here's some relevant theory:





... from the man himself:





There's nothing voodoo about it, just common sense.


MFBB.

RECOMMENDED VIDEOS: SOCIALISM IS THE CAUSE OF VENEZUELA'S ECONOMIC COLLAPSE.

A short but telling video of what caused the downfall of Venezuela's economy by libertarian journalist Nicholas Gillespie:





Just remember that Joseph Stiglitz, the Nobel Prize Winner for Economy 2001, who in 2007 heaped praise upon Hugo Chavez' economic model....





.... endorsed Hillary Clinton for President.



MFBB.

DUMB & DUMBER IN FRENCH IS SPELLED FRANCOIS HOLLANDE: FRANCE DROPS "MILLIONAIRE TAX".

Dumb & Dumber in French is spelled François Hollande. The supertax, originally meant for all Frenchmen and -women earning one million EUR, is going, not with a bang, but a whimper.


Via BizNews.com:

"...It beggars belief that with so much evidence on the outcomes, really dumb economic decisions keep getting repeated. But French socialist President Francois Hollande’s 75% supertax on high earners set a new high watermark for insanity – one definition of which is the act of repeating the exact same thing but expecting a different result. Economic realities have forced Hollande to quietly shelve the supertax. Too late, though, to assist his low popularity among the same voters who loved the idea when it was mooted ahead of his election.

By Eric RANDOLPH of Agence France-Presse

Once a flagship policy of French President Francois Hollande, the 75-percent “supertax” on top earners limps into its final weeks this month having sparked plenty of controversy but few economic results.

It was no surprise that the policy, which expires on February 1, would be quietly dropped: it was only ever slated to last two years and the Socialist government has for months declared it would not be renewed.

The tax had also been watered down until it was barely a shadow of the “exceptional contribution to solidarity” proclaimed by Hollande when he came to power in 2012.

France’s top court had declared as unconstitutional the original plan to levy the tax on all individuals earning one million euros ($1.2 million).

The government came back with a version that made companies pay the 75-percent rate only for the portion of employees’ salaries above the million-euro ceiling.

But by then, it had already become a symbol of France’s opposition to big business and attracted high-profile derision.

Actor Gerard Depardieu stormed out of the country in a huff over the tax and took up Russian citizenship in 2013. It was reported he only paid six-percent tax in his new home.

“I am leaving because you consider that success, creation, talent — anything different — must be punished,” he wrote at the time..."

And because it worked SO WELL in France, the Belgian Parti Socialiste is now proposing... a millionaire tax too!!! Granted, the levy would be less. So let's call them instead of dumb just a little bit short on furniture in the attic.



MFBB.

RECOMMENDED READS: JEFFREY FOLKS ON OBAMA'S "ENERGIEWENDE".

Dang. Barely have I put up a modest post about the economical and financial disaster that is Germany's so-called 'Energiewende', or there's an insightful article from Jeffrey Folks over at American Thinker, regarding Obama using the same flawed arguments to strive for green energy which led to Germany's disastrous experiment with (especially) wind and solar:

"President Obama has committed the U.S. to a 26% to 28% reduction in carbon emissions from 2005 levels by the year 2025. Is a reduction of that magnitude workable? The German experience with energiewende (“energy transition”) proves that it is not.

Having already begun its costly phase-out of nuclear power, Germany plans to rely on renewable sources for more than 35% of its needs by 2020 and 80% by 2050. The country is now more dependent on wind and solar to power its large industrial economy than ever. The result has been a colossal disaster.

German customers, both residential and commercial, pay twice what Americans pay for electricity. As higher energy costs filter through the economy, German industry is no longer expanding, consumers are purchasing fewer consumer goods, and job growth is stagnant. This is a recipe for national decline.

Germany’s GDP declined by .6% in the second quarter of 2014. In the third quarter, German GDP increased by just .1%, below that of the EU overall. The real problem is not so much current growth, or lack of it, but future growth as the cost of renewables sinks in. Anticipating this cost, German industry has cut domestic capital investment and shifted jobs overseas. According to a recent report, German capital investment fell by .9% in the third quarter of 2014. Capital investment is among the most reliable indicators of future economic growth.

The irony is that as Germany and other countries shift to renewable fuels to combat global warming, global temperatures show no sign of warming. Even if they did, Germany’s contribution to warming would be a fraction of one degree over the next century. Germany produces only 2% of global greenhouse gases. With an IPCC consensus of 3 degrees Celsius warming by 2100, and with man-made warming supposedly accounting for 40% of that, Germany’s contribution would be .024 degrees. Given the proven inaccuracy of IPCC forecasts in the past, Germany’s contribution to warming would likely be less than .024 degree or even zero. Is it worth impoverishing a nation, punishing retirees on fixed incomes, and forever dashing the hopes of a generation of young job seekers just to make an ideological point?




Compared to the U.S., which relies on fossil fuels and nuclear for 90% of its electricity needs, Germany derives less than 80% from fossil and nuclear, and it has been rapidly moving away from both (with nuclear to be phased out by 2022). As costs mount, business investment is fleeing Germany.

The recent decline of oil prices, along with sustained low prices for natural gas, makes Germany’s energy transition seem all the more doubtful. Germans pay 35 cents per kilowatt hour of electricity. Why not pay 12 cents, as Americans do?

The price differential between renewables and natural gas is even more compelling. With an import price just under $9 per mBtu, German electricity prices should be closer to 25 cents per kWh. And with the prospect of U.S. gas exports beginning in 2015, the European import price could decline further. A 43% cut in electricity prices, from 35 cents to a potential 20 cents, would revive growth in the German economy and in the EU as a whole. All that’s necessary is for Germany to abandon the energiewende and embrace clean fuels like natural gas and clean coal as the solution to its energy needs.

Fortunately, a light bulb seems to have been turned on among German lawmakers, who in June 2014 voted to curb future subsidies for renewables. The plan, which calls for a clawback of up to 40% of subsidies from future clean-energy producers, should slow the conversion to wind and solar, and may eventually rescue the German economy from some of the ruinous cost of renewables.

Yet just as Germany retreats from wind and solar, Obama is committing America to a renewables program that sounds a lot like the failed German experiment. Obama’s climate deal with Chinese Premier Xi calls for a 26 to 28% cut in U.S. carbon emissions from 2005 levels by 2025. What did Obama get in return for this toxic pledge? A promise that China would begin cutting emissions by 2030—but by no more than they are already likely to be cut.




That doesn’t sound like much of a deal. The only thing Obama got in return is a bundle of cash from well-heeled environmental donors. That cash might help the Democratic Party in future elections, but the China deal will harm ordinary American workers for decades to come...."

Readers should not get me wrong. I do think that there is what I would call a substantial niche market for wind and solar power. In locations benefiting from relatively constant and predictable wind fluxes, windfarms might be an option. In the same manner, for certain localized industrial applications in regions with lots of sunshine solar furnaces, as pioneered by France's Odeillo plant, might be a solution for a.) cheap energy and b.) reducing the need for conventionally generated power. The same goes for small relatively isolated communities awash in sunlight: there solar power towers, like Spain's PS10 might be an attractive alternative. Hydropower and tidal power: same story. And I do believe that it makes great sense to ASAP develop technically sound electric cars - for them to be there by the time real alternative energy arrives.

But politicians and the media should be honest in acknowledging that wind and solar will NEVER be able (unless some efficient means to store the generated power is developed, which I doubt very much) to substitute for the massive energy provided by power plants using fossil fuel and nuclear power. To strive to do so with arguments rotating around the CO2-"threat" is a second lie.

Humanity's energy needs can only be solved adequately, and in the long term, through fusion. Until that arrives, we simply have to rely on the current means of production - and Earth can certainly take a few more decades of CO2-"pollution" augmented by nuclear power (with, in the latter field, a gradual shift from U235 fuel to thorium).


MFBB.

BILL WHITTLE ON CHINA "SURPASSING" THE US ECONOMY.

I wrote "surpassing" because that's only if you adjust for purchasing power in both countries, using the so-called PPP metric (Purchasing Power Parity). In that case, according to the IMF, China will have a PPP-relative GDP of 17.632 Trillion dollars, whereas the US's will be 17.416 trillion. Not adjusted for PPP, there's still a big chasm between the two countries, as all people with a healthy, no-nonsense gut feeling about economy will suspect. But still, the evolution is undeniable...




... as well as unavoidable, since China's economy is becoming more free market, more capitalistic by the day, whereas the US economy is becoming ever more regulatory, more socialistic.

The goon in the WH promised change, and Americans are getting change indeed.


MFBB.

SWELL: LOW OIL PRICES HURTING OPEC.

Outlaw Mike & family stay warm through the winter with heating oil, since we're too far out in the country to have natural gas mains near our home and besides, I don't like gas. For Americanos, by gas I mean methane of course, not petrol.

We have but a 2,000 litre tank under the lawn in front of our house, but still we need to fill it only twice a year, in February and November.

Last February I paid around 1,700 EUR for some 2,000 litres. Cripes.

Then last week when my wife woke me up saying I'd have to wash with cold water Outlaw Mike feared he would have to scrape the bottom of the money barrel again.

But no - imagine my surprise when my supplier left an invoice of only 1367 or so EUR for 1,935 litres! Well, okay, it's not that a boon of around 350 euros suddenly makes a world of difference. For the Clintons it might, poor bastards that they are.

But that don't mean we can throw with it either, so that little extra was more than welcome.


The Telegraph's Jeremy Warner has some thoughts. Happy thoughts:

"...For big oil-consuming regions – America, Europe and Asia – the collapse in the price is a boon, which ought to provide a substantial stimulus to economies becalmed by deficient demand. In both Britain and the US, there is already evidence that lower fuel prices are helping to boost consumer spending and confidence.

Yet for many oil exporters, it is a disaster. Ever since the Arab Spring, there has been an unwritten understanding that the price required to keep the natives quiescent is $100 a barrel or higher. The benchmark for Brent crude is now down to $71, with every possibility, given the abundant supply, of it going as low as $50.

For a low-cost producer like Saudi Arabia, with its huge financial cushion of overseas assets to fall back on, this may just about be tolerable, at least for a while. For many others, it’s a living nightmare with massive domestic and geopolitical implications.

We shouldn’t mourn that much. Ever since its foundation back in the Sixties, Opec has been a brutally destructive force on the global stage, whose malign grip on oil prices has helped sustain some particularly unsavoury regimes. The best analogy I can think of for its influence is that it is a bit like having your interest rate policy set by a small caucus of self-centred outsiders, who pay little or no regard to wider economic needs.

....

This monstrous cartel, an organisation which in any other line of business would be hunted down and prosecuted, may now be about to get its comeuppance. By ensuring that the price stayed above $100 a barrel for much of the past six or seven years, Opec has sowed the seeds of its own destruction. Those sky-high oil prices are one of the reasons why the global economy has been struggling. There is even quite a bit of evidence to suggest they were a key factor in tipping the world into crisis in the first place.

The effect on the oil market has been both to depress demand, while at the same time encouraging the development of other, non-Opec sources of production – the most striking example of which is American shale. There is a sense in which Opec's hubris has created its own nemesis. This is not unlike what happened after the oil price shocks of the Seventies, when by hiking up the price, Opec similarly pole-axed demand and spawned a worldwide search for alternative sources of energy supply, including Britain’s North Sea. Opec lost market share on a hitherto unprecedented scale amid the consequent glut.

....

Admittedly, some big growth markets remain – notably China, where new car sales are running at around 1.5 million a month. There’s life in the black stuff yet. Even so, the once-fashionable idea of “peak oil” – that the petroleum would run out before we’d found alternatives, or at least that the low-cost supply was close to exhaustion, leaving the world dependent on much more expensive sources – looks ever more misplaced.

I’m not saying that the oil price will never again get much above $80 a barrel. Inevitably it will. There are, no doubt, at least another couple of cycles left in the oil market yet. Hydrocarbon consumption still accounts for around a tenth of global GDP, and much of the rest of it owes its existence to the transformative power of oil. It will be many decades before the world frees itself of this dependence.

All the same, oil is steadily losing its power to shock – and so are Opec and its Bedouin masters. This is an overwhelmingly positive development, and in a gloom-ridden world, a matter for some celebration."

Mr Warner is right. By keeping prices so high for so long, OPEC has shot itself in the foot, spurring the West to look for alternatives. A considerable effort has of course gone to false leads, like solar and wind power. Don't get me wrong - there IS a niche for these things, but they can never substitute for the substantial demands of our industry and infrastructure.

However, part of the search for an alternative to OPEC oil has ultimately led to the exploitation of shale oil. And now that we have discovered its abundancy, and developed a technology to extract it - fracking - there's no stopping it anymore.

This is very good news. Of course, the lower oil prices are a bad thing for the couple of decent OPEC members; Ecuador, Nigeria. As for the rest, I couldn't care less. Finally, there's payback for four decades of being in the claws, energy-wise, of deranged Arabs who f*cked up our economies for the first time in 1973-74 because those monsters were unable to live in peace with a small prodigious country harming no-one: Israel. From the US over Europe to Japan, we all had to pay dearly for the malignant whims of the oil sheikhs. Degenerated religious idiots who were themselves incapable of extracting the very oil they were sitting on. They needed western intelligence, engineering and management to produce their riches, and what did they do with it? Finance the spreading of their hateful islamic message throughout the world. That barbaric appeal was directly responsible for decades of terror, culminating in 2001 in two airliners plunging themselves in the WTC, their tanks full of dearly paid kerosene.



Payback time!


Of course this evolution will not lead to an immediate collapse of the Saudis & Co. Like Mr Warner observes, global demand is bound to increase, spurred by China and other major countries taking off. To paraphrase Winston Churchill, this is not the end. It's not even the beginning of the end.

But the West, and especially the US, finally being able to provide for its energy needs without having to beg degenerated terrorism sponsors - that's certainly the end of the beginning. A matter for celebration, certainly.


MFBB.

DON BOUDREAUX AND THE AMAZING HOCKEY STICK OF ECONOMIC PROGRESS.

Over at Townhall, Daniel J. Mitchell has an interesting story about human economic prowess thrives when the constraints of the state are lifted: The amazing hockey stick of economic progress:

"The moral of the story is that poverty is, or at least was, the natural state of humanity.

But then something remarkable happened. The power of government was constrained and the vitality of markets was unleashed. The rest, as they say, is history."

Watch this short, well-done video by Don Boudreaux, economics professor. Of the Austrian School, that is:




Prof Boudreaux has a PhD in economics from Auburn University and a law degree from the University of Virginia School of Law. He was also an Assistant Professor of Economics at George Mason University.

Yes, he is a libertarian. I'm not. I don't believe in a skeleton state. But the world would be a far better place if the number of Krugmans were decimated and the number of Boudreaux doubled. Make that tripled.




MFBB.

BILL WHITTLE ON THE AFTERBURNER: AEROSPACE PRODIGY XCOR INVESTING IN TEXAS RATHER THAN IN CALIFORNIA. GUESS WHY?

A video I highly recommend:



So XCOR, a young and dynamic aerospace company, currently developing the Lynx, a small suborbital mini-shuttle that's reusable and can function as a small freighter and a test platform, will expand, not in its home state California, but in Texas.

The reason? California has become a socialist state.

And don't contradict me. As a European, I recognize a socialist state when I see one.

GO FOR IT XCOR!!

MFBB.

BEING RIGHT FOR DUMMIES.

For starters, check out this Bill Whittle video. Watch your back for the Thought Police.





Hat tip CDR Salamander.


Then - who would have thunk it? - a European Central Bank study has come to the conclusion that too much government spending undermines a country's economic performance:

Europe is in the midst of a fiscal crisis caused by too much government spending, yet many of the continent’s politicians want the European Central Bank to purchase the dodgy debt of reckless welfare states such as Spain, Italy, Greece, and Portugal in order to prop up these big government policies.

So it’s especially noteworthy that economists at the European Central Bank have just produced a study showing that government spending is unambiguously harmful to economic performance. Here is a brief description of the key findings.

…we analyse a wide set of 108 countries composed of both developed and emerging and developing countries, using a long time span running from 1970-2008, and employing different proxies for government size… Our results show a significant negative effect of the size of government on growth. …Interestingly, government consumption is consistently detrimental to output growth irrespective of the country sample considered (OECD, emerging and developing countries).

There are two very interesting takeaways from this new research. First, the evidence shows that the problem is government spending, and that problem exists regardless of whether the budget is financed by taxes or borrowing. Unfortunately, too many supposedly conservative policy makers fail to grasp this key distinction and mistakenly focus on the symptom (deficits) rather than the underlying disease (big government).

The second key takeaway is that Europe’s corrupt political elite is engaging in a classic case of Mitchell’s Law, which is when one bad government policy is used to justify another bad government policy. In this case, they undermined prosperity by recklessly increasing the burden of government spending, and they’re now using the resulting fiscal crisis as an excuse to promote inflationary monetary policy by the European Central Bank.

The ECB study, by contrast, shows that the only good answer is to reduce the burden of the public sector. Moreover, the research also has a discussion of the growth-maximizing size of government.

… economic progress is limited when government is zero percent of the economy (absence of rule of law, property rights, etc.), but also when it is closer to 100 percent (the law of diminishing returns operates in addition to, e.g., increased taxation required to finance the government’s growing burden – which has adverse effects on human economic behaviour, namely on consumption decisions).

Cato@Liberty has the goods. Hat tip Barcepundit.

Of course, over here at DowneastBlog we don't need expensive ECB research to know that.


MFBB.

THE ECONOMIST ON BIG GOVERNMENT.

All week long I've been wanting to do a small post regarding an article regular reader Mark formerly from Colorado (and before that from California) linked to in the comments section. Well, it's half past midnight here, it's snowing, my latest Koontz book (The Darkest Evening Of The Year) is out, lovemaking Demand and Supply Economics was yesterday, and tomorrow night is Saturday Music Night so if there's got to be a time to do that post it's now.

Would it be asked too much - providing you have time, of course - to read the article first? It's from The Economist and it deals with the ever growing role of the state. I do not agree with everything, and I have my issues with The Economist (they backed Obama for God's sake, which makes me smarter than them) but all in all it's a good read.

When I still have your attention we could walk quickly back over it, and I got a few quick points to make. Your remarks are welcome. Here goes:

"...IN THE aftermath of the Senate election in Massachusetts, the focus of attention is inevitably on what it means for Barack Obama. The impact on the Democratic president of the loss of the late Ted Kennedy’s seat to the Republicans will, no doubt, be significant (see article). Yet the result could be remembered as a message more profound than the disparate mutterings of a grumpy electorate that has lost faith in its leader—as a growl of hostility to the rising power of the state. America’s most vibrant political force at the moment is the anti-tax tea-party movement. Even in leftish Massachusetts people are worried that Mr Obama’s spending splurge, notably his still-unpassed health-care bill, will send the deficit soaring."

I tend to agree. I must say that I was actually flabbergasted at the Tea Party phenomenon, the motivation of which seems to be a genuinely intellectual one, a deliberate rejection of too much state power. Why do I use the word intellectual? Because , judging by the boards and slogans carried, the mere emergence of the tea parties nationwide was an ideological mass statement, and something ideological is in se intellectual. When people take to the streets in Europe, they do so either for very emotional reasons (e.g. they hold pathetic silent marches to condemn this or that heinous crime committed against children) or they do it for jobs, wages and pensions, in other words for simple basic things. There's of course nothing wrong with that, but in essence it's something on the intellectual level of a toddler: me hungry, must have food. How one achieves what they want, whether it's safe jobs, raised wages, or secure pensions, Europeans don't bother about. And they wouldn't understand it either. Now, you can argue that ultimately the Tea Partiers also want those same things, and that's only normal. But there's a reasoning behind their demands: they send the message they want job security and decent health care but NOT with more state. They not only demand something, they ask it be not done in this or that particular way.

I must say I was very, very impressed by this outburst of concerned, intellectually committed citizenship. Here is a people that recognizes bullshit when it smells it. Not so in Europe, where, oh irony! far too many people [not a majority, thank God] call Americans dumb!

The immediate reason for the rise of the state is the financial crisis. Governments have spent trillions propping up banks and staving off depression. In some countries they now play a large role in the financial sector; and thanks to bail-outs, stimulus and recession, the proportion of GDP made up by state spending and public deficits has rocketed. But the rise of Leviathan is a much longer and broader story (see article). Long before AIG and Northern Rock ended up in state custody, government had been growing rapidly. That was especially true in Britain and America, the two countries in which “the end of big government” had been declared in the 1990s. George Bush pushed up spending more than any president since Lyndon Johnson. Britain’s initially frugal Labour government went on a splurge: the state’s share of GDP has risen from 37% in 2000 to 48% in 2008 to 52% now. In swathes of northern Britain the state now accounts for a bigger share of the economy than it did in communist countries in the old eastern bloc.

Apart from saying again that I tend to agree, I have little to add. The statement about Bush may or may not be true. If a reader can come up with material backing that claim up, that would be very appreciated.

"Demography is set to push state spending up further. Ageing populations will consume ever more public health care and ever bigger pensions. Unless somebody takes an axe to them, entitlements will consume a fifth of America’s GDP in 15 years, compared with 9% now."

Again, a correct assessment. Paradoxically, democracies are at greater risk of becoming unmanageable because there is a very real danger that simply because it has become the biggest voting bloc, pensioners will find themselves in a position, in the foreseeable future, where they might veto any measure the state deems necessary to survive financially. It's a Catch 22 situation. Put in simple terms, a state might be forced to contemplate cutting pensions to be able to keep working the state machinery, including its many and various responsibilities that are not directly related to the elderly (education e.g.). But the Grey Panthers might, twenty years from now, be in a position to block such a move. The end result will of course be that the state will head for financial ruin, after which it will not be able to ... pay pensions at all. It's a conundrum, and one that can possibly only be avoided by adapting different pension systems, e.g. the Pinera system born in Pinochet's Chile, and/or spurring people to take more care of themselves with fiscally attractive pension saving schemes.

"Rising government spending is not the only manifestation of growing state power. The spread of regulation is another. Conservatives tend to blame the growing thicket of rules on unwanted supranational bodies, such as the European Union, and on the ever growing industry of public-sector busybodies who supervise matters like diversity and health and safety. They have a point. But voters, including right-wing ones, often demand more state intrusion: witness the “wars” on terror and drugs, or the spread of CCTV cameras."

Okay for the CCTV cameras, which are an intrusion in our private lives straight out of 1984. Not okay for the War On Terror or the War On Drugs. A state should, and must, have the monopoly for the use of violence. When the state is attacked militarily, it must respond in force. Defeating the enemy is the prime objective. Winning World War II placed the US in a budgetary nightmare of unfathomable proportions. But in a losing situation, I assume that few would have consoled themselves by arguing that at least they had adhered to a sound principle like staying out of the red.

"A further danger consists in equating “smaller” with “better”. As the horrors in Haiti demonstrate, countries need a state of a certain size to work at all; and more government can be good."

Agree. A well-functioning state IS a necessity. If that implies a relatively impressive size, so be it. However sympathetic I might be, intellectually, vis-à-vis libertarianism, I often consider it as a concept that's as outworldish as communism. I do not believe in a skeleton state. Sanitary conditions in seventeenth century London only improved when the town authorities levied taxes, giving them the financial means to process human waste in a hygienic and healthy way. And as appalling as Saddam Hussein's state was, its dissolution in 2003 led to an unforeseen chaos. In my own country, the state has created financial backup organizations that have effectively helped key industries to grow. A state is not inefficient per se. There's got to be a state of a certain size. What size? I don't know. You might want to study Dick Armey's findings.

"In these circumstances, hard rules make little sense. But prejudices are still useful—and this newspaper’s prejudice is to look for ways to make the state smaller. That is partly for philosophical reasons: we prefer to give power to individuals, rather than to governments. But pragmatism also comes into it: there is so much pressure on the state to grow (bureaucrats building empires, politicians buying votes, public-sector workers voting for governments that promise bigger budgets for the public sector) that merely limiting the state to its current size means finding cuts."

What else can I say than that I agree?

"And cuts can be found. In the corporate world, slimming a workforce by a tenth is standard fare. There’s no reason why governments should not do that too, when it’s needed. Sweden and Canada managed it, and remained pleasant countries with effective public services. Public-sector pay can be cut, given how secure jobs are: in both America and Britain public-sector workers are on average now paid more than private-sector ones. Public-sector pensions are far too generous, in comparison with shrunken private-sector ones. Entitlements can be cut back, most obviously by raising pensionable ages. And the world might well be a greener, more prosperous place if the West’s various agricultural departments disappeared."

Ditto.


Nite, thank you for your attention. Tomorrow some lighter stuff.



MFBB.