News

Why don’t governments cut spending during tough times?

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Check out this article from USA Today.

Excerpt:

Many states and cities coping with hard times are asking residents to open their wallets for the latest fashion in taxation — the temporary tax.

Governments are raising taxes for a specific period of time and promising the hikes will go away when good times return.

Some big temporary taxes:

•Arizona voters decide today whether to approve a three-year sales-tax hike. Republican Gov. Jan Brewer pushed to raise the sales tax from 5.6% to 6.6%, dedicating two-thirds of the new money for schools.

•Kansas hikes its sales tax July 1 from 5.3% to 6.3% for three years. The tax is designed to prevent cuts in education and social programs.

• Mobile, Ala., boosts its sales tax by 1 cent for 16 months starting June 1. The combined state and local rate will be 10%. Goal: avoid laying off police and firefighters.

A half-dozen other states are eyeing temporary taxes. So are many cities and counties, including King County, Wash., which includes Seattle.

Temporary taxes are phenomena seen during recessions, says Curtis Dubay, a tax expert at the conservative Heritage Foundation. “You don’t hear about temporary taxes when money is flowing into the coffers.”

The problem is that these taxes rarely go away, he says. “Once politicians get their hands on revenue, they won’t give it up,” he adds.

I noticed that Stan, a resident of Arizona, wrote about an alternative to temporary tax hikes in this post.

Excerpt:

Let’s see what the official 2010 budget says. Hmm. Well, they’ll be paying back $50 million in Federal Stimulus money. Odd. There is a line item for an additional $40 million in “new private prison beds”. Right … so our criminals are more comfortable. Got it. Interesting. There is a “Department of Racing”. Apparently the Department of Racing regulates the Arizona parimutuel horse and greyhound racing industry. Oh, now this is funny. The Department of Economic Security has a budget of $546 million. Perhaps we ought to fire them, eh? While we’re at it, perhaps we ought to take a real hard look at the Governorʹs Office of Strategic Planning and Budgeting and their $2 million. I’m thinking they’re not doing their job. Oh, I suppose there is no way around the $2 million we’re spending on the Board of Cosmetology. I mean, what could be more important to Arizonans than beauty treatments. Oh, yeah, we have to regulate that carefully. There’s another $4 million on a “Telecom for the Deaf Fund”. I know … that’s a good thing … but is it more important than public safety? Is that really the job of the government? And the fact that we’re spending more than $13 million on a “Department of Gaming” (with another $74 million to the Arizona State Lottery Commission) is troubling to me all on its own.

Allegedly something around 60% of our budget is already spent on schools and public safety and health care. Fine. But is anyone looking at what that money is going toward and how to cut waste? Trust me. There is lots of waste.

Overspending governments always market tax hikes as ways to say essential services or “compassionate” social programs. Why can’t they just cut some wasteful spending, instead? Is that so hard?

News

Hugo Chavez confiscates private property as Venezuelan economy declines

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Bad news from Investors Business Daily.

Excerpt:

Acting like Robert Mugabe on cocaine, Venezuela’s dictator went on a shopping spree over the weekend, confiscating one farm and industry after another.

[…]One taking stood out, however — a 370-acre ranch in Yaracuy state that grows oranges and coffee and raises cattle with 38 shareholding farm workers. The scenic property on an otherwise desolate stretch of highway is owned by Diego Arria, Venezuela’s former president of the U.N. Security Council. It’s been in his family since 1852.

Arria had spoken out against Chavez, so Chavez got personal. “If he wants to farm now, he will have to topple Chavez, because this now belongs to the revolution,” El Presidente pronounced.

Arria told IBD he’s been pressured for two years with acts of vandalism and the kidnapping of farmhands. A month ago, Chavista Ministry of Culture operatives approached him in Norway, demanding that he quit criticizing the Chavez regime. If he didn’t “play ball,” he’d lose the ranch, Arria was warned. “But I never negotiate with thugs,” he said.

Chavez’s red-shirts finally acted over the weekend, opening the farm to “the masses” in a show of class warfare. Chavista leaders from the National Institute of Lands headed first to Arria’s living quarters, rolling over his bed, pawing through his wife’s clothing and desecrating a chapel dedicated to the Arrias’ late daughter.

For their big photo spectacular, they hauled in 300 or 400 children to swim in Arria’s swimming pool, ride the ranch horses and tour the main house — encouraging the kids to take “souvenirs.” Chavez said it was all proof he was “socializing happiness.”

Business Week explains what happens when a socialist tyrant like Chavez destroys the right to private property and confiscate profits from business owners.

Fitch Ratings cut its Venezuelan economic growth forecast by more than half on concern this month’s currency devaluation will spur inflation and erode consumers’ purchasing power, said analyst Erich Arispe. Venezuela’s gross domestic product will expand about 0.7 percent this year, down from a previous forecast of about 2 percent, Arispe, who covers the Andean region for Fitch, said in a telephone interview from New York today. He estimates the South American nation’s economy shrank 2.5 percent in 2009.

[…]President Hugo Chavez has threatened to seize businesses that raise prices following the devaluation of the official exchange rate of as much as 50 percent. Trade Minister Eduardo Saman said yesterday the government began to expropriate six Hipermercado Exito stores after Chavez said the French-Colombian owned retailer broke the law by raising prices.

[…]Morgan Stanley said yesterday that Venezuela’s inflation rate will surge to 45 percent this year from 27 percent last year, which was the highest rate among 78 economies tracked by Bloomberg. A 45 percent increase in consumer prices would be the biggest since 1996.

[…]The devaluation comes at a time when Venezuela began rolling blackouts this month for two to four hours a day to save power as the worst drought in 50 years threatens to shut the nation’s biggest hydroelectric plant and collapse the power grid.

If you attack business like this, you lose jobs. Entrepreneurs shut their businesses down when they have to take losses because government inflates the currency. It’s madness. It’s like asking someone to make gold out of straw, and whipping them when they can’t. But that’s socialism. And Chavez isn’t any different from any other socialist. The whole system doesn’t work. And this is what you can see today in places like North Korea of Zimbabwe. Or Greece and Venezuela, if you like.

I have to post this picture of Obama and Chavez. You know the drill.

Hey Obama! I think there's a point when people who disagree with me have made enough money!

It’s coming.

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Commentary

What caused Silicon Valley companies to outsource jobs?

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Article from the center-right Manhattan Institute.  (H/T ECM)

Excerpt:

Silicon Valley faces a serious threat, however: the fiscal and regulatory earthquakes rocking California, which verges on becoming a failed state. Measured by per-household state and local government spending, California ranks third-highest in the nation, behind Alaska and New York. The state government is trying desperately to squeeze money out of any profitable activity to meet the crippling costs. Further, California continues to impose onerous regulations on the private sector. High taxes and stifling regulations give companies a strong incentive to move elsewhere. In this increasingly business-hostile environment, will Silicon Valley’s unique entrepreneurial spirit survive?

[…]California has piled every imaginable burden on businesses. Minimum-wage laws are among the highest in the country, and health and safety regulations are among the strictest; cities like San Francisco and San Jose require businesses to offer employees health insurance; labor laws are extremely union-friendly; environmental policies drive up energy costs—and on and on. Small firms have the toughest time in this business-toxic climate. A recent study by Sanjay Varshney, dean of the College of Business Administration at California State University in Sacramento, estimates that the cost of state regulations in 2007 reached an average of $134,122 per small business—the equivalent of one job lost per company. And it’s not just the small guys: Google, which uses colossal amounts of electricity, is building its data centers in other states or abroad, where energy is much cheaper.

Hank Nothhaft is the CEO of Tessera, a firm in the field of semiconductor miniaturization. He shows me the vacant office parks and empty lots around his company’s San Jose factory. Silicon Valley, he observes, lost more than a quarter of its computer, microchip, and communications-equipment manufacturing jobs from 2001 to 2008, and Tessera proved no exception. The company has kept some of its assembly lines and industrial operations going here, but it now produces two-thirds of its nanotechnology chips in less expensive North Carolina and in various countries overseas, with China becoming the latest contender for a production facility. Just back from a trip there, Nothhaft says that he has been offered terms he “cannot decently refuse.” Using the Internet and videoconferencing, he can manage Tessera factories around the globe without leaving his San Jose office. “The business environment is becoming awful in California,” Nothhaft complains—just by moving his headquarters to Nevada, he’d save $5 million a year in taxes.

I quoted the interesting part of the article above, the rest is just more details about the past, present and future of Silicon Valley.