Tag Archives: Big Government

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What causes Colombia’s economy to grow? What causes Venezuela’s economy to shrink?

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Political Map of South America
Political Map of South America

Would you like to have a growing economy? Then follow the lessons of Colombia.

Excerpt:

Colombia expects lower fiscal deficits in 2013 than in 2012, while economic growth is projected at 4.8 percent for both years, Finance Minister Juan Carlos Echeverry said on Thursday.

Latin America’s No. 4 oil producer has seen a strong recovery from the global economic crisis, recouping three investment-grade credit ratings and continuing to reap strong inflows in the mining and oil sectors.

Presenting the latest fiscal plan, Echeverry said the government had revised down the 2012 central government fiscal deficit target to 2.4 percent of gross domestic product from 2.8 percent previously, and the consolidated deficit to 1.2 percent of GDP from 1.8 percent. The consolidated deficit includes the central and regional governments.

The central government deficit target is seen at 2.2 percent of GDP in 2013, with the consolidated deficit at 1 percent.

“This fiscal plan is serious, reasonable, we’re not extracting liquidity from the economy, but injecting liquidity into the economy,” Echeverry told reporters.

The government expects the economy to grow 4.8 percent this year and next. Economic expansion was 5.9 percent in 2011, the fastest growth rate in four years, helped by high foreign investment and strong consumer spending growth.

Colombia has attracted billions of dollars in foreign direct investment over the past decade, mostly into the oil and mining sectors after U.S. military aid helped security forces deal crippling blows to leftist guerrillas and cocaine cartels.

Consumer prices have remained at steady levels in recent months, and economists expect 2012 annual inflation to fall within the central bank’s target of 2 percent to 4 percent.

The fiscal plan forecasts full-year inflation at 3 percent this year and next.

Under Obama, the United States has been running deficits of between 8-10% GDP. Revenue is the same as usual, but spending to reward reckless, irresponsible behavior has skyrocketed.

Would you like to avoid a shrinking economy? Then avoid the policies of Venezuela.

Excerpt:

Venezuela has devalued its currency, joining Iran, Argentina and others whose wars on math brought the same result. Some call this a “restorative.” It’s not. It’s what happens when big government hits a wall.

Venezuela’s monster 47% devaluation from 4.3 to 6.3 bolivars to the dollar, reportedly ordered by President Hugo Chavez from his hospital bed in Cuba, marks the reckoning for his regime’s big-spending ways in Venezuela’s low-growth economy.

[…]This devaluation is characteristic of all tyrannies, which benefit by effectively expropriating the savings of the private sector through monetary means rather than the more common thuggery.

Chavez’s meltdown is coming for the same reason devaluations are also shaking Argentina, which is undergoing a new fiscal disaster of its own, Egypt, which is going through a slo-mo devaluation that’s pushing up the price of food and prompted its Islamofascist rulers to actually urge people to eat less food, and Iran, whose madhouse economics has triggered hyperinflation.

It’s how dictators do business. This is Chavez’s sixth devaluation in the last decade of his big-spending power, following devaluations in 2002, 2003, 2004, 2005, 2010 and 2011. Every one of these devaluations inflates away some of his debts — but at the expense of the country’s savings and investment, which are snapped away through inflation.

What’s more, this devaluation, which was done to plug his deficit spending and prop up the state oil company, will only cover 60% of the country’s deficit, meaning more devaluations ahead this year, likely to take the bolivar to 8 by year end.

Venezuelan officials, predictably, claimed it was “good” as well as an “improvement” that protects the middle class against “speculators,” echoing the party line of establishment economists such as Joseph Stiglitz, former Bill Clinton adviser and chief economist of the International Monetary Fund, who in the past has called devaluations an economic ” restorative.”

Tell that to the panic buyers across Venezuela. There, terrified consumers who are buying goods ahead of expectations of soaring prices, while the poor have seen their life savings wiped out.

When Obama took office, a US dollar was worth over 1.20 Canadian. Today it’s worth about 98 cents. He has been devaluing the currency in order to pay for massive government spending. Private savings of individuals have been devalued, as a result. Inflation is a hidden tax on those who earn and save.

In the United States, we are doing the exact opposite of Colombia. We are embracing Venezuela policies, and expecting Colombia results. Why are we stupid enough to believe words instead of results? Socialism doesn’t work. Capitalism does work. We should choose what works.

News

Food stamp president: nearly 16 million more people getting food stamps since Obama’s election

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From CNS News.

Excerpt:

 Since taking office in 2009, food stamp rolls under President Barack Obama have risen to more than 47 million people in America, exceeding the population of Spain.

“Now is the time to act boldly and wisely – to not only revive this economy, but to build a new foundation for lasting prosperity,” said Obama during his first joint session address to Congress on Feb. 24, 2009.

Since then, the number of participants enrolled in food stamps, known as the Supplemental Assistance Nutrition Program (SNAP), has risen substantially.

When Obama entered office in January 2009 there were 31,939,110 Americans receiving food stamps.  As of November 2012—the most recent data available—there were 47,692,896Americans enrolled, an increase of 49.3 percent.

Not only are we borrowing trillions of dollars to pay for all these handouts, but being dependent on government is not good for people.

Arthur Brooks explains in the Wall Street Journal.

Excerpt:

Earned success means defining your future as you see fit and achieving that success on the basis of merit and hard work. It allows you to measure your life’s “profit” however you want, be it in money, making beautiful music, or helping people learn English. Earned success is at the root of American exceptionalism.

The link between earned success and life satisfaction is well established by researchers. The University of Chicago’s General Social Survey, for example, reveals that people who say they feel “very successful” or “completely successful” in their work lives are twice as likely to say they are very happy than people who feel “somewhat successful.” It doesn’t matter if they earn more or less income; the differences persist.

The opposite of earned success is “learned helplessness,” a term coined by Martin Seligman, the eminent psychologist at the University of Pennsylvania. It refers to what happens if rewards and punishments are not tied to merit: People simply give up and stop trying to succeed.

During experiments, Mr. Seligman observed that when people realized they were powerless to influence their circumstances, they would become depressed and had difficulty performing even ordinary tasks. In an interview in the New York Times, Mr. Seligman said: “We found that even when good things occurred that weren’t earned, like nickels coming out of slot machines, it did not increase people’s well-being. It produced helplessness. People gave up and became passive.”

Learned helplessness was what my wife and I observed then, and still do today, in social-democratic Spain. The recession, rigid labor markets, and excessive welfare spending have pushed unemployment to 24.4%, with youth joblessness over 50%. Nearly half of adults under 35 live with their parents. Unable to earn their success, Spaniards fight to keep unearned government benefits.

Meanwhile, their collective happiness—already relatively low—has withered. According to the nonprofit World Values Survey, 20% of Spaniards said they were “very happy” about their lives in 1981. This fell to 14% by 2007, even before the economic downturn.

If we really cared about people, we would give incentives to job creators (“the rich”) to create jobs for them. Earned success makes people happy.

News

The US postal service and Amtrak: which one will go bankrupt first?

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Will it be the USPS? (H/T Wes)

Excerpt:

Inspector general David Williams says cash-strapped service, saddled with debt and low revenues, is in ‘very serious trouble’.

The chief postal watchdog has warned that the troubled US Postal Service will go out of business this year unless Congress acts to rescue it.

David Williams, the inspector general of the USPS, says the service is in “very serious trouble”, after five years lumbered with heavy debt and falling revenues.

In an interview with the Guardian, Williams warns that Congress, which has been distracted by November’s elections and the fiscal cliff crisis, must act this year to save the service.

The USPS lost over $16bn last year, and has lost about $41bn over the past five years, according to Robert Taub, a vice-chairman of the Postal Regulatory Commission.

Or will it be Amtrak?

Excerpt:

Amtrak triumphantly proclaimed 2012 to be a success. The reason? It posted a loss of only $361 million for the year. That’s its smallest operating loss since 1975, amid growing ridership along the Northeast Corridor between Washington and Boston. Although this represents progress in the right direction, Amtrak is still not worth what it costs American taxpayers.

Amtrak has never been profitable. From its outset in 1971, it has been backed by taxpayers with billions of dollars in direct aid and loans. Over the past three years alone, Amtrak has received more than $4.4 billion in federal aid, and it still was not able to finish any of those years in the black.

[…]But after more than 40 years of government funding, $4.4 billion in aid over the past three years should be particularly disconcerting. Rail transportation is not becoming cheaper because of government investment in the market; to the contrary, the price has gone up, especially as compared with other major public works projects.

[…]Rather than successfully spurring on American business, Amtrak provides slower trains at higher prices. It is a symbol of government waste because it fails to make any progress toward self-sufficiency and fails to innovate.

It is time to admit this train has left the station. Amtrak cannot and will not be run efficiently with the backstop of government funding behind it. Someday, a public-private partnership on railroads could be in the American interest, as it has been in the past. But for Amtrak, the government should shut off the spigot.

Or will Obama just borrow a few more trillion from your children, so that his public sector supporters in USPS and Amtrak can continue to vote for socialism?

The funny thing about this is that we could sell these wasteful government-owned organizations and privatize their functions. Then we wouldn’t have to sink more and more taxpayer money in public sector boondoggles.