The further to the left or the right you move, the more your lens on life distorts.

Saturday, July 04, 2015

Detroit, Greece, and Puerto Rico

Under the big government policies of Barack Obama and the entire Democratic party, our economic woes grow every month. Obama's trained hamster's in the media trumpet a supposed 5.3 percent "unemployment rate," but downplay or omit the fact that the labor participation rate in the United States (the percentage of people who are actually working) is at the lowest level in over 40 years! The national accounting of debt has remained unreported for almost six months—an ominous sign. The last accurate numbers we had indicated that the debt at somewhere north of $18 trillion, growing at a rate of $500 million each day! Government entitlements are grossly under funded, with Medicare projected to run out of money in the next decade. Social welfare programs are growing at an unprededented rate. No meaningful reform has been proposed by this president or his party.

And with all of this, Barack Obama, Hillary Clinton, Bernie Sanders and company rail against "income inequality" (their favorite class warfare meme), as if redistribution would magically solve the problems noted in the first paragraph. In the fantasy world of progressives, it's all about somehow getting ever more money from the "rich," regardless of the consequences (for example, Sanders, a hard-core socialist, has advocated a 90% tax rate). The government has to grow ever larger, ever more intrusive and ever more powerful—just as long as progressives control the government.

The problem is that progressives have controlled the government for over six years and things continue to get progressively worse.

It's interesting. Detroit, Greece, and Puerto Rico are in different countries, speak different languages, and have different politicians, and yet all suffer from the same malady—irresponsible spending, unsustainable public sector pensions, high local taxes, frighteningly high unemployment, intrusive government regulation, all resulting in a downward spiral toward bankruptcy. All are poster children for the big government ideology that Democrats espouse.

Here's The New York Times (a true friend of Barack Obama and the Democrats) describing Puerto Rico:
Before long, Puerto Ricans will face more tax increases — the next one is in October. Next on the list of anticipated measures, these for government workers, are fewer vacations, overtime hours and paid sick days. Others in Puerto Rico may face cuts in health care benefits and even bus routes, all changes that economic advisers say should be made to jump-start the economy.

People ricochet from anger to resignation back to anger again. Along San Juan’s colonial-era streets, in homes and shops, Puerto Ricans blame the government for the economic debacle. Election after election, they say, political leaders took the easy way out, spending more than they had, borrowing to prop up the budget, pointing fingers at one another and failing to own up to reality.
Hmmm. Reality. What an interesting concept. The reality is that Detroit, Greece and Puerto Rico are canaries in the coal mine. Each represents a failure of big government and progressive policies, yet somehow, progressives want to double down on those failed policies. If only the meany GOP would spend more taxpayer dollars (derived from an ever-shrinking pool of taxpayers) everything would be alright. Yeah, that's the ticket—more spending, bigger government—no matter what.

The Wall Street Journal provides additional background on Puerto Rico's predicament:
Puerto Rico’s economy has been contracting for nearly a decade, and employment has shrunk by 14% since 2005. Its 12.4% jobless rate would be higher if not for its astonishing 40% labor participation rate, compared to 63% nationwide. The island’s population has declined by roughly 300,000 in a decade as young people flee to the mainland, where they can work as U.S. residents.

For those who stay, rich welfare benefits provide a disincentive to work. A household of three can receive $1,743 per month in food stamps, Medicaid, utility subsidies and welfare compared to minimum-wage take-home pay of $1,159. Employers are required to provide 15 days of vacation and 12 sick days annually and a $600 Christmas bonus. Government employees make up a quarter of the island’s workforce.

To pay for all this, politicians have borrowed and taxed to the limit. Public debt has tripled since 2000 and exceeds 100% of gross national product. In 2006 the territory instituted a 7% sales tax, which this year was raised to 11.5% and next year will become a value-added tax. Since 2013 Mr. Padilla Garcia has raised the petroleum tax to $15.50 from $3 per barrel, imposed a 1% tax on insurance premiums and the gross income of financial institutions, and increased sewage rates by 60%.
Like all good progressives, Puerto Rican (or Greek or Detroit) politicians have chosen to tax and spend their way to ruin. It hasn't worked out very well for their constituents.

The disturbing reality is that if the Democrats maintain leadership control of the United States after 2016, taxing and spending will accelerate to ruinous levels. As a consequence, it won't work out every well for any of us.