|
Townhall
Finance...
Governments are Never
Cheap
by Jeff Carter
Two editorials today are interesting when you cross pollinate them. One
is David Malpass piece on the Greek government. Governments want
austerity for everyone but themselves.
The Greek government has been practicing a particularly aggressive form
of antigrowth austerity. While the private sector shrank in 2011,
Greece’s government grew to 49.7% of GDP from 49.6% in 2010. To
accomplish this bad outcome, Greece’s government increased its
value-added tax to 23%—a hidden sales tax so high that no one should be
asked to pay it or support it—and created a national property tax that
transfers private-sector wealth to the government and through it to
foreign creditors.
Meanwhile, Greece’s parliament kept full pay, full benefits, its fleet
of BMWs, and a full staff. Greece maintained its sweetheart subsidies
for businesses, banks, the army and those who choose not to work. Its
sizeable delegations and facilities in Brussels, Vienna, Geneva and
Washington are still large, as are the life-time pensions for
politicians. Last week, Greek officials suspended work on the sale of
government assets, one of the most pro-growth conditions in its IMF
program.
Ironically, the US government, state and local governments follow the
path of the Greek government behavior. They raise taxes but under the
guise of Keynesian stimulus, don’t restrain themselves. Hiring
bureaucrats isn’t increasing productivity. In fact, you might say every
new bureaucrat hired decreases productivity because of all the extra
paperwork they will find for private companies to do.
Did you hear about Maryland?
Readers may recall that when Mr. O’Malley first raised taxes, in 2007,
he said he could balance the budget on the backs of the rich. That
didn’t work out so well. The number of millionaires fell sharply in the
state, whether because of the recession or because they sought tax
shelters or simply fled to lower-tax states. Revenues came in far below
projections, and the deficit forecast ballooned. (See “Millionaires Go
Missing,” May 26, 2009.)
So Mr. O’Malley is now going where the real money is—the middle class.
The highest state-local combined income tax rate will rise to 8.95%
from 8.7% and 7.95% when Mr. O’Malley became Governor, giving Maryland
one of the highest rates in the nation. About 300,000 Maryland filers
reported six-figure incomes last year
As Peter Wallison correctly chronicles, whenever government starts to
hire bureaucrats, make new regulations and rules, crony capitalism
ensues. Because of Dodd-Frank, the US is now contemplating designating
insurance companies as too big to fail. How do you think insurance
companies will act when they get the implicit backing of the federal
government? Do you remember Fannie Mae and Freddie Mac? They also just
approved the CME and ICE clearinghouses as too big to fail. Do you feel
comfortable having CME($CME) and ICE($ICE) able to run up and borrow at
the Fed window if there is a derivatives blow up? I don’t.
The idiots that disrupted CME’s shareholder meeting yesterday yelled
about CME getting a tax break from the state of Illinois. Dumb. They
should have been screaming to high heaven about the government
implicitly backing business activity they shouldn’t be involved in, and
don’t understand.
This is why we need less government involvement and less regulation.
They screw up economic incentives and bad things happen to taxpayers.
This is what Occupy Wall Street ought to be marching against. Instead,
they want bigger government to solve the problem of big government.
Dumb.
Until we get serious and eliminate entire government agencies and cut
employees, not much will change.
Read this and other articles at Townhall Finance
|
|
|
|
