Europe's Phony Growth Debate

The austerity vs. spending fight ignores essential reforms

Growth or austerity? That's the choice facing Europe these days—or so the Keynesian consensus keeps saying. According to this view, which has dominated world economic councils since the 2008 crisis began, "growth" is mainly a function of government spending.

Spend more and you're for growth, even if a country raises taxes to pay for the spending. But dare to cut spending as the Germans suggest, and you're for austerity and thus opposed to growth.

This is a nonsense debate that misconstrues the real sources of economic prosperity and helps explain Europe's current mess. The real debate ought to be over which policies best produce growth.

In the 1980s, the world learned (or so we thought) that the way out of the malaise of the 1970s were reforms that encourage private investment and risk-taking, labor mobility and flexibility, an end to price controls, tax rates that encouraged capital formation, and what the World Bank now broadly calls "the ease of doing business." Amid this crisis, Europe has tried everything except these policies.

If Reagan or Margaret Thatcher are too déclassé for Europeans to invoke, how about Germany? Throughout the 1990s and the first years of the last decade, Germany was Europe's hobbled giant, with consistently subpar growth rates and unemployment that in 2005 hit 11.3%, nearly at the top of the OECD chart.

Then-Chancellor Gerhard Schröder, a Social Democrat, surprised the world, to say nothing of his own voters, by pushing through the labor-market reforms that paved the way for the current relative prosperity. The changes cut welfare benefits and gave employers more flexibility in reaching agreement with their employees on working time and pay.

The Schröder government, and later the coalition under Angela Merkel, also cut federal corporate income taxes to 15% from 45% in 1998. Include state taxes, and the effective corporate rate today is close to 30%, down from 50% or more in the 1990s. These reforms made Germany more competitive, attracted investment and jobs, and paved the way for the country's economic resurgence and an unemployment rate currently at 5.7%.

Mrs. Merkel's government did the world an additional favor in 2009, amid the financial crisis, by rejecting calls from the International Monetary Fund, then British Prime Minister Gordon Brown, President Obama, Treasury Secretary Tim Geithner and the same dominant Keynesian consensus to join the global spending party.

"They've already pumped endless amounts of money into the economy," said German Finance Minister Wolfgang Schäuble in 2010 about U.S. policy. "The results are dismal." (See our March 12, 2009 editorial, "Old Europe Is Right on Stimulus.")

Germany's resurgence might have been even stronger if Mrs. Merkel and her coalition partners hadn't reneged on their tax-cutting campaign promises and raised VAT and other taxes in a bid to stay close to budget balance. Still, Europe is lucky that its largest economy remains strong and creditworthy.

Yet now Mrs. Merkel is widely berated for avoiding the policy errors that led to the debt crisis and for having the nerve to encourage other countries to emulate the reforms that worked in Germany. The Keynesians will never forgive the Germans for being right.

Another European spending spree is unsustainable in any case. As the nearby chart shows, debt levels have climbed dramatically across the developed world since the crisis began in 2008, and that debt and the current dreary recovery (or double-dip recessions) are all there is to show for the great Keynesian spending blowout.

Now bond yields are ticking back up in the euro zone's periphery economies, European stock indexes are stumbling, and much of the Continent is in recession. Adam Smith's bond vigilantes are telling European governments that without reforms that reduce spending and encourage more growth in the private economy, their countries are increasingly risky bets. As the smarter Germans understand, the bond markets may be the only lobby for genuine pro-growth reform that exists in most of Europe.

Other than an inflation that will create new problems and bring its own crisis, economic growth is the only way out of Europe's debt morass. But it has to be private growth driven by reforms in taxes, labor markets, regulation, pensions and more.

Europe's voters have already swept several governments from office, and they seem ready to sweep out more. But what really needs to be swept away is the dominant and debilitating consensus that government spending can conjure prosperity.

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Spineless Texas??

As you may have guessed, I'm speaking of the new fascist program the TSA is carrying out in Houston, goose-stepping about on busses, randomly stopping and interrogating people, and searching bags without a warrant or probable cause. Come on, Texas! What happened to you? When did you become the land of the pansies and the home of the blindly obedient?

 At the very least, every time one of those jackbooted, fascist dumbasses searches a bag without a warrant, without probably cause, and without the consent of the owner, the victim should get the name of the state mercenary, make public that that person is an unthinking fascist thug, and immediately file a Bivens action against him, for the obvious, intentional violation of the victim's Fourth Amendment rights. Maybe if the federal parasites had to spend lots of time, effort and money defending against a Bivens action every time they do this, they might think twice. (And I really hope whoever already had his bags searched does this.)

Personally, I think relying on "lawsuits" is far too nice. Putting up with blatant injustice, and then begging "government" puppets--the dress-wearing megalomaniacs who call themselves "the courts"--generally sickens me. If you need some "court" to tell you whether randomly searching people's bags is a violation of the Fourth Amendment, then you might as well drive yourself to the nearest prison, and volunteer yourself into custody.

If the jackboots can get away with this in Texas, what hope is there for the rest of the country? Just how blatant does this police state garbage have to get, before the people stop echoing the blatant lie that this is a free country? Remember seeing those old movies about Nazi Germany, where the thugs randomly stop and interrogate people, and search through their stuff? Well, now you can see it in full color and 3D! Just go to Houston!

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Leftist hate set to be hugely destructive

Fortunately, there is no chance of the proposal being enacted

US REPRESENTATIVE JIM MCGOVERN, a Worcester Democrat, generated some unwanted controversy two years ago when he publicly declared: "The Constitution is wrong."

The context was a discussion of campaign finance during a debate between McGovern and his Republican challenger, Marty Lamb. "A lot of the campaign-finance laws we've passed have been declared unconstitutional by the Supreme Court," McGovern said. "I think the Constitution is wrong. I don't think money … equals free speech. I don't think corporations should have the same equality as a regular voter."

Critics pounced, a minor storm erupted, and a day later McGovern took his words back. A slip of the tongue, he explained -- he'd meant to say "court decision," not "Constitution." His problem wasn't with the Bill of Rights, it was with the Supreme Court's ruling in Citizens United v. FEC, which restored the right of corporations to engage in political free speech.

But McGovern's problem, it turns out, is with the Bill of Rights. He objects to the way it safeguards fundamental rights -- such as freedom of speech, freedom of the press, and freedom to petition the government for redress of grievances -- not only when citizens act as lone individuals, but also when they unite as corporations in order to pool their assets and act more efficiently.

Like many on the left, McGovern has gone batty on the subject of "corporate personhood." This is a perfectly commonplace, centuries-old legal construct that makes it possible for individuals organized as a group to carry out their affairs effectively. Because corporations are legal "persons," for example, they can rent property without requiring the signature of every shareholder on every lease. They can be sued in court as single entities, without obliging plaintiffs to go after tens of thousands of individual defendants. They can be taxed. They can enter into contracts. They can register patents.

What infuriates many liberals is that corporations can also express political views, spending money to take sides in contested elections. "Corporations are not people," scowled McGovern at a Democratic forum last week. "They do not breathe. They do not have children. They do not die in war. They are artificial entities which we the people create and, as such, we govern them, not the other way around."

So the congressman proposes to strip corporations of all constitutional liberties and guarantees.

McGovern has introduced a "People's Rights Amendment," which would explicitly limit all rights protected by the Constitution to "natural persons." All "corporate entities," on the other hand, would be subject to any laws and regulations that lawmakers "deem reasonable." At last week's forum House Minority Leader Nancy Pelosi endorsed the crusade to exclude corporations from the Constitution's safeguards.

It is hard to overstate how radical and dangerous the People's Rights Amendment would be. It would overturn Citizens United, all right -- along with much of the freedom Americans have always taken for granted.

Under McGovern's proposal, corporations -- for-profit and nonprofit alike -- would have no more rights than legislators chose to give them. Congress could ban ExxonMobil and R.J. Reynolds from commenting on any public issue, and they would have no recourse to the First Amendment. But it isn't only Big Oil and Big Tobacco that could be censored with impunity. So could Planned Parenthood and the National Rifle Association. So could the American Red Cross, Habitat for Humanity, and the Museum of Fine Arts. So could innumerable universities, charities, churches, small businesses, and government watchdogs. And so, of course, could most newspapers, magazines, TV networks, and book publishers. Corporations of every kind would lose their constitutional defenses. Vast swaths of American life would be permanently vulnerable to the whims and vendettas of politicians.

And what is true of First Amendment rights would be true of all the others: Protection against unreasonable searches and seizures, due process under law, the right to trial by jury -- corporations could be stripped of them all.

McGovern and Pelosi may honestly imagine that mutilating the Constitution in this way will make American democracy more wholesome and less corrupt. What it would really do is empower the political class to a degree never before seen in our history. Far from reinvigorating the dream of the Founding Fathers, the People's Rights Amendment would transform it into a nightmare.

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Son of SOPA

I think the comments below do rightly point out a decline in privacy but it is only that.  And there's not much privacy in the internet age anyway. 


The information sharing will be voluntary so nobody would be obliged to hand over information to the government if they thought a refusal  would make them more trusted by their users.  


It has passed through the House anyway and is unlikely to be derailed in the Senate

Having failed earlier this year to foist an Orwellian kill switch on Internet free speech, Congress is now peddling a kinder, gentler piece of “cybersecurity legislation.” However, Washington’s latest attempt to play Big Brother on the Internet poses an equally clear and present danger to our fundamental liberties.

With the furor over the Stop Online Piracy Act having subsided, congressional leaders apparently are hoping that the ire of America’s burgeoning information freedom movement has been exhausted. They’re also hoping that the same coalition that successfully shot down the Piracy Act won’t notice the sinister outlines of its latest alphabet soup invasion - the Cyber Intelligence Sharing and Protection Act (CISPA). In fact, they’ve enlisted the help of heavy hitters such as Facebook and Microsoft in an effort to convince us that the Web is somehow on-board with this latest example of unchecked government intrusion into our private lives.

Nothing could be further from the truth.

The stated purpose of CISPA is to “allow elements of the intelligence community to share cyberthreat intelligence with private-sector entities and to encourage the sharing of such intelligence.” While the first part of that equation isn’t particularly problematic (law enforcement is a core function of government and should alert providers to criminal activity allegedly occurring within their networks), the “sharing” component of this legislation represents an insidiously expansive assault on liberty.

How expansive?

“CISPA would allow [Internet Service Providers], social networking sites, and anyone else handling Internet communications to monitor users and pass information to the government without any judicial oversight,” writes Rainey Reitman of the Electronic Frontier Foundation.

In other words, concepts such as “probable cause” or even “reasonable suspicion” would no longer apply.

What sort of information are we talking about, though? And who would be reviewing it?

According to the American Civil Liberties Union, this legislation “would give the government, including military spy agencies, unprecedented powers to snoop through people’s personal information - medical records, private emails, financial information - all without a warrant, proper oversight or limits.”

More HERE

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ELSEWHERE

Christie the prophet:  "New Jersey governor Chris Christie recently warned that America is in danger of becoming a country of 'people sitting on the couch waiting for their next government check.' Predictably, the Left was outraged, but Governor Christie wasn’t far off the mark."

A rare check on the ever-growing powers of law enforcement:  "
The Michigan Supreme Court says people can resist police officers who unlawfully enter their homes.  In a 5-2 decision, the court ordered that charges be dropped against Angel Moreno Junior, a western Michigan man who was accused of obstructing officers at his home in Holland. The officers were looking for someone and tried to enter the home without a warrant.  Lower courts had upheld charges of resisting police, based on a 2004 Supreme Court decision, but justices on Friday said that case was wrongly decided.  The opinion was written by Justice Diane Hathaway. She and two other Democrats on the court were joined by two Republican justices, a rare alliance."

Another triumph against bureaucracy:  "Labor Department withdraws farm child labor rule:  "Under pressure from farming advocates in rural communities, and following a report by The Daily Caller, the Obama administration withdrew a proposed rule Thursday that would have applied child labor laws to family farms. Critics complained that the regulation would have drastically changed the extent to which children could work on farms owned by family members. The U.S. Department of Labor cited public outcry as the reason for withdrawing the rule."

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My Twitter.com identity: jonjayray. I have deleted my Facebook page as I rarely access it. For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, GUN WATCH,  FOOD & HEALTH SKEPTIC,  AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena

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The Big Lie of the late 20th century was that Nazism was Rightist.  It was in fact typical of the Leftism of its day.  It was only to the Right of  Stalin's Communism.  The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)

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