Five Lessons for America from the European Fiscal Crisis
by Dan MitchellI’ve written about the fiscal implosion in Europe and warned that America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and Medicaid.
But this new video from the Center for Freedom and Prosperity, narrated by an Italian student and former Cato Institute intern, may be the best explanation of what went wrong in Europe and what should happen in the United States to avoid a similar meltdown.
I particularly like the five lessons she identifies.
1. Higher taxes lead to higher spending, not lower deficits. Miss Morandotti looks at the evidence from Europe and shows that politicians almost always claim that higher taxes will be used to reduce red ink, but the inevitable result is bigger government. This is a lesson that gullible Republicans need to learn – especially since some of them want to acquiesce to a tax hike as part of the “Supercommitee” negotiations.
2. A value-added tax would be a disaster. This was music to my ears since I have repeatedly warned that the statists won’t be able to impose a European-style welfare state in the United States without first imposing this European-style money machine for big government.
3. A welfare state cripples the human spirit. This was the point eloquently made by Hadley Heath of the Independent Women’s Forum in a recent video.
4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing. Indeed, Miss Morandotti drew these two cartoons showing how the welfare state inevitably leads to fiscal collapse.
5. Bailouts don’t work. This also was a powerful lesson. Imagine how much better things would be in Europe if Greece never received an initial bailout. Much less money would have been flushed down the toilet and this tough-love approach would have sent a very positive message to nations such as Portugal, Italy, and Spain about the danger of continued excessive spending.
If I were doing this video, I would have added one more message. If nations want a return to fiscal sanity, they need to follow “Mitchell’s Golden Rule,” which simply states that the private sector should grow faster than the government.
This rule is not overly demanding (spending actually should be substantially cut, including elimination of departments such as HUD, Transportation, Education, Agriculture, etc), but if maintained over a lengthy period will eliminate all red ink. More importantly, it will reduce the burden of government spending relative to the productive sector of the economy.
Unfortunately, the politicians have done precisely the wrong thing during the Bush-Obama spending binge. Government has grown faster than the private sector. This is why this new video is so timely. Europe is collapsing before our eyes, yet the political elite in Washington think it’s okay to maintain business-as-usual policies.
Please share widely…before it’s too late.
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57 Comments
We need a government like the one Italy has now. No politicians.
All people have to do is look at the last 10 yrs and they will see exactly what is being said is true. Our politicians will continue to spend as much as possible because it is not their money they are spending, it is the tax payers money they are wasting.
here's my biggest problem with this.
"""Higher taxes lead to higher spending, not lower deficits."""
This was proven false during the 90's and 2000's
With a higher tax rate corporation weren't going out of business. The rich weren't walling themselves off.
With all the Bush tax cuts we got DEFICITS.
These points seemed to be written by corporation X and handed down to right wing media to regurgitate.
Here's the simple fact boys and girls.
Corporations are NOT uncertain. They are rolling in more liquidity, profits and CEO salaries the EVER before.
So can the "we're killing business" talk.
They're just telling you that so you fall for it and allow their off shore capital to be repatriated tax free AGAIN like in 2004.
We are headed over the economic cliff at maximum velocity. Our politicos don't care, seem more concerned with protecting their reelection, enjoy playing kick the can, refuse to make the difficult decisions, or are just too brain dead to see the cliff.
The video was superb, and should be shown in the house, senate, and oval office. I don't hold out much hope since they all seem to be oblivious to the crisis. Rather they feel they will be protected in those cushy jobs from the fallout when the bus hits bottom.
The problem is that the ruling elites think that they are so much smarter and capable than the people and it is their destiny to rule over the unwashed masses. No amount of empirical evidence, historic data, common sense or logic will convince them that what has been previously tried and failed every time will not work this time – because it's them that are doing it this time. I honestly believe that some people enter into politics with the best of intentions, but as the saying goes – power corrupts, and absolute power corrupts absolutely.
Only ONE lesson here… do the opposite of whatever Europe does.
("""Higher taxes lead to higher spending, not lower deficits."""
This was proven false during the 90's and 2000's )
How exactly has the spending by our govt decreased?
Last I looked our debt has continued to increase even though the taxes have increased also.
There are 2 Logical Fallacies in your statement.
The first is called a Fallacy of Equivocation. You are equating the "lower deficits" in the quote from the article with corporate instability. The statement Higher taxes lead to higher spending, not lower deficits – has no implications for corporations at all.
The 2nd is harder to spot, and is called the "Post Hoc, Ergo, Propter Hoc Fallacy" a.k.a. Before this, therefore, because of this". It applies to your statement that after the Bush tax cuts, we got deficits. Implicit in your statement is that the deficits were caused by the tax cuts. You will have to do a lot more convincing for people to believe that. Especially with the burst of the housing bubble and involvment in major military activities going on in the same time period.
Tell me again about the off shoring of industry to foreign countries in order to pay lower taxes, wages, and less regulation to hamper the bottom line.
No matter what's said by who, the endgame is totalitarianism. Believe it.
The problem after lowering the tax rate is that the govt continued to ramp up its spending. Great response BTW. Kudos.
I agree that there is not much hope. In fact, I believe that the fall of America as we know it is a mathematical certainty. But unfortunately – there is no where better to go! The Islamic world is far worse, Europe's doom is more certain than even America's, and China has shot her own foot off with her 1-child per family policy which will seal her fate by 2040.
There is, therefore, only one hope left. And I place everything on Him, for only He is reliable in this broken world: The Almighty Creator of Heaven and Earth, the Lord Jesus Christ. I can only believe that He must be coming soon – for if He tarry's, I shudder to think what may become of us.
The really really scary part is that our politicians will ignore the handwriting on the wall. Realistically speaking, I think it's time to switch to thinking about how to survive the coming government-caused fiscal disaster
Again with the economic illiterate. Why must you guys always repeat the same old always proven wrong point over and over again.
Here is the massive flaw in your logic, and its a pretty damn obvious one. Deficits are only and I repeat only caused by spending, if you have a credit card, then you should know this. Mind you, the government has been outspending itself creating more debt than the revenue it brings in. Yet, the government has more than enough revenue to pay for itself, but it just continues to go above what it takes in. Then to add, tax increases never raise revenue or lower deficit, as you take more from fewer people and still continue to spend tons more. If you want an actual increase in revenue, then lower rates and widen the base.
Sajc, I recommend that you stop using and repeating the same old talking points and actually get some facts and understand the actual economy for once instead of what you are told by the media or politicians.
She has a simple brilliant message. 99% of the leftists can not follow what she said.
The politicos have been ignoring the country's fiscal problems since the sixties. Spending reductions should have been made back then and continued until we were out of debt. The trolls chose to ignore the problem then and have continued to do so up to and including the present. I have no faith in the congress or executive branch to reduce spending.
Her #1 point is very true (as are all the others). Government will NEVER spend additional revenues on paying off debt. If you listen to proggies they actually justify borrowing as a duty. If the gov can borrow X then it MUST borrow X to spend on social programs. So does anyone believe additional revenues will go to pay off debt vs create or fund new or existing programs?
Very well said! These 5 things should be formed into questions for the next debate. Make them put their cards on the table about these 5 points.
What we got from the republicans was higher spending and lower revenue to pay for that spending which lead to deficits which lead to debt.
Who's taxes have increased? The GOP will not debate any legislation if it has a revenue increase in it.
Last I checked Obama renewed Bush tax cuts.
Exactly. Great reply. Increased taxes under Clinton lead to increased spending under Clinton. And just because taxes were increased doesn't mean corps would instantly go out of business. The point in the video is that increased taxation leads to increased gov spending and NOT increased payoff of debt which is EXACTLY what happened under Clinton.
"""The statement Higher taxes lead to higher spending, not lower deficits – has no implications for corporations at all"""
GOP has linked taxes to "job creators" saying an increase in any tax will burden them.
""""Implicit in your statement is that the deficits were caused by the tax cuts… Especially with the burst of the housing bubble and involvment in major military activities going on in the same time period.""""
We had deficits BEFORE any housing collapse.
And you cannot hide from the facts. The GOP increasing spending, (2 wars, medicare D) and cutting the revenue to pay for all this resulted in a deficit. So YES. tax cuts have a lot to do with our debt.
Whats your question?
Do you want NAFTA explained to you?
Do you want me to explain to you how both parties and their corporate masters lied to us and told us free trade was great for us, but never mentioned it would destroy the middle class by making american workers compete with slave workers.?
Actually, you just proved yourself wrong again. As the notice of massive spending increases, then with even further spending increases under Obama, add tons to the debt. Cutting taxes never adds debt, as debt only and only has relation to spending.
If you ever took any classes in money management, then you would know this simple truth. You never want to spend more than you bring in, and raising taxes doesn't mean raise in revenue. The best way to raise revenue is to lower the rates and widen the base, as that would bring in the most amount of revenue with little impact to the tax payer.
I will say, you make this too damn easy.
"""the government has been outspending itself creating more debt than the revenue it brings in.""""
Yes we've been doing that forever. The gap widens when you increase spending and cut the revenues. AKA the Bush years.
"""the government has been outspending itself creating more debt than the revenue it brings in."""
if you do not increase spending, BUT increase taxes 3% we'd lower the deficit. its just a mathematical fact you cannot get around.
Lower taxes doesn't not always create more jobs. We've had lower taxes for how long now? corps have more money on hand then ever before yet they're still not hiring. thats just a talking point.
Why are you side stepping the question?
How exactly has the govt decreased it's spending in the last ten yrs?
How does the national debt increase?
I recall a Stephen Chapman column, back in the late 80s, in which he argued against tax increases quite simply: "Every time the government gets another $1.00, it spends $1.09." Today, with every extra $1.00 the government gets, it spends about $1.38. That is most assuredly not progress.
I happen to own a business and can tell you right now that if business taxes are increased my cost of operating the business increases, so there for I need to change the cost of the products that I produce to cover any added cost to operation due to increases in taxes. By the way the ones who really pay the taxes levied against businesses are those who consume their products.
Your are correct we had deficits before the housing bubble burst and the Repubs did increase spending, but I have ask what created the deficits that we had before the housing bubble did burst?
As I said yesterday, the Left will always explain away the failures of socialism by claiming the wrong people were in charge and that they didn't implement the system correctly. This is the get-out-of-jail-free card that allows them to continue living in their little bubble of unreality.
Couldn't you try a little harder, you have brought nothing new to the table, and you are still ignore the obvious facts about the issue.
The reason for the rise in debt is purely spending, as I have said before debt is only created by spending. The government has plenty of revenue to more than pay for itself and the needed services.
Here is the massive flaw about increasing taxes even by 3%, it will never lower the deficit. As those increases will only further spending, since current politicians have no interest in lowering debt. In order to fix the debt, we need to cut both taxes and spending.
As for the businesses not hiring, that is simple. The government has placed a large uncertainty in the marketplace and the businesses need to hold onto their money in order to handle the impact of rising costs, more regulations/restrictions, more taxes, and cronyism running rampant right now and down the road.
Thanks again for proving that you really do not understand the economy beyond lame talking points.
Agreed. NAFTA(signed by Clinton and CAFTA(signed by Bush II) are two fine examples of govt lying to the citizenry. Both trade agreements were forged between politicos and special interest groups to the determent of the American worker.
However the corporate exodus to China, Indonesia, Philippines, India, etc was spawned by the idea of lower taxes, lower wages, less regulation, and greater profit..
We are now reaping the fruits of our stupidity by receiving phony goods in the form of fake chips for the military, contaminated food products, lousy manufactured products, and who knows what else. The big question is whether we can entice industry back home.
5 very good points, 1 excellent video. Thank you to Miss Morandotti. If I was a teacher I would love
to have a class full of students just like her. I hope her professors appreciate her and give her an
A+.
Marco Rubio made the same point about #3, about how the Welfare State weakens a people, who become 'dependant' instead of 'independant", in his speech at the Reagan Library, and was immediatly attacked by the Left as wanting to let all the old, the helpless, and the young starve to death. He was making the point that people used to take care of each other. This goes over the heads of Libtards who see 'Government' as their all-providing God, while never aknowledging WHERE government gets the funds required to support them from 'womb to tomb'.
She's hot, conservative, and knows fiscal policy. Can someone get me her number, I have a nephew about her age, and I'd like to get them introduced.
Basically, allowing the gov't to either borrow more or take more of our money is like loaning money to your deadbeat relative – they won't use it to pay off the credit card that's troubling them, or even pay for something essential like food. They'll blow it on bullcrap.
It's like all that money they keep asking for the schools – where has all the rest of the money gone. Most likely to pay administrators 6 figure salaries.
Unfortunately, most on the Left aren't into supporting anyone in the womb. More like "cradle to grave".
No worries.
As to your post re tobacco purchases and abortions – my mom has been saying that for years – girl can't share a Midol with her friend, but she can pick up condoms and birth control pills without the knowledge or permission of her parents.
In CA, 2 laws were just passed and signed by Moonbeam – 1. If you are under 18 you can't go to a tanning salon without permission from your parents; HOWEVER, 2. You can get the HPV vaccine if you are at least 12 and over without the knowledge or permission of your parent. And of course CA already allows girls to get abortions without the knowledge or permission of their parents.
We have yet another person who shows us he failed econ 101.
Hey moron.
1) the Bush tax cuts were over a DECADE ago and extended by the Teleprompter Tyrant. So call them the Obamugabe tax cuts or use proper terms, the tax rate.
2) Those terrible tax cuts generated $300 BILLION MORE in gov't revenue and led to the creation of 6 million more jobs. Virtually identical results happened with tax cuts under Coolidge, Kennedy and reagan. It's damn near a mathematical formula at this point.
Obsess much dumb ass?
Here's the simple facts. CEO's and business people are rolling in liquidity because they are TERRIFIED of what the Teleprompter Tyrant will do next, and there is an AsS TON of uncertainty. Well, modify it. They are CERTAIN you ass bags are going to dmamage then, it's just a matter of magnitude.
Want more facts?
Record poverty
record debt
record deficit
record numbers on food stamps
record dollar devaluation
record unemployment
record number of unenelected unaccountab;e czars bypassing representational gov't
record fascist illegal take over of business
Yeah, but it's those tax cuts from a decade ago. DUMB ASS.
Read some more about how your boy is the worst president in history, backed by the numbers.
http://online.wsj.com/article/SB10001424053111904...
http://www.americanthinker.com/2011/11/the_worst_...
Seriously, look at the numbers Spanky. This guy is an economic Katrina.
Oh, and only 49% of the country paid income tax, Want FAIR? Them make the 51% who pay NOTHING actually contribute so they would give a damn about what the tyrants are doing with our tax dollars. Ass bag,
Hey Spanky.
Show me a SINGLE study that shows raising the business killing taxes even higher make the poor wealthy. Go ahead. I'll wait because it DOESN'T EXIST.
Raising taxes actually makes the poor worse off. Reduced wages, lost jobs, lost benefits, prices of goods and services go up. BRILLIANT !! I have DOZENS of studies showing what we call FACTS and HISTORICAL data, but it doesn't fit with your head up the ass view that the productive must be punished out of your unadulterated greed and jealousy.
To call you a dumb ass would be insulting to former dumb asses, dumb ass.
A welfare state cripples the human spirit.
It's true. I live in Europe and am depressed that my spirit will never be as great as those proud Americans who sleep on the streets each night because they had to sell their house to afford their heart medication.
This is what's wrong with partisan politics, it's ALWAYS the other party's fault. What did we get out of 8 Bush years, again?
Crippling the human spirit also means someone is reduced to being a greedy parasite living off the the means of others and not even seeing that is greed.
Oh I am sure you are happy getting benefits and entitlements at someone else's expense and not even seeing how horribly greedy that really is…. similar to a mugger happy with his haul of wallets.
Perhaps you should ask some N. Koreans how happy their are with their welfare state.
Government hasn't decreased spending PLUS takes in less revenue.
ALL of this creates a budget deficit. deficits add to the debt.
Why are we debating 3rd grade economics?
if you take out bush new spending and add in tax cuts you still have a deficit not a surplus.
And with out country starved for revenue, our infrastructure literally crumbling to the ground, the GOP picks a heck of time to further deplete revenue
I assume your business is small? medium?
I do not support any tax increases on small business who already get nickel and dimed by credit card companies. Their tax burden should be reduced as much as possible.
I also do not support the wealthiest corps, who are making more profits then in any time in history and CEO salaries are higher then ever, paying little to no taxes at all. Then complaining abut how over burdened they are as their retiring CEO taxes a 100 million dollar package.
If the govt is taking in less revenue why has it not started to spend less?
Why is it always the govt approach that its spending can not be decreased and that the only solution is to raise revenue "raise taxes". When taxes are raised on a corporation it is passed onto the end consumer which happens to be you and me. When taxes are raised we have less money that we can spend as we wish.
The solution to this problem is for the govt to spend less, not increase taxes, and to start reducing the national debt.
By the way, all business always looking for ways to reduce the cost of manufacturing their products. With this being said businesses will naturally move manufacturing to areas that have lower taxes, lower cost living, etc… whether it is in our country or in another country.
Well said.
I had always hoped for a buy american movement. the american consumer keeps these guys in business. If we started buying american sooner or later they'd get the message and bring some jobs back. Might take a while but I think would work in the long run.
And I'll also add that unions need to be kept in check. I don't agree with the right that they need to be killed off entirely but they cannot run industry out of town like they've done.
Thats hilarious coming from the guy using the oldest, lamest and most debunked talking point "Uncertainty"
Uncertainty has nothing to do with taxes and regs and all to do with liquidity and demand. lending is low, banks aren't throwing money around like they were during the Bush years because of the crash so growth stalls.
HAHA you bought the lie that people aren't hiring because they're "uncertain" about a future regulation that might come down.
GOP talking points usually work on the weak minded.
What does it matter if my business is small, medium or large? Why is it that a business or a person should be taxed differently if make more then another? How is it fair?
Taxes should be uniform across the board for every one.
If a corporation is willing to pay a CEO millions then that is the corporation problem. If a corporation agrees to the golden parachute, again that is their problem. If you as a consumer do not like what a corporation is doing then do not buy their products, buy a competitors product. If enough people express their opinion this way a corporation will do one of two things, 1.) go out of business or 2.) change how it is doing business to attract consumers.
If they happen to go out of business a new business or businesses will step in to take over the market share of said corp.
"""uncertainty"""
Did you just get finished talking with frank luntz? because you sure know the lame rightwing talking points well.
CEO X: "I'm not hiring because some time in the future a regulation might be passed"
How does it feel to totally buy into such a stupid talking point?
""Teleprompter Tyrant""
Really? I'll take him over a president that got 5k troops killed, and trillion dollars lost based on faulty intel.
the Teleprompter Tyrant couldn't even try to make a bigger blunder.
BTW
Reagan raised taxes too
You want the proof on how you're a retarded person?
""""Record poverty
record debt
record deficit
record numbers on food stamps
record dollar devaluation
record unemployment
record number of unenelected unaccountab;e czars bypassing representational gov't
record fascist illegal take over of business """"
ALL OF THIS STARTED BEFORE OBAMA WAS EVEN IN OFFICE.
A L L O F I T
You obviously like class warfare even though the GOP talking point of the weak
get angry at the people who have nothing for not paying more.
""" Reduced wages, lost jobs, lost benefits, prices of goods and services go up. BRILLIANT"""
Been going on for a decade all while we've been cutting taxes.
Wages have been stagnant, off shoring, inflation all occurred under bush. You didn't see it because you're a blind partisan.
"""If the govt is taking in less revenue why has it not started to spend less? """
Because when the country is hurting you don't pick THAT time to cutting. Remember Hoover? If you want to cut lets start with the wars and empire.
"""When taxes are raised on a corporation it is passed onto the end consumer"""
Thats the battered wife logic. Dont make them angry or they might hurt us. They pay barely any taxes already after all their loopholes. If they want to be considered people, then they should stop avoiding taxes… I don't hide my earnings in the caymans.
"""The solution to this problem is for the govt to spend less, not increase taxes, and to start reducing the national debt"""
I agree we should spend less. But cutting alone is not going to get us all the way out.
If you want to spend less, lets start 700 billion a year in defense. Serves no practical purpose and the founders would be outraged we have military everywhere around the world.
"""With this being said businesses will naturally move manufacturing to areas that have lower taxes, lower cost living"""
You're leaving out child labor, slave wages and zero environmental regulations leading to no drinking water. Wonderful!
""""If a corporation is willing to pay a CEO millions then that is the corporation problem. If a corporation agrees to the golden parachute, again that is their problem""""
There is a new investigative journalism book out now on how Corps are raiding employee pensions to pay their gigantic golden parachutes then later complaining how they have no money to pay their employees their due pensions. Interesting look on how corps are ripping off their employees.
""Taxes should be uniform across the board for every one. """
Sure, that is an idea and I'd except that if that was law. But progressive taxes are not against the law either. If you want exxon to pay the same rate as ma's hardware then you better make sure they're not gaming the system, loopholes, cash stored off shore. should not enjoy advantages Ma's hardware does not have.
Now you are using a logical fallacy of relevance commonly known as the "Bait and Switch" by shifting the subject to corporations. __Regardless of what the GOP says, Regardless of whether higher taxes even affect corporations at all – the statement: Higher taxes leads to higher spending, not lower deficits – is true! Think about it. You earn $1000 a month. You spend $900 a month. Now suppose you earn $2000 a month – you think you will still be spending $900 a month?? No. Well neither would the government. (You may be disciplined but our government certainly is not) Now we can debate on how corporations are affected another time – but that's not the subject, my friend, and "bait and switch" tactics don't work with me.
Thanks Oldman Rick. Spotting logical fallacies is a little hobby of mine now. They are so easy to spot from liberals, although conservatives are just as guilty sometimes. (I've called a few of them out, some received my comments constructively, which is a good sign).
My real passion, though, lies in spotting the logical fallacy of evolutionary science. (And…lol…"evolutionary science" is a logical fallacy of equivocation in and of itself! Because such "science" is not science at all, but a philosophy about the past.)
Thanks – just don't let him use the "bait and switch" tactic of getting you to think that the subject is about corporations when the subject is government spending. The libs do that all the time because they have no real, logical, arguments.
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