Lessons from Ireland’s economic collapse

Ireland may have saved civilization at one time, but now Ireland may be pulling down the European economic system.  Robert Samuelson explains what is going on with the Irish economic collapse and the European bailout of yet another country in the Euro-zone:

That Ireland, after Greece, has come to grief is ironic. Until recently, it was admiringly dubbed the Celtic Tiger for emulating Asian countries in attracting foreign investment – Intel and others – and achieving rapid export-led growth. From 1987 to 2000, annual economic growth averaged 6.8 percent; unemployment fell from 16.9 percent to 4.3 percent. But then solid growth gave way to a housing boom and bubble whose collapse left Irish banks awash in bad loans.

One cause was easy credit occasioned by the euro. With its own currency, Ireland could regulate credit. If it seemed too loose, the Central Bank of Ireland could raise interest rates. Adopting the euro meant Ireland surrendered this power to the European Central Bank (ECB), which set one policy for all euro countries. The ECB’s rates, though perhaps correct for France and Germany, were too low for Ireland and some others. Moreover, financial markets pushed rates on government bonds of euro countries down to lower German levels. In 1995, Ireland’s rates were more than a percentage point higher than Germany’s; by 2000, they were almost identical. . . .

So now the reckoning. In Ireland, the burst housing bubble left a massive budget deficit and lifted unemployment to 14 percent. Most European economies suffer from the ill effects of some combination of easy money, unsustainable social spending and big budget deficits. Countries are interconnected, so there are spillover effects. European banks – led by British, German, French and Belgian banks – have $500 billion in loans and investments in Ireland, reports the Financial Times. Large losses could snowball into a broader banking crisis.

Europe’s challenge is no longer just economic. It’s also social and political. Cherished values and ideals are under assault. The euro, intended to nurture unity, has bred discord, as countries assign blame and argue over sharing costs. The social contract is being rewritten, with government benefits and protections being cut.

via Robert J. Samuelson – In Ireland’s debt crisis, an ominous reckoning for Europe.

A single currency set by a central authority, indifferent to individual country’s economy sounds like an experiment that didn’t work.  This is another kind of argument for federalist-style de-centralization.

Is America exceptional, or what?

The latest ideological buzzword is “exceptional,” as in, “America is exceptional.”  Republicans Mitt Romney, Mike Pence, Sarah Palin, Mike Huckabee, and Newt Gingrich are accusing Democrats–and President Obama in particular–of not believing in “American exceptionalism.”  See this rather biased article for an overview of the phenomenon: Conservatives’ new focus: America, the exceptional.

What does it mean to say that America is exceptional?  Does it mean, as the article says, that America is the best of all countries, or does it really mean something different?  What IS exceptional about America, and what is not?

Isn’t it true that conservatives tend to be more positively patriotic, while liberals tend to be patriotic in the sense that “it’s patriotic to criticize what is wrong”?  Why is that?

And what does all of this mean from a Christian point of view? At what point does patriotism turn into pride and idolatry?

The “tax expenditures” solution

Here is another proposal for how to cut the deficit.  This one suffers from a toxic premise:

There is a way to cut budget deficits without raising tax rates. “Tax expenditures” are the special features of U.S. income tax law that subsidize mortgage borrowing, health insurance, local government spending and more. Although these subsidies are a form of government spending, they are counted as reduced tax revenue rather than increased government outlays. Yet tax expenditures increase the deficit by hundreds of billions of dollars a year, more than the total cost of all non-defense programs other than Social Security and Medicare.

A critical feature of the proposal recently unveiled by Erskine Bowles and Alan Simpson, the co-chairmen of the president’s bipartisan fiscal commission, is to reduce tax expenditures rather than raise tax rates. That would increase revenue without reducing incentives to work, save or invest.

Their most extreme suggestion is to eliminate all tax expenditures, raising $1 trillion a year in additional tax revenue, and then use all but $80 billion of that to cut tax rates. I think that devotes too little money to deficit reduction at a time when fiscal deficits are dangerously large.

Because Bowles and Simpson recognize that eliminating all tax expenditures is politically impossible, they also proposed to eliminate or scale back some tax expenditures while cutting tax rates less to achieve the same $80 billion annual deficit reduction. This option will undoubtedly be opposed by some who find it unfair to limit measures from which they benefit while leaving unchanged tax rules that benefit other people.

Here is a practical alternative toward the same end: Congress should cap the total benefit taxpayers can receive from the combined effect of different tax expenditures. That cap could be set as a percentage of an individual’s adjusted gross income and perhaps subject to an absolute dollar amount.

To be clear, the cap would not apply to the amount of any deduction but would limit the total tax savings that result from such deductions. Someone with a 25 percent marginal tax rate who pays annual mortgage interest of $4,000 would still deduct that $4,000. The cap would apply to the $1,000 tax saving that individual could expect on mortgage interest, not to his or her deduction.

The idea is not to single out a particular tax expenditure. Because the cap would reduce the revenue cost of all tax expenditures without eliminating or reducing specific ones, it would not unfairly burden taxpayers who benefit from one particular type of tax measure.

The budget gain would be substantial. My colleague Daniel Feenberg of the National Bureau of Economic Research and I have estimated that capping an individual’s benefit from tax expenditures at 2 percent of adjusted gross income would reduce the federal deficit in 2011 by $262 billion, or about 1.7 percent of gross domestic product. An additional cap on these benefits in absolute dollar terms would produce a larger deficit reduction.  . . .

The tax expenditures subject to the cap in our calculations reflect deductions for mortgage interest, state and local income and property taxes, and charitable contributions; credits for dependent care, children and certain education costs; and the exclusion of employer payments for health insurance. Congress could, of course, expand or reduce this list. Dropping the deduction for charitable contributions, for example, would reduce the 2011 revenue gain by some $45 billion.

More than 65 percent of taxpayers do not itemize their deductible expenses but use the standard deduction. Nearly half (46 percent) of taxpayers who use the standard deduction would not be affected by a 2 percent cap. For those who are, the cap would apply to various tax credits and to the exclusion of employer payments for health insurance.

via Martin Feldstein – How to cut the deficit without raising taxes.

Doesn’t this assume that all money belongs to the government?  So not taking a person’s money counts as an “expenditure”?  It also says that taxing something that was not taxed before somehow avoids a tax increase.

If you can get past those problems, what do you think of this idea?  Capping deductions might be better than eliminating them entirely, as some are proposing.  But decreasing the mortgage deduction certainly won’t help the housing market–which is necessary for non-government economic growth–nor will cutting back charitable deductions help churches and other private groups step in with the safety nets that government budget-cutting will be eliminating.

Why “socialist” gets spam filtered

tODD has solved the mystery of why comments on this blog that mention “socialism” or its variants get treated like spam, exiled into a spam world until they are “released” whenever I think to check it.   Look closely at that word.  Specifically its third through sixth letters.  Do you notice the brand name of a “male enhancement product”?  One that is marketed on obnoxious TV commercials and is sold through shady internet sites?  The word is ubiquitous in spam, and any good spam filter is going to filter it out.

So WordPress–or rather, the spam filter Akismet–is NOT a Republican who does not want that anti-free-enterprise economic system brought up, and it is NOT a Democrat who does not want the current president to be accused of subscribing to that theory.  It is just rightfully squeamish and suspicious of male enhancement peddlers.

I would think this would be an issue with virtually all blogs, though.  This is a genuine inhibitor of political speech, one that should be very frustrating for leftists conspiring to bring on the great proletarian revolution.

P.S.:  My brother’s first big comment the other day got caught in the spam filter because he used the word “socialist.”  Yesterday he got another comment blocked because he used the word “specialist,” which has the same problem!  Do see what he has to say on the Medicare post, along with my rejoinder.  I think we found the solution.

Religion means "be careful"

In a discussion of how Roman Catholic church bureaucracy and the American Academy of Religion both try to keep the lid on supernatural experiences, the notable Lutheran sociologist Peter Berger cites some interesting etymology:

Sociologists who deal with religion often like to refer to the etymology of the Latin word religio. Supposedly it derives from the verb religare—to re-bind. If so, this points to a very valid insight, most fully formulated by the classical sociologist Emile Durkheim—namely, that religion provides the symbolic ligature that keeps a society together. I understand that Latinists reject this etymology for a different, and actually more interesting one: Religio derives from relegere—to be careful. In other words, the supernatural is a very dangerous reality—one has to approach it with great caution. This understanding was brilliantly formulated by Rudolf Otto, arguably one of the greatest twentieth-century historians of religion, in his book The Idea of the Holy. Religion is always based on an experience, on whatever level of intensity or sophistication, with a reality that is intensely dangerous. . . .

Otto coined the term “numinous” to refer to this experience. His German language too seems to break down, as he falls back on Latin to describe the numinous—it is a mysterium tremendum, both terrifying and alluring. It is totaliter aliter—totally other than the fabric of everyday life. Above all, it is extremely dangerous. This is why, in the Bible and in other sacred scriptures, the first words spoken by an angel to a human being is “Do not be afraid!”

via Defanging the Supernatural | Religion and Other Curiosities.

This, I think, is what is missing in so much of today’s Christianity:  the fear of God.  We have tamed our own religion.  We are no longer “careful,” and so we have lost the “numinous” and thus the sense of holiness.   I would argue that the historic liturgy and sacramental spirituality retain that sense, whereas so much of the trappings of contemporary Christianity, in its worship and art forms, have the effect of domesticating  the supernatural and rendering it banal.

Diplomatic catastrophe

Wikileaks is releasing to the public a quarter of a million classified documents.  This latest batch isn’t so much about atrocities in the Iraq and Afghanistan wars.  It mainly consists of confidential reports by diplomats that contain unflattering and sometimes snarky comments about world leaders, including important allies.  The reports lack “diplomacy.”  As a result, we have a diplomatic catastrophe on our hands.

For a sampling of what they contain, here is a list of breathless headlines from the Drudge Report.  Go there for links to the articles:

USA RACES TO LIMIT WIKILEAKS DAMAGE…

250,000 State Dept. cables cover Iran, NKorea, Putin… MORE

Reveal: Iran ‘smuggled arms’ to Hezbollah on ambulances…

Reveal: Hillary Clinton ordered diplomats to spy on UN leaders…

Reveal: Iran obtained missiles from NKorea…

What America REALLY thinks of world leaders…

MOST EMBARRASSING, DAMAGING DISCLOSURE IN DECADES…

Clinton Calls Leaks A Global ‘Attack’…

AWKWARD: Clinton heads abroad, will meet world leaders dissed in cables…

Reveal: Saudis repeatedly urge US attack on Iran…

SENATORS: PROSECUTE THE LEAKERS!

NYT EXPLAINS: DECISION TO PUBLISH…

Now Australian police investigate Assange…

France: Leaks threaten democracy…

Rep King: Website leaks are terrorism…

Holder orders criminal investigation…

PALIN: Obama admin’s handling ‘incompetent’…

via DRUDGE REPORT 2011®.

One could make a case for leaking documents that cover up misdeeds.  But it’s hard to imagine what good it would do to leak documents that just embarrass people needlessly.  Diplomats do need to be able to give their superiors candid assessments without worrying that they will show up on the internet and in the world’s newspapers.


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