Admiral Valdemar wrote:We're facing similar problems in the UK, with commentators in some papers saying we'll be the next Greece
The UK isn't going to be the next Greece. We might have been, if Labour had managed to hang onto power for the last forty years. Fortunately we had Thatcher's impressive socialism roll-back and a following decade of relative restraint on public sector bloat. To be fair I don't think the UK would culturally tolerate the Greek level of corruption even Labour had managed to renationalise everything and bloat the public sector up to 70% of the economy.
The UK could certainly be the next Ireland, but the ability to independently devalue will put that off a bit and hence there are lots of other nations eagerly pushing ahead of us in the queue. If the situation got bad enough for the UK to actually have a sovereign default I'd expect the entire Eurozone to be gone or going too, with second world countries imploding like a string of firecrackers and a US meltdown not far behind, and at that point it probably won't make much difference.
I'm interested to see whether inter-generation conflict becomes a real issue. It depends how much pension payouts are protected, relative to punitive taxation on younger workers. So far 'screw the boomers' sentiment seems to be restricted to a few agnsty irrelevant bloggers - certainly in the US, the political activists seem to be overwhelmingly 50+.
GrandMasterTerwynn wrote:In twenty or thirty years, the combined costs of servicing that debt and making our mandatory payouts to Social Security and Medicare/Medicaid will exceed government revenues. Even if we assumed that Social Security, Medicare and Medicaid growth remained perfectly flat and all else continued per-normal, servicing the debt will exceed government revenues in fifty years. (All from that bane of academic research, Wiki.)
How does this square with economic growth? I'd like to see some actual projections and uncertainties. Also, a big part of Medicare and SS obligation is funding the Baby Boomer hump coming through the demographic pipeline --- in fifty years, the last of the Boomers will be in their mid-90s. In sixty, they'll be gone. At the same time, immigration will be increasing and Hispanics tend to have many children, which will skew the age curve young. How does your model (if you have one) account for demographics?
Assuming the debt grows by a trillion dollars a year (which actually understates the most recent CBO estimates,) you would have to increase government revenues by a trillion dollars just to match that. Government takes in $2.2 trillion in revenue now. Of which, about $1 trillion is income tax. American households have about $5.8 trillion in income. So to prevent further growth of the national debt while taking into account the growth of the government and its obligations, tax revenues must go up to $3.2 trilllion. Of which, $1.45 trillion would be on the American people. That is an average tax increase of some 45%. So a family pulling in $200,000 who pays 28% of its income in taxes every year would now have to pay 40.7% of its income in taxes.
Again, how does this square with economic growth?
All of this, of course, ignores the effect of pulling an additional two trillion dollars out of the American economy. This would trigger massive economic contraction, as businesses cut wages and workers to preserve themselves against increases in payroll taxes and decreases in income as consumer spending craters. Federal government would have to cut spending to keep up, placing more burdens on the states, who would raise taxes and float debt of their own, which would pull more money out of the economy and cause consumer spending to crater even harder. Consumers would try to shift this into debt vehicles, but credit cards and home equity (which will also crater, as housing demand will go into free-fall and take housing prices with it,) will only get you so far.
What's you quantitative model for this? Surely you don't suggest that we're on the wrong side of the Laffer curve?
A Government founded upon justice, and recognizing the equal rights of all men; claiming higher authority for existence, or sanction for its laws, that nature, reason, and the regularly ascertained will of the people; steadily refusing to put its sword and purse in the service of any religious creed or family is a standing offense to most of the Governments of the world, and to some narrow and bigoted people among ourselves.
"The US Treasury spent some $383 billion in FY2009 just servicing interest on its debts. The government has five percent of its budget allocated to servicing its debt. In ten years, the CBO forecasts the national debt will equal 100% of the nation's GDP. In twenty or thirty years, the combined costs of servicing that debt and making our mandatory payouts to Social Security and Medicare/Medicaid will exceed government revenues. Even if we assumed that Social Security, Medicare and Medicaid growth remained perfectly flat and all else continued per-normal, servicing the debt will exceed government revenues in fifty years. (All from that bane of academic research, Wiki.)"
And the US spends less then 150 billion in 2010. You're right that if we do nothing we're all doomed but that's assuming we do nothing.
"Eliminating all military spending would succeed in only cutting the growth of the debt to a mere $300 billion a year. Only the economic deflation resulting from the collapse of the military-industrial complex (remember all those people whose high-tech jobs we outsourced to India? Wipe out the defense industry and we'll have to find domestic jobs for former MI complex employees. Which means paying them the same as we would for a high-tech professional in India. Can we say economic contraction? Yes? Good.) would wipe out all the savings and then some. ght if we do nothing NOW, that would happen but that assumes we can't change course in any way."
More like 220 billion. This says nothing on why we can't just eliminate the Iraq War and Afghanistan spending which accounts to 200 billion per year. Seriously we've cut the military budget before and things didn't go to hell unless there's a new scenario I'm not seeing.
"
Assuming the debt grows by a trillion dollars a year (which actually understates the most recent CBO estimates,) you would have to increase government revenues by a trillion dollars just to match that. Government takes in $2.2 trillion in revenue now. Of which, about $1 trillion is income tax. American households have about $5.8 trillion in income. So to prevent further growth of the national debt while taking into account the growth of the government and its obligations, tax revenues must go up to $3.2 trilllion. Of which, $1.45 trillion would be on the American people. That is an average tax increase of some 45%. So a family pulling in $200,000 who pays 28% of its income in taxes every year would now have to pay 40.7% of its income in taxes."
Ahh I thought so, this is where our number research is differing. We're using different numbers as basis for our economy numbers. You're using 2009 and 2010 when the recession hit and Governments slashed taxes in response (remember 300 billion of the Stimulus Package of tax cuts), I've been using 2008 when the economy was slowing down but before this stimulus stuff was fudging up everything. (Granted, if we continue with the bail out garbage, yeah we'll never pay back out debts). Our numbers are assuming 400-700 billion dollars in tax collection difference.
"
WhRemember that just prevents the national debt from growing further. To actually pay it off in, say, ten years, you would have to increase government revenues by a further $1.29 trillion per year, to bring total revenues up to $4.49 trillion. Of which, the American taxpayer would be on-foot for $2.04 trillion of this. A family pulling in $200,000 would now have to pay 57% of their income in taxes. The average American family making $50,000 would have to pay 30.6% of their income in taxes . . . $7800 more per year (or $650 more per month.) Better hope they're not carrying a lot of debt."
Why would anyone suggest ten years? That's a ridiculously short amount of time why not something more reasonable like 20-30 years? In which you're slowly paying off the debt while 1-2% inflation helps a little, and additional payments are being made by the cash no longer paid on interest payments. By assuming a 30 year track, a 300 billion dollar surplus could pay the entire debt off in 30 years even if there's zero inflation.
"
All of this, of course, ignores the effect of pulling an additional two trillion dollars out of the American economy. This would trigger massive economic contraction, as businesses cut wages and workers to preserve themselves against increases in payroll taxes and decreases in income as consumer spending craters. Federal government would have to cut spending to keep up, placing more burdens on the states, who would raise taxes and float debt of their own, which would pull more money out of the economy and cause consumer spending to crater even harder. Consumers would try to shift this into debt vehicles, but credit cards and home equity (which will also crater, as housing demand will go into free-fall and take housing prices with it,) will only get you so far."
This assumes all of the money comes from low paid families. What about taxes that hit mostly the rich like the Bush tax cuts. Also like I said, so much money in health care is waste and while like Broom said there will be short term increase in spending to not look at the long-term savings I think is foolish.
"Why not cut federal spending?" you say? Well, yes, you'll have to do that; but, services the federal government provides will end up being foisted on the states, who will have to find ways to raise the needed revenue, driving up their own debts. To the average American, it's going to be a non-consensual anal gangbang. The only thing that changes are the identities of the gangbangers"
Unless it's services that don't bring much benefit like the War on Drugs and cutting spending in programs like Social Security by implementing means testing will there be increases in welfare spending as a result in areas.? Yes but I don't see how people can say it'd equal the saving amounts unless we're arguing that all Government spending goes directly to employees and that the amount they're paid is the lowest reasonable wage to pay them.
THough I gotta ask if lowering spending has such horrible consequences how did Clinton manage it?
Clinton had a much better economy to work with while he was in office, not a Great Recession/Depression.
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I know but even with a great economy if lowering spending almost always lead to negative consequences, shouldn't Clinton had least have seen some kind of negative consequence? It would've been balanced out by the economy but it should have still been seen.
The consequences of lowering spending depend very much on the state the country is in. America in 2020 is quite different from America in 1995: it is much older, and thus much more reliant on the government for income (i.e., SS and Medicare); the economy is probably not growing as quickly; unemployment may be higher; the workforce is less dynamic; the composition of the economy is very different (probably less industry and more service); etc. All of these factors must be accounted for when predicting the outcome of a change in magnitude or type of government spending.
A Government founded upon justice, and recognizing the equal rights of all men; claiming higher authority for existence, or sanction for its laws, that nature, reason, and the regularly ascertained will of the people; steadily refusing to put its sword and purse in the service of any religious creed or family is a standing offense to most of the Governments of the world, and to some narrow and bigoted people among ourselves.
Alphawolf55 wrote:I know but even with a great economy if lowering spending almost always lead to negative consequences, shouldn't Clinton had least have seen some kind of negative consequence? It would've been balanced out by the economy but it should have still been seen.
Back in those days we had real actual growth in the economy and a reasonable level of debt, we could slowly take away spending as a percentage of GDP and private demand would take up the slack keep things going. This is no longer true, we have "growth" right now only because the government is spending like a drunken sailor, try to wind down government spending now and there's a good chance you'll have an instant depression.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
What is "ACTUAL GDP"? Real GDP - Gov't spending? I highly doubt it's actual real GDP because inflation was damn near zero last year, not anything like 10%.
A Government founded upon justice, and recognizing the equal rights of all men; claiming higher authority for existence, or sanction for its laws, that nature, reason, and the regularly ascertained will of the people; steadily refusing to put its sword and purse in the service of any religious creed or family is a standing offense to most of the Governments of the world, and to some narrow and bigoted people among ourselves.
Surlethe wrote:What is "ACTUAL GDP"? Real GDP - Gov't spending?
Yup. Not the best measure around, but I don't get paid enough to work out what the real "real" is. It gives a general idea of what the actual economy's doing minus the government borrow & spend.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
Is it real GDP - spending or real GDP - deficit spending?
A Government founded upon justice, and recognizing the equal rights of all men; claiming higher authority for existence, or sanction for its laws, that nature, reason, and the regularly ascertained will of the people; steadily refusing to put its sword and purse in the service of any religious creed or family is a standing offense to most of the Governments of the world, and to some narrow and bigoted people among ourselves.
Surlethe wrote:What is "ACTUAL GDP"? Real GDP - Gov't spending?
I'm pretty sure it's reported GDP minus government borrowing. It does seem odd to consider this 'unreal' without also writing off the amount of private sector spending/investment that is supported by debt creation. This just shows what we already know; the US government believes in massive Keynesian stimulus (particularly when it benefits major banks). To actually be useful you'd have to consider how much of that spending is successful investment that creates an asset worth more than the debt, and how much of it is failed investments or purely consumptive.
Starglider wrote:I'm pretty sure it's reported GDP minus government borrowing. It does seem odd to consider this 'unreal' without also writing off the amount of private sector spending/investment that is supported by debt creation. This just shows what we already know; the US government believes in massive Keynesian stimulus (particularly when it benefits major banks). To actually be useful you'd have to consider how much of that spending is successful investment that creates an asset worth more than the debt, and how much of it is failed investments or purely consumptive.
TARP was probably a write-off, but we'll never know until the damn Fed is audited. The ARRA isn't looking that great unless you pick all the high range numbers on page 4 of the CBO report. Overall, not much of that $1.5 trillion went into asset creation.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
I get the feeling from the article and from some of the rhetoric in this thread that Greece's economic meltdown may lead to a social meltdown. With public sector workers and even members of the army protesting/striking against having their bonuses and various benefits cut, I have to wonder if the government will even be able to continue doing business.
Are things to that point? Are the people so ingrained in the way business was done that they will refuse to change until society collapses around them?
It sounds like they're bloody fucking insane to me.
Scrapping bonus payments for public sector workers
Capping annual holiday bonuses and axing them for higher earners
Banning increases in public sector salaries and pensions for at least three years
Increasing VAT from 21% to 23%
Raising taxes on fuel, alcohol and tobacco by 10%
Taxing illegal construction.
What makes those measures so unreasonable to the union(s)?
Broomstick wrote:It sounds to me like France and Germany are willing to fuck Greece in order to save their own banks by imposing draconian conditions that make the payback of loans effectively impossible, thereby imposing debt slavery on Greece indefinitely and to hell with any bad effects on the populace. If this doesn't work, then France and Germay's economies go under. If it does work, the predatory banks will go after Spain and the like for more fun and games.
Did I read that right, or not?
Starting from the beginning, before the bailout package was announced the interest rates for Greek bonds was trading at something like 12-20%, that is the Greeks would have to pay 12-20% interest per year to service their debts. That's pretty close to credit card interest rates and if you've ever had credit card debt you know it doesn't take long at all for the interest compounding to put you in the hole for good. The same was true of Greece, with those kind of rates it's dead and the country will have to default on its debts which is similar to a person filing for bankruptcy.
The bailout package would extend loans to Greece at around 5-6% interest, far better than what they had before, provided of course that the Greeks get their finances under control. I'm not familiar enough with their economy to know whether the plan is actually workable but on the surface level it seems so assuming Greece doesn't burn itself out with riots & civil disobedience.
With regards to French & German banks, if Greece defaults on its debts the French banks are on the hook for around $80 billion while German ones will eat a $45 billion or so loss. In the case of Germany it wouldn't cost much more for them to let Greece fail and then bailout their own banks themselves vs. what they're contributing to the proposed bailout plan for Greece. I say proposed since the German government still has to approve it.
Whether or not the Greek bailout works, or if it even goes through, the traders will target Spain, Portugal and the rest of the weaker countries and attempt to sink them. They've identified a weakness which can net them a ton of money and they'll trade it for all it's worth. That's just the way the market works.
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[R_H] wrote:Scrapping bonus payments for public sector workers
Capping annual holiday bonuses and axing them for higher earners
OK, I'm going to say this from the perspective of someone in the US.
How the fuck do you justify bonuses for Public Sector employees? Do they get more money if they process more drivers license applications than the average or something?
[R_H] wrote:Scrapping bonus payments for public sector workers
Capping annual holiday bonuses and axing them for higher earners
OK, I'm going to say this from the perspective of someone in the US.
How the fuck do you justify bonuses for Public Sector employees? Do they get more money if they process more drivers license applications than the average or something?
I'm not understanding this either. I don't know how it is in Greece, but here in Switzerland there's been a lot of criticism directed towards the banks for their love of bonuses ("bonus culture"), so why in the public sector of all places?
Maybe it's the Greek public sector's equivalent to 13 month salaries?
Jason L. Miles wrote:How the fuck do you justify bonuses for Public Sector employees? Do they get more money if they process more drivers license applications than the average or something?
It's known as the 13th & 14th month bonus and evolved from the traditional christmas & summer vacation pay. In the old days, factory owners would hand their workers a small bonus cheque for buying christmas gifts and another one during the summer which they could save up over the course of a few years and use to take vacation. These bonuses eventually got written into a whole bunch of employee contracts so everyone gets bonus pay. Maybe not everyone, but a whole lot of people anyway.
This post is a 100% natural organic product.
The slight variations in spelling and grammar enhance its individual character and beauty and in no way are to be considered flaws or defects
I'm not sure why people choose 'To Love is to Bury' as their wedding song...It's about a murder-suicide
- Margo Timmins
When it becomes serious, you have to lie
- Jean-Claude Juncker
[R_H] wrote:Scrapping bonus payments for public sector workers
Capping annual holiday bonuses and axing them for higher earners
OK, I'm going to say this from the perspective of someone in the US.
How the fuck do you justify bonuses for Public Sector employees? Do they get more money if they process more drivers license applications than the average or something?
In the case of S'pore, civil service bonuses (in addition to the 13th month) are linked to the country's projected economic performance for that year. The annual bonus if any is paid out in 2 installments, one in July and the other at year's end, which allows the garmen the flexibility to raise or chop the year end installment if there is a sharp change in economic performance. If economic growth is low, annual bonuses are low, if in recession, even lower (say less than 1 mth bonus; the lowest is 0.25mth bonus) or no bonuses at all depending on the economic hit. Things would have to be really in the shitter for the 13th month bonus to be affected.
In the S'pore civil service, the real mystery in bonuses is actually the 'performance bonus' (ostensibly to reward the better individual performers) which few if any know how that is derived.
J wrote:It's known as the 13th & 14th month bonus and evolved from the traditional christmas & summer vacation pay. In the old days, factory owners would hand their workers a small bonus cheque for buying christmas gifts and another one during the summer which they could save up over the course of a few years and use to take vacation. These bonuses eventually got written into a whole bunch of employee contracts so everyone gets bonus pay. Maybe not everyone, but a whole lot of people anyway.
Essentially, this.
The Greek government is cutting these "extraordinary" (as they are calling in Spain) pays, which represents a dent of roughly 15% of the income of their employees, and encouraging private business to follow suit.
So, yes, the Greek public sector is gonna be hurting as a result of these decisions.
Well seeing as rthe choices are this or a governmental default and everyone losing their jobs they should think a bit before they lose their shit. But that would require the me generation to give a shit about the collective whole.
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Facts on Greece's fucked-up economy as reported by my morning daily; I do not presume to be able to validate how accurate they are, but given the discussion I thought that they could be useful. Of greater interest than the general pointers are the specific examples, which (if accurate) illustrate just how entrenched in the system the general sense of entitlement apparently is.
Greece Lied About Economy
There are several reasons for the Greek problems. Greece has lived beyond its means and concealed its financial problems. Here are seven reasons for the crisis:
*Already when Greece entered the Euro community, the country lied about its finances to gain admission. Thereafter the country has been shown to have massaged the figures several times. More money is spent than is earned.
*The substantial “black economy” is a heavy burden on the country. A considerable portion of the economy takes place outside the law and does not generate any taxes. Additionally, tax evasion is an enormous problem. For example, taxi drivers are presently complaining about now having to issue receipts.
*Bonuses can be issued to employees for being fluent in a foreign language, arriving on time at work, or using a computer.
*All employees receive 14 monthly salaries yearly. Half a month’s extra pay is issued at Easter and the same sum at summer’s leave. To be added to this is an extra month’s pay at Christmas.
*Employees of the Greek public sector can retire early: those working for 35 years have been able to retire with full benefits. Presently, the goal is to raise the average retirement age from 61 to 63 before 2015.
*Unmarried or divorced daughters of public sector employees may inherit the retirement pensions of their dead parents. It is estimated that around 40,000 women are presently enjoying this perquisite.
*Military expenditure is high due to the often strained relations with Turkey. Greece’s military budget in 2009 amounted to 14 billion Euro, some 6 per cent of GDP.
No link, since this was from the paper edition; the paper's site is here. The text is originally in Swedish, translated on the fly by me; my apologies for any resultant problems or bad English.
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*Bonuses can be issued to employees for being fluent in a foreign language, arriving on time at work, or using a computer.
Is there something I am missing? I can imagine being a few minutes late but I have a feeling that is not what they are talking about.
*Military expenditure is high due to the often strained relations with Turkey. Greece’s military budget in 2009 amounted to 14 billion Euro, some 6 per cent of GDP.
Is Turkey that much of a threat to Greece? I know they don't like each other, but do they really need to defend themselves against Turkey?
*Military expenditure is high due to the often strained relations with Turkey. Greece’s military budget in 2009 amounted to 14 billion Euro, some 6 per cent of GDP.
Is Turkey that much of a threat to Greece? I know they don't like each other, but do they really need to defend themselves against Turkey?
Well, considering that one of the biggest reasons for Greece's relative lack of development was their being ruled, sacked and culled by the Ottomans for centuries, it's quite understandable. When I was there, the bitterness about what the old empire did was quite mainstream.
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