True Economic Governance

The ongoing Euro zone crisis and the potential collapse of the single currency have led to Merkel and Sarkozy calling for ‘true economic governance’ in the EU. Who would have thought it, eh?

Of course, by ‘true economic governance’, our kind European masters really mean a drive towards fiscal union and European taxation. The proponents of ‘ever closer union’ never fail to exploit a crisis for their benefit and further their goals.

However, this attempt was inevitable. You cannot have a currency covering such a wide geographic area, with a single interest rate set by a central bank and just hope that it will work. The collapse of Ireland, Greece, Spain and Italy were predictable, given the cheap rates of credit they were able to obtain in contrast to the state of their national economies and levels of demand.

Yet, while the Eurocrats will always argue that a crisis is caused by a lack of integration (rather than ‘ever closer union’ itself being the actual problem), their road to full fiscal consolidation will be long and contentious – and they are very quickly running out of time and money, with events increasingly playing out beyond their control. At the end of the day, they will be swept along by the markets and events, just like the rest of us. That is European equality for you.

US Waves Goodbye To Triple-A Credit Rating

Reuters UK brings us the inevitable news of credit rating agency Standard & Poor’s downgrading of United States debt from its prized triple-A position to AA-plus, citing concerns with the government’s budget deficit and rising debt burden.

As I recounted yesterday, the recent U.S. deal on raising the debt ceiling and supposedly reducing the deficit and debt was a calculated fraud. Instead, the U.S. will increase its borrowing and spending, albeit at a slightly slower rate than projected.

Commenting on the announcement, Republican Senator, Jim DeMint of South Carolina observed very much the same, saying:

The deal Congress just passed over conservative objections has already had its obvious effect, the loss of America’s credibility around the world. The deal was not a serious attempt to solve our spending and debt problem, it was a political solution meant to kick the can down the road. The only real solution to our spending and debt crisis was Cut, Cap & Balance that the president rejected out of hand.

The announcement by Standard & Poor’s was largely expected with the agency having placed the U.S. credit rating under review on the 14th of July. It is therefore unlikely to have much on an immediate impact on the markets. However, the long term implications for the United States and the world economy could be far reaching.

The Chinese, who are currently the biggest single creditor to the United States, were immediately critical of U.S. debt reduction steps (or lack thereof), and called for the creation of a new, stable global reserve currency. The country’s official news agency, Xinhua, said:

The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.

China has also strongly urged the United States to cut military and social welfare expenditure, warning that further credit downgrades would very likely undermine world economic recovery and trigger a new round of financial turmoil.

Meanwhile, the BBC’s great Europhile, Mark Mardell has been asking whether the separated system of Government in the United States is to blame for the financial crisis, and wondering if ‘the system itself may not be fit for purpose’.

Much like his former colleagues in the EU, Mark is rather adverse to actual opposition. In their world, the ‘dysfunctional’ government he claims the U.S. system produced has led to the prevention (mainly, in his eyes, by the Republicans and the Tea party) of a serious and unified agreement on the future of the dollar and the United States economy. If everyone would only just agree (or be given no choice in the matter) then the country could easily sort out its economic troubles in a flash – just like the EU. Oh no, wait..!

Still, we in Britain do not have the same system of Government as the United States, so I’m sure we have nothing to worry about. Our economy is so safe in fact that our MPs are able to spend time on much more important business…

The Taxpayers’ Alliance

I missed yesterday’s announcement that former Telegraph and ConHome writer, Jonathan Isaby had been appointed Political Director of the Taxpayers’ Alliance.

The Conservative party and the Taxpayers’ Alliance have always had a very close relationship. The appointment of Isaby as Political Director, apparently responsible for ‘building links with Ministers, MPs and MEPs’, means the partnership will become cosier still.

This appointment brings to mind an occasion in 2006 when I visited Conservative Central Office at its former residence in Victoria Street. During the meeting, our group were informed by Mark Clarke, who was then the pompous Chairman of Conservative Future, and Ian Oakley, at the time a Conservative candidate in Watford, that the newly formed Taxpayers’ Alliance were simply a front organisation set up by the Tories to attack Labour on tax.

The ‘brilliant idea’, so we were told, was to create a separate organisation that could attack Blair and Brown on economic issues, meaning the Labour party, BBC and print media couldn’t just dismiss the complaints as being irrelevant because they had come from the Conservatives.

I even recall mention of how the organisation was to be funded by existing donors to the Tory party and indirectly, the Conservative party itself. At the time I wrote a blog entry on my website making note of a few of these remarks on the TPA, and criticised Mark Clarke and Ian Oakley for being slimy and insincere. Not long afterwards Clarke contacted me by email to ask that I withdraw the article, not, so he said, due to the personal criticism, but for revealing matters about the workings of the TPA at a private meeting in CCHQ. Naturally I refused, and that was the end of the matter as far as I saw it. Furthermore, in subsequent years my observations on the disgraceful Ian Oakley were rather vindicated by events.

Thus, from its inception, the Taxpayers’ Alliance existed as a Conservative sanctioned group used to indirectly assault the Labour administration over their economic incompetence, high tax policies and runaway spending habits. Of course, now that Labour are no longer in office and the Tories (and Lib Dims) have replaced them, the situation has somewhat changed.

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Practice What You Preach

Greg Easterbrook of Reuters wrote a serious, if at times mildly amusing article about some proposals to raise taxes on the wealthy in the United States.

He noted that while rich individuals such as Bill Gates and Warren Buffett declare that the wealthy should pay more in tax, then they do not practice what they preach. Indeed, he says, Barack Obama falls into that category, earning considerably more than the average American:

If Obama is in earnest about wanting increased taxes on the wealthy, then he should send the United States Treasury $182,998. That’s the difference between his Form 1040 Line 60 (“This is your total tax”) and what he would have owed at the higher rate (plus limits on itemized deductions) he himself advocates.

So why doesn’t he tax himself more? The Form 1040, after all, only stipulates the minimum tax an American must pay. More is always welcome. Obama should write a check to the United States Treasury for $182,998.

This very much reminds me of a local debate that I attended just before the General Election. During questions from the audience, a local Methodist Minister stood up and declared that he had earned £18,500 for the previous financial year. He was happy to declare this he said, and had even brought his documents so he could tell us exactly how much tax he had paid, which he then duly listed.

Later, when he eventually got to the point (funny isn’t it how during questions from the audience, more often than not, those who raise their hand seem to feel the incredible urge to give us their long winded opinion rather than actually ask a question?), he said that he was very happy to pay that tax and he got good value for it. He went on to say that he wished he paid even more tax and would be happy to pay it for such excellent public services, etc…

That was his opinion and while I do not share it I did not have a problem with him expressing it in the public forum. My immediate verbal suggestion to him was that he make a voluntary donation to the Treasury. No doubt it would be well spent on some worthy cause I told him. This he did not like.

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