Political Dupery and Consequential Austerity: a participation sport?

Defining the popular term austerity: the managing response to the known long-term cascading unintended consequences of politico policy.

It’s a known-known that first stage economic consequences, the short term effects thereof, match politico time horizons i.e. the next election. Second, third, and so on economic consequences of politico policy yield long-term cascading unintended consequences, much of which are unfunded politico promises, ending in a reversal of the “promise”. The action phase of reversing the unfunded promises being “austerity“.

Assume for a moment that the anti-austerity mantra within Greece is basically the public's reaction to politicos having put them [the public at large] in the current situation. That is, the public was duped.

Further, a new set of politicos can easily draw upon the mantra that the public was duped and that somehow, and in some way, the public should not have to pay for such dupery.

OK. Someone else is at fault, responsibility is transferred, and someone else should have to pay the price.

However, the dupery of politico policy yielding positive first stage economic consequences are in fact benefits accruing to certain individuals and groups. That the politico, benefited individuals and benefiting groups believe the dupery is transferred to a third party [taxpayer]. Stated alternatively, the benefiting individuals and groups participate in the dupery in that they happily welcome the benefits and think someone else will pay the price of dupery.

Going back to the Greek public’s reaction to austerity, let us examine a counter factual. Assume for a moment that Greece was still on the upward slope of an accumulating debt spiral. That the accumulating debt spiral was still funding an extremely liberal early retirement, fat public sector pensions, bloated government with fat pay, government owned enterprises producing non-competitive items with workers garnering fat pay, etc., etc. Would we hear calls of dupery?

The benefiting groups were not duped. The debt spiral and the false benefits thrown off by the spiral became a "participation sport". Any dupery is that the benefiting groups thought they had transferred dupery, when in fact, all parties were duped for the exception of the politico.




　

Euro Zone: Interactive Debt Graphic

Below is a link to a most excellent interactive graph showing what the many players of the euro zone crisis owe to one another. The graph also shows gross domestic product [GDP], foreign debt outstanding, foreign debt per person, foreign debt to GDP, and government debt to GDP.

Eurozone debt web: Who owes what to whom? BBC 11/18/2011

 http://www.bbc.co.uk/news/business-15748696

h/t Mark Perry at Carpe Diem

The Late Stage Social Welfare State and "Rent Seeking"

Greece: what happens when one attempts to privatize state owned enterprise

Its been long argued that when politicos through the mechanism of government legislate state ownership or state run enterprises, the removal of such a program is nearly impossible.

Why is state owned enterprise near impossible to remove? What if state ownership has to be removed?

The state ownership many times was a political constituency building exercise at its inception. That is, politicos bestowing benefits on a particular recipient group creates a voting block of dependent recipients. The recipients of the benefits in many cases become long term dependent on such bestowed benefits. In order to continue to receive such benefits the recipients vote for the politicos that support the particular state owned enterprise. Hence we have the complete political circle of the politico bestowing benefits on a particular class of recipients, the recipients grow dependent on the bestowed benefits, the recipients then vote for the politico bestowing benefits.

Meanwhile the bestowed benefits (in this case the state enterprise) must be administered by some government agency. The agency exists to bestow the benefits directed by the politico. The end of such benefits would theoretically mean the end of the agency. Hence agency employees also become a dependent class that support the politico that continues the programs the agency administers.

Further, vendors exist that supply the government agency with items to administer the state owned enterprise. These vendors have suppliers and so on. Further, the state owned enterprise have vendors and suppliers as well.

Hence we have an army of recipients, bureaucrats, and vendor/suppliers that are dependent on the state owned enterprise to continue. These dependent parties support the politicos that perpetuate the state owned enterprise.

What happens when you threaten to end such a program? Obviously great resistance is put forth by the dependent parties as well as the politicos that gain political support from the dependent parties. The politico stands to lose the political constituency base of the dependent parties and the dependent parties stand to lose benefits of one type or another.

What happens if the program must end? That is, there is absolutely no money remaining to fund the program? Greece is an excellent example of what happens when state owned enterprise must end. The resistance that occurs when you threaten to end such programs morphs into delay when you must end the program.

In an article appearing in Financial Times 05/13/2011 entitled Greece can privatize more, says IMF one sees a tail of delay. The article in this particular case focuses on state owned assets and state owned enterprises that need privatized. The article points out that privatization would gain confidence from exogenous parties that hold Greek debt as well as cut the debt. With only one-fifth of assets up for sale the delay to privatization is self evident.

'Antonis Samaras, leader of Greece's conservative opposition New Democracy party backed the privatization programme and on Thursday said the governing socialists were taking "too timid" an approach.

 "We need to act boldly to seek strategic partners who will invest in growth rather than simply selling equity stakes" said Mr. Samaras in a speech outlining his party's economic policy.

He urged immediate liberalisation of the energy sector, saying socialist-backed public sector unions were blocking the opening of the electricity market. "This is what international investors want to see," he said.' (1)

Notes

(1) Financial Times, 05/13/2011, Greece can privatize more, says IMF

ObamaCare: expanded entitlements in an environment of non-sustainable entitlements

ObamaCare has had a rough couple weeks. Apparently all the naysayers were really the truth tellers. How can it possibly be?

All central planning schemes that attempt to replace a free market eventually unravel. No one person or even group of people have the mundane knowledge to replace the free market mechanism with a predetermined outcome, centrally planned, price fixing scheme. Regardless of the notional argument that certain intellectuals possess "special knowledge", knowledge that will cause schemes to work, the empirical evidence is that no scheme can mimic a free market.

The quick unravel of the ObamaCare scheme is seen in its most recent form as coverage vs. penalties and immediate skyrocketing costs. However, the real unravel is the attempt to create an additional entitlement scheme in an environment of current overall entitlement schemes failing.

Providing Coverage vs. Paying Penalties

Once companies did the math on providing coverage vs. paying a health-care penalty, the efficient position is to pay the penalty and eliminate coverage. (1) (2) AT&T, Verizon and many others are weighing the option of dumping coverage and merely paying the penalty as the cost would be less.

Escalating Cost Estimates

Then comes more pesky math. Yes, allowing children to stay on their parents policy until age 26 will increase premiums. (3) Yes, several revisions of the cost of ObamaCare by the Congressional Budget Office have now pegged the cost to exceed $1 trillion and yes the federal government budget deficit will increase not decrease due to ObamaCare. (4) (5) (6) (7)

European Meltdown of Economies based on Entitlements

During the six or so weeks following the passage of the European style ObamaCare plan, we have experienced an European style financial meltdown in the home of socialized medicine. Yes, the European Union is melting down. (8) The meltdown in Europe is in part due to socialized medicine and its out of control costs.

Unfunded Entitlements, Empty Promises, and Unsustainable Costs

Progressives and/or socialists over the last 100 years solve every possible problem with more and more government intervention in the form of regulation, government programs leading to addition bureaucrats, and unfunded entitlements.

To understand this perpetual phenomena more fully, you have to understand progressives within the political class (democrats and/or republicans). The progressives within the political class are the anointed/intelligentsia that know what is best for the common man/woman. The progressive political class wants to paint the world in their own self image. They paint the world with "notions" that are not based on empirical evidence. These notions (the way things ought to be) are then argued through verbal virtuosity of moral obligation. Basically the political class argues that the producer class has a moral obligation to the recipient class. This moral obligation takes the form of transfer payments from the producer class to the recipient class.

Along the way, the progressive political class learned that they could build a constituency group, a voting block if you will, based upon the recipient class. The conduit of power is the "transfer payment" from the producer class to the recipient class. The power of the progressive political class is the transfer payment.

However, with any good scheme comes overreach. You see, the progressive political class made a major error in painting the world in their own self image through notions of the way things ought to be. The error is that the way things ought to be, in the long run, exceeds the summation of all possible transfer payments. Opps!

In other words, the accumulation of all the progressive political class actors over time and the accumulation of all their notions leading to all the schemes over time, go bust when the transfer payment from the producer class approaches or becomes equal to a 100% transfer to the recipient class. (9) (10)

Failure

The idea that the private sector is the only sector that fails is ridiculous. Both private and public sectors can and do fail. An overarching notion in progressive and socialist policies is the implicit assumption that the private sector is the only sector in which failure occurs and to limit or stop failure is the responsibility of the public sector with the implicit assumption that the public sector doesn’t itself fail. This is a ridiculous non-empirical assumption. The fact of the matter is that governments and government policy fails on a daily basis.

Sometimes Failure comes with a Warning

ObamaCare is merely another entitlement added to the sea of unfunded entitlements (currently standing at +$100 trillion unfunded) that will unravel like the other unfunded entitlements, the summation of which, are creating a word of hollow promises. Progressives and socialist have created the ultimate world of unreality. Promises built on a house of cards. Promises heading for a recognising day with of no funds and hence no benefits.

However a warning signal, a lighthouse standing on the rocks, a sinking ship distress signal is available for all to see. Greece is imploding due to unsustainable debt directly linked to unfunded and unsustainable entitlements (empty promises) made by their socialist government policies. The European Union, lead by Germany have arranged for a bail out. However, the bail out comes with conditions.

Of the many conditions of the bail out is the privatizing their health care system. No way! Way! That the Greek socialized medicine system needs privatized should be a warning that ObamaCare is merely an additional pathway to bankruptcy. (11)

Summary

The American people, armed with mundane knowledge, are signaling repeal of ObamaCare (12) (13). Political leaders should hear the message from the American people and see the warning that the Greece and euro-style financial meltdown is largely due to unsustainable unfunded entitlements. That current entitlements need addressed and fix before empty promises go bust. That no new entitlements such as ObamaCare need proposed until the U.S. financial house is in order which could take decades.

(1) http://www.examiner.com/x-37620-Conservative-Examiner~y2010m5d5-BreakingObamaCare-prompts-top-companies-to-consider-dropping-employee-coverage

(2)http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/

(3)http://blog.heritage.org/2010/05/11/side-effects-higher-premiums-from-adult-children-on-parents-health-plans/

(4)http://sweetness-light.com/archive/cbo-now-says-obama-care-will-cost-1t

(5) http://www.politico.com/news/stories/0510/37081.html

(6) http://hotair.com/archives/2010/05/11/great-news-cbo-says-obamacare-will-cost-115-billion-more-than-thought/

(7)http://politics.foxnews.mobi/quickPage.html?page=23888&content=38392802&pageNum=-1

(8)http://www.bankruptingamerica.org/2010/05/04/in-case-you-missed-it-is-greece-just-the-tip-of-the-iceberg/

(9)(10) http://www.bankruptingamerica.org/2010/04/23/video-is-washington-bankrupting-america-gretchen-hamel-on-the-kudlow-report/

(11)http://www.glgroup.com/News/The-Greek-bailout--What-will-happen-in-the-productive-economy--47718.html

(12)http://www.gallup.com/poll/127727/americans-no-less-worried-healthcare-costs.aspx


(13) http://www.rasmussenreports.com/public_content/politics/current_events/healthcare/march_2010/health_care_law