Strengthening Constitutional Self-Government

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Foreign Affairs

Confidence in New Europe

The Czech Republic survived a vote of no confidence on Friday, whereas the Romanian government has fallen. Both countries are implementing austerity measures which domestic leftist movements deeply oppose. (Sound familiar?) The Czech Republic has increased sales and income taxes and introduced modest university fees (which will likely never disappear, now that they have been successfully introduced - signaling an end to "free" college education). They have also proposed deep spending cuts.

Romania, on the other hand, has failed to accept austerity measures and courts political chaos.

Romania took a €20 billion ($26 billion) bailout loan from the International Monetary Fund, the European Union and the World Bank in 2009 when its economy shrank 7 percent. The government has hiked the sales tax to 24 percent and slashed public sector wages by one-fourth in 2010 to meet the conditions of the loan, angering many Romanians.

The IMF and European Commission said in a statement they expected Romania to "continue to observe its economic policy commitments to its international partners."

Whether Romania will comply with the former government's international obligations is an interesting question. And whether Romania presents a potential trend of ruling party collapses is another interesting question. The Czechs seem to have barely avoided such a fate, but France seems likely to depose Sarkozy in light of the continuing fiscal crises and subsequent French unemployment. With Spain at 24% unemployment and Greece still circling the drain, Europe remains a fragile enterprise.
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"Both countries are implementing austerity measures which domestic leftist movements deeply oppose. (Sound familiar?)"

It is mostly the fault of Merkel, Sarkozy and Cameron.

Do you realize that Great Britain just entered a recession, (defined as two consecutive quarters of contraction)?

So foreseeable... so analytically simple in terms of inventory cycles anyways. Less consumption equals, less inventory draw down, less inventory draw down equals fewer renewed orders, fewer renewed orders, equals less production.

We have a partial beginning to an answer about whether or not deficits matter.

Austerity measures do not grow an economy.

For non-monetarily sovereign entities loans which have to be paid back, are not the answer. This includes businesses, states (and European nations which like U.S. states are not monetarily sovereign)

We can choose to consume more and produce more. On this front at least, may the domestic leftists triumph (pro-deficit hawks)

I care about the deficit, I want it to be larger.

So it is clear that we need a debt floor not a debt ceilling. If there was actually a guarantee that the budget deficit would grow 5% a year, the debate would still be about distributing this as increased spending, tax cuts or default rebate mechanic.

What rebate mechanic? Well, you can keep the tax code as it is, just add another section:

HB 420: American Taxpayer Rebate ACT (2013) aka. "Munchies" aka. "FEED THE BEAST"

When the budget deficit fails to grow by 5% YOY (with base year 2012, table 1A) this differential surplus will be redistributed on a per capita basis to all taxpayers of record.

I would actually prefer a 25% flat tax with this...but that complicates/simplifies too many sections of code. (not fundamental to my mechanic)

In this way there would be a populist incentive to reduce government spending in the form of the tax rebate. The less money government spends the more progressive the tax code.

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