Want More "Fairness?" Look to Europe's Basket Cases

President Obama calls for “social justice.”  He agrees with the motley “occupiers” that the One Percent gets almost everything.  Reagan and the Bush tax cuts burdened us with a tinderbox of inequality, he lectures us. The rich should pay their fair share. “Enough is enough.”  We must create a “just” society that guarantees the poor a dignified life.

In a word, we must become like Europe, for whom Obama expresses open admiration.

Obama apparently does not know that the European countries that have become “fairer” over the past two decades are now basket cases of debt, social unrest, and an unaffordable welfare state.  Those European countries that have had the discipline to become “less fair,” are, in the words of a sympathetic liberal columnist (The GOP scrambles for a bogeyman) “doing well economically, both in absolute terms and in contrast to us.”

We should be like Germany or Sweden but not like Greece, I guess. But Germany and Sweden are recovering from too much of the social justice that Obama wishes to impose on us, while Greece is falling apart in a sea of equality and justice.

Buried in OECD statistics is an innocuous table entitled “Gini coefficients (after taxes and transfers).” Gini coefficients are the most widely used measure of income inequality.  A zero Gini means everyone has the same income. A unitary Gini means one family has all the income. Ginis therefore fall between zero and one. The higher the number, the greater the inequality.

The table shows the percentage increase (or decrease) in income equality for European countries after redistribution by the state through taxes and benefits. (The more positive the number, the greater the increase in inequality. Negative numbers show a reduction in inequality, as Obama would like.)

Go to Forbes.com

This Is The Point I Have Been Making About Greece

The Greek people not its technocrats will decide on austerity, and the Greeks do not like it.

  
               Cartoon from The Economist, Feb. 18-24, 2012
 
Caption: Merkel to Greek finance minister: "I'm afraid more belt tightening may be required." Finance minister: "Perhaps you'd like to tell him."

Krauthammer is Right: We Are Defunding Social Security

In my A Shame Republicans Let Politics Trump Economics, I bemoaned the terrible politics of “compromise” that led to the ill-conceived extension of the payroll tax cut.

Charles Krauthammer nailed this issue in recent commentary, which I heard on the radio (I cannot find it on Google). Here is the gist of what he said:

If this were a Republican administration, the Democrats and media would be screaming about a Republican plot to do away with social security.  We should not allow the Obama administration to call this a tax cut. We should call it by its true name: The defunding of social security.  What’s worse, we are defunding social security for short run political gain on both sides of the aisle. All economists know there will be no economic gain from such short term measures.

We have reached the strange point where Congressional Republicans are being congratulated for cooperating with the Obama administration for passing harmful legislation, both for the purpose of short-run political gain.

A Vivid and Amusing Eye Witness Account of the February 4 Moscow Demonstrations: A Moment of Fame on VOA

A colleague of Marianna Yarovskaya and me, Gregory Kataev (film and theater director), sent this description of what it was like to be a part of the 100,000 plus Moscow demonstrations of February 4. This letter shows the confusing and quixotic mix of "anti-government forces" that must organize themselves if Russia is to have a return to democracy.

"On Saturday, February 4th, my friends and I went to Bolotnaia Square.  We walked the full length of the demonstration route along Yakimanka Street – from the Oktiabr’skaia metro station to the Udarnik cinema, and on to Bolotnaia Square.

There were A LOT of people there.  Unfortunately, there were also a lot of Communists and Nationalists. My friends and I lost each other as I was carried off by the crowd. As I’m walking, I’m thinking to myself: Here are some good guys – rosy cheeked, stalwart, marching with precision, holding jaunty cute yellow flags; in short, nice guys. They appear to regard me with compassion. And suddenly these nice guys start yelling at the top of their lungs: “Russia for the Russians!” “Russia for the Russians!” I thought, “Well, I'm in trouble.”

It was not easy to get out of there!  To my right, a bearded guy, about 40 years old and a head taller than I (and I'm not that short myself), looks at me and asks: “Why aren’t you chanting?” I reply: “Sore throat.” And immediately I ask myself, “Why did I chicken out?”  Then I say to him, “As a matter of fact, I’m half Jewish.”  He says, “Aaaaaah... And which of your parents is Jewish – mother or father?  Your father is a Jewish man?” I answer: “The Jewish man – is my mother.” He says, “Well then you are Russian. The important thing is that your father is Russian!"  And he bellows out once more: “Russia for the Russians! Russia for the Russians!” And to me again: “Well, you have  done well, brother, coming out to march!”  That is how I became the brother of a Russian Nationalist.

Then, I seized the moment and defected to another column of demonstrators. But things went from bad to worse. Now I was marching with Anarchists (black-and-red flags), also nice guys. We were followed by a huge crowd of Communists with red banners, stars, hammers and sickles, and other such horseradish. In general, Marianna and Paul, one thing was clear: if any of these nice guys comes to power, he will hang people like me from lampposts.

We caught up with the biggest column, a coalition of Democrats, Liberals, People's Freedom Party (Parnas) and Yabloko already in Bolotnaia Square.  My friends and I again lost each other there. I roamed around among different groups of people.  I heard conversations that were reminiscent of the revolution of February 1917!  The only difference was that people were not shooting their Mausers into the sky.*  But it seemed like they might start firing any minute.  So I walked around and talked to people, then finally stopped to rest and climbed onto a huge snow mound where it seemed to be a bit quieter.

To my surprise, I found myself among some American journalists. They did not seem like themselves. They wore valenki (felt boots) or some kind of specially warmed boots and winter coats. Their faces were blue from the cold. It was -22ºC, and even I wore my father's dublenka (sheepskin coat) and ridiculous winter hat for the first time in several years. In short, they looked like engineers from the Russian industrial town of Tula, but certainly not like Americans!

One guy, in his 40s, turned out to be James Brooke, the Voice of America Moscow Bureau Chief. In a nutshell, standing right there in this snowdrift, I said something to him and his microphone, which ended up on Voice of America news in my brief moment of fame as:

“Standing on a pile of snow, Gregory Kataev, a filmmaker, said he was happy to see such a turnout when the temperature was minus 20 degrees.
‘If I want a better Russia, if I want it to be a democratic country,  I have to do something, not only speaking in the kitchen, as we say in Russia,’ he said.”

The atmosphere was like a crowded, chaotic marketplace, but with snow and arctic cold. Bearded, rosy-cheeked men wearing tulups (rural sheepskin coats), members of the Union of Russian People, stood nearby. They stared at us as though we were reptiles, bastard spies, smack dab in the middle of the Russian nation and wanting nothing more than its demise. I strongly felt home-brewed patriotic hospitality in their kind glances – it became clear that it was better not to speak English for more than ten minutes in their earshot.

They started asking us questions.  I kept my VOA interview brief because I wanted to avoid engaging in a more radical form of interaction with these people than discussion. They carried posters reading "Give the power to the Russian people!" and they outnumbered us significantly.

The funny thing is that the Russian version of the VOA report says that I addressed the crowd from the height of the snow mound!  And all I did (besides my short interview) was help the Americans understand a couple of speeches that were broadcast by the powerful loudspeakers. We all stood on the snow mound very far from the stage and it was impossible to get anywhere near it because of the dense crowds. The next day two friends of mine called me to say: "We heard you on the Voice of America! Have you been addressing the people from the top of a snow mound, like Lenin from the roof of his armored car?  Did you get there in the sealed train from Washington?"**

I hope, Marianna and Paul, that you find this account entertaining and enlightening.

* Mauser - the name (the brand) of the hand-gun popular during the First World War, Revolution and Civil War in Russia. The crowd of people shooting in the sky from their Mausers is a typical political-meeting street scene in pre-revolutionary Russia.

** Lenin, Russian Communist and Bolsheviks' leader, was sent by the German secret service from Germany to Russia (in April, 1917) across the First World War frontline in a sealed, protected train-wagon in order to get safely into Russia and complete the Russian revolution—so that Russia would sign a peace treaty on German conditions. Having arrived in Russia, Lenin held his famous “uprising speech” addressing the people on the train-station square from the roof of the armored car (bronevik).

I Repeat Again: There Is Still No Greek Solution

The press is again full of reports that the troika (IMF, EU, and ECB) have reached an agreement on Greece. Markets will again rise, until they see that little has happened.

The troika has agreed to release a new tranche of rescue funds to stave off a March Greek default. Private lenders have agreed to their haircut (but that had really been decided a long time ago). The rescue funds will probably be doled out slowly to make sure that Greece meets its end of the bargain and cuts wages and public sector employment.

With an election coming up (and the public vehemently against outside intervention and austerity), Greece cannot meet its end of the bargain. Greece can only do so by agreeing to be governed by external bodies, such as the troika, which spells the end (temporarily perhaps) of Greece independence.

This is one of a hundred of steps that remain to be taken before we can say that Greece has been rescued.

Widow Martha Pays More Than Warren Buffett and His Secretary Combined

Scene: Senate Committee on Finance Hearing Room. Date: Sometime in 2012. Martha, a stylish attractive woman in her 70s, raises a shaking right hand as she is sworn in. The network cameras are notably absent. They have been told by their management to stay away.  CSpan is covering another hearing and Fox News has been delayed.

Senator John Coburn (R Oklahoma) begins the questioning:

Coburn: We are meeting here to discuss the President’s proposal to raise the rate of taxation on capital gains from 15 to 23.8 percent. We understand that you have particular views on this subject.
Martha: Yes sir. I am a widow. I live in a nice retirement community in Houston, Texas. My social security check pays for most of my living expenses, and I do some part time work. But I have to cover the rest by selling off the stock I own.

Coburn: So you are one of the millions of ordinary Americans who own stock?
Martha: Yes, my late husband Sam was pretty good when it came to investments. Before he died ten years ago, he told me to hold on to my stocks as long as I could. He was particularly high on Massachusetts Investors Trust. Barron’s lists it in its “Best Mutual Fund Family,” I am told. All I can say is that Sam trusted this company. He had a big share of his assets in Massachusetts Investor’s Trust.

Coburn: How have these stocks been doing? We all know the market has been down.
Martha: My stocks have not done well since Sam died, especially the last five years. But I need more money to pay my bills, so I finally sold my Massachusetts Investor Trusts. In December, I sold $20,000 worth of shares and my broker told me that my capital gain was $2,600, and that I would have to pay a tax of $390.
Senator Schumer (D of New York) asks Coburn to yield time to him.

Schumer: Well, it seems things worked out for you. You only have to pay a small tax of 15 percent on the $20,000 sale. Hard working folks have to pay more than that on their income taxes.
Martha: Senator, it is hard for me to understand, but my broker told me that my real gain after inflation was only $30. He explained that the annual return on Massachusetts Investor Trust shares over the past ten years was 2.97 percent but inflation was 2.95. He said that everyone knows that what counts is the capital gain after inflation. He then had a shocker for me. He told me that the tax rate on my $2,600 capital gain after inflation is 1,200 percent.

Schumer: Stammers.

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