Is It Political Suicide For Paul Ryan To Still Be Hawking A Failed European Austerity Agenda?

Martin Wolf's autopsy of Europe's Austerity Agenda for the New York Review of Books doesn't even mention Paul Ryan. But I hope Democrat Rob Zerban, who nearly beat Ryan in 2012 and will take him on again next year, is reading it and absorbing it. It really is-- at least as much as Ayn Rand's adolescent writing-- what Ryan is all about.

After Ryan's buddies in the state legislature gerrymandered WI-01 to make it redder and safer, Ryan managed to beat Zerban 55-43%, his closest call since he was first elected. Zerban won his home county, Kenosha, and he also won Ryan's home county, Rock. Ryan swamped him, 73-25%, in the clueless, blood red Republican heartland that had been appended onto the district in Waukesha County. The biggest county, Racine, was very close. Ryan took it with 51%. Next year Zerban will win Racine by a bigger margin than that. I doubt many people in Waukesha read the NY Review of Books or even have a clear idea what the Austerity Agenda Ryan has been trying to import to America, even is. It will be up to Zerban to help these folks understand it-- and how it impacts them and their families. Wolf, who works for the Financial Times, is one of the world's most highly regarded and influential economic journalists. In his words, "Austerity has failed. It turned a nascent recovery into stagnation. That imposes huge and unnecessary costs, not just in the short run, but also in the long term: the costs of investments unmade, of businesses not started, of skills atrophied, and of hopes destroyed." He isn't alone as seeing it as one gigantic blunder, one that should, in a rational world, sink the careers of austerians like Paul Ryan.

Austerity came to Europe in the first half of 2010, with the Greek crisis, the coalition government in the UK, and above all, in June of that year, the Toronto summit of the group of twenty leading countries. This meeting prematurely reversed the successful stimulus launched at the previous summits and declared, roundly, that "advanced economies have committed to fiscal plans that will at least halve deficits by 2013."

This was clearly an attempt at austerity, which I define as a reduction in the structural, or cyclically adjusted, fiscal balance-- i.e., the budget deficit or surplus that would exist after adjustments are made for the ups and downs of the business cycle. It was an attempt prematurely and unwisely made. The cuts in these structural deficits, a mix of tax increases and government spending cuts between 2010 and 2013, will be around 11.8 percent of potential GDP in Greece, 6.1 percent in Portugal, 3.5 percent in Spain, and 3.4 percent in Italy. One might argue that these countries have had little choice. But the UK did, yet its cut in the structural deficit over these three years will be 4.3 percent of GDP.

What was the consequence? In a word, "dire."

In 2010, as a result of heroic interventions by the monetary and fiscal authorities, many countries hit by the crisis enjoyed surprisingly good recoveries from the “great recession” of 2008–2009. This then stopped. The International Monetary Fund now thinks, perhaps optimistically, that the British economy will expand by 1.8 percent between 2010 and 2013. But it expanded by 1.8 percent between 2009 and 2010 alone. The economy has now stagnated for almost three years. Even if the IMF is right about a recovery this year, it will be 2015 before the economy reaches the size it was before the crisis began.

The picture in the eurozone is worse: its economy expanded by 2 percent between 2009 and 2010. It is now forecast to expand by a mere 0.4 percent between 2010 and 2013. Austerity has put the crisis-hit countries through a wringer, with huge and ongoing recessions. Rates of unemployment are more than a quarter of the labor force in Greece and Spain.

...Why is strong fiscal support needed after a financial crisis? The answer for the crisis of recent years is that, with the credit system damaged and asset prices falling, short-term interest rates quickly fell to the lower boundary—that is, they were cut to nearly zero. Today, the highest interest rate offered by any of the four most important central banks is half a percent. Used in conjunction with monetary policy, aggressive and well-designed fiscal stimulus is the most effective response to the huge decrease in spending by individuals as they try to save money in order to pay down debt. This desire for higher savings is the salient characteristic of the post–financial crisis economy, which now characterizes the US, Europe, and Japan. Together these three still make up more than 50 percent of the world economy.

Of course, some think that neither monetary nor fiscal policy should be used. Instead, they argue, we should “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” In other words, sell everything until they reach a rock-bottom price at which point, supposedly, the economy will readjust and spending and investing will resume. That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into the Great Depression. Mellon thought government should do nothing. This advice manages to be both stupid and wicked. Stupid, because following it would almost certainly lead to a depression across the advanced world. Wicked, because of the misery that would follow.

...The UK certainly did have alternatives-- a host of them. It could have chosen from a wide range of different fiscal policies. The government could, for example, have:

1. Increased public investment, rather than halving it (initially decided by Labour), when it enjoyed zero real interest rates on long-term borrowing.

2. It could have cut taxes.

3. It could have slowed the pace of reduction in current spending.

It could, in brief, have preserved more freedom to respond to the exceptional circumstances it confronted.

Why did the government not do so?

1. It believed, and was advised to believe, that monetary policy alone could do the job. But monetary policy is hard to calibrate when interest rates are already so low (at or close to zero) and potentially damaging particularly in the form of asset bubbles. Fiscal policy is not only more direct, but it can also be more easily calibrated and, when the time comes, more easily reversed.

2. The government believed that its fiscal plans gave it credibility and so would deliver lower long-term interest rates. But what determines long-term interest rates for a sovereign country with a floating exchange rate is the expected future short-term interest rates. These rates are determined by the state of the economy, not that of the public finances. In the emergency budget of June 2010, the cumulative net borrowing of the public sector between 2011 and 2015–2016 had been forecast to be £322 billion; in the June 2013 budget, this borrowing is forecast at £539.4 billion, that is, 68 percent more. Has this failure destroyed confidence and so raised long-term interest rates on government bonds? No.

3. It believed that high government deficits would crowd out private spending-- that is, the need of the government to borrow would leave less room for private borrowing. But after a huge financial crisis, there is no such crowding out because private firms are reluctant to invest, and consumers are reluctant to spend, in a weak economic environment.

4. It argued that the UK had too much debt. But the UK government started the crisis with close to its lowest net public debt relative to gross domestic product in three hundred years. It still has a debt ratio much lower than its long-term historical average (which is about 110 percent of GDP).

5. The government argued that the UK could not afford additional debt. But that, of course, depends on the cost of debt. When debt is as cheap as it is today, the UK can hardly afford not to borrow. It is impossible to believe that the country cannot find public investments-- the cautious IMF itself urges more spending on infrastructure-- that will generate positive real returns. Indeed, with real interest rates negative, borrowing is close to a “free lunch.”

6. The government now believes that the UK has very little excess capacity. But even the most pessimistic analysts believe it has some. Of course, the right policy would address both demand and supply, together. But I, for one, cannot accept that the UK is fated to produce 16 percent less than its pre-crisis trend of growth suggested. Yes, some of that output was exaggerated. There is no reason to believe so much was.

We, on this side of the argument, are certainly not stating that premature austerity is the only reason for weak economies: the financial crisis, the subsequent end of the era of easy credit, and the adverse shocks are crucial. But austerity has made it far more difficult than it needed to be to deal with these shocks.

The right approach to a crisis of this kind is to use everything: policies that strengthen the banking system; policies that increase private sector incentives to invest; expansionary monetary policies; and, last but not least, the government’s capacity to borrow and spend.

Failing to do this, in the UK, or failing to make this possible, in the eurozone, has helped cause a lamentably weak recovery that is very likely to leave long-lasting scars. It was a huge mistake. It is not too late to change course.

It won't be easy, but if Rob Zerban can convey this to suburban votes in southern Milwaukee County, the suburban areas of Racine County and to at least some of the folks living south and west of the city of Waukesha from Muskego to Mukwonago to North Prairie and Wales, we'll never hear from Paul Ryan again-- which would be a tremendous boon to working families all over America.

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The Banksters Know Just How To Fix Spain's Economy-- Suspend The Minium Wage... And Give The Banks To The Banksters

Luis Maria Linde, ECB President Mario Draghi and President of the Spanish Parliament Jesus Posada

Spain cooked its own goose last year when it elected a uber-corrupt right-wing government lead by crooked wing-nut Mariano Rajoy. The Bank of Spain's brand new crackpot right-wing Governor, Luis Maria Linde, is urging that government, enmeshed in endless corruption scandals and an Austerity economy cascading out of control, to sell two nationalized banks (Catalunya Banc and NCG Banco), quickly raise the retirement age and scrap the minimum wage. Nothing about executing banksters and confiscating all their stolen loot.

Linde calls his "reform" temporary but, of course, ending the minimum wage has been a goal of right-wingers since before it was ever adopted. He claims it will help end unemployment and give the labor market flexibility. Not a peep about the ultimate goal: slavery.

“It would be worth exploring the possibility of establishing new formulas that would allow, in special cases, temporary departures from the conditions laid down in collective bargaining agreements, or exceptional mechanisms to prevent the minimum wage from acting as a constraint on specific groups of workers with most difficulties in terms of employability,” he said in the report.

Spain’s minimum wage is currently set at €645 a month with a record 6.2 million people out of work. The national unemployment rate has hit 27.2% while Andalucia has been named as the second hardest place to find a job in Europe with 34.6% of the population without work.

Nationally, youth unemployment has reached a record 57.2%.

Linde also suggested making reforms to the state pension by increasing the retirement age and changing how pensions are calculated.

The report, which calls for the official age of retirement to increase from 65 to 67, recommends that calculating the amount a person receives should be based on contributions made in the last 25 years of working life rather than the last 15.

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Paul Krugman has a message for policy-makers: "Where we are is not O.K. Stop shrugging, and do your jobs"

Patrick Chappatte [click to enlarge]

"For more than three years some of us have fought the policy elite's damaging obsession with budget deficits, an obsession that led governments to cut investment when they should have been raising it, to destroy jobs when job creation should have been their priority. That fight seems largely won -- in fact, I don't think I've ever seen anything quite like the sudden intellectual collapse of austerity economics as a policy doctrine.

"But while insiders no longer seem determined to worry about the wrong things, that's not enough; they also need to start worrying about the right things -- namely, the plight of the jobless and the immense continuing waste from a depressed economy."

-- Paul Krugman, in his NYT column "The Big Shrug"

by Ken

Howie and I were talking the other day (or the other week?) about what is, I now gather the talk of the blogging community: the death of politics. Or rather, that fewer and fewer people seem interested in the stuff.

Which I understand completely. Things aren't bad enough to drive us into open revolt, or even vaguely mutinous disgruntlement, as might have been the case in the first year or two of the economic meltdown -- the vaguely mutinous disgruntlement, not the impulse to open revolt. We have learned enough about the corruption of our system, and the way in which it is controlled by our power elites, as to leave most of us throwing our arms up, saying, "WTF can we do anyway?"

And there's a tendency to answer: fry up some more bacon, and watch the new episodes of Game of Throw-Up.

Imagine Paul Krugman, then, trotting out the quaint idea that there are people in policy-making positions whose job it is to do something about the state of the economy.

"I've been in this economics business for a while," he begins today's NYT column, "The Big Shrug." "In fact, I've been in it so long I still remember what people considered normal in those long-ago days before the financial crisis."

In those ancient times, he says, "normal" meant:

* "an economy adding a million or more jobs each year, enough to keep up with the growth in the working-age population";

* "an unemployment rate not much above 5 percent, except for brief recessions";

* and "very few people out of work for extended periods."

"So how, in those long-ago days," he wonders, "would we have reacted to Friday's news" --

that the number of Americans with jobs is still down two million from six years ago, that 7.6 percent of the work force is unemployed (with many more underemployed or forced to take low-paying jobs), and that more than four million of the unemployed have been out of work for more than six months? Well, we know how most political insiders reacted: they called it a pretty good jobs report. In fact, some are even celebrating the report as "proof" that the budget sequester isn't doing any harm.

Krugman credits the Fed with at least -- once upon a time, which is to say last fall -- signaling a "willingness to do whatever it took to get unemployment down." But that passed, and now, he says, "sometimes it seems as if nobody in Washington outside the Fed even considers high unemployment a problem."

He wonders why this isn't "a major policy priority," and ventures three answers:

(1) "Inertia"

[I]t's hard to get policy changes absent the threat of disaster. As long as we're adding jobs, not losing them, and unemployment is basically stable or falling, not rising, policy makers don't feel any urgent need to act.

(2) "The unemployed don't have much of a political voice"

Profits are sky-high, stocks are up, so things are O.K. for the people who matter, right?

(3) "The monetary hawks"

[W]hile we aren't hearing so much these days from the self-styled deficit hawks, the monetary hawks -- economists, politicians and officials who keep warning that low interest rates will have dire consequences -- have, if anything, gotten even more vociferous. It doesn't seem to matter that the monetary hawks, like the fiscal hawks, have an impressive record of being wrong about everything (where's that runaway inflation they promised?). They just keep coming back; the arguments change (now they're warning about asset bubbles), but the policy demand -- tighter money and higher interest rates -- is always the same. And it's hard to escape the sense that the Fed is being intimidated into inaction.

"The tragedy is that it's all unnecessary"

Krugman allows that "you hear talk about a 'new normal' of much higher unemployment," but insists that "all the reasons given for this alleged new normal, such as the supposed mismatch between workers' skills and the demands of the modern economy, fall apart when subjected to careful scrutiny."

If Washington would reverse its destructive budget cuts, if the Fed would show the "Rooseveltian resolve" that Ben Bernanke demanded of Japanese officials back when he was an independent economist, we would quickly discover that there's nothing normal or necessary about mass long-term unemployment.

#

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It Wasn't A Happy May Day, Not In Europe-- And Probably Not At Chez Paul Ryan

Except for Seattle, it was a pretty quiet May Day here in the U.S. where Boehner, Ryan, Miss McConnell and Obama are introducing the devastating Austerity agenda more gradually than they did in Europe. May Day was marked by protests by workers across the globe, starting in Asia, with as many as 150,000 demonstrators getting the ball rolling in Jakarta, while smaller protests sprang up in Seoul, Phnom Penh, Dhaka and Manila.

With 80 countries around the world marking May 1 as a public holiday, Istanbul's Taksim Square was in lockdown on Wednesday, after the Turkish government banned May Day protests there.

The square is the site of a 1977 May Day massacre in which dozens of people died under disputed circumstances.

Al Jazeera's Hashem Ahelbarra, reporting from Istanbul, said: "There have been scuffles, particularly in areas that lead to Taksim Square, which has been sealed off.

"Protesters say they should be given access to celebrate May 1 in a place of symbolic importance; they want to honour the memory of those who were killed here. There is a tug of war under way between the government and people."

...In Moscow, the Russian capital, authorities sanctioned 16 separate rallies, including one led by Vladimir Putin's ruling United Russia party.

Other groups, including the Communist Party, are holding gatherings of their own. Up to 90,000 people are expected.

Protests in Greece were widespread and included a major transport workers strike but were generally peaceful. There were demonstrations in 80 Spanish cities, were Austerity is especially catastrophic to a devastated middle class and where the unemployment rate in 27%. And in Italy, the new Pope took the side of working people over the oligarchs and plutocrats. It must have infuriated Catholic fascists in America like Paul Ryan to see Pope Francis denouncing Austerity yesterday.

Pope Francis on Wednesday urged political leaders to make every effort to create jobs and said unemployment was caused by economic thinking “outside the bounds of social justice.”

“I call on politicians to make every effort to relaunch the labor market,” the Argentine pope told thousands of followers at his weekly general audience in St. Peter’s Square, which coincides with May Day demonstrations around the world.

“Work is fundamental for dignity,” he said.

“I think of labor market difficulties in various countries. I think of people, not just young people, who are unemployed often because of an economic conception of society based on selfish profit outside the bounds of social justice,” he said.

Paul Krugman warned his European counterparts they were heading in the wrong direction-- and still are. "Sometimes," he prodded, "economists in official positions give bad advice; sometimes they give very, very bad advice; and sometimes they work at the OECD."

It’s almost exactly three years since the Paris-based OECD gave what may have been the worst advice of any major international organization-- worse than the European Commission, worse than the ECB. Not only did it join in the demand for fiscal austerity, it also demanded that the US start raising interest rates rapidly, so as to head off the threat of inflation-- even though its own models showed no such threat.

So here we are three years later. No inflation takeoff in America (and the Fed trying to find ways to boost demand at a zero rate); austerity economics has crashed and burned; the latest numbers from Eurostat look like this:

And what is the OECD’s chief economist (still the same person) saying?

The euro zone is at risk of snatching defeat from the jaws of victory by abandoning efforts to cut budget deficits and fix long-standing economic problems, the Organization for Economic Cooperation and Development‘s chief economist warned Monday.

…Mr. Padoan said the growing perception that austerity has been futile is incorrect.

“Fiscal consolidation is producing results, the pain is producing results,” he said.

He added that euro-zone policy makers need to do a better job of communicating their successes to a weary population.

I believe that’s eurospeak for “the beatings will continue until morale improves.”

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Maybe It Really Isn't Fair To Always Just Blame The Germans

The conventional wisdom runs something like this: the northern European (Protestants) are industrious and thrifty and the southern Europeans + the Irish (Catholics) are slackers and high livers who squander their wealth on wine and women. Or... the Nazis won the long-war after all and are now cracking the whip to make everyone in Europe act like a good little Germans-- or starve. After all, who really gained the most from the creation of the Common Market and the Eurozone? German industry is well... very much über alles. Cyprus, Spain, Italy, Portugal, Greece... not so much. German banks have, conventional wisdom has it, underwritten their spendthrift ways-- or at least their ability to buy expensive German manufactured goods.

Over the weekend, Der Spiegel offered an alternative interpretation, basically, why don't the 1% in these crooked countries pay their fair share and stop avoiding taxes? Like here in the U.S. "interest rates are very low, because the ECB [like the Fed] is flooding the euro zone with money to stabilize the system. People who save their money are currently getting the short end of the stick, as they are stealthily being dispossessed. On the other hand, those with enough money to invest in stocks and real estate are benefiting from the boom triggered by the flood of funds coming from the ECB. In other words, taxpayers and ordinary savers are paying for the euro rescue efforts, which are primarily benefiting the rich in Europe's most troubled economies. Their assets remain largely untouched, while the assets of their rescuers are melting away... [T]he aid programs to date have only replaced old loans with new ones, so that the borrower countries will never shed their heavy debt burdens." Ordinary Germans are getting sick of being painted as the bad guys, although keep in mind when you read the numbers below that the averages reflect that many of these southern Europeans countries have much, much less economic equality than the northern countries do. The rich are really rich (and powerful) and the poor are getting poorer and the middle class in smaller, less powerful... and shrinking.

[T]here is also a second image of Germany, one that's based on numbers, not emotions. The figures were obtained by the European Central Bank (ECB) and released last week. This image depicts a country whose households own less on average than those that are asking for its money.

In this ranking of assets, Cyprus is in second place Europe-wide, while Germany ranks much lower, even lower than two other crisis-ridden countries, Spain and Italy.

And this Cyprus, with its affluent households, is now supposed to receive €10 billion ($13.1 billion) from the European Stability Mechanism (ESM), the Euro Group's permanent bailout fund, and the International Monetary Fund (IMF), at least according to the decisions reached after dramatic negotiations, which the German parliament, the Bundestag, is expected to approve this week. But a new question is arising: Why exactly are we doing this? Isn't Cyprus rich enough to help itself?

In light of the new ECB study, a new discussion of the Euro Group's bailout strategy is indeed necessary. So far taxpayers have born the risks of this strategy, by guaranteeing all loans the ESM has paid out to needy countries. Greece, Ireland, Portugal and Spain are already part of this group, and now Cyprus has been added to the mix.

...It would be more sensible-- and fairer-- for the crisis-ridden countries to exercise their own power to reduce their debts, namely by reaching for the assets of their citizens more than they have so far. As the most recent ECB study shows, there is certainly enough money available to do this.

The numbers are potentially explosive. For instance, the average German household has assets of €195,000, almost €100,000 less than the average Spanish household. The average net wealth of households in Cyprus is €671,000, more than three times the German value. Italian and French households are also significantly wealthier than their German counterparts.

The differences are even more pronounced when it comes to median net wealth, which is the level that the lower half of the population just reaches and the upper half exceeds. On this measure, Germany, at €51,400, is actually in last place in the euro zone. The corresponding value for Cyprus is five times as high. Median net wealth is even higher in crisis-rattled Portugal than in Germany.

The conclusions of the ECB study had hardly been published before various efforts to relativize and whitewash the figures began. The results were apparently embarrassing to the ECB itself, but also to the German government.

...[T]he differences in wealth were mainly attributable to property ownership habits in the various countries. Whereas just over 80 percent of households own their own homes in Spain (83 percent) and Slovenia (81.6), and even 90 percent in Slovakia, this is true of only 44 percent of Germans.

...Nevertheless, some attempts to downplay differences in wealth within the euro zone are reminiscent of card tricks. One argument holds that the Germans are portrayed as being too poor, because their figures do not account for their claims against the government pension system. In other countries, people provide for their retirement by buying property, which Germans don't have to do because they have government pension insurance.

But this is a spurious argument. Claims against a government pension fund do not constitute the asset accumulation in the classic sense, but rather a promise that could quite possibly not be kept. The current working generation pays for the pensions of retirees, which is precisely why pension claims cannot be reflected in the wealth calculation. They are offset by the younger generation's obligation, which is essentially a liability to vouch for the claims.

There are in fact understandable reasons why the Germans even lag behind such crisis-ridden countries as Greece, Cyprus and France when it comes to asset accumulation. In the last 100 years, Germans have been the victims of several events with the traits of expropriation. The hyperinflation of the 1920s, a consequence of World War I, destroyed the wealth of a middle class that had seen its fortunes consistently improve during the German Empire.

The monetary reform of 1948 eliminated the Reichsmark, which had become worthless after Germany's defeat in World War II, and wiped out the savings of an entire nation. In East Germany, 40 years of socialism destroyed the last vestiges of wealth and property. In the less than 23 years since German reunification, residents of the former East German states have not yet managed to attain the same levels of affluence as their fellow Germans in the west.

Most countries in the euro zone were spared such disasters. Either they emerged victorious from the two world wars, like France, or they remained neutral, like Spain. Either way, their citizens were able to build wealth over generations.

...The numbers, Italy's leading business newspaper Il Sole 24 Ore wrote, seem to suggest that "la Bundesbank" were trying to say to us: "You're the rich ones, and if you have problems, kindly solve them on your own."

Italy isn't swimming "in money, but in poverty," the paper argued, noting that 16.5 percent of Italians are considered poor while only 13.4 percent of Germans fall below the poverty line. The Italian central bank prepared its own report, which emphasized that Italy has more poverty and a lower average income, but also more wealth and less private debt.

It isn't this supposed wealth but growing poverty that has Italians upset these days. And it isn't the lives of the rich that shape the headlines, but the fates of people like Anna Maria Sopranzi, 68, and Romeo Dionisi, 62. Dionisi was a self-employed craftsman from Civitanova Marche in central Italy.

Sopranzi and Dionisi hung themselves from a heating pipe in their basement. A farewell note was stuck to the windshield of their neighbor's car. "Forgive us," they had written. Deeply in debt and impoverished, they had had no income for months but plenty of delinquent customers. Right up until the end, they hadn't shown any signs of despair or asked for help, neither from relatives nor the church.

They died of shame, and of the burden of the demands imposed by Equitalia, a government-owned company that collects taxes for the tax authorities.

People commit suicide every day in Italy. This was also the case before the crisis, but the deaths of Sopranzi and Dionisi were suicides committed out of despair, a warning sign that shook the entire country. The newly elected president of the parliament, Laura Boldrini, a former spokeswoman for the United Nations High Commissioner for Refugees, attended the funeral. "This is government murder," people said in the church. "To you we are just numbers." The archbishop appealed to politicians, saying: "It must become clear to you that we can no longer manage."

The crisis has plunged many people into poverty in Southern Europe, people who no longer know how they will make ends meet. Unemployment has risen to record level, and there are no new jobs in sight.

In Spain, a third of residents have taken out mortgages on their homes. With more than 4 million people losing their jobs in the years of crisis since 2007, many have been unable to continue servicing their loans with banks and savings banks.

There were 30,000 foreclosures last year alone, and most of them were primary residences. In most cases, the downgraded price paid at auction isn't sufficient to cover the entire outstanding debt, so that the mortgage holder is forced to continue paying high penalty interest and pay off the remaining debt in installments.

...Southern Europeans in a number of countries have traditionally paid no taxes on a good share of their income, which is one reason households with far smaller incomes have been able to accumulate substantially larger assets than German households.

Estimates by Friedrich Schneider, an economist in the Austrian city of Linz, reveal how horrifying the scope of the shadow economy is in the crisis-ridden countries of the euro zone. Among all the countries in the Organization for Economic Cooperation and Development (OECD), Greece, Italy, Portugal and Spain occupy the first four positions in the applicable negative ranking.

On the Iberian Peninsula and in Italy, the hidden economy makes up 20 percent of GDP, compared with almost 25 percent in Greece. By comparison, it only constitutes about 13 percent in Germany, and significantly less than 10 percent in other euro countries, like Austria and the Netherlands.

The greater the importance of moonlighting, the lower the tax revenues. The shadow economy deprives Spain, Italy and other countries of dozens of billions of euros in tax revenue each year, and has been doing so for decades.

Schneider's figures also show that in Greece, Spain and Portugal, the shadow economy plays an even greater role today than it did in the late 1980s. The scope of the shadow economy has declined in Italy, but only slightly. In other words, if attitudes toward taxation in Southern Europe were just as good as they are in the north, the debt-ridden countries would have solved their budget problems long ago.

All problems aside, Lars Feld, a member of the German Council of Economic Experts, also sees the ECB figures as good news. "They show that Germany, with its tough conditions for the euro bailout funds, is in the right."

After all, the debt-ridden countries are only eligible for the billions from bailout funds if they satisfy certain conditions in return. In addition to spending cuts and tax increases, they generally include the obligation to actually collect taxes. If tax laws not only appear on paper, but are also enforced, then "even Greece will be able to set aside doubts concerning the sustainability of its debts," says Feld.

Despite the drawbacks and qualifications of the ECB's wealth figures, one realization remains: The countries of the south are far more prosperous than previously supposed.

For these countries' governments and the politicians in the partner countries dealing with bailouts, this can only lead to one conclusion: There is still plenty to be had. Cash-strapped countries that have already taken advantage of aid from the bailout funds should be required to increase their own contribution even further.

In fact, the ailing economies have already begun increasing taxes on their citizens, in some cases substantially. In this context, many governments are also taking aim at assets.

Last year, for example, Spain reintroduced a wealth tax that had been abolished five years earlier. It doesn't generate much in revenues, in fact, less than €1 billion. This is because of generous exemptions that can reach €1 million on properties used as primary residences.

The Socialist government in France introduced a special tax on assets last year, which generated €2.3 billion in revenues. The Greek government plans to tax the rich to an even greater extent. After the government drastically increased revenue goals for the wealth tax last year, it now expects revenues to increase from €1.2 billion to €2.7 billion.

Economist Labrianidis also favors requiring the wealthy to play a stronger role in repaying the government debt. "The biggest problem is tax evasion and tax flight. And I'm not talking about the kiosk owner who doesn't give you a receipt for a pack of cigarettes," says the professor. He is referring to "the very rich," and he is calling for political will and a "wealth registry." Still, Labrianidis sees "no steps being taken in this direction. There is no political will to chase capital."

The average wealth of Greek households may seem high, but the country ranks near the bottom in Europe in terms of tax revenues. In 2011, tax revenues, including social security contributions, amounted to 35 percent of GDP, compared with an EU average of 40 percent.

Greek authorities are also making very little headway in their fight against tax evasion. Lists exist of delinquent doctors, wealthy people unwilling to pay their taxes and tax fugitives in Switzerland. There are also lists of undeclared swimming pools (which are subject to a tax) and proud owners of luxury yachts whose incomes are barely large enough to pay taxes. But the tax collectors continue to come up short. Last year, tax authorities were expected to drum up €2 billion in back taxes to help pay off the country's debt, at least under the conditions imposed by the troika consisting of the International Monetary Fund (IMF), the ECB and the European Commission. The actual figure was barely €1.1 billion.

In all southern European countries, the rich show little inclination to help pay for the consequences of the crisis. One exception is Diego Della Valle, 59, the inventor of the driving shoe and the president and CEO of Italian leather goods company Tod's. He proposes that companies like his, which are doing well despite the crisis, invest 1 percent of their profits to help the weakest members of society: the local elderly and unemployed youth.

In the case of Tod's, that would amount to €1.5 million, and if other profitable, publicly traded companies follow suit, he hopes to raise €150 million. Della Valle, who plans to launch his voluntary welfare contribution campaign this week, notes that this is something he can afford, and that for him it is "no great sacrifice, nor is it populism."

As nice as that may sound, keeping the government's hands away from private assets is a very popular pastime in Italy. It's an approach embodied by Silvio Berlusconi. More than anyone else, the self-made billionaire and longstanding former prime minister personifies the notion of circumventing the law and living according to the motto: Taking is more sacred than giving.

Although Italy has a high income tax rate of up to 43 percent, the government loses an estimated €120 billion a year to tax evasion and tax flight. There have long been discussions of tax increases and capital levies, but as is so often the case, little has ever been implemented.

Some ideas that have been discussed are the reintroduction of the land tax, an increase in the value-added tax and a wealth tax. The IMU, a tax on real estate ownership, including primary residences, was finally introduced under former Prime Minister Mario Monti. His predecessor Berlusconi had pledged, if re-elected, to reimburse around €4 billion in money that had been paid under the IMU tax. There was also a levy on yachts 10 meters or longer.

...Spain is a little further along in this respect. The conservative government of Prime Minister Mariano Rajoy, which came into office in December 2011, felt compelled to increase the maximum income tax rate from 45 to 52 percent. Rajoy also limited the possibility of reducing corporate income tax with write-offs. Before, on average, companies paid a de facto rate of only 10 percent to the government, says Josep Oliver i Alonso, a professor of applied economics at the Autonomous University of Barcelona

. Rajoy also reinstated the inheritance tax abolished by the Socialists, which will now apply to medium-sized and large estates. But because the crisis-torn population is already suffering under the increased value-added tax of 21 percent, as well as prescription fees and increases in taxes on alcohol and tobacco, Spaniards are growing less tolerant of the rich who try to avoid paying taxes on their money. New scandals are uncovered almost daily.

A former treasurer with the governing party, the conservative People's Party, hid €38 million in Swiss bank accounts, while a son of the former head of the Catalan government reportedly moved €32 million to tax havens. Even the son-in-law of the Spanish king allegedly siphoned ill-gotten public funds abroad.

...Peter Bofinger, a member of the German Council of Economic Experts, which advises the federal government, also believes that the crisis-ridden countries should ask the wealthy to make a substantially larger contribution. To clean up government finances, he is even calling for a capital levy. "The rich would then, for example, be required to relinquish a portion of their assets within 10 years."

A model of this sort of capital levy is the so-called Equalization of Burdens program implemented in Germany after World War II. At the time, the wealthy were compelled to pay a special tax for a period of 30 years.

Bofinger is convinced that a wealth tax would be far more appropriate than imposing a levy on savers, as was recently the case in Cyprus. "Resourceful wealthy people from Southern Europe will simply move their money to banks in Northern Europe, thereby evading the levy."

For Brussels economist Wolff, the ECB statistics provide more than just an answer to the question of who should pay the bill for the crisis in Southern Europe. "It becomes clear, once again, how unfair wealth is distributed, in Germany and elsewhere."

What he means is that wealthy Germans should also be expected to cover the costs of the crisis. "The effort to rescue the euro would be completely absurd if, in the end, the relatively poor average German household helped the super-rich in Greece avoid paying higher taxes."

Sounds like Paul Ryan and Silvio Berlusconi have substituted the same childish Ayn Rand books for the Bible on their bedside tables. Or are greed and selfishness just part of the inherent nature of conservatism?

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Did You Vote For Obama (Or Romney)? Yes?-- Well Eat Your Dog And Cat Meat Burger And Shut Up

Liberty-- though not for Fido, obviously

Michael Brenner wrote a powerful piece for AlterNet a few days ago, America Is Ruled By Billionaires, And They Are Coming After The Last Shred Of Our Democracy. Like most Americans-- I'd like to say 99% of Americans but I know that would be wishful thinking-- Brenner is instinctually repulsed by plutocracy. He defines it succinctly in opening his essay and points out that aside from owning everything, the plutocrats have had their political handmaidens take significant actions that "directly favor the moneyed interests."

The latter include the dismantling of the apparatus to regulate financial activities specifically and big business generally. Runaway exploitation of the system by predatory banks was made possible by the Clinton “reforms” of the 1990s and the lax application of those rules that still prevailed. Attorney General Eric Holder just a few weeks ago went so far as to admit that the Department of Justice’s decisions on when to bring criminal charges against the biggest financial institutions will depend not on the question of legal violations alone but would include the hypothetical effects on economic stability of their prosecution. Earlier, Holder had extended blanket immunity to Bank of America and other mortgage lenders for their apparent criminality in forging, robo-signing, foreclosure documents on millions of home owners. In brief, equal protection and application of the law has been suspended. That is plutocracy.

...There are myriad other examples of complicity between legislators or regulators, on the one hand, and special business interests on the other. EPA judgments that are reversed under the combined pressure of the commercial interests affected and beholden politicians is one. The government’s decision not to seek the power to bargain with pharmaceutical companies over the price of drugs paid for with public funds is another. Tolerance for the concealment of offshore profits in the tens of billions is a third. Relaxed interpretations of the tax laws by the IRS to the advantage of high income persons can be added to the list. So, too, can the give-away to sole source contractors of the tens of billions squandered in Iraq and Afghanistan. The number of such direct assists to big business and the wealthy is endless. The point is that government, at all levels, serves particular selfish interests no matter who holds high positions. While there is some difference between Republicans and Democrats on this score, it has narrowed on most major items to the point that the fundamental properties of the biased system are so entrenched as to be impervious to electoral outcomes. The most revealing experience that we have of that harsh reality is the Obama administration’s strategic decision to allow Wall Street to determine how and by whom the financial crisis would be handled.

...Systemic biases are the most crucial factor is creating and maintaining plutocratic orientations of government. They are confirmed, and reinforced, by the identities and identifications of the persons who actually hold high elected office. Our leaders are nearly all rich by any reasonable standard. Most are very rich. Those who weren’t have aspired to become so and have succeeded. The Clintons are the striking case in point. That aspiration is evinced in how they conduct themselves in office. Congress, for its part, is composed of two rich men/women’s clubs. In many cases, personal wealth helped win them their offices. In many others, they knit ties with lobbies that provided the necessary funds. Whether they are “bought off” in some sense or other, they surely are often coopted. The most insidious aspect of cooptation is to see the world from the vantage point of the advantaged and special economic interests.

The devolution of the Democratic Party from being the representative of ordinary people to being just “another bunch of guys” is a telling commentary on how American politics has degenerated into a plutocracy. The party’s rolling over to accommodate the interests of the wealthy has been a theme of the past four years. From the Obama White House to the halls of Congress, party leaders (and most followers) have conceded the dominance of conservative ideas about macro-economic strategy (the austerity dogma), about retaining largely untouched the for-profit health care “non-system,” about bailing out the big financial players as the expense of everyone else and the economy’s stability, about degrading Social Security and Medicare. The last item is the most egregious-- and revealing-- of our plutocratic ways and means. For it entails a combination of intellectual deceit, blatant massaging of the numbers, and disregard for the human consequences in a time of growing distress for tens of millions. In other words, there is no way to conceal or spin the trade-offs made, who was being hurt and who would continue to enjoy the advantages of skewed fiscal policies.

The American version of plutocracy is noteworthy for its crassness. Subtlety, discretion and restraint are foreign to it. It has a buccaneering quality. That style has roots in the country’s history and culture. Much of the behavior is impulsive, grasping. Individuals are greedy for vivid displays that they are top dog, of what they can get away with, as well as the riches themselves. There is little interest in building anything that might endure-- no ‘new order,’ no new party, no new institutions. Not even physical monuments to themselves. Why bother when the existing set-up works so well to your advantage, to that of your like-minded and like-interested associates-- when you can turn ideas, policies and money in your direction with ease. And while the public is blind to how they are being deluded and abused. After all, the more things appear to stay the same, the more they can change in a country whose civic ideology imbues everyone with the firm belief that its principles and institutions embody a unique virtue. To challenge any of that would be to run the risk of raising consciousness-- which is the last thing that the plutocrats want.

Brenner's essay gets better and better. Do yourself a favor and read the whole thing. I'm heading off in a slightly different, though related, direction. Recall how early on Brenner alluded to plutocracy's infatuation with a kind of fake "liberty," much ballyhooed by brain-dead teabaggers and well-paid media and political shills as deregulation. Liberty to a rightist isn't just about owning popguns you can use to kill each other with but also making sure the government can't intervene on behalf of society against plutocratic financial interests-- whether causing toxic tar sands oil spills in Arkansas or feeding unsuspecting people-- moronic teabaggers more likely than anyone else, of course-- dog and cat meat gussied up to look like beef.

Dutch officials said they suspect dog meat was used in meatballs produced in Spain and sold in Amsterdam.

The investigation began 18 months ago when the owner of an animal shelter reported to authorities she suspected a company that disposes of animal remains was instead using the carcasses for meat.

Think Spain said the woman, Olga Costa, of Ponteverda, Spain, said she heard from a woman whose pet was put to sleep that she went to the company's headquarters in an attempt to say a final goodbye to her pet and found workers deboning dog carcasses.

Dutch officials said the investigation traced the dog meat to a distributor in Amsterdam. The suspected tainted meat has been sent for DNA samples to confirm its origin.

Oh, please... don't just single out the Dutch. Wherever Austerity has allowed conservatives to cut back on the "evils of government spending" (shorthand, among other things to do with the good of society in general, for regulatory activities). Like Conservative-ruled England, where it's an open secret that dog and cat meat is served "secretly" to the proles all the time.

An unnamed Indian takeaway has been found serving wrongly labelled meat by BBC researchers. Food experts working for a BBC3 programme had ordered an Indian lamb curry from the London restaurant but found that the meat in the curry had no trace of lamb.

Further DNA tests concluded that the meat chunks were not beef, chicken, pork, goat, horse or even human flesh, leading to speculation that the "lamb" curry contained dog or cat meat.

...Nutritionist Surinder Phull said: "It's absolutely terrifying because if it isn't any of the meats we know, what is it? Where has it come from? Where was it slaughtered? Was it hygienic? Was it covered in bacteria?"

...The restaurant in the programme was not the only one found to be serving suspicious meat. The young diners also had doubts about food they obtained from Chinese takeaways and fast food outlets in the capital.

The beef in Chinese black bean sauce consisted largely of chicken blood and contained only tiny amounts of beef.

And a beefburger bought from a local fast food shop was analyzed in the laboratory to reveal that it consisted of bovine blood, chicken scraps and a high level of chicken blood.

The only takeaway restaurant to serve authentic meat was a doner kebab shop. The lamb kebab purchased by the research team contained no trace of any other meat mixed with it.

Since the horsemeat scandal broke, the Food Standards Agency has ordered more than 5,000 tests and returned 44 positive results showing equine contents in meals.

Some might say the Dutch deserve to have to worry if the meatballs they've been eating were made of Fido and Tiger. It was after all, a greedy Dutch criminal job creator who was buying the Romanian horsemeat and selling it to the French as beef earlier this year, actually something he's been doing-- and getting away with because of lax regulations and enforcement-- for some time. Go, Austerity! He had already been sentenced in January 2012 for deliberately marketing South American horsemeat as halal-slaughtered Dutch beef and falsifying documents. Some of this found its way into British lasagna.

The scandal has focused attention on the murky pan-European supply chain for meat products, which stretches from abattoirs to supermarkets via mysterious offshore companies.

An investigation by the Organised Crime and Corruption Reporting Project revealed yesterday that that Draap Trading Ltd was registered in 2008 in Limassol, Cyprus. Its sole shareholder is Hermes Guardian Ltd, an offshore company in the British Virgin Islands. A Draap representative, Andreas Mercruri, refused to disclose the beneficial ownership of the company.

Speaking from Cyprus, he told OCCRP: "I'm sorry but with everything that is going on at the moment we are not able to comment on anything at this time." Mercruri answered from the offices of Trident Trust, a Cyprus firm that provides company formation and incorporation services on the island. Trident Trust mentions on its website that beneficial ownership information of the companies it incorporates is not disclosed to any regulatory authority.

The same Hermes Guardian company is a shareholder in at least a dozen other Cyprus, Panamanian and Russian based companies.

Cyprus company records indicate a Trident Trust company as a secretary of Draap Trading while its director is another Cyprus company by the name of Guardstand Limited. The latter's paperwork points to a link with Russian business.

Authorities in Romania have suggested that international criminal networks may be involved in the opaque meat trading business. Sorin Minea, head of Romalimenta, the Romanian food industry federation, described France's consumer affairs minister, Benoît Hamon, as an "idiot" after he suggested Romanians may have been responsible for "a case of fraud."

Minea told the Guardian: "There is an international mafia ring behind this problem. I don't know who they may be, or whether any Romanians are involved. But if you think about it, there were five intermediaries so I'm sure that an international network is involved."

This is disgusting. We must stop talking about it at once. Besides, it's all so far away. (I asked my very practical Dutch friend Nicky what he knows about this and he said the Dutch, who have now been looking for horse meat in their butcher shops, agree that "we eat what we have enough of but dog is a step too far. It is one of the only things differing us from the North Koreans.") 

So my friend R gets a distressed call from his friend F the other day. F is a male nurse who had already negligently murdered one of his elderly patients by giving him the wrong medicine and now... damn, it happened again. He was worried he'd wind up in prison so he was going back to his home country. He asked R to come over and pick through his things and see if he wanted anything. [R wound up getting me a brand new jacket.] Anyway, the day before F was flying off to his native land, everything calmed down. He would have to pay back the money he had misappropriated from murder victim #2 and he was fired by the private, high-end nursing firm, of course, but no charges would be pressed. After all, who wanted that kind of publicity? I didn't even have to give back the jacket-- although R didn't get to keep the Mercedes SLS-class roadster convertible. Because F already has a new agency and a new job being the nurse for a rich old white guy... who probably won't live much longer. I would have thought private nursing firms would be regulated. But... liberty.

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Why Are Bobby Jindal And Sam Brownback So Unpopular With Voters In Their Deeply Red States?

Last week there was a minor news buzz about how unpopular Bobby Jindal has become among Louisiana voters, 60% of whom agree he's doing a lousy, unsatisfactory job. His approval rating had plummeted in less than a year from 51% to 38%, coincident with his embrace of the ideologically-driven Austerity agenda for his state-- state cuts to higher education and health care, plans to privatize the charity hospital system and the governor’s proposed state tax overhaul, the last of which is especially hated. 63% oppose the plan to abolish personal and corporate income taxes and raise state sales taxes, while only 27% support it.

There may be an even more hated governor lurking in the fringes-- and he was chosen to give the weekly Republican Party radio address yesterday, Kansas reactionary Sam Brownback, who, like Jindal, has seen his approval rating disappear as he decided to use his state as a laboratory for failed European Austerity agendas. And of course, he actually used the speech to tout his unpopular tax policy as something everyone ought to try. Like Jindal he's trying to eliminate the state income tax and the services it pays for.

A poll just over a month ago shows that Brownback and his Austerity agenda so unpopular among Kansas voters, that he could have troubling winning reelection in 2014. His approval rating, 37%, is even lower than Jindal's.

Brownback has a negative -15 job approval rating, with 37% of Kansas voters approving and 52% disapproving of his performance as governor. 72% of moderates disapprove of his performance as well as 30% of Republicans and 66% of independents.

Brownback’s plan to phase out the state’s income tax is almost as unpopular as he is, with 48% of voters opposed and 37% supportive. 65% of moderates and 56% of independents oppose the plan. Even 34% of somewhat conservative voters and 28% of Republicans are opposed to the proposal to overhaul the income tax.

And then there's the Republican War Against Women, in which Kansas is a major battlefront and in which Brownback in a leading general. Friday night the Republican-dominated state legislature gave final approval to the worst anti-Choice legislation-- clearly unconstitutional-- in the country, declaring that life begins at fertilization. It passed in the House 90-30 and in the Senate 28-10. Brownback will sign it and it takes effect on July 1.

The declaration that life begins at fertilization is embodied in "personhood" measures in other states. Such measures are aimed at revising their constitutions to ban all abortions, and none have been enacted, though North Dakota voters will have one on the ballot in 2014.

But Kansas lawmakers aren't trying to change the state constitution, and the measure notes that any rights suggested by the language are limited by decisions of the U.S. Supreme Court. It declared in its historic Roe v. Wade decision in 1973 that women have a right to obtain abortions in some circumstances, and has upheld that decision while allowing increasing restrictions by states.

Thirteen states, including Missouri, have such language in their laws, according to the National Right to Life Committee.

Sen. David Haley, a Kansas Democrat who opposed the bill, zeroed in on the statement, saying that supporters of the bill were pursuing a "Taliban-esque" course of letting religious views dictate policy limiting women's ability to make decisions about health care and whether they'll have children.

And in the House, Rep. John Wilson, a Lawrence Democrat, complained that the bill was "about politics, not medicine."

"It's the very definition of government intrusion in a woman's personal medical decisions," he said.

Brownback has signed multiple anti-abortion measures into law, and the number of pregnancies terminated in the state has declined 11 percent since he took office in January 2011.

I'm going to just take a guess that many of those poll respondents who have made Brownback one of the least popular governors in America, are women.

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