The left-right coalition government in Berlin appears divided on how best to use the tax surplus.
Economy Minister Michael Glos, a member of Chancellor Angela Merkel's Christian Democrats, favors tax cuts but Finance Minister Peer Steinbrück, a Social Democrat, is opposed to such a step.
Steinbrück would prefer to use the surplus to balance the German budget and reduce the national debt.
"This is a historic development, we can at last begin to reduce the mountain of debt that has accumulated and which stands at more than 1,500 billion euros," Steinbrück said.
In the meanwhile, several other ministers are calling for the surplus to be used to fund projects in their portfolios.
Steinbrück gave assurances that the government planned to invest two billion euros a year in key areas such as "education and research, the family, environmental protection, infrastructure, development aid and internal security."
In a breakdown given by the ministry, the total fiscal surplus is forecast at 20.3 billion in 2007 euros and at 47.9 billion euros next year.
Somehow we only get to hear about our national debt. 1.5 Trillion Euros in debt and convert by multiplying by 1.3451 (not too scientific) gives them 2.01765 debt.
GDP (trillions): United States 13.244 Germany 2.897 --------------------------- Let me add the gloom and doom forecasts (other threads) about Sub-Primes Sub-Prime Mortage Woes are no Accident
The left-right coalition government in Berlin appears divided on how best to use the tax surplus.
Economy Minister Michael Glos, a member of Chancellor Angela Merkel's Christian Democrats, favors tax cuts but Finance Minister Peer Steinbrück, a Social Democrat, is opposed to such a step.
Steinbrück would prefer to use the surplus to balance the German budget and reduce the national debt.
"This is a historic development, we can at last begin to reduce the mountain of debt that has accumulated and which stands at more than 1,500 billion euros," Steinbrück said.
In the meanwhile, several other ministers are calling for the surplus to be used to fund projects in their portfolios.
Steinbrück gave assurances that the government planned to invest two billion euros a year in key areas such as "education and research, the family, environmental protection, infrastructure, development aid and internal security."
In a breakdown given by the ministry, the total fiscal surplus is forecast at 20.3 billion in 2007 euros and at 47.9 billion euros next year.
Somehow we only get to hear about our national debt. 1.5 Trillion Euros in debt and convert by multiplying by 1.3451 (not too scientific) gives them 2.01765 debt.
GDP (trillions): United States 13.244 Germany 2.897
Interesting. The Conservatives want to reduce taxes, the Liberals want to pay down the national debt thus allowing money being paid out in interest to be lowered every year...thus releasing more money to be utilized for the German people and tax reductions. Sounds pretty familiar.
The best approach would be a compromise. Use part for tax reduction, part for deficit reduction, part for the German people. As the deficit reduces, additional tax cuts could be made from interest savings.
The Conservative policy would maintain the deficit with nothing being utilized for the majority of the German people's benefit and future tax reductions become an impossibility.
Of course, Germans include such things as really good public transit as a "people's benefit". One of the things that benefit the nation.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
I found the following article to be very interesting-but long.
quote:
Opportunity costs also arise from the fact that accumulated foreign reserves could have otherwise been used to repay its foreign debt (estimated at 5 per cent of GDP). Interest rates paid by China on its external borrowing are higher than those received on its foreign reserve assets. Yields on long-term Chinese government external debt (about a quarter of the total) have recently been 60-70 basis points above US Treasury yields, and spreads on other debt are likely to be higher.
There is also a large exposure to future currency losses. China’s foreign reserves were equal to 38 per cent of GDP at the end of 2004. Assuming at least 80 per cent of these reserves are dollar-denominated, each 10 per cent appreciation against the dollar would mean a currency loss equivalent to about 3 per cent of GDP. Potential losses increase the longer China continues to accumulate reserves to hold down the RMB. RMB undervaluation and its opportunity costs for China ... Hence, RMB adjustment would need to be combined with measures to expand domestic demand in China in order to have a significant impact on external imbalances. Given that Chinese investment is already very high, this will most likely take the form of measures to address factors contributing to China’s high saving rate. These factors include financial underdevelopment, limited social safety nets and corporate governance shortcomings that contribute to high corporate saving. While exchange rate adjustment is important, it should not be overemphasised at the expense of other elements required to address imbalances. ... The appropriate rate of adjustment will also depend on whether the PBoC can continue to sterilise the monetary impacts of reserve accumulation. If monetary control becomes more difficult, there may be an argument for a faster pace of adjustment. Excessive monetary expansion would only aggravate future financial sector problems. One of the problems associated with a gradual approach is that speculative inflows are more likely to persist because the currency is seen as a ‘one way bet’ , which means continued high reserve accumulation.
Well, it is an interesting article, and it's based on assumptions of western economic outlook, not one from a Communist Command/Capitalist Economy state.
Infrastructure and expansion of infrastructure support are not as a rule privately driven. While wages are kept at a minimum as in some free market economies, the build-up of goods isn't allowed to occur. They are exported and the internal wages kept low so there is no imbalance between wages/products.
AS long as China maintains a balance of goods/money supply/wages, inflation/deflation will remain in check. They have found a way to do this.
A lot of China's surplus foreign reserve assets are utilized for importation of infrastructure needs that can't as yet be produced by China herself. She seems to have struck a balance betweeen accumlation of foreign assets in dollars and spending of foreign assets. High speed rail systems, jet aircraft manufacturing facilities, solar panel plants and the like.
AS long as China maintains enough goods at home to match the money supply, that paid in wages, no problem should occur.
A sudden drop in savings rates and utilization of savings would contribute greatly to an inflationery problem.
China is not yet a consumer society to the degree we are. Value is being added in construction, etc. Those things which can be produced internally without effecting goods for export and which help keep the money/goods supply in balance.
Foreign assets are withered away by de-valuations in the dollar. This is one reason China is slowly switching basket currencies to reflect greater diversification away from the dollar. A wise move.
When nations such as the U.S. can no longer sustain credit purchases, China will have to either find additional markets, or raise wages at home and increase the general living standards of her own people to avoid economic malaise. My own guess is that they will be able to opt for the latter, and probably will. By that time, her infrastructure needs should pretty well be in place and the foundation for a truely dynamic internal economy would be well established. In large part financed by the United States (and Walmart).
Some economic laws are irrefuteable. All the "mays" and "coulds" in the article show we have little understanding on how they are applied in China. Different mind set. Different ways of applying them.
The current valuation of Chinese currency serves the Chinese goals and policies very well. It is thrusting China into the modern industrial and technolgical age at a very fast pace.
What they are doing makes no sense to totally "free market" outlook or from the social Democratic outlook of European countries. From the Chinese Communist/Capitalist model outlook it makes a lot of sense and has been working very well. They have taken advantage of our stupidity of short-term gain for long- term loss.
Retired Monk "Ideology is a disease"
This message has been edited. Last edited by: polycarp,
Posts: 3412 | Location: denver co | Registered: 17 April 2007
Tax rates influencing peoples behavior, what a novel concept.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
Posts: 8264 | Location: Fl | Registered: 05 July 2001
Well, like they said. It's a tax cut WAR. First country down to zero wins! Revenues are made-up by an increase in more firms paying the zero tax rate. I suppose this could make some kind of sense somewhere.
Germany can lower their rate to 10% and get Irelands corporations. Ireland can lower it to 5% at get them back from Germany. Germany can lower its to 1% and take them back from Ireland.
The U.S. has a lower corporate tax rate than most of Europe, so where is the boom of new corporations?
Lower corporate taxes to zero and wages to 12 cents an hour, we'll have more corporations than anybody.,,and no money even to pay for one division of troops, let alone an Air Force.
Easy to compete in this manner. Socially, you get chaos and you win the competition...just have to find a way to keep the rabble from burning down the company.
In the meantime, China takes up Kruchev's rallying cry, "We'll bury you (economically)"....and they seem to be doing this.
A mixture of Command/Capitalist economy is pretty new to the world as implimented by China...we'd better learn to compete with it rather than financing it.
Their economy will reach a point where their own one billion population will provide a base for a dynamic internal economy. The non-capitalist input to their economy won't need trade for "maximum profit". It's not a part of the dynamic once China obtains her goals of infrastucture and the ability to sustain her own technological advancement. When this happens, they'll cut the apron strings leaving us to flounder by ourselves on a sinking ship.
China applies economic theory to suit her own needs under a system that has never been tried before. It seems to be working. Our companies may be able to go to another nation for maximum profit even if the home nation is ultimately harmed by it. China isn't handicapped by this same dynamic. They want to become the world's economic/military power house, and they probably will. Tax policy won't effect their major businesses...decisions to leave or stay are government, nation building based, not maximum shareholder profit based.
Our tax policies encouraged the "flight" to China. They could have been balanced by laws to counteract it. The piper has yet to be paid.
Taxes effect peoples behavior. So do applied laws with penalties unless one's basic needs of food, clothing and shelter aren't addressed.
Your rigid beliefs are going to come back with a rabid bite, and the nation is going to pay for it. Taxes aren't the only thing that influence peoples behaviour. Just one of the components.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
Easy to compete in this manner. Socially, you get chaos and you win the competition...just have to find a way to keep the rabble from burning down the company.
In the meantime, China takes up Kruchev's rallying cry, "We'll bury you (economically)"....and they seem to be doing this.
A mixture of Command/Capitalist economy is pretty new to the world as implimented by China...we'd better learn to compete with it rather than financing it.
Their economy will reach a point where their own one billion population will provide a base for a dynamic internal economy. The non-capitalist input to their economy won't need trade for "maximum profit". It's not a part of the dynamic once China obtains her goals of infrastucture and the ability to sustain her own technological advancement. When this happens, they'll cut the apron strings leaving us to flounder by ourselves on a sinking ship.
Wow. Sounds pretty grim.
Did you read any of that article before you started psychobabbling typing? Here's what has happened in Ireland:
quote:
Supporters of lower corporate taxes point to the success of Ireland, whose 12.5 percent rate, the lowest in the developed world, is down from 47 percent in 1988. That proved a magnet for such U.S.-based technology companies as Microsoft, Intel and Dell and helped Ireland's economy grow more than three times the rate of the euro area in the past decade, while still running a budget surplus in nine of the 10 years.
I wish Michigan Governor Jenny Granholm was watching this. Michigan's economy sucks, and the outlook is even suckier. We don't have a lot of profitable companies left, but we have a tax code you would probabl like.
Posts: 1807 | Location: West Michigan | Registered: 23 June 2005
Easy to compete in this manner. Socially, you get chaos and you win the competition...just have to find a way to keep the rabble from burning down the company.
In the meantime, China takes up Kruchev's rallying cry, "We'll bury you (economically)"....and they seem to be doing this.
A mixture of Command/Capitalist economy is pretty new to the world as implimented by China...we'd better learn to compete with it rather than financing it.
Their economy will reach a point where their own one billion population will provide a base for a dynamic internal economy. The non-capitalist input to their economy won't need trade for "maximum profit". It's not a part of the dynamic once China obtains her goals of infrastucture and the ability to sustain her own technological advancement. When this happens, they'll cut the apron strings leaving us to flounder by ourselves on a sinking ship.
Wow. Sounds pretty grim.
Did you read any of that article before you started psychobabbling typing? Here's what has happened in Ireland:
quote:
Supporters of lower corporate taxes point to the success of Ireland, whose 12.5 percent rate, the lowest in the developed world, is down from 47 percent in 1988. That proved a magnet for such U.S.-based technology companies as Microsoft, Intel and Dell and helped Ireland's economy grow more than three times the rate of the euro area in the past decade, while still running a budget surplus in nine of the 10 years.
I wish Michigan Governor Jenny Granholm was watching this. Michigan's economy sucks, and the outlook is even suckier. We don't have a lot of profitable companies left, but we have a tax code you would probabl like.
Yep, I read it. Did you read the absurdity of a tax-cut war? It leads to nowhere. I imagine the national health care system of Ireland adds to a lessened expense for business there than in the U.S., too.
I suppose if we had the defense budget of Ireland as a % of GPD we could lower ours to 7% and get compaies back. Who will pay the the military? We spend more than all the rest of the world combined. Going to shift the burden to whom?
The developing economy of China will ultimately make all this irrelevant anyway. Western countries will be fighting over rushing down to the lowest tax rates, cutting one-anothers throats... China will gloat and be the over-all winner. That sort of thing won't concern them. The economy is run on a different cultural/economic model.
You tend to focus on very small pieces of a picture.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
Yep, I read it. Did you read the absurdity of a tax-cut war?
Yes, it is absurd if you fail to acknowledge that people flee from onerous taxation. Your chicken little doomsday scenario is based on the assumption that business and corporation are evil.
Posts: 1807 | Location: West Michigan | Registered: 23 June 2005
No Pee Wee, it is base upon the observations of the Chinese economy. How their economy functions, the basic precepts behind it, the cultural background in which it is evolving and the announced goals of the Chinese government.
Corporations are just corporations. They do what they do to make a profit. They are neither moral nor immoral...only "real" people are. The corporation is neutral. Those guiding them are either moral or immoral.
If you think our economy and infrastructure is growing faster than the Chinese, stick to it.
If you think a domestic economy of 300 million can ultimately support a larger domestic economy than one billion people, stick to it.
Major enterprise in China is govrnment owned...no driving incentive to capture a world market when growth potential is within its own nation. They are interested in becoming an economic/military powerhouse...not raising value for shareholders.
If a country had a zero tax rate, China would not be interested in re-locating a factory to that country if it wasn't in the interests of creating a sound home industrial base and infrastructure. They operate from a different perspsective.
China will do what is best for their own goals...not increasing "on paper" share value. This is not within the scope of Chinese economic structure.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
If you think our economy and infrastructure is growing faster than the Chinese, stick to it.
I didn't see anyone bring that up other than you. The Chinese are going through their industrial revolution as we speak. They have lots of ground to make up but their economy is growing rapidly.
quote:
If you think a domestic economy of 300 million can ultimately support a larger domestic economy than one billion people, stick to it.
I've actually done some business with the Chinese government. Believe it or not, I exported furniture to a chain restaurant in Beijing. Only did it once. I'm sure the Chinese are making it now, they only need to be shown once. Their domestic economy will exceed ours only if their version of capitalism encourages entrapenuerism. There is some signs of that but the government tightly controls entrepreneurs and they are a partner in every business. Their relationships between private and public sectors is very corrupt as well. Everyone has their fingers in the pie.
quote:
Major enterprise in China is govrnment owned...no driving incentive to capture a world market when growth potential is within its own nation. They are interested in becoming an economic/military powerhouse...not raising value for shareholders.
This isn't true. Government owns public works projects but all the new manufacturing is a public/private partnership. I know several business owners in the States who are partners in manufacturing with the Chinese government. I also know some who were screwed by entering into partnerships with individual Chinese citizens. The Chinese are smart enough to know that government can't manage manufacturing and there has to be someone with skin in the game to run profitable business.
quote:
If a country had a zero tax rate,
There you go with a false dilemma again. You really like that don't you?
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
Posts: 8264 | Location: Fl | Registered: 05 July 2001
If you think our economy and infrastructure is growing faster than the Chinese, stick to it.
I didn't see anyone bring that up other than you. The Chinese are going through their industrial revolution as we speak. They have lots of ground to make up but their economy is growing rapidly.
quote:
If you think a domestic economy of 300 million can ultimately support a larger domestic economy than one billion people, stick to it.
I've actually done some business with the Chinese government. Believe it or not, I exported furniture to a chain restaurant in Beijing. Only did it once. I'm sure the Chinese are making it now, they only need to be shown once. Their domestic economy will exceed ours only if their version of capitalism encourages entrapenuerism. There is some signs of that but the government tightly controls entrepreneurs and they are a partner in every business. Their relationships between private and public sectors is very corrupt as well. Everyone has their fingers in the pie.
quote:
Major enterprise in China is govrnment owned...no driving incentive to capture a world market when growth potential is within its own nation. They are interested in becoming an economic/military powerhouse...not raising value for shareholders.
This isn't true. Government owns public works projects but all the new manufacturing is a public/private partnership. I know several business owners in the States who are partners in manufacturing with the Chinese government. I also know some who were screwed by entering into partnerships with individual Chinese citizens. The Chinese are smart enough to know that government can't manage manufacturing and there has to be someone with skin in the game to run profitable business.
quote:
If a country had a zero tax rate,
There you go with a false dilemma again. You really like that don't you?
You're unaware that many large businesses in China are run by the army? French solar plants weren't purchased by private business. They were purchased by the Chinese gov't.
Locomotive mfg. plants aren't run by private enterprise, they are run by the Chinese gov't. You won't find any major enterprise in China run privately without government control. It just isn't done.
I don't consider a plant producing goods for Wal-mart to be a major endeavor, no matter how large it may be.
You will find anything related to nation- building to any large degree will not be privately owned without a lot of government fingers in the pie.
You won't find privately owned corporations involved in Chinese military production to any great extent either.
The Chinese are smart. They have blended a Command Economy with elements of a Capitalist economy. Capitalist functions for efficiency, and government control over any major enterprise. And you won't find the gov't making decisions on increasing shareholder "paper value" if it conflicts with the goal of becoming an economic/military powerhouse.
Paper value is not wealth. Goods are wealth. Factories are wealth. Agricultural production is wealth. China is building wealth, not paper.
If you think China will move a factory to Ireland because of a low tax rate, you're nuts.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
If you think China will move a factory to Ireland because of a low tax rate, you're nuts.
You make up some really crazy stuff. Why would China move manufacturing anywhere when labor costs them a couple bucks a day?
Do you know the difference between public and private works?
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
Posts: 8264 | Location: Fl | Registered: 05 July 2001
The Chinese control all public transportation. Did you notice the word public in the previous sentence? The bulk of the growth China's GDP is the result of public/private partnerships, both with international and domestic partners.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
Posts: 8264 | Location: Fl | Registered: 05 July 2001
Originally posted by Sawdust: The Chinese control all public transportation. Did you notice the word public in the previous sentence? The bulk of the growth China's GDP is the result of public/private partnerships, both with international and domestic partners.
Yep. And the gov.t portion of that partnership controls the ultimate decisions.
China has a different application of Say's Law than we do.
prod.cost/money supply/labor = aggregate = Value.
What this law does not include is profit.
Profit comes from the central piece, money supply.
In the U.S. this is spent, re-invested, or withdrawn from the money supply...as non-productive equities, etc. It disturbes the aggregate.Money not utilized in purchases or re-directed in new productive enterprise destroys the aggregate. Causes disturbance.
In Chinese application, profit is re-directed to U.S. Treasuries or importation of hard goods for nation-building. The aggregate is not distrubed because Chinese wages are consistent with what remains in the country for purchase of what is not exported.
U.S. consumption of exports prevents overproduction of goods that would be applicable under Say's Law and allows the Chinese to maintain rapid expansion through capital accumulated in the process. Capital from export isn't utilized to the extent of private gain as it is in the U.S.egain...it's invested in income generating U.S. Treasuries which in turn help finance Chinese external debt and allow for importation of goods for building the infrastructure and establish new industries. ' Say's Law is being utilized in a manner that provides employment and builds the nation. They keep the aggregate in balance. We do not.
If you can't see the difference in application, then you will have no clue what I'm talking about and will continue to see the Chinese economy from an American perspective rather than the Chinese. Their application is nearly 180 degrees from ours, and it works.
Profit from export has a different function than in the United States. We no longer produce enough goods for export to maintain the balance in Say's Law. Intensive Chinese export itself has a different function in that it keeps a balance between goods available and low wages.
Our application of Say's Law is counter-productive. We siphon money into non-productive assets which disturb the aggregate. In producing less, we have to keep wages low to prevent inflation. This is a race downhill leading to the production of less goods, and lower wages as a % of the population. A cycle. When the U.S. can no longer sustain the interest on the credit purchases, and China no longer needs the capital to finance what she can't produce for herself, the credit will end...so will the goods. China will use them herself.
They keep wages low to finance national effort. Their application has the effect of ultimately producing more goods with higher wages. Wages will have to rise to keep Say's Law in aggregate when U.S. imports no longer eat up the difference.
Our application will have the effect of producing less goods and lower living standards.
Say's Law is irrefutable. The applications differ.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
Originally posted by polycarp: I don't consider a plant producing goods for Wal-mart to be a major endeavor, no matter how large it may be.
I don't understand.
Wouldn't how large it may be, be the determining factor when considering whether it is a "major endeaver"?
A major endeavor is that which contributes to nation building. Aircraft plants, auto, steel, oil, power stations, rail networks, heavy farm equipment, etc. Not clothes and trinkets. We buy clothes and trinkets. It finances China's nation building efforts. Smart move on the part of the Chinese. And we helped finance the relatively inexpensive trinket plants.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
If the profits from clothes and trinkets are 10 times the amount of heavy farm equipment, aircraft, autos, etc...and a large % goes to finance the infrastructure effort, wouldn't that be a major endeaver?
Textile production can be a major endeaver IMO. Production workers in America sure do bitch about it leaving our shores. The entire world buys clothes and trinkets, not just us.
^^^^^^^^^^^^^^^^^^^ "A vote is like a rifle: its usefulness depends upon the character of the user."
Theodore Roosevelt, 1913
Posts: 2404 | Location: Redmond WA | Registered: 04 September 2006
A quick google indicated that the size of the US retail clothing industry was 181 billion dollars.
Chump change.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
Posts: 8264 | Location: Fl | Registered: 05 July 2001
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