Lessons From A Declining California

I love the state of California. Its my home state. It is a state that has everything. Picture perfect beaches, amazing mountains and world famous deserts. It has a strong diversity of people and a wide range of activities for tourists and citizens to enjoy. 

So, why are so many people leaving the state? 

The Daily Beast provides us with some clues: 

Californians needs to ask if the state has started a cycle of decline, in which a loss of jobs to other states leads to a loss of tax-paying residents, and in turn to a deterioration of the public services that make the state even less desirable for businesses. This “toxic state syndrome,” as it might be called, could be very difficult to shake. The businesses that bring jobs (or take jobs with them when they leave) look for certain things: a skilled work force, relatively low costs, sound infrastructure and public services, and—maybe most important of all—some assurance that these conditions will stay the same.

A state in chronic fiscal distress can’t offer such predictability, and California is a very distressed state. For most of the past decade, its credit rating has been at or near last place in the nation; currently it is rated the lowest by Standard & Poor’s, and Moody’s ranks only Illinois lower. Texas, on the other hand, is just one notch from the top on the S&P scale.

However, California could turn things around. But with Jerry Brown at the helm with a Democrat majority legislature, recovery will not happen if Jerry Brown's tax increases takes place:

Californians could make things worse this November when voters decide on a measure, backed by Gov. Jerry Brown, to raise its income tax rates (already near the highest in the nation) to prevent deep cuts in school spending. That might produce a temporary burst of revenue but leave the state even more dependent on a volatile revenue source. Then again, if the tax hike doesn’t pass, schools will take a hit that could leave California that much less attractive to employers and employees.

What may be most damaging about California’s tax debate is its tone of desperation. The state is like a man at the end of his rope who has taken hostages—in this case, the schools. Meanwhile, Texas and other states are poaching California jobs with tax incentives at a scale that California state and local governments can’t afford, most recently with the $36 million package of tax breaks and investment funds that convinced Apple Inc. to expand in Austin and add some 3,600 jobs.

Raising taxes is a good way to make a state's terrible financial situation even worse.  Frank Rich in an article that appeared in the Wall Street Journal explains why:

Nearly half of California's income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population's during the recession. When they crashed, they took California's finances down with them.
Mr. Williams, a former economic forecaster for the state, spent more than a decade warning state leaders about California's over-dependence on the rich. "We created a revenue cliff," he said. "We built a large part of our government on the state's most unstable income group."

Frank Rich discovers that California addicted to raising taxes on the rich because they think that the rich will stick around and continue to pay these taxes:

"These revenues have a narcotic effect on legislatures," said Greg Torres, president of MassINC, a nonpartisan think tank. "They become numb to the trend and think the revenue picture is improving, but they don't realize the money is ephemeral." 

However, what California and other states don't realize is that raising taxes on the rich leads to the government receiving less revenue in taxes.  As John Stossel mentioned in a television special , “Tax The Rich”, “Maryland’s millionaire tax was supposed to bring in $106 million. Instead revenue went down by $257 million. Many millionaires just left the state.”

The Democrats in California as well in other states and in our Federal government want to soak the rich because they believe that the myth that the rich don't pay their fair share is real.

Its a simple lesson that liberals, progressives and Democrats don't understand. Raising taxes doesn't fix a state's or a nation's financial problems. It only makes it worse for the following reasons:  they rely on the rich to pay taxes while those in lower income taxes pay little to no income taxes at all, they spend more money than they earn in revenue and think they can sack the rich to atone for their irresponsible spending habits, the rich make money in good times but lose a lot of it in bad times, rich people will leave the state if they are taxes or demonized too much and create laws that make it harder for business to employ people to work.

California can turn around only if they learn the simple lesson of stop taxing the rich, spend with in your means and create a business friendly environment in which job creators, innovators, investors and rich people want to stay. 

Which leads me to our current financial problems in the Federal Government. The United States is facing a huge tax increase that conservatives are calling "Taxmageddon" is a one-year $494 billion tax increase slated to strike the economy on January 1, 2013. The reason why taxes would be going up dramatically is because end of the Bush-era tax cuts that are scheduled to expire at the end of this year while its also the start of new taxes like ObamaCare and other taxes that target the rich. The Congressional Budget Office and International Monetary Fund have also both issued warnings regarding these incoming tax hikes.

Unless our elected officials in California and Washington D.C. learn the lessons above and engage in real tax reform, we will face a huge financial mess of our own making. As Paul Ryan said, these problems are avoidable and we can do something about it. But it must be done NOW.

Who Has A Better Economic Record: Obama Or Romney?

With the general election underway in which Mitt Romney will challenge Barack Obama for the Presidency, both candidates will try to make the case that they are the one who can turn this economy around.

Unfortunately, Obama cannot make that case because he's never been serious about improving the U.S. economy. And it shows. Now that Obama has been in office for almost four years, his economic record is something that Americans are not proud of. 

Obama's reelection strategy is to blame the previous administration for the current problems. If that's the strategy he wants to use in this election, its not a very good one because he hasn't done anything to fix the problems he has inherited from the Bush Administration. Take a good look at the chart below and you'll see why: 

When Mitt Romney was governor of Massachusetts, the previous administration had left him with a terrible financial mess for him to deal with. When Mitt entered into office in 2003, he was a left with a massive deficit of approximately $3 billion. Mitt Romney did not complain about the previous administration nor did he attempt to place the blame on anyone else. He simply went to work to balance the budget. By 2005, Mitt Romney had a budget surplus of $1 billion and by the time he left office in 2007, he left the state had a $ 2 billion surplus. Moreover, when the state was threatened with a loss in credit rating, Mitt Romney took swift action to take care of the problem.

Mitt Romney's economic record stands in stark contrast with Barak Obama's. Our economy is in grave danger and we need a candidate who knows how businesses work, knows how to create jobs, and how to whip a government back into financial shape. 

The choice for who should be the President is clear. We need Mitt Romney in the White House. You can make that happen by voting for Mitt in November.

The Power Of Captialism: Making People's Lives Better And Healther

Capitalism provided people with the freedom to make major discoveries in science, medicine, nutrition and technology which has increased the life expectancy and wealth of individuals all over the world over a long period of time. Hans Rosling explains: 

Another video takes a different approach in making the same point about how capitalism has helped improve the qualify of life for people: 

Another video demonstrates that capitalism provides the freedom for wealth to expand which makes it possible for living standards to rise for everyone, not just the rich only.  Capitalism has made it possible for the poor today to enjoy things that previous people in poverty could never enjoy before. The video shows how capitialism has raised the income of rich and poor people alike in just the last 40 years. What makes the video you're about to see even more powerful is that not only do we see a comparison between the rich and the poor in the United States but goes one step further by comparing the American poor and the average citizen in Europe, Asia, and Africa:

As shown in these videos above, capitalism has done more to improve the lives of humankind than any other political, social or economic system invented by mankind.

The Occupy Wall Street protesters do not realize that we stand on the shoulders of the men and women in the past who made these amazing discoveries which has led to further discoveries that made it possible to enjoy the life we live today. In fact, these protesters fail to see the irony in their protests against capitalism. One photo demonstrates the irony perfectly:   

In attempt to get the world to wake up to the flaws of capitalism, they are unknowingly promoting the benefits of capitalism by using products created by business organizations who have the economic freedom to create products and services in their protests against capitalism.

The Only Solution To Reducing The Deficit Is Entitlement Reform

With the political showdown over raising the ceiling, President Obama, Ron Paul and Gary Johnson and others would have you believe that best way to get out of the red and into the black is to reduce defense spending rather than reductions in entitlement spending. 

For example President Barak Obama and Ron Paul are in agreement that America ought to withdraw from Afghanistan because of the cost incurred in fighting that war. However, the cost of fighting in Afghanistan is a small drop in the bucket compared to the amount of money we spend on entitlements:

Next year the Pentagon plans to spend $107 billion in Afghanistan—this, in comparison to the $3.7 trillion that the Obama team plans to spend overall. Put another way, Afghanistan amounts to all of 0.75 percent of the nation’s $14.1 trillion GDP. So, no—war bonds, scrap drives, and rationing won’t be necessary. Quite the reverse: while the government spends $100 billion on America’s fighting men and women in Afghanistan, it will funnel 20 times that—more than $2 trillion—to its citizen-spectators through Medicare, Social Security, Medicaid, and other varieties of domestic spending.

The amount we spend in fighting terrorists, not just in Afghanistan, Iraq, or Libya but around the globe is tiny in comparison to the amount we spend on entitlements: 

Despite these facts, the anti-war left and right stubbornly contend that defense spending is the main driver of our national debt. They point to the fact that since 9/11, America has increased the amount of money it spends on defense spending. Here's a chart that gives a visual demonstration of their argument: 

While it is true that we have increased our military spending since 9/11, they neglect to give you a fuller picture of how much money we spend on defense in comparison to how much we spend on entitlements:

The problem with entitlement spending is that that it consumes more than half of what we spend currently and we can't even afford it now since these programs are already set to run annual deficits starting this year until it is completely drained in 2037. Furthermore, the amount we will spend on entitlements will continue to grow until we won't be able to afford it in the future. 

The graph above projects that entitlement spending will consume all revenues by 2052. However, there are other projections that predict that we won't be able to afford entitlements much earlier:

Regardless of the timing of when welfare spending will consume all revenues, the fact remains that while our defense budget has increased since 9/11, it is only a small fraction of the amount we currently spend on and it will continue to be a small fraction of the government's expenses in the future. In fact, we would have to engage in a multitude of wars before defense spending starts to eclipse all the revenue we receive. Conversely, we could eliminate all defense and national security spending, it still wouldn't make a dent in our national debt. 

Even more daring, we could eliminate all spending except entitlement spending and it still won't solve our debt problem.

The truth is that we have been reducing spending on defense while increasing the amount on entitlements since the 1960s:

Ladies and gentlemen, the reality is that defense spending is not something that on course to exceed government revenue. Nor will it ever. Furthermore, defense spending is not on autopilot like entitlement spending is right now. We can control what we spend on wars, weapons, troops, intelligence gathering, research and development and administrative agencies but we can't control what we spend on welfare programs because those expenses are locked in and mandatory. They're automatic. No questions asked.

It amazes me that there are politicians on the left and the right that want cuts in the defense budget despite the mountain of evidence that entitlement spending is the real driver of our deficit and will be in the future. Even the CBO acknowledges this fact.

That means we have a spending problem. Entitlements have taken on a life of its own unless we do something about it. Any denial that entitlement spending is the main driver of our deficit reveals the astounding inability to assess the seriousness of our financial problems and fundamentally skewed set of priorities on what to put on the chopping block. 

We've been cutting defense for a long time now.  We have never made any cuts since the we've started the war on Poverty.  Instead, we've been increasing spending on this war and somehow we're supposed to make more reductions on defense in the real wars we're fighting overseas.  That doesn't make any sense.

Thus, any politician, both on the left or the right, who is too cowardly to take on entitlement reform is not worth remaining on office. Politicians are more concerned alienating the check takers rather than the taxpayers. As a result, they're putting the entire nation at risk, both financially and militarily,  if we do not fix entitlements, just to keep these programs afloat.

The only solution to reducing the deficit is entitlement reform. No other austerity measure will have an impact on shrinking the deficit. The sooner we get on our way to making these reforms, the better our future will be.

Failing To Learn From Europe

As President Obama meets with Congressional leaders to squabble on whether or not to raise the debt ceiling, I am amazed at how our leaders fail to learn the lessons of what is going on in Europe.  As we argue about the ramification of raising or not raising the debt ceiling, how much government spending we should have and what our tax rate should be, we act as if what is going on in Europe will not happen to us here. 

For example, France, Ireland and Italy have either had their credit rating lowered or are under threat of having their credit rating lowered by Moody’s Investors Service. Moody's isn't the only one lowering the credit rating of these nations. Other companies have lowered them too. For example, one company has lowered Greece to junk bond status.

Yet, we act like the consequences of the reduction in credit ratings felt by these countries won't happen to us despite the fact that Moody's and other credit rating companies have been threatening to reduce America's credit rating.  Moody warned us that it would reduce our credit rating back in January of 2011 and has just recently issued another warning. Having our credit rating would be bad news for America and yet we continue to ignore these warnings.

As as result of massive debt and a loss in credit ratings, many countries in Europe such as Spain, Portugal, Ireland, England, France, Italy, Latvia, and many other European countries have enacted tough austerity measures in order to reduce their public debt. Yet, many of these countries are experiencing massive social unrest because people are unhappy with the austerity measures. Greece is constantly getting rocked by protesters who demand to keep the status quo. Spain is now experiencing protesters too. 

John E. Silvia, chief economist at Wells Fargo, has warned that the United States is on a path of insolvency much like Greece and Portugal are: 

To me—being in Europe for a few days—the plot in Greece and Portugal sounds an awful lot like the same plot that's going on in the United States. But the characters have different names," he said.

As the deadline for a budget agreement looms in Congress, Silvia told CNBC that the US must recognize that the moderate economic growth forecast by most economists for the country will fail to generate the tax revenue necessary to fund long-running government entitlement spending.

"We have to make some arrangements in terms of cutting back the promises that were made by prior politicians for these entitlements," Silvia said.

"(We've had) forty years of political promises to give people certain entitlements, certain benefits. And we've now come to understand that the United States is in a very difficult position than it was in the early post-World War II period. We're not the dominant economy. And our pace of growth has moderated. Our ability to finance this is all limited." 

Judd Gregg (R-Nh) is another voice who has raised concerns about the U.S. spending and how it contributes to the increasing U.S. deficit. He has stated that the financial future of the United States looks grim unless makes major changes in its spending habits:

Chief among Gregg's concerns is the massive deficit under which the U.S. is currently operating. Gregg says the economy is on an "unsustainable track" that, if continued at its current pace, "will double the federal debt in five years, and triple it in 10 years." Gregg compared financial problems here in the U.S. to those Greece is currently having, noting that while the U.S. is a "more vibrant nation, we are still on the exact same track" as the troubled country when it comes to finances.

Gregg insists we need to cut spending, especially as the nation gets ready to take on "70 million retirees" as opposed to the "35 million retirees" the U.S. is currently sustaining via Social Security, Medicare and Medicaid programs.

The Dallas Federal Reserve Bank President Richard Fisher has issued the same warning as well stating that unless we make serious changes now, then the debate will revolve around when will America go bankrupt:

"If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when," Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. "The short-term negotiations are very important, I look at this as a tipping point."

But what is going on in Europe will happen here, if we fail to take immediate action to fix our economy. We have the ability to avoid the problems that Europe is going through. There are many people who have been warning us that we are following down the same path as Europe. 

However, the President doesn't want to learn from Europe. He wants to emulate Europe by enacting expensive programs like starting new rail road projects, ObamaCare, and a host of other unfordable government projects. 

George Santayana famously said that "those who do not learn from history are doomed to repeat it." Unless we learn from the mistakes of Europe, then we are doomed to repeat it too. 

The Welfare State Is The #1 Leading Killer Of Modern Nations

In modern history, the #1 killer of modern nations is the welfare state. The concept of the welfare state exists in many different forms such as Nazism, Socialism, Communism, or Progressivism. The common theme among the different variations of the welfare state is that it always fails in the end. Even states that attempt to mix different economic systems cannot survive long since it will be corrupted by its own welfare programs. 

The welfare state is a failure both in theory and application. It produces misery in so many different forms. It can come in the form of brutality, oppression, poverty, death, and misery as demonstrated by former Communist Russia, China, Eastern Europe, Cuba and North Korea.

It can also come in the form of reducing human beings to immature children as the nanny state looks to their every need and want. As a result, it robs human beings of the ability to be free to make decisions for himself. Immanuel Kant explains the tragedy of the welfare state:

"It is so easy to be immature. If I have a book to serve as my understanding, a pastor to serve as my conscience, a physician to determine my diet for me, and so on, I need not exert myself at all. I need not think, if only I can pay: others will readily undertake the irksome work for me. The guardians who have so benevolently taken over the supervision of men have carefully seen to it that the far greatest part of them (including the entire fair sex) regard taking the step to maturity as very dangerous, not to mention difficult. Having first made their domestic livestock dumb, and having carefully made sure that these docile creatures will not take a single step without the go-cart to which they are harnessed, these guardians then show them the danger that threatens them, should they attempt to walk alone. Now this danger is not actually so great, for after falling a few times they would in the end certainly learn to walk; but an example of this kind makes men timid and usually frightens them out of all further attempts.

Thus, it is difficult for any individual man to work himself out of the immaturity that has all but become his nature. He has even become fond of this state and for the time being is actually incapable of using his own understanding, for no one has ever allowed him to attempt it. Rules and formulas, those mechanical aids to the rational use, or rather misuse, of his natural gifts, are the shackles of a permanent immaturity."

However, the fundamental flaw of the welfare state is that it violates the immutable mathematical or economic laws of the universe. The philosophically behind the welfare is complete failure because it thinks it can overcome the inflexible rules of  nature. As a result, the welfare state is a story that never ends well. 

Marget Thatcher famously quipped that the "the problem with socialism is you run out of other people's money.” In other words, the ultimate fate of all welfare states is financial death. Whenever government extracts money from one segment of society and gives it to another segment of society, it is ultimately bound to fall. A blogger known as Ace explains why:  

As in France, we have let an enormous segment of our population -- perhaps as much as half -- fall into a state where they depend on government largesse for a substantial part of their income. This is not money they earned themselves, not wages or savings, but rather money squeezed from the more productive half of the country. Half of our citizens pay no income taxes at all. An increasing number will draw public-sector pensions, Social Security, and medical insurance (Medicare/Medicaid) in amounts that far exceed what they contributed to those plans. Half of the US population, in short, lives not by the fruits of their own toil but by the (coerced) charity of others, as filtered and distilled through the hand of the government. This can not -- it can not, by the laws of economics and simple physics -- continue. The mathematics of the problem trump even philosophical issues of fairness, of governance, of ethics or law. The mathematics simply will not allow it.

In other words, entitlement programs are mathematically unsustainable. Governments cannot get around the immutable laws of economics and mathematics. Period. Why? Ace provides the answer:

It is not wrong to wish that every citizen have free health care, free food, free housing, and some money to spend even if they have no job. It's not wrong; it's just impossible. Health care is a service that has huge costs associated with it. These costs cannot be "magicked" away just because we find them inconvenient. Food must be grown, transported, packaged, and prepared -- all costs that must be accounted for. Shelter does not precipitate out of thin air. We cannot delude ourselves into thinking that "the government" can provide these things to us at no cost, because "the government" must pay for these things just as individuals do, and because the government has only one source of wealth -- the citizens -- that's where it must go for the money. So if Bob is given 'free' health care, 'free' food, and a 'free' apartment, the government isn't paying for it; Tom, Jane, Howard, and Sue are paying for it. And at a vastly inflated cost due to the innate governmental inefficiency that dilutes every dollar that passes through their hands. Soon the social welfare costs eat up the money intended for good and necessary governmental expenditures like the military, the police, and infrastructure. Social welfare becomes a beast that eats everything.

America would do well to understand how that story ends.  Just as prophets who came to Jerusalem to warn its inhabitants of imminent dangers were ignored in Jerusalem, I fear that many of those voices who warn of imminent financial dangers are being ignored today.

Europe: The Canary In The Coal Mine

However, one doesn't have to receive messages from a heavenly source or be a financial wizard to know that America is on a dangerous course to financial collapse. We don't even need to look to the past or the future to see what might happen to us. All we have to do is look across the ocean to Europe. And we've been seeing the warning signs for a long time. 

Take a look at the chart on the right side of this article. It is a long list of government debt held by each European country. 

In 2008, Iceland was the first European nation to financially collapse. Greece almost fell until it received a bailout from other European nations. Ireland is also on the edge of a financial collapse and is looking for a bailout from Europe. Other countries like Spain, Portugal, France and England are also struggling with debt and may be next in line to need a bailout or face a financial meltdown. 

Europe is quickly realizing socialist programs do not work. They are finding that they must slay the entitlement beast by enacting austerity measures if they wish to survive. Which is why nations around the world are scrambling to reduce their debts. England is making huge budget cuts which have not been done since World War II while France faced some riots when Nicolas Sarkozy reformed the state's pension system and is working to reduce its debt. Voters in Latvia voted to reelect their government that cut public-sector workers' pay by 50 percent.

Another consequence of Europe's debt due to massive government programs and financial irresponsibility is that their credit rating gets down graded. Countries like France and Ireland have either had their credit rating lowered or are under threat of having their credit rating lowered by Moody’s Investors Service.

Even countries outside of Europe are recognizing that the welfare state is unsustainable. Especially the few countries who remain communist today.  Cuba is recognizing that its communist system is financially unsustainable. North Korea is flirting with capitalism since this welfare state cannot feed its own people. Those countries that have not engaged in financial reform are alive only because of brutal totalitarianism and outside economic assistance. For example, Communist Russia would not have lasted as long as it did had United States provided economic and agricultural assistance. 

The Economic Crisis In America  

What does Europe have to to with America's debt crisis? Well, the common denominator in Europe's financial woes is that each country was spending more money than they had on social programs. And that same problem that exists in Europe is the same problem that exists here in America.

Judd Gregg (R-Nh) is merely another voice who has raised concerns about the U.S. spending and how it contributes to the increasing U.S. deficit. He has recently stated that the financial future of the United States looks grim unless makes major changes in its spending habits:

Chief among Gregg's concerns is the massive deficit under which the U.S. is currently operating. Gregg says the economy is on an "unsustainable track" that, if continued at its current pace, "will double the federal debt in five years, and triple it in 10 years." Gregg compared financial problems here in the U.S. to those Greece is currently having, noting that while the U.S. is a "more vibrant nation, we are still on the exact same track" as the troubled country when it comes to finances.

Gregg insists we need to cut spending, especially as the nation gets ready to take on "70 million retirees" as opposed to the "35 million retirees" the U.S. is currently sustaining via Social Security, Medicare and Medicaid programs. 

In other words, the financial story of America will not end well unless we do something about it.  Social programs makes up the largest bulk of America's government spending as indicated in the pie chart below: 

No nation, business or family can survive financially when almost 60% of its budget is going  paying mandatory bills. If America does not find the will or courage to touch the third rail of American politics and either reduce or eliminate its entitlement spending, we will collapse financially. 

Any other budget cut  for another other program will not solve the problem. Even if you did cut all other programs, including the military, our nation will still be in debt due to our irrational commitment to entitlement programs. Why? Because if enlistment spending is left unchecked, it will become the beast that will consume all of our available finances at some point in the future as seen in the chart below:

Today, Moody's has expressed concern about our debt and may have to down grade our credit rating. Which is very bad news for America. As I said, we don't have to look into a crystal ball for what happens if we loose our credit rating because we were unable to get our entitlement spending under control. All we have to do is look to Europe.

Some people feel that we are witnessing the end of the welfare state in Europe and round the world as governments make a mad dash to avoid financial collapse. However, that remains to be seen. It could go either way. Some states will insist on maintaining the entitlement state while others will ditch it altogether.  

But a choice has to be made: either the entitlement programs die or the entitlement state dies. 

And there is no middle ground. Mix economies eventually fail too since they eventually morph into a welfare state and then its only a matter of time before they are on their way to financial collapse. In the end, they all collapse because the very programs that they use to support the people can no longer support the state.

America risks falling into same sad story of welfare states. The important question for America is whether or not we can let the story be written for us or do we dare to change the story? How do you want the great American story to end?

Should England Have Thier Own "Tea Party?"

America isn't the only country that is facing a severe financial crisis right now. England, like the United States, is also struggling with an irresponsible government that has been engaging in excessive spending and piling up a massive deficit. As of today, April 23, 2009, the United Kingdom's budget deficit to hit a record £175 billion. The economic future for Britain doesn't look very good as the total government debt will double to 79% of GDP by 2013 - the highest level since the Second World War. To make matters even worse, Britain's trade deficit gap is getting wider.

Politicians are pretty much the same around the world: They're stupid. They think raising taxes while continuing to spend beyond what they can afford will bring them out of the current economic crisis and into financial prosperity.

The British government is attempting follow America's approach to resolving the financial problem by raising taxes. Chancellor Alistair Darling has announced that he will be increasing the tax rate from 45% to 50% for those who are making £150,000 and above. That is not the only tax increase England will see. He has also announced that he will be increasing taxes on fuel, alcohol and cigarettes.

The Chancellor of the Exchequer, Allistar Darling, isn't afraid to explain the justification for the massive tax increases. The justification is a simple which is "to pay for additional support for people now." Basically, he's saying that an increase in taxes is needed for an increase in spending. To be even more blunt, Allstair Darling is raising taxes to keep the British Welfare state alive.

Ever since Allistar Darling released the details of the British government's budget last Thursday, the GDP fell by 1.9% during the 1st quarter, making Darling's 3.5% fall over 12 months look overly optimistic (and they only have 1.6% left for the next 9 months!)

If the forecasting by the government is wrong, then the debt figures quoted will be wrong too. It is widely expected that borrowing will exceed £200bn now.

Yet, the current Chancellor of the Exchequer refuses to learn from the past. Raising taxes on the rich never works as intended.

Mr. Darling has received a lot of harsh criticism for being financially irresponsible with the tax payer's money but taxes are only one side of the problem.

The other side of the problem is excessive spending. Even some politicians are getting upset on this issue. Look at the Conservative MEP, Daniel Hannan, attacking Prime Minister Gordon for spending beyond what England can afford.

Politicians like Daniel Hannan are rare. However, the truth is that the British deficit cannot be attributed to just a single party. Falling into debt occurred regardless if political parties such as Labor, Tory, or BNP had the majority power.

I think citizens of England should have their own "tea party" as a way of fighting against financially irresponsible politicians. For obvious reasons, I don't think Britons would like call their protests "tea parties."

What do you think the name of the British version of the tea party should be called?

UPDATE (5. 22.09) : Britain's debt outlook lowered to negative from stable by Standard & Poor's