If you are an elected official, and you have to make a choice between raising taxes on your constituents or cutting the number of government employees and their salaries, what would you do?

For most of the last few decades, in most places, the politicians would just raise taxes. Now that is changing, and here is why. In recent weeks, what used to be a rare event is becoming commonplace, and that is public employees losing their jobs or having their wages and benefits cut.

Government employees are rioting in Greece (as if that does any good when the cupboard is bare) because many of them are losing their jobs. Greece, Spain, Portugal and even the Cayman Islands have announced they will be cutting public-employee wages and benefits. Many state and local governments in the United States are doing the same thing.

As most of the world's governments head toward a Greek-style meltdown, taxpayers increasingly realize that if government spending is growing faster than the economy, there is no way that tax increases can solve the problem - and most countries have about reached the limit of how much more tax revenue they are going to be able to coerce and extort from their citizens.

[Note from JW:  Skye posted this response to Disraeli's Tea on the Forum, which by TTPer acclamation was requested to be a full article.  Happy to comply. 

Also - as I have been on the road so much, Jack Kelly was to write the HFR this week but is unable to do so for health reasons.  I apologize for there being no HFR today.]

The central government has become so titanic that slowing its rate of growth would simply slightly delay the inevitable crash. The Federalies must be cut down to size, and voting NO on the debt limit increase is currently our best chance for doing so.

Vote NO on increasing the debt limit. The deficits must be stopped or America will be pushed over the economic cliff onto the ash heap of history where it will join the Soviet Union.

If the deficits are not stopped now, then when?  But if they are, you can then cut three Gordion Knots at once that have hogtied our economy.

The predictable narrative has already begun to take hold, regarding the despicable, murderous attack by a madman in Norway last Friday (7/22) .

The confessed perpetrator of a bombing of government offices in Oslo and a seek-and-destroy slaughter at a Labor Party youth camp on Utoya Island, Anders Behring Breivik, is depicted as a "Christian," "conservative" and "right-wing extremist." His attacks, we are told, were animated by a delusional ambition to save his country from an Islamic takeover.

Much remains to be learned about this evident psychopath and his precise motivations for acting in such a deranged fashion. Still, an unholy axis of Moslem Brotherhood operatives and those on the Left - groups whose spokesmen, ironically, endlessly inveigh against precipitous judgments when jihadists are the perpetrators - have been quick to find in this attack proof of their favorite meme:

That conservatives and Christians are as much a threat to domestic tranquility - if not more - than those seeking to impose the totalitarian Islamic politico-military-legal doctrine of Shariah.

Somehow, the axis overlooks Mr. Breivik's admiration for the terrorists of Al Qaeda and Iran.  In his 1,500 page "manifesto," Mr. Breivik states that he will:

"consider working with the enemies of the EU/US hegemony such as Iran,  al-Qaeda, al-Shabaab or the rest of the devout fractions of the Islamic Ummah with the intention for deployment of small nuclear, radiological, biological or chemical weapons in Western European capitals and other high priority locations."

If government spending is growing faster than gross domestic product (GDP), can the resulting deficit problem be solved by:

(A) decreasing the rate of growth of government spending,
(B) increasing tax rates,
(C) decreasing the rate of growth of government spending and increasing tax rates?

If you answered A, you have a strong brain and can go to the head of the class. If you answered B, you have a flaccid brain and will need to repeat the class. I will get back to the C students later.

People with flaccid brains have a hard time understanding the consequences of actions, and they tend to treat variables as constants (e.g., I know how to drive, so I should be able to drive drunk).  They rarely do real cost-benefit analyses or think about the long run.

An example of a flaccid brain is that which occupies the skull of Sen. Bill Nelson, Florida Democrat, who, in a hysterical reaction to the Gulf oil spill, wants to shut down all offshore drilling.

Outgoing US Defense Secretary Robert Gates is worried about the shape of things to come in US foreign policy. In an interview with Newsweek over the weekend, Gates warned:

"To tell you the truth, that's one of the many reasons it's time for me to retire, because frankly I can't imagine being part of a nation, part of a government... that's being forced to dramatically scale back our engagement with the rest of the world."

What Gates is saying is that he doesn't trust his commander in chief to allocate the resources to preserve America's superpower status. He is saying that he believes that Obama is willing to surrender the US's status as a superpower.

This would be a stunning statement for any defense secretary to make about the policies of a US President. It is especially stunning coming from Gates. Many conservatives hailed Obama's decision to retain Gates as defense secretary as a belated admission that Bush's aggressive counter-terror policies were correct.

These claims ignored the fact that in Bush's last two years in office, with the exception of the surge of troops in Iraq, under the guidance of Gates and then secretary of state Condoleezza Rice, US foreign policy veered very far to the Left. As bad as it has been so far under Obama with Gates, it is now going to get much worse without him.

The "Dodd financial reform" bill being considered by the Senate will make it illegal for 99.6 percent of the population to invest in needed new and promising start-up companies.  At the same time, the bill ensures that the 33 largest banks, which control 92 percent of all bank assets, will be required to purchase more federal government debt before giving loans to businesses and individuals.

Quite simply, the government is continuing to practice financial fascism.

The new financial reform bill will make it illegal to invest in a new venture or start-up company for anyone who does not have a liquid net worth of $2.2 million or an annual income of roughly $450,000 if single or $675,000 if married - which rules out all but fewer than 1 percent of the population.

If this passes and is signed into law, Congress and the president will be saying to the American people, "Ninety-nine-plus percent of you are too stupid to know how to invest your own money." They think the rest of us are as irresponsible as they are.

What right do the financial fascists in Washington, who created the world's biggest financial Ponzi schemes (i.e., Social Security and Medicare) and the largest unsustainable debt in history, have to tell more than 99 percent of the rest of us what we can and cannot invest in?

One of the secrets about Western trade with enemy states like Iran is that the Western companies trading with them may also wittingly or unwittingly serve as espionage assets for their home country or for other Western countries.

The boycott drive against states like Iran uses a legalistic framework to deal with complex military challenges. And since the nail doesn't exactly fit the hole, it stands to reason that the damage sanctions can do to military or intelligence operations may in certain circumstances outweigh the benefit they bring to diplomatic operations.

Late last month (5/24), the State Department announced that it was sanctioning the shipping company of Israel's richest family, the Ofer Brothers, for reportedly violating US law by trading with Iran.  Ever since, there has been a deluge of news reports alleging that the Ofer Brother's ships were used by the Mossad and perhaps the IDF to infiltrate and exfiltrate agents into and out of Iran. 

There are number of troubling aspects to this story.

A century ago, if you had told typical citizens of Argentina (which at that time was enjoying the fourth-highest per capita income in the world) that it would decline to become just the 76th richest nation on a per capita basis in 2010, they probably would not have found it believable.

They might have responded, "This could not happen; we are a nation rich in natural resources, with a great climate for agriculture. Our people are well educated and largely descended from European stock. We have property rights, the rule of law and an open free-market economy."

But the fact is, Argentina has been going downhill for eight decades, and it now has one of worst sovereign credit ratings in the entire world - on a par with Pakistan and lower than Bangladesh. Argentina, despite its natural resources and human capital, has managed to throw it all away.

Argentina did not become relatively poor because of having been involved in destructive conflicts. It became poor because it has had a series of both democratically elected leaders and non-elected dictators who never missed an opportunity to make the wrong economic decisions.