On E.U. States Negotiating the E.U. Budget

Having state governments at the front in putting together a federal budget is problematic for several reasons. Those governments can easily form ideologically clashing groups that result in stalemate at the expense of the federal level. That states have a built-in political interest in safeguarding their own turf means not only that they would tend in a positive sense to ward off too much federal encroachment at the expense of the states and federal-state balance necessary for the check-and-balance function of federalism, but also that the states could exploit a structural conflict of interest to deny the federal governmental institutions adequate sovereignty and money to act effectively in the common or general interest as represented by the union rather than any one state or subset of states. The lack of progression of negotiations in the Council of Ministers in 2026 on the upcoming seven-year federal budget demonstrate that perhaps the European Parliament rather than the Council of Ministers should come up with the budget and sent to the European Council for passage.

The full essay is at "On E.U. States Negotiating the E.U. Budget."

The U.S. Federal Debt Hits $40 Trillion

The U.S. GNP in 2025 had been $30.77 trillion (nominal). Even though that represents a real growth rate of 2.1 percent, according to the U.S. Bureau of Economic Analysis, the total dollar-amount of economic output of the bloc was almost $10 trillion lower than the total federal debt, and this does not count the respective debts of the member-states. In fiscal year 2025, the net-interest paid on the federal debt amounted to $970 billion, which translates into nearly 20 percent of the federal government’s revenue and exceeded the $917 billion in defense spending. The milestone of $40 trillion in federal debt, reached on August 19, 2026, can thus be put into perspective at the federal level of government. It is no wonder that Europeans had been raising concerns regarding the issuance of federal debt by which the E.U. could aid Ukraine militarily.

The full essay is at "The U.S. Federal Debt Hits $40 Trillion."

The European Parliament: Rejecting the Council’s Proposed Budget

On 16 June, 2026, the European Parliament rejected the European Council’s proposed budget for the E.U. not only because of the proposal’s €32.8 billion budget-cut, which would reduce the six-year 2028-2034 federal budget even below that which the Commission had proposed, but also because the Council had refused to address the issue of federal-sources of revenue, which was made increasingly salient by the increasing need of funds at the federal level. In seeking to keep the federal institutions dependent on money supplied by the states, the Council, which like the U.S. Senate represents states, can be viewed exploiting a conflict of interest at the expense of the ability of the E.U. to operate even within its given mandates. Put another way, the requirement that the Parliament pass any proposed budget can be viewed as a check on the state-centric Council’s proclivity to put the interest of the parts above the whole—the individual states above the Union.

The full essay is at "The European Parliament."

The E.U.’s Borders Held Hostage by the State Veto

With E.U. states like Germany, Austria and Poland becoming increasingly active in patrolling their respective borders at the expense of the Schengen Agreement, it makes sense that the proposed E.U. budget announced in July, 2025 includes more money to protect the E.U.’s borders from illegal crossings. This is important because reinstituting controls on the borders of states contributes toward the visual of the E.U. coming apart geographically. Such a set-back may be worse for the E.U. than the secession of Britain was; in fact, letting that state go arguably strengthened the Union because the British government consistently refused to admit that the E.U. is more than a network of countries that the UK happened to belong to, which was the view of the former governor, David Cameron.

The full essay is at "The E.U.'s Borders Held Hostage by the State Veto."

Taxation and Economic Inequality

The top 1% of U.S. taxpayers had 19.4% of the total income in 2007 and paid 28.1% of all federal taxes. In 1987, the top 1% had had 11.2% of the total income and paid 16.2% of all federal taxes. The share of total income going to the wealthy (income over $353,000 in 1987) and the share of federal income taxes they paid increased. That the poverty rate hit 15% in 2011 while the real wages of the middle and lower classes were back to mid-1990s levels suggests that the rich were getting richer as the poor were getting poorer; income and wealth inequalities were increasing. Differential impacts of a taxation regime can have an impact on a growing inequality, and thus on whether a society should adjust its tax structure. 

The full essay is at "Taxation and Economic Inequality."

Misconceptions of the E.U. Budget

Could it be that at least some of the British voters who were in favor of secession from the E.U. held misconceptions of the federal budget? If so, perhaps the antagonism was unduly harsh in the referendum.  

The full essay is at "Misconceptions of the E.U. Budget."

Holding the U.S. Debt-Ceiling Hostage: A Case of Political Expediency over Statesmanship

In April of 2011, S & P lowered expectations on U.S. Government debt from “stable” to “negative.”  Astonishing, the $14.2 trillion U.S. debt was still rated as AAA. The shift in expectations did not trigger higher borrowing costs because the market presumed that a political deal lowering the deficit would be facilitated by the warning-call. At the same time, Congress and the U.S. president were grappling with the need to extend the federal debt ceiling. The federal government was projected at the time to reach its borrowing limit by May 16, 2011, though the Treasury secretary, Tim Geithner, said he could use accounting options to push the date back to July 8. He assured the public that Republicans in Congress had told President Obama that they would go along with a higher limit. “I want to make it perfectly clear that Congress will raise the debt ceiling,” the Geithner said.  He also said the Republican leaders had assured the president that they “couldn’t play around with the government’s credit rating. They recognize it, and they told the president that.”[1] Such a recognition and statement by the Republican leadership, if true, would evince statesmanship over political expediency, for Republican lawmakers could have leveraged their votes on raising the ceiling to get more in negotiations on the budget. This would be particularly notable considering that appropriations to keep the U.S. Government's non-essential operations going were pawns in a Congressional-presidential power-struggle during the Trump administration. 

The full essay is at "Political Expediency  vs. Statesmanship."

1, “Geithner Confident Congress Will Raise Borrowing Limit,” USA Today, April 18, 2011, p. 6A.

Beyond Collectivism and Individualism: Freedom from Fear

In his speech on April 13, 2011 on reducing the U.S. Government deficits, President Obama identified two strains that had run through the country’s political history and thus informed the American political culture. “More than citizens of any other country” he said, “we are rugged individualists, a self-reliant people with a healthy skepticism of too much government. But there has always been another thread running throughout our history – a belief that we are all connected; and that there are some things we can only do together, as a nation.  We believe, in the words of our first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves.”[1]  These two strains can be identified as individualism and collectivism, respectively. I contend that collectivism enables both individual and collective security. Individual security is oriented to a person’s survival and collective security is exemplified by national defense. In his speech, the president explicitly placed individual security within the collectivist strain. “Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security.  We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us.  ‘There but for the grace of God go I,’ we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities.”  That is, limits to rugged individualism exist, whether in the state of nature or in an interdependent economy, and collectivized programs can bridge the gap on an individualized basis such that individuals can continue to enjoy liberty. The individualist/collectivist dichotomy is thus not so clearly dichotomist.

The full essay is at "Beyond Collectivism and Individualism."

1. Barak Obama, “Text of Obama Speech on Deficit,” The Wall Street Journal, April 13, 2011.

Greek Austerity: Pressure on the Environment

“While patrolling on a recent cold night, environmentalist Grigoris Gourdomichalis caught a young man illegally chopping down a tree on public land in the mountains above Athens. When confronted, the man broke down in tears, saying he was unemployed and needed the wood to warm the home he shares with his wife and four small children, because he could no longer afford heating oil. ‘It was a tough choice, but I decided just to let him go’ with the wood, said Mr. Gourdomichalis, head of the locally financed Environmental Association of Municipalities of Athens, which works to protect forests around Egaleo, a western suburb of the capital.”[1] Tens of thousands of trees had disappeared from parks and forests in Greece during the first half of the winter of 2013 alone as unemployed Greeks had to contend with the loss of the home heating-oil subsidy as part of the austerity program demanded by the state’s creditors. As impoverished residents too broke to pay for electricity or fuel turned to fireplaces and wood stoves for heat, smog was just one of the manifestations—the potential loss of forests being another. On Christmas Day, for example, pollution over Maroussi was more than two times the E.U.’s standard. Furthermore, many schools, especially in the north part of Greece, had to face hard choices for lack of money to heat classrooms.

Greek forests were succumbing  in 2012 to the Greeks' need to heat their homes as austerity hit.   source: Getty Images

Essentially, austerity was bringing many people back to pre-modern living, perhaps including a resurgence in vegetable gardens during the preceding summer. At least in respect to the wood, the problem was that the population was too big—and too concentrated in Athens—for the primitive ways to return, given the environment's capacity. 

The full essay is at "Greek Austerity and the Environment."

1. Nektaria Stamouli and Stelios Bouras, “Greeks Raid Forests in Search of Wood to Heat Homes,” The New York Times, January 11, 2013.
2. Skip Worden, God's Gold, available at Amazon. 

Investor Assessments of Political Events

Although the various investors in the financial markets doubtlessly pay great attention to important political events, such as were a state in the E.U. to default on its bonds, I suspect that market analysts overstate the importance of more commonplace political events. For example, The New York Times reported in late September 2012 that investors were shifting their portfolios to reduce risk out of uncertainty regarding the upcoming American elections and the ongoing negotiations in Congress to avoid the huge budget cuts and tax increases set to begin automatically at the beginning of 2013 and run for a decade. Additionally, fears that E.U. leaders might hesitate on moving forward with the bailout program oriented to indebted states were prompting investors to be more risk-averse. Generally speaking, analysts were “anticipating that politicians may not act until forced,” both in the U.S. and E.U., “setting the markets up for weeks of angst.” In my view, this account is overstated.

 Does expertise on these make one an expert on politics?  

The full essay is at "Investor Assessments."

Source:

Nathaniel Popper, “Fearing Fiscal Cliff, InvestorsCash In and Seek Safety,” The New York Times, September 28, 2012. 

Handouts in Averting the Fiscal Cliff: The Price of Politics?

What is that nebulous thing called politics? Might it be that the practice is essentially exploiting or creating what are known as principal-agent costs? That is, might politics boil down to a skill in the agent (elected representative) in putting his political or economic interests ahead of doing the bidding of his principal(s) (i.e., his constituent body).  
In the U.S. Senate bill in early 2013 to obviate the “fiscal cliff,” for example, the Democrats may have agreed to benefits for the Republican lawmakers’ campaign backers in exchange for going along with a more progressive federal income tax system. Among the added provisions were special expensing rules for certain film and television productions—no doubt those made by particular campaign contributors. The provision for tax-exempt financing for the New York Liberty Zone around the former World Trade Center may also have been a favor to a particular someone. Lest it is wondered what an extension of the American Samoa economic development credit was doing in an expedited measure to obviate the “fiscal cliff,” the answer may have had to do with a particular Republican lawmaker’s relationship with someone having an interest in American Samoa. I can only speculate here, as I was not privy to the actual relationships and negotiations. However, the sheer strangeness of such provisions in such a bill suggests that the particular political or economic interests of particular Republican lawmakers may have been the culprit.

 Is money the language of politics?    citizen.org

The full essay is at "Handouts in Averting the Fiscal Cliff."

The Debt-Ceiling vs. the Fiscal Cliff as Negotiating Leverage

It is likely a drawback of democracy that hard decisions—that is, those in which fixing the problem goes against instant gratification or financial advantage—get pushed back, or “kicked down the road,” rather than addressed in a definitive way such that difficult problems are fixed. This structural problem can be seen in how Congressional leaders and the U.S. President delayed the “fiscal cliff” for two months at the beginning of 2013. More generally, the political tactic of holding the federal budget and the debt-ceiling as ransom evinces a fundamental flaw in democracy itself.

The full essay is at "Structural Flaws of Democracy."

A Weak Economy as a Competitive Advantage to the Largest Corporations

Size matters, at least in the business world. Richard Fuld, the last CEO and Chairman of Lehman Brothers, overextended "his" bank with risky real-estate and financial derivatives in part so Lehman Brothers would be as big as Goldman Sachs. 

Empire-building (and ego) aside, the largest corporations can indeed perform differently than smaller firms in an economy. In April 2013, it was clear that the biggest companies were outpacing smaller ones. Analysts estimated profits for the 100 largest companies in the Standard & Poor’s 500 stock-index to rise 6.6% in the second quarter, while earnings for the bottom 100 were expected to fall by 1.6 percent. Of all the profits earned by the companies in the S&P 500, 22% would be coming from the 10 largest companies, enabling them relatively more wherewithal with which to gain still more market share. Put another way, beyond a certain point, organizational size can protect or buffer a company in the midst of a languid economy. It is not only the market mechanism that accounts for this phenomenon.

The full essay is at "A Weak Economy as a Bonus for Large Companies."

Balancing Budgets: Italy vs. Wisconsin

In what could be dubbed a tale of two states, Scott Walker of Wisconsin bragged about bringing the budget into balance without raising taxes while Silvio Berlusconi broke his pledge not to raise taxes in order to balance his budget for 2013. Walker relied on spending cuts and constricting the collective bargaining of government employees, while Berlusconi agreed to a package of tax increases, spending cuts and fewer labor protections to make up for $76 billion (54 billion euros) by 2013. The tax increases include raising the value-added tax from 20 to 21 percent and imposing a “solidarity tax” of 3 percent on state residents who earn more than $420,000 (300,000 euros). The latter tax would run through 2013. At a news conference in August, 2011, “Berlusconi acknowledged that he had pledged never to raise taxes, but that the attention of world markets had forced him to do so.” Was breaking his pledge a vice or a virtue?

The full essay is at Balancing Budgets

California’s Turnaround in 2013: Brown’s Budget Surpluses

By early 2013, California had turned the corner from deficits—$9 billion in 2011 and $25 billion in 2010—to anticipated surpluses—$785 million for the fiscal year ending June 2013 and $851 million in the year thereafter. The lack of balance between billions and millions suggests that Keynesian economics may contain a fundamental imbalance in favor of consumption, at least in a democratic context. The prudent proposals by Jerry Brown, California’s head of state and chief executive, point to the ability of a republic to responsibly manage its fiscal business even within the overall imbalance.

                   
The full essay is at "California's Turnaround."

Political Staying Power: Ethanol Subsidies

“A broad bipartisan majority of the Senate voted [on June 15, 2011] to end more than three decades of federal subsidies for ethanol. . . . [At the time,] Gasoline blenders [received] a tax credit of 45 cents for every gallon of ethanol they blend[ed] with motor fuel. The amendment would have repealed that as well as a tariff of 54 cents a gallon on imported ethanol. . . . The tax breaks . . . cost about $6 billion a year. The House [was] expected to reject the repeal as unconstitutional because tax bills must originate in that chamber, and the White House opposes it. But the 73-27 vote signals that once-unassailable programs could be vulnerable.  [The intent was] to end subsidies for wealthy interest groups and [to make some] cuts before slashing social-welfare programs. [Thirty three] Republicans joined 40 Democrats and Independents in supporting [the] repeal. (E)thanol has come under increasing fire from diverse groups, including food industry groups concerned about rising corn prices and environmentalists who had concluded corn ethanol wasn't an effective way to reduce greenhouse gas emissions.”

The full essay is at "Ethanol Subsidies."

The Saudi Crackdown: A Cause for Market Confidence

The Saudi government sought to confiscate cash and other assets worth as much as $800 billion in ostensibly cracking down on corruption in late 2017. More than 60 princes, officials, and business practitioners were initially detained. Both the figure and the number of arrests reflect merely “the initial stages” of asset seizures and arrests, according to a Saudi spokesman.[1] It was not long before 500 had been detained.[2] I submit that both the swiftness and scope left international investors and foreign businesses in Saudi Arabia unnecessarily rattled. Doubtless uncertainty as to the real reason for the crackdown unnerved the business elite. Corruption was endemic in the Saudi political economy, so the sudden need to crack down on it understandably left people to wonder as to the real reason, which, as it turns out, was nothing for business to fear.

The full essay is at "Political and Market Risk."

---

[1]Margherita Stancati, “Saudis Target Up to $800 Billion in Assets,” The Wall Street Journal, November 8, 2017.

[2] Nicholas Kulish and David Kirkpatrick, “Arrests Reveal Blending of Kin and Kingdom,” The New York Times, November 8, 2017.

Democracy and the Courts: Alternative Checks on Austerity in Greece

In May 2011, “Athens agreed to impose a new $9 billion round of tax increases and spending cuts and speed up nearly $75 billion in promised privatizations.” In early June, a new round of tightening was being planned by the Greek government. It was feared that those cuts would deepen the recession and thus further shrink the tax base, making it even harder for the government to cut its deficit. Meanwhile, Reuters reported, “Greeks are showing signs of reaching the limits of their endurance as budget cuts imposed under Greece's first bailout a year ago have helped to push unemployment close to 16 percent.” The news service cited police reports of more than 80,000 people packing the main Syntagma square outside parliament on June 6^th—the 12^th consecutive day of protesting there.

                                              Reuters

The full essay is at "Democracy and the Courts: On Austerity."

The Keynesian Drug: America’s Achilles' Heel

Keynes posited that government deficit-spending could boost an economy’s output of goods and services when it is short of full-employment. In the context of an economy near full-steam, tax cuts and/or more government spending could trigger inflation while adding little to GDP. To maintain balance in the government accounts, government surpluses during the ensuing upswing are used to pay off the accumulated debt. This is the theory. Unfortunately, it seems to be at odds with representative democracy. Specifically, a systemic bias exists in favor of recurrent deficits, and thus accumulating debt.

The full essay is at "The Keynesian Drug."

Sources:

Brutus, Letter 8, January 10, 1788, 2.9.95, in Herbert J. Storing, ed., The Anti-Federalist, (Chicago: University of Chicago Press, 1985).

Alan Simpson, Newsweek, December 27, 2010, p. 28.

U.S. Government Debt: A Constitutional Moment?

The Congressional Budget Office (CBO) issued a report in June 2011 indicating that the debt of the U.S. Government had reached a dangerous level—that is, one likely to trigger a financial crisis. This characterization ought to have garnished close attention by the American people, for the viability of the Union itself may have been at stake. I submit that such a condition, moreover, warrants a constitutional moment—that is, a time when the citizenry focus on solving a basic governmental problem. In other words, the matter of the publicly-held U.S. Government debt may have justified popular sovereignty stepping in. Of course, how this would have been done is itself a problem, particularly because government officials had no interest at the time in relinquishing their power as our agents. This might explain in part why the debt would go on to reach $20 trillion by 2017. 

The full essay is at: A Constitutional Moment.