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Thursday, March 07, 2013

Getting Rich by Fighting for the Poor

Hugo Chavez's death was met with tributes from Iran, Bolivia, China and El Salvador. The Western left did not waste much time adding their withered roses to El Comandante's coffin. George Galloway called him another Spartacus. Jimmy Carter described him as a leader who fought for the "neglected and trampled". Michael Moore praised him for declaring that the oil belongs to the people.

Whether or not the oil belongs to the people is a matter of some debate considering how much of it seemed to end up in Chavez's pocket.

Chavez died with an estimated net worth of 2 billion dollars making him the 4th richest man in Venezuela and the 49th richest man in Latin America. For a while, Chavez weathered attacks from the media empire of Gustavo A. Cisneros, the richest man in Venezuela. Then before the 2004 election, their mutual friend Jimmy Carter brokered an agreement between them. Cisneros' media stopped criticizing Chavez and both men bent to the task of getting even richer.

While the Bolivarian Spartacus lined his pockets with oil money, Venezuela's middle-class was struggling to get by in a country where the private sector had imploded. Income increased on paper, but decreased in reality as inflation increases ate the difference. Around the same time that Comrade Hugo was launching the third phase of his Bolivarian Revolution, inflation had decreased household income 8.8 percent while consumer goods prices increased 27 percent.

On his deathbed, Hugo Chavez devalued his country's currency for the fifth time by 32 percent, after tripling the deficit during his previous term when the national debt had increased by 90 percent. From 2008 to 2011, Chavez's oil-rich government increased the debt by nearly 50 billion in a country of less than 30 million. That same year, The Economist speculated that Venezuela might go bankrupt.

Chavez had swollen the ranks of Venezuela's public employees to 2.5 million in a country where the 15-64 population numbered only 18 million. With 1 public employee to every 7 working adults, the entire mess was subsidized by oil exports and debt. When the price of oil fell, only debt was left.

Those public employees became Chavez's campaign staff with no choice but to vote for him or see their positions wiped out to keep the economy from crashing. And they won him one last election.

The dead tyrant leaves behind the lowest GDP growth rate and highest inflation rate in Latin America. He leaves behind an economy where more than half the population depends on government benefits or government jobs. He leaves behind a giant pile of debt for the people and 2 billion dollars in misappropriated oil money for his heirs.

But we don't need to look to a leftist banana republic south of the border to see how profitable fighting for the poor can be.

7 of the 10 richest counties in America are now in the Washington D.C. area. Arlington County alone added $6,000 to its average income in one year alone. D.C. and its bedroom communities got rich at twice the rate of the rest of the country and in the last election; Obama won 8 of the 10 richest counties in the country.

Washington D.C. is richer than Silicon Valley. Median income in the D.C. area has hit $84,523 despite the city itself having horrendous unemployment and poverty statistics. The top 5 percent in D.C. earns 60% more than the top 5 percent in other cities and 54 times what the bottom fifth earns in that same city.

This wealth of government money isn't a rising tide that lifts all boats. Income inequality in Washington D.C. is one of the worst in the nation. For families with children, the income inequality level in D.C. is double the average for the rest of the country.

But when you concentrate the wealth of the land in a single imperial city, then you end up with a sharp gap between the poor and the fighters for the poor. Mid-level jobs are disappearing, but high-level jobs continue to grow. Small businesses are going out of business, but lawyers and consultants are being hired at a breathtaking rate.

Washington D.C. has the highest concentration of lawyers in the country. 1 out of every 12 city residents is a lawyer. 1 in 25 of the country's lawyers lives in Washington D.C. In 2009, the Office of Personnel Management reported that there were 31,797 practicing lawyers in the Federal government earning an average salary of $127,500 a year. Or to put it another way, the taxpayers were spending double Hugo Chavez's 2 billion dollar net worth each year just to pay the lawyers.

That was in 2009. The numbers have undoubtedly gotten much worse since.

That same year there were 383,000 federal civilian workers with six figure salaries. Multiply that and you get all the debt that Hugo Chavez dumped on Venezuela being dumped out in a single year on American taxpayers.

The number of Federal civilian employees is only slightly higher than in Chavez's utopian Socialist paradise, but average Federal employee salary clocks in at a mean $75,000. The closest private sector match to working for Uncle Sam, in a non-military position, is working for Microsoft.

Federal civilian employee wages and benefits run around $200 billion. The end of the pay freeze that wasn't really a pay freeze alone added $763,125,000 to the Federal budget. Or to put it another way, the cost of the Federal workforce in a single year is more than double Venezuela's entire national debt.

During Nixon's first year in office, $200 billion would have covered the entire Federal budget. Now it's just the paychecks. In the United States Department of Health and Human Services, which oversees welfare and food stamps, among other things, 1,461 of HHS' 64,750 employees earn over $155,000.

While the Obama Administration fires marines, it hires more civilian employees. 101 new Federal employees have been hired every day of Obama's first term in office. In 1962, there were more American military personnel than Federal civilian employees. The number of military personnel has dropped sharply, but the number of civilian employees is higher now than it was then. And their salaries have become much higher. 

But the civilian employees are only part of the picture. The massive deficit spending has turned Washington D.C. into a treasure trove of government grants and stimulus plans on the favor train. The national debt grew by 6 trillion dollars in one term of Obama adding $50,521 in debt per household. That money was used to buy favors and support across the country.

While Obama ran on a platform of taking care of the poor, he was raiding the social safety net to buy support from a coalition of billionaires that paid him back with bundled contributions and SuperPACs. Green Energy tycoons got rich on loans and grants, while the middle class imploded. Billions in taxpayer money was traded for millions and hundreds of thousands in contributions in one of the dirtiest deals to take place outside an actual banana republic.

Like Chavez, Obama presides over a poorer country whose poor are convinced that he is the only thing standing between them and absolute poverty. Deficit spending and high debt has destroyed any potential for GDP growth leaving America looking like an oversized version of Venezuela.

The new America is not a booming economy, but a political power structure built on unsustainable spending. Like Chavez, Obama has created an impossible trap that leaves half the country dependent on him and leaves his opponents with no alternative but to propose some form of austerity. It is an economic kamikaze maneuver that invariably ends with economic or political destruction.

Obama, like Chavez, has made economic recovery structurally impossible, perpetuating poverty in order to profit politically from the national state of misery. Chavez died before the consequences of his economic policies caught up with Venezuela. Like Chavez, Obama won a contentious election, but he has no easy escape from the economic destruction coming up on the road ahead.

17 comments:

Edward Cline said...

"Chavez died before the consequences of his economic policies caught up with Venezuela. Like Chavez, Obama won a contentious election, but he has no easy escape from the economic destruction coming up on the road ahead." Yes, Chavez died before having to face the consequences of his policies. But I think it is debatable whether or not Obama wishes to escape from the consequences of his policies. No one relentlessly pursues policies as destructive as Obama's without hoping for the kind of crisis that would be an excuse to throw out the rule books and just take over. The man is a nihilist. I wish more people would get that through their heads. They'll be less shocked and outraged if they did.

FuzzyBear said...

My best guess is the classic Putin maneuver. Obama leaves office, then somehow the rules change and he's President again after someone in the interim.

Vegas Dave said...

Way too many guns and too much ammo floating around the country for that to happen Fuzzy Bear. Why do you think they are desperately trying to seize the stuff

IgorR said...

Poor people are mostly poor because they are stupid. Being stupid also makes them vote for those who will work against their interest, and who will keep them poor. Unfortunately everybody but the corrupt allies of the quasi-dictator suffers along with the idiot poor.

meema said...

Have you ever noticed that it is the despots that are idolized and elevated to sainthood by the masses? I can’t help but draw the conclusion that there is serious deficit in the human psyche where dictator worship is easily tapped into. I just do not get it. I’d say “coming to a country near you.” But what good is a warning when it is given too late?

OT: I find it hard to believe the bottom feeding spammers get what they hope for-clicks. But they are persistent, aren't they?

Daniel Greenfield @ the Sultan Knish blog said...

It's mostly bots with a list of sites. I've been getting hit with a ton of them lately and some are getting through.

It's a choice between imposing moderation screening on all comments or cleaning up afterward.

mushroom said...

Additionally, D.C. isn't the only culprit. The same kind of excess is evident in state capitols. Local school districts in my state typically suck up around 75% of our property taxes. The most impressive building in the rural areas are the massive and elaborate local schools with their dedicated theaters, unionized middle-school media coordinators, and paper-shuffling administrations.

Government is top-heavy. Whether it is poverty, education, law enforcement, health, transportation, etc., most of the taxpayer-funded jobs are not directly involved in actually doing anything necessary let alone productive. Then there are all the unproductive jobs in the private-sector that are required by government regulation.

These people are not going to vote for or support smaller government. Our problem goes way beyond the welfare queens, lawyers and college professors.

Daniel Greenfield @ the Sultan Knish blog said...

Yes that's true. School districts gobble up ridiculous amounts of money since 'education' is such a compelling argument.

Bill said...

I don't really wonder how all that loot is serving him right now.

DenisO said...

The State Founders understood that if those who weren't taxed could vote for or against taxes, or politicians who promised free lunches, the Country would turn into what we see today.
Why should citizens who don't own property be allowed to vote on property taxes?
The things the Federal Government could spend money on were very limited; certainly not social programs, but as that changed, the States and taxpayers lost most of their power. It really all boils down to non-taxpayers voting themselves benefits paid by taxpayers. Things can't get better until that is reversed.

AG said...

This is one of those articles that need to be read multiple time and studied because of all the valuable information it contains. How you were able to stuff so much into a small article and keep it readable is awe inspiring.

Good Shabbos Daniel.

Daniel Greenfield @ the Sultan Knish blog said...

Good Shabbos AG

pedro said...

Oh Yeah Central America's version of Robbing the Hood.

Anonymous said...

Chavez and his family not only controlled the entire government but was the biggest land owners in Venezuela.The extent of his family's wealth is never mentioned.

Dennis Latham said...

Venezuela, where legal guns are outlawed, also has one of the highest murder rates in the world from illegal guns. Caracas averages something 48 per day/ 24/7 with an unsolved rate at about 90%. The country may soon implode in civil war. America is going to end up the same way. Right now, there is no ammo anywhere in America. Between the government buying it up and people stockpiling, it appears war is not far away. I believe it will just take one incident where a law abiding civilian gets killed during a confiscation attempt. People say, ha, that could never happen. Don't bet on it.

Anonymous said...

And so it was with both Russia and The Soviet Union. The Imperial capital sucked all the wealth and life from the surrounding Empire. Things have changed a bit under neo-Russia, as a bew cities such as Volgograd, Nizhnyi Novgorod, and maybe a few others have prospered a bit. And Sankt Peterburg (nee Leningrad) has declined. But the wealth and populace still drain toward the center. I do not know for sure, but I suspect it is much the same with China, and other Empires, and wannabe-Empires. It is the mark of an Imperium that political, economic, social, and cultural powr all gravitate to the Center. In the old Rus, there were two major cities, Kiev and Novgorod The Great. Later Moscow rose from nothing, and after Novgorod was crushed into decline, it was succeeded by Peterburg, which continued to vie with Moscow to the present.

Similarly, We are a country with two capitals (in fact if not law), Wshington and New York. I suspect that Chicago now aspires to make itself a third such.And Los Angeles aspires to replace New York. We differ from Russia and other empires in having vibrant regional centers ... but for how long? Out here on the marches, in Flyover Country, I'm happy to study imperial pretensions from a distance. Imperial capitals are sacked, but the remnants of civilization then are preserved in the distant provinces.

-Rurik

Anonymous said...

Jefferson said the world belongs to the living, so the government's debt should be capped at what it can repay in a generation. Today's socialists say somebody's grandchildren can pay today's debts.

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