Saturday, February 18, 2012

Japanese Gov't Plans to Double Sales Tax - Will it Matter? To You & Me, Yes! To the National Debt? No!

Once again the clamoring for a raise in sales tax is in the Japanese news recently. It conveniently coincides with the news about the emperor of Japan having to enter the hospital for heart surgery.

Actually, before you jump to conclusions, I think this guy is OK. He's never invaded China or Asia, or even Ezo, so, as Japanese emperors go, he seems like a cool dude. 

Of course, in matter of national importance, in Japan, the medical condition of a "well known and loved man" who is nearly 80-years-old will be the top page news in all publications; the doubling of our sales tax that affects everyone slides in second.

I suppose though, that might be a tad bit better than the USA, a country with very poor press freedom that ranks 47th in that category along side beacons of liberty nations such as Argentina, Taiwan and Romania whereby regular important news is completely dropped down the memory hole like a day's work by one Winston Smith.

Seems to me that something very important happened to the American body-politic about the time Whitney Houston died... I believe it had to do with a scandalous and corrupt voting process in a country that has fought and spilled blood to bring democracy to many middle eastern nations... Nevertheless, the main stream media ignored this corruption and, instead, chose to focus all its attention on poor Whitney and how much we all loved her, owned all her albums, and how everyone's life was changed forever by her seven #1 hit songs between 1985 ~ 1987.

But I digress... 

Google News reports on how Japan's current prime minister and cabinet (soon to be ex-prime minister and cabinet) are so mathematically challenged that they are actually dumb enough to propose a sales tax increase:

TOKYO — Japan's cabinet on Friday approved a plan to double sales taxes as part of the government's move to rein in public debt as the rapidly ageing nation faces rising social welfare costs.

If agreed by parliament, the package of reforms will see consumption tax rise to 8.0 percent in April 2014 and to 10 percent in October 2015 from the current 5.0 percent.

Finance Minister Jun Azumi told reporters that the government planned to submit related bills to parliament in March.

But the legislation is expected to face a rocky road as opposition parties, as well as some lawmakers in the ruling Democratic Party of Japan, are against it.
The opposition bloc controls the upper house of parliament.

Prime Minister Yoshihiko Noda has warned the future of the world's third-largest economy depends on reversing the rising public debt, arguing Japan has "no time to spare" in reducing its fiscal burden.
In an online message after the decision Friday, Noda noted Japan's social security costs would increase by one trillion yen ($12.6 billion) every year as the population gets older.

"If you pile up one trillion yen in 10,000-yen bills, it reaches the height of 10,000 metres, which is taller than Mount Everest," he said.

Laughable, really. This is the intelligence level of these people. That someone has pointed out that the bills of the national debt, if stacked up, will be "taller than Mount Everest"??? That is their motivation to action? Bwa! Ha! Ha! That's just hilarious, folks. 

Left: OK. Right Dame desu.

Have a laugh on that one. Wow! Mount Everest!? What!? Can't have that! What about our samurai spirit? This is Japan! We are Nipponjin! We can't have our debt looking like a foreign mountain! It's got to look like Mount Fuji or nothing at all!

In Japan, we have our own rock stars, and we have our own dolts and political calamities. The current group of mathematically challenged fools want to raise the sales tax to 8% and then to 10% within the next 3 years? Seriously, folks. It doesn't get better than this. 

See? I told you. The fools who ostensibly "run" this country are unable to complete simple 1st grade mathematics. They are incapable of recognizing a basic rule of fundamental first grade math.

Let me explain two very simple ideas: 

1) First: A Fundamental Rule of Math. Let me make this easy so that even a politician can understand: Say, you have five marbles in a can. Can you take out six marbles from that can? No. You cannot. Why? Because there are only five marbles. 

Meaning: The government can raise sales taxes for ever and ever but, if they don't cut spending to less than revenue, they will never get out of the hole. Spending must be kept in line with revenue. It's the same for you and me: If you have debt, then your spending must take into account interest payments on that debt. Your total spending must be under your total revenue.

2) Since most people's incomes do not rise with expenses, then an increase in taxes will cause a decrease in spending. Meaning, I have a dollar. If I use that dollar to buy food, I buy a dollar's worth of food. If you tax me 20% then I can only spend 80 some cents on food as I have to pay tax. The increase in tax will correspond with an equal decrease in spending

People have short memories so they don't remember that when the 3% sales tax was started, the government then said that it would fix our debt problem. They said the same thing when it was raised to 5%.

But, alas, the sales tax increases didn't help. Why because spending kept speeding along. 

My good friend, Marc Sheffner who runs the Accurate Maps blog has an interesting post on Japan's current debt crunch. Marc shows us that Japan's debt has now surpassed 500% of GDP. He writes:

"If you're holding a hot beverage, you might want to sit down before looking at this. You might need a stiff beverage afterwards. (See bottom of the post for US/UK total debt horror story, but after seeing the Japan one, hey! That's nothing!)"

Thanks Marc! 

But once again, though, I think Marc over-reacts. I'm thinking of running for Japanese political office. I can be just as mathematically challenged as these clowns we have in office now. In fact, I can do better! 

Here's my platform and my message:

Citizens of Japan! Worry not! It’s all under control. Just as soon as you elect me to prime minister I will fix the budget by the tried and true methods of the great Japanese prime ministers who have come before me! I promise to pay everyone and all Japanese government obligations! To do so, I plan on raising our sales tax to 10% in 2015… Then 20% in 2016... Then 25% in 2018… Then 40% in 2020… Then 60% in 2025… Then 80% in 2027… 90% in 2030… Then 100% in 2032… Then 115% in 2035… Then 125% in 2037… Then 135% in 2040. Then 146% in 2042…Then 160% in 2045... Then 185% in 2047… 220% in 2050… 245% in 2052... 270% in 2055....And so on…. Well, you get the picture. Everything’s under control. Vote for me and the New Party Party! Don’t worry!…. Kampai!



Remember these good old days? Well, neither do I. 
(But, ♫ Yo-ho, yo-ho, it's a ladies life for me!♫ )


Anonymous said...

Anonymous said...

500% of GDP, eh?
So much for all those who say no nation makes it past ~120% of GDP.

Man, and this Blogger deal with the two words to prove I'm not a robot, yeesh, more than half the time on some websites I cannot read these words, takes me like 3 trys to post. Just something.

- clark

Mr. Nobody said...

Isn't it the case that the only way to increase the monetary base in a fractional reserve scheme, is to go into more debt (print more money)? Isn't that the job of most central banks?

Isn't it the case that once a person or nation is in debt, the creditor effectivly owns them? Didn't Clinton find this out after he became president?

There was a quote attributed to him, which said, that if he (Clinton) could do it all over again, he would become a bond-trader instead of a president, because that is where the real power lies...

The JPG government needs to do something to appease the creditors, the bond traders, that they will be paid back. Look at what the IMF & World Bank have done to “Third World” countries. Imagine a similar situation with Japan.

Anonymous said...

Thanks for the plug, Mike, and thanks, too, to Anonymous @ 12:15 whose link is very interesting. Especially this part: "As you can also see from this graph, total debt service payments are steadily growing (blue line) and government revenues are steadily decreasing (red line), for two decades" FOR TWO DECADES, i.e. from 1992, tax revenues have been decreasing. But don't worry, just vote for Mike.

mike in tokyo rogers said...

Clark, everybody,
Yeah, I hate the part where we have to read the words in order to comment. I try to turn it off, but I can't figure out how to do it...

Anonymous said...

Heh, someday soon the robots will be better at proving they're human than the humans.

Also, I have this I wanted to present, it's kind of off topic, but not really, it's about government causing lower productivity and marketing themselves as "the good guys" when it seems they are not.

I posted this at The Beacon, after that I wondered if Japan has massive drug testing of employees? Is it the same over there, is it the same the world over?

Here's what I wrote, maybe you'll find it interesting?:

When the drug war was heating up in the 1980′s the justification businesses used for drug testing employees was too many sick days, employee theft and injuries.

What I wonder is, since that time have any of these numbers decreased? [Kind of like the sales tax in Japan too, huh]

If not, unless there is profit to be made from administering drug tests (does the government reimburse businesses in excess of cost?) what is the reasoning used for continuing them? Is it because insurance is denied for companies otherwise? What a racket that is.

It’s quite sickening how some organizations use the threat of a drug test whenever employee performance is low or an error is made, not to mention the barrier drug testing creates which increases the odds a Person trying to improve themselves cannot get even a simple low rung job like a fry cook to lift themselves up by the bootstraps. In that manner, drug testing works like welfare to keep individuals out of the workplace and in poverty.

I imagine employee injuries have gone down since the 1970′s or 1980′s due to improvements in safety devices and processes – and from the replacement of men by women who are (I think) less likely to take risks or horseplay – instead of drug testing employees ...but the other categories, sick days and employee theft, I’d bet those numbers are the same or higher.

- clark

Anonymous said...

... And don't even get me started on requiring employees to wear hard hats. Brain boiling, hair loss causing, eye sight limiting contraptions.

- clark

mike in tokyo rogers said...

About drug testing, they don't do that here... It's hard to explain but even the idea that people would do drugs at work is so foreign for the average Japanese that it sounds like something from another planet (or the USA)... Oh, sure, in some occupations, speed, for example, isn't considered so unusual... Contradiction? Nope. In WWII and after the war, speed was a big problem because people worked 26 hour days... But that's not the case anymore. This is a long subject and I could write an entire book about it.

Victoria Gates said...

Great post. I stumbled here after looking up some Japanese business facts for my International Marketing course in college. The comment about Japanese debt being compared to a foreign mountain cracked me up. As an American I can say yes... yes our government is a load of crap and I don't watch the news its all about celebrities and horrific murders with anything important shoved aside and covered with so much muck you cant tell whats fact or fiction.

I guess most countries are having issues with national spending and taxes right now. Its rather frustrating because unless you have contacts and connections your politicians ignore you and continue with the pandering. I simply continue my studies and hope for the best despite all this nonsense politically.

Anonymous said...

Thank you for answering my question.
Interesting contrast.

Victoria Gates wrote, "I guess most countries are having issues with national spending and taxes right now. Its rather frustrating because unless you have contacts and connections your politicians ignore you and continue with the pandering."

Reminds me of this bit:

"... understanding China's role within the larger realm of Anglosphere directed history is very important. The Western rulers of this gloomy globe know full well that China's economy is bound to implode sooner or later.

If the top Chinese are actually in league with Western powers that be, we should begin to see a kind of coordinated take-down of the world's economy. In fact, absent China (arguably), this is well on its way. One can argue as to whether it is a purposeful collapse or not but for me the arguing is done.

Once the Chinese economy collapses – and inevitably it must sooner or later – the elites may wish to take the next step toward building a fully integrated global government. This may well include a one-world currency, central bank and political and military structure."...

Victoria, hope for the best, but prepare for the worst.

Anonymous said...

Geeze, I like Marc Faber, but this comment makes me wonder:

19 February, 2012
Japanese Economy: They Have Deleveraged And The Household Sector Is In Good Shpae
I think the Japanese economy isn't in such a bad shape. They have deleveraged and the household sector is in pretty good shape. - in CNBC

- clark

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