Fears Grow for Portuguese Economy - WSJ.com
Comment:
I am a Brit living in Portugal and have done for fifteen years. Portugal pushed out the PS Socialist party last year and elected the PSD centre right party under a PM called Pedro Coelho, that is Peter Rabbit for those who remember the books for children. You would be mistaken for thinking this lot is to the right as they seem far more socialist than the socialists.
Response:
You are right on. The politicians have never read Arthur Laffer and thus don't have a clue that at a certain point, higher taxes produce diminished returns.
To say Portugal has passed the point of diminished returns is borne out by your comments.
It's like going to the grocery store with all prices doubled and no change in salaries. For most people, that means buying less.
If the VAT is 19% and people are spending all they make, then when the VAT rises to 23%, the people may spend the same amount of money - but they are buying less. Thus the stores and sellers of goods and services are transferring part of what they make to the government. And, as a result, they have less to pay themselves and their employees.
The question never asked in socialist Europe is whether policies are in place to support individual endeavor, savings and investment. Instead, it's higher taxes and cumbersome (let's admit it, make-work) bureaucracies.
Thus, no matter what people want to do, they realize they get left too little to start businesses and have them prosper.
All this talk of 'growth' in Europe's southern parts is just talk. No one wants to change socialist policies. They just seem to feel and hope that by changing the description of the outcome, then the outcome will change.
Europe needs pro-entrepreneurial, pro-saving, pro-investment policies. It's almost like asking for them to close the church door and stop having religious (socialist religion in this case) services.
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