It would seem that the brave Slovakian government is battling the evil, evil budget deficit with a brave new "stabilization" program. This is something of a never-ending story that can be seen routinely in any newspaper near you, regardless of the place where you may live and the idiotic government that may be ruling you. Almost all governments go through this endless (and useless) debate at least one a year at or near budget time. The story is always the same; the government needs money (BTW, when was the last time you heard that the government has too much money… but we digress). Yes, that's it. The government needs money. Allow us to decode the political techno-speak.
A "stabilization" program simply means a new tax grab. It means that politicians want to continue spending as usual (after all their job is on the line) but they have run out of money. So, they need to "stabilize" their jobs.
Debt measurement. Typically you will hear that the government's debt is an X percentage over GDP. It could be 10% or 50% or 150% for that matter. As indicated by this percentage, the debt is too high and "something has to be done". As we have said numerous times, measuring debt vs the GDP is meaningless. It is like measuring your debt against all the gross earnings of your neighborhood (GEYN). Technically speaking (as in assets - debt) you may be broke, but in terms of your debt against the GEYN you are doing just fine! Does this make any sense? Of course not.
Similarly, you may hear that the budget deficit is a Y percentage over GDP. Again. This is meaningless. It is like saying that you are increasing your debt a Y% when compared to the GEYN.
After this, you will get a long "shopping" list of the sacrificial victims who will be burdened with new taxes. You will notice that no matter who is in the list, they all have something in common. There is no objective rationale in the selection process. We have explained this extensively in Taxed To Death No Just Into Slavery.
Now that you understand the lingo, let's take a look at Slovakia's issues as described by the newspaper SME in the article "Kažimír wants to reduce VAT, debt surpassed 55 percent". According to the article:
- Slovakia's debt surpassed the 55% GDP mark.
- Slovakia's deficit surpassed the 3% GDP mark.
The hit list (with its tax "revenue") includes:
- No reduction to the VAT = 428 million EUR
- Compulsory use of cash registers for some professions = 71 million EUR
- Taxation of non-monetary benefits for some professions = 5 million EUR
- Additional savings (i.e. suckers) = 106 million EUR
- Settlement of Social Security contributions = 56 EUR (in 2016)
- New tax on real estate = not disclosed
- Reduction of tax-deductible expenses = not disclosed
Now you understand how to read government lingo when it comes to budgets, debts and taxes.
But allow us to go a step further. We will pull our economic crystal ball from our drawer, and we will forecast that for the next year, the Slovakian government will be in debt! WOW! That's accuracy. Furthermore, we forecast that next year the Slovakian government won't balance the budget. In addition, we forecast that next year yet another "stabilization" program will be underway.
The moral of this story is that expecting anything other than unending expenditures from any government is a pipe dream. Budgets won't be balanced and debts will rise. In the past, there were some exceptions to this rule, but since the fall of communism, this is no longer true. Budget deficits and debts are a one way and one direction only street, just like the Entropy in the universe.
You may choose to believe this or not, that's your decision. However, we urge you to review what your government is doing in this area, that's your education.
Note: please see the Glossary if you are unfamiliar with certain words.
