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Thursday, November 13, 2008

Whose Belts Should We Tighten, Mr. President?

President Yushchenko: The Chinese hieroglyph for crisis is illustrated in two parts: The first part talks about ruin and the second part talks about opportunity. We should — I have no doubt about it — come out of the crisis stronger. We can live without expensive foreign-made cars, TV sets, and a whole variety of home appliances, but we need to save the national economy.

So whose belts should we tighten, Mr. President?

If your hieroglyph for we refers to your Brioni-clad brethren and the 5 percent of Ukrainians swimming in luxury, then I can only say “Amen to that!” It’s the Ukrainian Dream come true!

It’s they — not we, the remaining 95 percent trying to make both ends meet — who should cut back on $200K+ cars and $2M+ villas. (Learn more here, here and here.)

Since most of the proud owners of this hard-earned stuff make about $30K a year according to their tax returns, shouldn’t they live by their books?

Now, if you want to make good on your 2004 “the rich will help the poor” promise, here’s a personalized can-do list:

  1. Repossess the Mezhyhirya state residence, your gift to Mr. Yanukovych;
  2. Sell your iPhone and donate the proceeds to a cancer center for kids;
  3. Send your kids to a public school.

Can you do that?

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Original source:


Anonymous said...

I guess you won't be getting any answers to your questions, don't you think?
All the best from Peru.

Taras said...

Tienes razón, Gabriela!

It was a rhetorical question.

Saludos desde Ucrania!

Orest said...

An iPhone costs $200 in Canada.

I think the President of Ukraine could rightfully afford that!

Anonymous said...

Hello Tarase!
I think President's suggestion was not rhetorical but a quiet concrete one.
To tighten or not to tighten does not depend on the absolute amount of salary of an average Ukrainian or its equivalent in terms of living standrads, but on the level of budget and trade deficits.

By the way, the poor always pays for the rich. Nothing is more natural than inequality. That's what profoundly distinguishes our society from hypothetical "standard" models in mainstream economics and politics.

Crisis nothwithstanding, have a nice week-end!

Taras said...

Of course, he can afford it, Orest!

I just wanted to apply his rhetoric to his lifestyle. He should practice what he preaches, shouldn’t he?

In Kyiv, a 3G 16Gb will cost you about $900. Ukraine’s GDP per capita (PPP) is less than $10,000 .

You do the math.

Good to see you again, Serhiyu:)!

Neither Europe nor America can beat Ukraine when it comes to the "poor pays" principle. We should therefore distinguish between varying degrees of this state.

Ironically, the President’s speech sounds as if it’s my belt he wants to tighten while leaving his own belt and the belts of his buddies untightened.

If the President wants to teach this nation frugality, he should start with his own budget. He should also take his lecturing business to his robber barons.

Liberté, Egalité, Fraternité!

Anonymous said...

Of course, you are right, Tarase; actually, in France, people are joking that Sarkozy was right when he increased his salaries and those of his administration immediately after his election, now it will be a bit difficult for this decision to pass:).

Anyway, probably Yushenko has bad communication advisers, and the way he told that we need to restrain consumption and imports was not the best one.
But cutting consumption is an obvious need, Ukraine will not be able to sustain a trade deficit that may go as high as 12 per cent of GDP this year, when investors' confidence is fragilized by the crisis. Certainly constraining consumption should first of all mean reducing the imports of luxury goods and improving one's energy efficiency. If this way the main message of Yushenko, as I do believe, his reaction was quiet correct.

It seems to me that Yushenko is regularly lecturing the robber barons, but they are not really good students. Probably, because the students have comfortable MP seats and the "teacher" doesn't really enjoy a lot of authority vis-à-vis to them. And for that, we shoud thank, first of all, thank grand father Kuchma, for his instituional reform, as well some big oppositioners, like Taras Stetskiv, who persuaded Yuschenko to accept it, believing it will bring a "full-fledged democracy" to Ukraine.

Taras said...

Sarkozy sure put his “travailler plus pour gagner plus” slogan to good use:)!

Still, compared to our leaders, he’s as poor as a church mouse:)

You have my full agreement on Yushchenko's follies. He leads poorly and communicates poorly. He tries to lead his robber barons on a path of enlightenment only to end up being led by them on a path of perdition.

True leaders lead by example. To stop lecturing and start leading, Yushchenko should demonstrate personal abstinence from luxury goods and services.

Equally important, he should take the lead in fighting corrupt sources of income and improving the country’s energy efficiency. It’s that simple.

We don’t need a President who preaches Les Misérables but practices La Boum:)

Taras said...

Let me add a CNN news report that mirrors my concerns:

Big Three auto CEOs flew private jets to ask for taxpayer money

Anonymous said...

OK, Taras, we'll digress.

It was a bad PR move for the CEO's to fly on company jets. They also fly with some other execs and staff.

The larger issue is whether the taxpayers ought to lend them the money.

And here's where accountability - and politics - come in.

Congressional hearings on the matter are televised, at the very least on C-Span. And available, to a certain extent, over the Internet.

The crux of the problem is liquidity and the "moral hazard" - AIG came running to Congress because ONE branch of its business, credit default swaps which "insured" securitized mortgage investments, went bad, and they basically said "if you don't save us, then the world will end."

The Big Three make money outside of the US. In the US, they've sold about 17,000,000 units per year. But they have been "downsizing" for years - letting union and management employees go.

They incur an average cost of $105,000 per employee that has been let go, from continued health care benefits, to severance pay, to pensions, etc.

The Japanese manufacturers come to the US, and they are not unionized. So they don't have those costs.

GM goes to China, and competes well. In China, cars have to be made in China. But GM starts with a clean slate - and no union.

The Democrats have always counted on the unions for their political votes - and for support in Congress on legislation.

As you will see, there is an issue as to whether the Big 3 ought to take advantage of a so-called Chapter 11 reorganization in bankruptcy court, as opposed to asking the taxpayers for a loan.

If they go through Chapter 11, in a reorganization, many contracts, including the union contract, could be avoided.

Democrats in Congress are pushing for a taxpayer loan to pander to the unions - and votes.

ALL of the Congressmen talk about their fiduciary duty to taxpayers, and express serious concerns about the ability of the Big 3 to repay the money, and about sources and uses of funds.

But therein lies the crux of the matter.

Plus, it has been a basic principle that government does not run businesses.

The US is beginnning to turn into a socialist state.

The jets will remain, despite the bad PR.

Anonymous said...

Here is Mitt Romney's opinion - no auto bailout.

And the jets must go, along with the execs.

His father turned American Motors around when it was on life support. He gives some good example of how an executive should operate.