WE MUST HAVE HIGH TOP TAX RATE TO REVERSE WEALTH INEQUITY!!!!!
AS US CORPORATIONS ARE BUSY HAVING THEIR CORPORATE POLS SENDING TAXPAYERS ALL OF CORPORATE COSTS TO BOOST PROFITS.....EUROPE IS INCREDULOUS THAT THE US WOULD ALLOW THEIR CORPORATIONS TO GET AWAY WITH SO LITTLE.
WHY IS AMERICA ALONE IN KEEPING TAXES FAIR? BECAUSE WE HAVE POLS THAT TELL US THAT US CORPORATIONS ARE PAYING MORE IN TAX AND THAT MAKES THEM LESS COMPETITIVE...........THEY ARE TELLING YOU AND ME A LIE!!!! US CORPORATIONS PAY INCOME TAX WHILE OTHER NATIONS PAY A VARIETY OF CORPORATE TAXES WHICH AD UP TO MORE THAN THE US RATE IN MANY CASES. THE US IS IN THE MIDDLE FOR ALL NATIONS IN WHAT WE TAX OUR CORPORATIONS. THAT DOESN'T EVEN COUNT ALL THE DEDUCTIONS THAT BRING THE AVERAGE RATE TO 17% THESE LAST FEW YEARS. THE PUBLIC IS GETTING SOAKED BY A THIRD WAY CORPORATE PRESIDENT AND CAPITOL DEMOCRATS.
BELOW YOU SEE HOW ALL OF THE INCUMBENTS IN MARYLAND......THE RULERS FOR LIFE......ARE PLEASED THEY NOT ONLY GOT THE CASINOS RAKING IN REGRESSIVE PUBLIC REVENUE......THEY GOT TO LOWER THE PERCENTAGE THAT THE STATE GETS AS RELATES THE CASINO. O'MALLEY KNEW WHEN HE ORIGINALLY STATED THAT GAMBLING PROCEEDS OF 70% MADE IT WORTH IT FOR SCHOOLS AND NOW IT IS ONLY SLIGHTLY ABOVE 50% WITH AN APPOINTED COMMISSION THAT WILL FIND WAYS TO LOWER THE STATE'S TAKE FURTHER.
NOW, IF YOU RAISED TAXES AND FEES LIKE NO TOMORROW ON THE MIDDLE/LOWER CLASS AND YOU HAVE GAMBLING......YOU CAN LOWER CORPORATE TAXES SAYS MARYLAND CORPORATE POLS. THAT IS WHAT THIS IS ABOUT. DON'T FORGET THERE WERE LARGE CUTS IN MEDICAID THIS YEAR. SO WHY DOES MARYLAND VOTERS ALLOW THIS TO HAPPEN?
IT IS APATHY, PURE AND SIMPLE. MARYLAND HAS BEEN CAPTURED SO LONG PEOPLE WILL NOT GET TOGETHER TO PROTESTS AND SHOW OUTRAGE. WE HAVE FEW UNIONS THAT ARE ALREADY ORGANIZED AND ALL OF THEM DO NOT WANT TO MAKE WAVES....
MARYLAND NEEDS A PUSH INTO ACTIVISM AND WE ARE GOING TO GIVE THAT PUSH!!!!
DO YOU THINK THAT YOUR MARYLAND INCUMBENT IS GATHERING THESE BUSINESS LEADERS TO TALK ABOUT REVENUE GENERATION INVOLVING BRINGING BILLIONS OF DOLLARS IN CORPORATE FRAUD BACK TO THE CITIZENS OF MARYLAND.....NO, THEY ARE GOING TO TALK ABOUT HOW MUCH IN CORPORATE TAX CUTS WOULD PLEASE THE CORPORATIONS?
DO YOU HEAR YOUR MARYLAND AND BALTIMORE INCUMBENTS SHOUTING LOUDLY AND STRONGLY AGAINST ALL THESE GIFTS TO CORPORATIONS?
Md. board to hear from business leaders
November 15, 2012 02:19 EST WBFF Fox News
ANNAPOLIS, Md. (AP) -- The Maryland Board of Revenue Estimates is holding a forum to hear from business leaders.
The board is holding the forum on Thursday in Annapolis to get a better sense of the current economic conditions and challenges facing the state's economy.
It will include business leaders from a variety of Maryland industries and leaders from every region of the state.
The forum also will include representatives from banking and financial services industries. It also will include representatives from real estate, consumer services, utilities and manufacturing industries
THIS FROM A COMMENTER IN THE ECONOMIST:
Okay, I'm not a tax accountant and I don't even play one on TV, but let me ask: why is this so hard? Why are closing loopholes AND raising the rate mutually exclusive? Why do lobbyists get to decide what we do in the face of the commitments/deficit situation we face? This per Paul Krugman today:
"Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today."
Why is not simple to raise the rate to what it was under Clinton and attack the glaring inefficiencies of the tax code? A lot of voices here sound like raising rates will plunge us into an economic tar pit. But that's simply not been the case and we have a bill to pay. What?
Governor Brown is not the liberal of his early years. He slashed and burned pensions, social programs, and education with the best of them all while holding on to high-speed rail and loosening environmental protections. HE DID MAKE A SIZABLE ACCOUNTING FOR THE RICH AND BUSINESSES TO PAY THEIR FAIR SHARE UNLIKE O'MALLEY!!!
We need to keep pushing for higher corporate/wealth taxes to fix that structural deficit!!!
Californian politics Brownian motion The passage of a tax measure and a political realignment have left California’s unpredictable governor in a strong position Nov 17th 2012 | LOS ANGELES | from the print edition The Economist
ON NOVEMBER 6th Americans voted for the presidential and congressional status quo. But Californians decided to set their state on what may be a new course. Proposition 30 became the first tax-raising measure to win the support of a majority of voters since 2004, averting planned deep education cuts and bringing California closer to fiscal health. The state’s Democrats, already dominant, were returned to both houses of the legislature with supermajorities of more than two-thirds that grant them sweeping new powers, including the ability to raise taxes unilaterally. The scene was set, feared some, for a particularly gruesome episode of what the Wall Street Journal called “the Liberals Gone Wild video that is Sacramento”.
Unions certainly wasted no time urging their newly empowered Democratic allies to begin reversing some of the deep cuts of recent years. But the state’s leaders tried to dampen their expectations. A victorious Governor Jerry Brown, his voice gruffer, his pate sparer and his metaphors more florid than during his first stint in office over 30 years ago, called for California to adopt “the prudence of Joseph” in the coming years. His legislative colleagues warned that they were not about to jack taxes up further.
That is wise. Prop 30, or something like it, may have been necessary to stanch California’s budgetary bleeding. But it leaves the state with the highest top income- and sales-tax rates in the country. Most of its revenues will come from high earners, which will do little to ease California’s business-unfriendly reputation.
On November 14th the independent Legislative Analyst’s Office declared that the “budget situation has improved sharply.” But the state’s fiscal problems are hardly over. Borrowing costs are high, and the credit rating dreadful. An over-reliance on income- and capital-gains taxes on the wealthy makes revenues highly volatile: when the Dow sinks, so do revenues
Still, the success of Prop 30, which had looked to be in trouble in polls, leaves Mr Brown looking strong. Asked about his priorities for the two remaining years of his first term, he reels off a list that includes infrastructure schemes such as high-speed rail and water-diversion projects, as well as education and green-energy plans.
He acknowledges that work remains to be done on the long-term liabilities of the state pension system, but seems less keen on tax reform: economists would like to see the state’s tax base broadened and sales tax extended to services. “What is the justification for going through all that turbulence?” Mr Brown asks. (The last attempt to reshape the tax code came from a commission appointed by Arnold Schwarzenegger, Mr Brown’s predecessor. It was completely ignored.)
Then there is Proposition 13. A populist measure passed in 1978, during Mr Brown’s first governorship but against his wishes, the initiative slashed property taxes, introduced the two-thirds legislative requirement for tax rises and reshaped the relationship between state and local government. Nationally, it began a tax revolt that helped lift Ronald Reagan to the presidency. California’s liberals have long wanted to reform (or remove) it, but politicians have considered it untouchable.
That may now change. A full-throated assault on Prop 13, whose basic precepts remain popular, is unlikely. But two provisions may come under attack. First, the two-thirds voter approval requirement for the passage of “parcel taxes”—essentially measures designed to work around the constraints of Prop 13 at local level, including school districts. Some, including Darrell Steinberg, president pro tempore of the state Senate, want to reduce that to 55%. Second is Prop 13’s failure to distinguish between residential and commercial properties. At the moment all property values (and hence tax bills) are reassessed only when ownership is transferred. Many favour a “split roll”: annual reassessment of commercial property value, which in a rising market would mean higher revenues.
Many businesses supported Prop 30, at least in public. Yet even minor tweaks to the totemic Prop 13 would spark anger. If the Democrats go for the split roll, says Bill Whalen, a research fellow at the Hoover Institution, “the business community will have to fight.” Jon Coupal, president of the Howard Jarvis Taxpayers Association, a lobby group named after the man behind Prop 13, says the organisation will exert “whatever political pressure we can” to head off threats to Jarvis’s creation.
For his part, Mr Brown appears to want to get things done rather than to get into scraps. But much will depend on how restive the victorious Democratic lawmakers prove to be. The tightness of the elections of some, and the brevity of their terms, should deter their more radical ambitions. But precisely because the supermajority is unlikely to hold for longer than two years, interest groups will want to exploit an opportunity they may not soon see repeated.
If it does prove fractious, the big Democratic tent could, paradoxically, provide an opening for the few Republicans still limping around Sacramento. Some items on Mr Brown’s to-do list, including pension reform and a softening of environmental rules, will alienate some of his party allies. Republicans could stem their slide into oblivion by working with the governor on such issues. Whether they choose to is another question; as the party has shrunk it has hardened, and after its latest reversals it may turn out to have calcified.
Mr Brown has positioned himself well to take advantage of the new political dispensation, says Raphael Sonenshein of the Pat Brown Institute of Political Affairs (named after Mr Brown’s father, another former governor). The political capital he earned with the passage of Prop 30 means that Democrats, Republicans, business and unions alike must, in practice, go through him if they want to get anything done. And if his unpredictability, what Mr Sonenshein calls his “Brownian motion”, once made it hard for him to form alliances, it now grants him a useful flexibility.
For many Americans, California has become a byword for debt, dysfunction and decline. Mr Brown says he will make it his business to refute such notions. Few governors of California leave office unscathed. Mr Brown has not even said whether he will run for a second term. But if he can find a way to exploit this moment this most protean of politicians may find a way to leave the legacy he craves.
European Countries Seek More Taxes From U.S. Multinational Companies
By ERIC PFANNER Published: November 18, 2012 New York Times
PARIS — Google reported sales of more than $4 billion in Britain last year. It paid less than $10 million in taxes.
Enlarge This Image Peter Muhly/Agence France-Presse — Getty Images Google’s European base in Dublin, where its tax rate is much less than in some parts of Europe.
Some tax collectors, lawmakers and competitors of Google in Europe say this is unfair.
As governments throughout the region seek to close gaping holes in their budgets, they are taking aim at United States multinational companies, especially Internet giants like Google and Amazon.com, which pay little or no taxes in Europe, despite generating billions of dollars in revenue on the Continent.
“Why on earth do you manipulate your accounts so that you get away with not paying corporation tax in the U.K.?” Margaret Hodge, a member of Parliament, asked representatives of Google, Amazon and Starbucks last week, during a heated committee hearing in London.
In France, tax collectors have gone further. Amazon says it has received a bill from France for taxes and penalties related to the “allocation of income between foreign jurisdictions” from 2006 through 2010. Other companies, including Google, are also reportedly in the French authorities’ sights.
“Even if the Internet is a zone of freedom, it shouldn’t be a lawless zone,” Najat Vallaud-Belkacem, a spokeswoman for the French government, said last week. “Fiscal rules should be able to be applied to those activities as well.”
Google, Amazon, Starbucks and other American companies facing tax scrutiny say they are doing nothing wrong. They use complex accounting strategies to exploit national differences across Europe in corporate tax rates, which range from less than 10 percent to more than 30 percent, and loopholes that can reduce their effective European tax levies to almost nothing.
Google, for example, records most of its international revenue at its European headquarters in Ireland, where the corporate tax rate is 12.5 percent. Across Europe, customers who buy advertising, Google’s primary source of revenue, sign contracts with the company’s subsidiary in Ireland, rather than with local branches.
Google ends up paying Irish taxes on only a fraction of the billions of euros that course through its Dublin office. That is because the company uses a variety of methods, including royalty payments to a unit in Bermuda, to reduce further the amount of money exposed to tax liability.
So, while Google told the Securities and Exchange Commission that it generated more than $4 billion in sales in Britain last year, it reported revenue of only £396 million, or $629 million, in its official filings there. The total, the company said, reflected the amount that Google’s British unit billed Google Ireland for promotional work, consulting and other activities. Google declared a profit of £31 million in Britain, resulting in a British tax bill of only £6 million.
“We pay the tax we are required to pay in every country in which we operate,” Matt Brittin, Google vice president for North and Central Europe, told the parliamentary panel.
Ms. Hodge, chairwoman of the Public Accounts Committee, acknowledged that she thought Google, Amazon and Starbucks were probably complying with the law. “We are not accusing you of being illegal, we are accusing you of being immoral,” she said.
In France, more than morality is at stake. In his testimony to the parliamentary panel, Andrew Cecil, director of public policy for Amazon in Europe, confirmed that the company had received a demand for $252 million from the French tax collection agency. He said Amazon was contesting the claim, which was originally disclosed in an American regulatory filing.
Amazon, which has European headquarters in Luxembourg, another small country with favorable tax conditions for multinational companies, reported 9.1 billion euros, or $11.6 billion, in revenue across Europe last year. It posted an after-tax profit of 20 million euros on those sales, and paid about 8 million euros in tax, Mr. Cecil said.
Mr. Cecil told the parliamentary committee that when customers across Europe bought books from Amazon, they were actually buying them from the Luxembourg-based Amazon entity, rather than their local subsidiaries. That response was met with incredulity by Ms. Hodge, who noted that when she ordered a book from the company, she used a British Web site, Amazon.co.uk, and the goods were delivered from a British warehouse via the British Royal Mail.
News reports in France note that French fiscal authorities are also seeking back taxes and penalties from Google, amounting to 1.7 billion euros. Ms. Vallaud-Belkacem told reporters that she could not comment on individual companies for privacy reasons. Google, in a statement, said the reports were premature.
“Google has not received any tax assessment from the French tax administration,” the company said. “We have and will continue to cooperate with the authorities in France.”
Europe is not the only place where the complex tax arrangements of United States multinationals are being questioned. The authorities in Australia have sent Apple a bill for 28.5 million Australian dollars, or about $29.5 million, in back taxes, according to news reports Friday. Apple could not be reached for comment.
In an era of globalization, determining the tax liability of multinational companies has long vexed policy makers and tax collectors. International agreements generally state that commerce should be taxed in the physical location where profit-making activity occurs, not necessarily where a customer is based or where a transaction takes place.
Determining the appropriate jurisdiction for taxation is especially difficult with Internet businesses, because of the intangible nature of many of the goods and services that change hands and the ease with which transactions can cross borders.
Google says that most of the economic value it creates is generated in Silicon Valley, where its engineers toil away at the computer algorithms behind its search engine and other services. So the company says it is fair that most of what it pays in taxes goes to the United States Treasury, not its foreign counterparts.
While Google’s United States taxes have come under scrutiny, too, the company pays substantially more in the United States. In 2011, the company’s annual report shows, it made a provision of $2.6 billion for income taxes, all but $248 million of that going to the state and national treasuries in the United States. Based on pretax income of $12.3 billion, that amounted to an effective rate of 21 percent.
“If Google was a British business, if Google had been founded in Cambridge by Larry and Sergey, I think we’d be in a very different place here, because the profitability would rightly sit where all the technology and innovation take place, which is not here,” Mr. Brittin said. He was referring to Larry Page and Sergey Brin, the co-founders of Google.
Though Google employees across Europe advise clients on the use of the company’s services, advertisers sign contracts with the company’s subsidiary in Ireland. This has shielded Google from tax liability in France, Britain and other European countries, at least so far.
“Google is saying, ‘We just float around freely above this useful aircraft carrier, Ireland,’ ” said Richard Murphy, founder of the Tax Justice Network, an independent organization that campaigns against what it calls tax “loopholes and distortions.” “What France is saying is, ‘We don’t think you float around over Ireland, we think you are in France.’ ”
If Google believes that its profit-making activity — that is, its taxable work — occurs in the United States, Mr. Murphy said, then it ought to take its European earnings home and expose them to the Internal Revenue Service. Yet, like many other American multinationals, it has been reluctant to do so.
Instead, Google said it had accumulated $24.8 billion as of the end of 2011 outside the United States — part of a cache of stored American corporate cash that Citizens for Tax Justice, an American advocacy group, estimates at more than $1.5 trillion. The money has been accumulating in Bermuda and other offshore havens since a 2004 United States tax holiday for the repatriation of corporate profits.
While some American corporate leaders have been lobbying in Washington for another tax holiday, lawmakers in Europe are moving to collect a greater share of multinationals’ taxes.
Last spring, the European Parliament threw its support behind a proposal to create a single set of European Union-wide accounting rules for calculating multinational corporations’ tax liabilities. But policy makers are divided over whether the standards should be voluntary or mandatory.
Ms. Vallaud-Belkacem said last week that the administration of President François Hollande of France was discussing with other European governments ways to crack down on tax avoidance by international companies.
After a meeting this month, George Osborne, the British chancellor of the Exchequer, and Finance Minister Wolfgang Schäuble of Germany called for “concerted international cooperation to strengthen international standards for corporate tax regimes.”
Mr. Osborne said in a statement, “We want competitive taxes that say Britain is open for business and that attract global companies to invest in and bring jobs to our country, but we also want global companies to pay those taxes.”
REMEMBER THE BANK TAX THAT WAS MEANT TO BE THE FIRST STEP IN HOLDING BANKS ACCOUNTABLE FOR THEIR FRAUD AND TO CURB EXCESSIVE ROLLOVER THAT BRINGS FEES? REMEMBER IT WAS OBAMA AND GEITHNER WHO CRISS-CROSSED EUROPE SHOUTING AGAINST THIS BANK TAX.......YOU HEAR NOTHING IN THE US ABOUT THIS AS THEY TALK OF SPENDING CUTS AND LOWER CORPORATE TAXES.
HOW DID WE REELECT THESE INCUMBENTS?
VOTE YOUR INCUMBENT OUT OF OFFICE.
Italy and Spain Add Support to a Tax on Financial Trades in Europe
By JAMES KANTER Published: October 9, 2012 New York Times
LUXEMBOURG — Italy and Spain joined nine other European Union countries on Tuesday in backing a tax on financial trades, bringing the most significant attempt at such an initiative a step closer to success.
Enlarge This Image John Thys/Agence France-Presse — Getty Images George Osborne, center, British chancellor of the Exchequer, greeted the finance ministers Wolfgang Schäuble, right, of Germany, and Pierre Moscovici, of France, Tuesday in Luxembourg.
The levy, also known as a Robin Hood tax, or Tobin tax, gained momentum in Europe in better economic times. It was originally expected that the revenue would mostly go to humanitarian and environmental causes, including ways to combat climate change. Since the outbreak of the financial crisis, the emphasis has shifted.
European officials now mainly see the tax as a way of penalizing the financial sector and returning some of the money that was spent on bank bailouts to citizens squeezed by austerity and the economic slowdown.
“I think that taxpayers have legitimate expectations that they will be paid back for what was used in the bailouts, and the financial transactions tax can provide for this,” Algirdas Semeta, the European commissioner for taxation, said Tuesday after a monthly meeting of European Union finance ministers, where a number of nations pledged their support.
“Many citizens are angry about these problems over the causes of the financial crisis, and this small contribution of very tiny rates could help rebuild confidence in the financial sector,” Mr. Semeta said.
A qualified majority of all 27 European Union finance ministers would have to approve the measure for the tax to take effect among those nations that support it. Mr. Semeta said that step could be taken at the next meeting of the finance ministers, in November.
Such a tax has been under discussion for decades, and the idea is closely associated with James Tobin, an economist who proposed a version of it in the 1970s and received a Nobel in economic science in 1981.
In the United States, the tax has become a rallying point for labor unions, nongovernmental organizations and the Occupy Wall Street movement, which view it as a way to claw back money from the top wage earners. Last year, demonstrators urged the leaders of the Group of 20 nations to do more to help the poor, including passing a tax on financial transactions.
Mr. Semeta has already proposed legislation that would impose a tax of 0.1 percent on the value of all stock and bond trades, and of 0.01 percent on all derivatives trades. That could raise 57 billion euros ($74 billion) annually, or about 0.5 percent of European Union output, if it were applied across the bloc.
But with fewer than half of those countries expected to participate — and without the revenue from the tax that could be generated by Britain — the amount would probably be significantly less.
Britain opposes the measure, fearing that it could drive business from the City of London, a world financial center.
But Britain would probably have a partial exemption because only trades between British banks and those in countries that adopted the system would be taxed. Many specialists contend this would push even more financial business toward the City, as banks seek a base in a no-tax country.
“This is giving a present to London, the best present you can imagine,” said Karel Lannoo, the chief executive of the Center for European Policy Studies, a research organization.
The drive for investment bankers, hedge fund managers and high-frequency traders to pay for the economic difficulties had become a paramount concern, Mr. Lannoo said. Politicians “see there is pressure to do something about the financial sector,” he said.
European officials said Tuesday that George Osborne, the chancellor of the Exchequer, would not oppose the measure as long as Britain was allowed a partial exemption from the plan.
Sweden and the Netherlands also have shown no interest in applying a new European tax.
“We still think that the financial transaction tax is a very dangerous tax,” Anders Borg, the Swedish finance minister, said. “It will have a negative impact on growth.”
The Dutch finance minister, Jan Kees de Jager, said his country was “not in favor of a financial transaction tax” and was “even reluctant about introduction in other countries.”
Mr. Semeta acknowledged on Tuesday that the countries seeking to introduce the tax did not agree on how, exactly, the revenue would be spent.
“Of course the big question is how the money will be used, but first we need to agree on the tax itself,” he said.
Mr. Semeta said some countries still would like to use some of the money to supplement financing for overseas aid projects, while others want to use it to help offset their contributions to the annual European Union budget of about 140 billion euros.
The opposition from Britain and Sweden led the biggest supporters of the tax, Germany and France, to push hard for a procedure known in European Union jargon as enhanced cooperation. It allows a core group of European nations to proceed with policies that other nations oppose. A minimum of nine nations is required for the commission to write legislation.
In recent days, Austria, Belgium, France, Germany, Portugal and Slovenia pledged their support for the levy. On Monday, they were joined by Greece. On Tuesday, Italy, Spain, Slovakia and Estonia pledged support.
WE DO NOT WANT TO BECOME APATHETIC OVER THIS.....WE WANT TO SEE PEOPLE MOVE WITH OUTRAGE. AS YOUR WAGES FALL YOUR INCUMBENTS SAY IT IS THE HIGH TAX RATE THAT IS CUTTING INTO YOUR PAYDAY. IT IS YOUR WAGES!!!!!!! THE DEFICIT IS A FAILURE TO COLLECT CORPORATE TAXES AND FRAUD......PERIOD! WE MUST TAKE THE LESSONS FROM EUROPE IN STANDING FIRM AS THE INJUSTICE GROWS.
Editorial Spanish Protests, German Prescriptions Published: October 1, 2012 New York Times
Demonstrators have been filling the streets of southern Europe’s capitals in numbers too large for politicians to safely ignore, protesting the latest economic austerity measures. Hundreds of thousands have turned out in Lisbon, Madrid and Athens, and more such protests are likely in coming days.
The public’s patience is running out on austerity policies demanded by the German government and European Union leaders, which have conspicuously failed in their stated goal of reducing debt burdens and paving the way for economic revival. Instead, it’s clear that these measures will accelerate depression-levels of unemployment and damage social safety net programs when they are most needed.
The spotlight is now on Spain, where Prime Minister Mariano Rajoy is struggling to make new budget cuts, without provoking further explosions of anger at home and fueling secessionist talk in restive regions like Catalonia, the country’s economic powerhouse. But the harsh mix of new public service cuts, pay freezes and tax increases that Mr. Rajoy announced last week will almost certainly make both the political and economic situations worse. Experts now forecast a second straight year of negative growth in Spain for 2013, while unemployment, at more than 25 percent, is more than double the European Union average.
Yet unless Spain goes through with those self-defeating measures or the Spanish economy miraculously produces new tax revenues to meet unrealistic budget targets, Germany threatens to hold up a desperately needed new European banking union that would help recapitalize foundering Spanish banks. Unlike Greece and Portugal, Spain has, so far, avoided a formal European Union bailout. That gives it a little more freedom to set its own economic course. But Mr. Rajoy is not really a free actor. Without German approval for the European banking union, Spain, too, could soon be forced into a binding debt bailout deal.
Spain’s current debt problems are not the result of profligate government spending during the boom years. They came from the abrupt collapse of a reckless housing bubble in the private sector, fueled by artificially cheap credit. The bursting of that bubble wiped out millions of Spanish jobs, dragging down tax revenues and consumer spending. It also forced the government to pledge billions of euros that it did not have and could no longer raise to rescue its tottering banking system. New cuts to remaining jobs and spending power will not bring recovery. It would only bring further misery and turmoil.
Mr. Rajoy also wants to rein in spending by Spain’s 17 regional governments, which pay a large share of education and health care costs. Regional governments squandered billions on wasteful public-works projects during the boom years. But that money is lost, and health and education should not be subject to big cuts even in hard times.
Nor is a deep recession the right time to tackle the long-term problem of pension costs and the demographics of an aging population. With unemployment benefits ending for many of the long-term unemployed, pension payments are the main remaining source of income for hundreds of thousands of extended families.
There are no easy places left for Mr. Rajoy to cut services or spending without risking social disaster. The story is much the same in Greece and Portugal.
Time is running out. Only a sharp change in economic policies can save the euro. European leaders — most of all Chancellor Angela Merkel of Germany — need to recognize that returning the euro zone to solvency will require renewed efforts to encourage economic growth through less rigid budget targets, not continued austerity imposed on desperate governments by Berlin and Brussels.