Burton - "Welfare keeps the economy ticking"

Count Dooku

KyussBishop wrote: »

What I am talking about, is when the private sector doesn't want workers, and leaves a load of them unemployed, that government gives them something to do (and earn from) until the private sector wants them again.

Make sense when public sector will be less attractive place to work than it now, when even during boom it was 10 applicants per position in civil service

nesf

nesf wrote: »

More like 40% of the market and 96,800 people. (source: Daft report details here: http://www.daft.ie/report/joan-burton)

Interesting graph of rent vs house price index there actually.

Certainly points to a floor in the rental market. What a great way to "keep the economy ticking". Very productive and efficient eh

Frank Lee Midere

SupaNova2 wrote: »

And all this psuedo intellectual bull**** talk surrounding multipliers and gdp is bloody tiring, if its simply spend and increase gdp = economy growing, a counterfeiter with lavish spending habits rather than being a criminal would actually be a blessing. You don't need “the stimulus wouldn’t work here we’re an open economy” jargon or the fussing over useless aggregate statistics, spending for the sake of spending/unproductive spending does not benefit the economy.

This is an argument ad absurdity. Look it doesn't matter if you don't understand multiplier effects. They are there and they work. Rather than transfer tax from income to welfare we would be better transferring it from wealth to welfare.

People who believe tax cuts stimulate the economy are making the same argument.

SupaNova2

Frank Lee Midere wrote: »

This is an argument ad absurdity. Look it doesn't matter if you don't understand multiplier effects. They are there and they work. Rather than transfer tax from income to welfare we would be better transferring it from wealth to welfare.

The argument that welfare keeps the economy ticking is absurd without anyone having to reduce it to an absurdity.

What do you think I don't understand about multiplier effects?

Jawgap

SupaNova2 wrote: »

So the neuro-economists say that "we are talking ourselves into a recession, and we should try talk ourselves out." Oh dear.

Not quite - I think the message is rhetoric matters and can have some influence.

Count Dooku wrote: »

Make sense when public sector will be less attractive place to work than it now, when even during boom it was 10 applicants per position in civil service

That must be a different PS to the one I worked in and am working in. My experience of running recruitment comps pre-2008 is

• No applicants
• Being openly laughed at when people were told the starting salaries
• People accepting job offers and not showing up
• People starting and disappearing during the day never to be seen again
• The record - one guy started at 9-00am one Monday morning, left by 10-30am because he had a better offer (subsequently this genius put me down as a reference for another job)

SupaNova2

Frank Lee Midere wrote: »

People who believe tax cuts stimulate the economy are making the same argument.

The argument for tax cuts is not entirely the same. The argument is that money taxed and spent by government gets wasted on bureaucracy, useless quangos, unproductive welfare payments etc, and the less money to fund such waste the better.

GCU Flexible Demeanour

Frank Lee Midere wrote: »

This is an argument ad absurdity. Look it doesn't matter if you don't understand multiplier effects. They are there and they work. Rather than transfer tax from income to welfare we would be better transferring it from wealth to welfare.

People who believe tax cuts stimulate the economy are making the same argument.

Putting it more neutrally, people sometimes do advocate cutting tax as a stimulous to spending But, in an open economy, that's just as misguided as advocating high rates of social welfare.

However, there's also different arguments to be made for tax cuts from the small, open economy perspective. One is that the only tool we have at our disposal is competitiveness; therefore we should strive to keep all costs in the economy low, including the cost of Government. The other is the tax fiddle strategy that we've actually gone for - offer a low effective rate of corporation tax, and folk will route money through your economy to avail of it.

clairefontaine

Frank Lee Midere wrote: »

This is an argument ad absurdity. Look it doesn't matter if you don't understand multiplier effects. They are there and they work. Rather than transfer tax from income to welfare we would be better transferring it from wealth to welfare.

People who believe tax cuts stimulate the economy are making the same argument.

What wealth?

What would you consider to be wealthy?

Jawgap

Historically, I think people generally use any extra income that comes about from reductions in the tax rate to pay off household debt, or save.

Personally, if there was to be a reduction in tax rates I prefer to see it targeted at those on or just above (say, within 15%) of the minimum wage.

GCU Flexible Demeanour

Jawgap wrote: »

Personally, if there was to be a reduction in tax rates I prefer to see it targeted at those on or just above (say, within 15%) of the minimum wage.

Are they caught in the tax net at present?

hmmm

Someday it'd be nice to hear a Labour Minister acknowledge those poor fools who go out and work for a living. You know, the ones that generate the income and pay the vast majority of tax in this country, which is then handed out by Labour Ministers to the hordes of people that feed off the state. Apparently we're the only ones in this country who don't have "entitlements" - sometimes I feel like apologising for working hard and having a well paid job, it seems at time my only role in society is a target for more taxes and more regulations.

KyussBishop

Deleted User wrote: »

It is always preferable to tackle the reasons why the unemployment rate is so high. Sending people off on work programs does not do one thing to solve any of the real issues.

You are wrong, I've already explained this:
The private sector does not want these unemployed workers, because private debt has grown so large, that it is suppressing peoples spending power, and that is suppressing aggregate demand, meaning less profits in the private sector, and thus greater unemployment.

So the problem is a mix of private debt, and unemployment (which prevents people from being able to earn enough to get out of debt), therefore the solution to unemployment is to (surprise) give people jobs, so they can earn money and pay down their debts, which over time gives them more money to spend (due to less money going into debt, and due to wages from their job), which increases aggregate demand over time, which pumps up the private sector (more profits, more private sector jobs), causing the private sector to reabsorb people out of the temporary jobs program, until the program ends altogether.

Then you have 100% recovery - the temporary jobs program, is an automatic stabilizer that helps to resolve all the issues of: private debt, unemployment, aggregate demand shortfall, private sector slowdowns etc..
The temporary jobs program, solves all of the 'real' issues; it in fact, gives the private sector the money it needs, to solve those issues by itself - allowing 'the markets' to do their magic.

Count Dooku

KyussBishop wrote: »

You are wrong, I've already explained this:
The private sector does not want these unemployed workers, because private debt has grown so large, that it is suppressing peoples spending power, and that is suppressing aggregate demand, meaning less profits in the private sector, and thus greater unemployment.

So the problem is a mix of private debt, and unemployment (which prevents people from being able to earn enough to get out of debt), therefore the solution to unemployment is to (surprise) give people jobs, so they can earn money and pay down their debts, which over time gives them more money to spend (due to less money going into debt, and due to wages from their job), which increases aggregate demand over time, which pumps up the private sector (more profits, more private sector jobs), causing the private sector to reabsorb people out of the temporary jobs program, until the program ends altogether.

Then you have 100% recovery - the temporary jobs program, is an automatic stabilizer that helps to resolve all the issues of: private debt, unemployment, aggregate demand shortfall, private sector slowdowns etc..
The temporary jobs program, solves all of the 'real' issues; it in fact, gives the private sector the money it needs, to solve those issues by itself - allowing 'the markets' to do their magic.

What do you mean by recovery - another property bubble?

KyussBishop

clairefontaine wrote: »

She's a idiot. Welfare is not a buoy. It is a pacifier. If there were no welfare, there would be riots and higher crime, thus upsetting the taxable classes even more. She knows this. She's trying to ameliorate the resentment of what's left of the emaciated tax payer.

Yes there should be a safety net. But the poles holding it up are cracking. Or emigrating.

Unless rent allowaynce is propping up property values- that I don't know, maybe someone else does.

It's all about 'sectoral balances' - a public deficit, is a private sector surplus - it is money going out of the public sector, into the private sector (when the private sector greatly needs the money).

So public sector deficits/spending, does buoy the private sector but, the extent of which it does that, depends on where the money is sourced:
- If it's sourced from taxes, this dampens that (but still acts partially as wealth-redistribution, for the proportion of tax that goes from the wealthy to those receiving welfare)
- If it's sourced from debt, this does not dampen the effect on the private sector (but in the future, it needs to be paid back - preferably in more prosperous times)
- If it's sourced from money creation, this does not dampen the effect on the private sector (so long as inflation targets are kept in check, and so long as the trade balance is carefully managed)

clairefontaine

KyussBishop wrote: »

It's all about 'sectoral balances' - a public deficit, is a private sector surplus - it is money going out of the public sector, into the private sector (when the private sector greatly needs the money).

So public sector deficits/spending, does buoy the private sector but, the extent of which it does that, depends on where the money is sourced:
- If it's sourced from taxes, this dampens that (but still acts partially as wealth-redistribution, for the proportion of tax that goes from the wealthy to those receiving welfare)
- If it's sourced from debt, this does not dampen the effect on the private sector (but in the future, it needs to be paid back - preferably in more prosperous times)
- If it's sourced from money creation, this does not dampen the effect on the private sector (so long as inflation targets are kept in check, and so long as the trade balance is carefully managed)

My question is how much rent allowance, state subsidy, is floating the housing market and inhibiting it for reaching healthy levels faster.

Count Dooku

KyussBishop wrote: »

It's all about 'sectoral balances' - a public deficit, is a private sector surplus - it is money going out of the public sector, into the private sector (when the private sector greatly needs the money).

Most of money are going to China where most of goods are produced

KyussBishop

The logic behind tax cuts is simple: More money in the private sectors hands (when the private sector is sorely in need of more money for deleveraging debt and restoring aggregate demand).

Same reason why government deficit spending is desirable, when it is sourced through means which takes unproductive or idle money in the private economy (such as through encouraging investment through public debt), or just creates it (while keeping inflation within targets, and managing the trade balance), and spending it into the private economy in ways that serve the public purpose, and which help get the private sector back on its feet.

KyussBishop

clairefontaine wrote: »

My question is how much rent allowance, state subsidy, is floating the housing market and inhibiting it for reaching healthy levels faster.

Government are doing a lot to keep property prices propped up alright, I agree there - I was more commenting on how welfare payments (not specifically rent allowance) do help keep the private sector ticking.

clairefontaine

KyussBishop wrote: »

Government are doing a lot to keep property prices propped up alright, I agree there - I was more commenting on how welfare payments (not specifically rent allowance) do help keep the private sector ticking.

They do up to a point. The private sector is paying out of pocket for them, and there's only so far that will go, before the golden goose runs out of eggs.

KyussBishop

clairefontaine wrote: »

They do up to a point. The private sector is paying out of pocket for them, and there's only so far that will go, before the golden goose runs out of eggs.

Ya but, that depends on where the money is sourced

You have the options of tax (least desirable during economic crisis), public debt (encourages investment of idle/unproductive savings, for public purpose and economic recovery), and money creation (limited by inflation targets, and trade balance targets - basically allows full economic recovery over time, with the speed of recovery vs level-of-comfort/quality-of-life tradeoff, depending upon physical resources available locally vs those acquired through tipping trade balance towards imports).

So, not all of those options for public deficit spending, dampen the private sector (though unfortunately, policy options other than tax, are only possible if the EU as a whole undertook them, at the moment).

GCU Flexible Demeanour

KyussBishop wrote: »

The private sector does not want these unemployed workers, because private debt has grown so large, that it is suppressing peoples spending power, and that is suppressing aggregate demand, meaning less profits in the private sector, and thus greater unemployment.

Certainly, there is a tranche of the population who are heavily in debt. However, your analysis is somewhat faulty. Again, the issue is about your analysis implicitly assuming the economy is closed.

The point is that there isn't a strong connection between what we collectively buy in the shops, and what we make a living out of making. You can spend all you like in Irish shops, but all you'll have at the end of it is a whole load of consumer debt plus an increase in imports.

Show me one example of a country that had an import-led recovery.

Jawgap

GCU Flexible Demeanour wrote: »

Are they caught in the tax net at present?

Depends how much they earn - you're not excused taxes by virtue of only being paid the minimum hourly rate.

GCU Flexible Demeanour

Jawgap wrote: »

Depends how much they earn - you're not excused taxes by virtue of only being paid the minimum hourly rate.

And I'm not suggesting that they are automatically excluded. I'm just enquiring as to whether you've evidence that people on the minimum wage are generally caught in the tax net at present.

Farmer Pudsey

KyussBishop wrote: »

It's all about 'sectoral balances' - a public deficit, is a private sector surplus - it is money going out of the public sector, into the private sector (when the private sector greatly needs the money).

So public sector deficits/spending, does buoy the private sector but, the extent of which it does that, depends on where the money is sourced:
- If it's sourced from taxes, this dampens that (but still acts partially as wealth-redistribution, for the proportion of tax that goes from the wealthy to those receiving welfare)
- If it's sourced from debt, this does not dampen the effect on the private sector (but in the future, it needs to be paid back - preferably in more prosperous times)
- If it's sourced from money creation, this does not dampen the effect on the private sector (so long as inflation targets are kept in check, and so long as the trade balance is carefully managed)

We are back to the money creation lark again. However the Germans will not allow our government to do it thanks be to god, because Joan et al would be well up for it.

The issue with government created jobs for everyone are very inefficient. What would they put these workers doing and at what level of pay. In one way I believe if all those on welfare had to work 2-3 day a week for there money it would be a good idea. However the problem is at what.

If we used skilled workers nurses/teachers to fill gaps in health and Education system would there be union uproar as they take other workers work. Maybe we could put unemployed accountants into revenue and legal people to quicken the legal system. However most unemployed are low skilled workers, the government is not in the business of shops and factory's what is left is really construction.

Maybe we could start a large scale public work scheme. The Cork to Limerick motorway never got started. We could put 200K unemployed with shovels picks and sledges digging there way through. Maybe a couple large shanty towns along the course of it like the old days at Ardnacrusha or the old Bord na Mona sheet iron turf huts. The reality is Kyuss that I do not think most of the unemployed would be interested and Jack O'Connor would shut it down before it got off the ground.

Public Works in general equate to construction work which is quite expensive unless we go back to the type of work that went on during the later 19th and early 20th centeury.

We cannot generate massive public work employment schemes unless we go down the pick and shovel route. Then again we could put a few thousand pulling the ragworth at the sides of the roads.

Jawgap

GCU Flexible Demeanour wrote: »

And I'm not suggesting that they are automatically excluded. I'm just enquiring as to whether you've evidence that people on the minimum wage are generally caught in the tax net at present.

Well everyone earning in excess E10,500 pays the USC, but I suppose there is a semantic argument that this is not a 'tax.'

It certainly feels like a tax!

KyussBishop

GCU Flexible Demeanour wrote: »

Certainly, there is a tranche of the population who are heavily in debt. However, your analysis is somewhat faulty. Again, the issue is about your analysis implicitly assuming the economy is closed.

The point is that there isn't a strong connection between what we collectively buy in the shops, and what we make a living out of making. You can spend all you like in Irish shops, but all you'll have at the end of it is a whole load of consumer debt plus an increase in imports.

Show me one example of a country that had an import-led recovery.

My analysis doesn't assume a closed economy at all, and people wouldn't go into greater debt, when they spend wages from the temporary employment program (that reduces private debt, by giving the private sector a means to pay down debt).


World economies can't collectively boost their exports in order to seek recovery, because for every country that increases exports, another has to increase imports by the same amount (that's true as an accounting rule).
It is a zero-sum game - if all economies try to exit the crisis through increased exports, with none increasing imports to match, then all there will be is economic stagnation and a race-to-the-bottom in destruction of wage levels, as everyone tries to out-compete on exports (with nobody wanting more imports).

When our trading partners decide to decimate their own economic output (a pretty silly thing to do, seeing as that is totally unnecessary, but then that's mainstream economics for you), the logical choice is not for us to also decimate our own economic output through high unemployment (which is grossly inefficient), but to redirect our resources and find something useful to do with those idle workers, until the world economy improves.

If that causes an increase in Europe's import level, then that actually helps other world economies recover through increased exports, and when other world economies finally catch-on that wasting idle labour is a stupid thing to do, then more will boost their economic output with similar temporary employment programs, thus recovering world economies even faster and allowing Europe to increase exports to those countries again (automatically correcting any trade imbalances).


If, today, all our trading partners engaged in a temporary employment program at the same time as us, our collective trade balance (imports vs exports) would actually remain largely unchanged because we are all increasing economic output at once, which would give a practically painless recovery.

We don't need that to engage in our own recovery though, we could do that now ourselves (if Europe wasn't so screwed politically), and engage people in public work (investing in infrastructure to boost our economy now and into the future), until the rest of the world catches up.

KyussBishop

Farmer Pudsey wrote: »

We are back to the money creation lark again. However the Germans will not allow our government to do it thanks be to god, because Joan et al would be well up for it.

The issue with government created jobs for everyone are very inefficient. What would they put these workers doing and at what level of pay. In one way I believe if all those on welfare had to work 2-3 day a week for there money it would be a good idea. However the problem is at what.

If we used skilled workers nurses/teachers to fill gaps in health and Education system would there be union uproar as they take other workers work. Maybe we could put unemployed accountants into revenue and legal people to quicken the legal system. However most unemployed are low skilled workers, the government is not in the business of shops and factory's what is left is really construction.

Maybe we could start a large scale public work scheme. The Cork to Limerick motorway never got started. We could put 200K unemployed with shovels picks and sledges digging there way through. Maybe a couple large shanty towns along the course of it like the old days at Ardnacrusha or the old Bord na Mona sheet iron turf huts. The reality is Kyuss that I do not think most of the unemployed would be interested and Jack O'Connor would shut it down before it got off the ground.

Public Works in general equate to construction work which is quite expensive unless we go back to the type of work that went on during the later 19th and early 20th centeury.

We cannot generate massive public work employment schemes unless we go down the pick and shovel route. Then again we could put a few thousand pulling the ragworth at the sides of the roads.

I haven't seen anybody lately, able to present arguments against money creation that aren't 100% political, by asserting political misuse of the ability - that has nothing to do with economics.

The assertion that there is no useful public work that anyone can do is a completely unbacked one - countries all over Europe have been dismantling parts of their public services since the crisis began (giving immediate opportunities for restoring employment there), and there is practically no limit to the amount of infrastructural upgrades that can be done all over Europe, or the level of research and technological development that can be done.

The claim that people would be unwilling to work in such a program as well, is as unbacked as the claim that unemployment is so high because people don't want to work - there is no indication at all that people are unwilling to work.

If all you can personally think of are grossly inefficient ways of employing people in temporary public employment, that is just a failure of imagination on your part, and amounts to a straw-man; it comes off more as making up examples you know are false, just so you can sneer at the concept, and remain eternally 'unconvinced'.

johnory1

i have to agree, welfare keeps the economy ticking. Without welfare our economy would be far worse. Could you imagine how many more foreclosures would occur and how many business would close. welfare gives a larger portion of our citizens spending power,albeit marginal, but it still allows them to be consumers. i'm not saying welfare drives the economy but i believe its essential in all countries who aim to be a first world country.

GCU Flexible Demeanour

KyussBishop wrote: »

My analysis doesn't assume a closed economy at all, and people wouldn't go into greater debt, when they spend wages from the temporary employment program (that reduces private debt, by giving the private sector a means to pay down debt).

Yes, it does assume a closed economy as you're assuming the increase in consumer expenditure would be available to pay debts of domestic retailers, which ignores the large import content of such expenditure. Incidently, you'll notice I haven't inquired into why you think retailers debts are particularly important. (There's more than a few implicit assumptions in what you are saying that won't stand scrutiny - in particular the way you conflate "private sector" with retail, and the way you don't consider at all the extent to which retail includes foreign multiples. So spending more in Tesco and Marks and Spencer is going to pay off debts of domestic entities, apparently.)

KyussBishop wrote: »

World economies can't collectively boost their exports in order to seek recovery, because for every country that increases exports, another has to increase imports by the same amount (that's true as an accounting rule).

International trade exists because there are gains from trade - if there weren't, there would be no reason to engage in it. The advantage of being a small open economy is that, unlike Germany, we don't have to worry so much about the general state of global demand. A significant increase in our exports would be negligible in world trade terms. If our strategy is simply to become competitive, that can succeed even during a global recession.

KyussBishop

GCU Flexible Demeanour wrote: »

Yes, it does assume a closed economy as you're assuming the increase in consumer expenditure would be available to pay debts of domestic retailers, which ignores the large import content of such expenditure. Incidently, you'll notice I haven't inquired into why you think retailers debts are particularly important. (There's more than a few implicit assumptions in what you are saying that won't stand scrutiny - in particular the way you conflate "private sector" with retail, and the way you don't consider at all the extent to which retail includes foreign multiples. So spending more in Tesco and Marks and Spencer is going to pay off debts of domestic entities, apparently.)

I didn't say anything about domestic retailers (I'm pretty sure the word 'retail' didn't pop up in my posts at all, so not sure where you're pulling that from), you are trying to put words in my mouth. Who has the bigger private debt problem - domestic retailers, or people stuck in massive mortgages? (the ones who'd be betting the wages from the temporary employment program)

I've even explicitly talked about how the policies I put forward would affect the trade balance, so that (with the trade balance, by definition, assuming an economy that is not closed) means you should re-read my posts, as you are misrepresenting what I said.

GCU Flexible Demeanour wrote: »

International trade exists because there are gains from trade - if there weren't, there would be no reason to engage in it. The advantage of being a small open economy is that, unlike Germany, we don't have to worry so much about the general state of global demand. A significant increase in our exports would be negligible in world trade terms. If our strategy is simply to become competitive, that can succeed even during a global recession.

That's great, except we're not the only country trying to increase exports right now, and everyone is trying to reduce imports - that, trying to recover through exports when nobody wants them, is an economically illiterate policy.