Social Welfare too high - discouraging people from taking up jobs?

[Complainer]

Point a

What you are suggesting, without evidence, is that there are businesses that would not exist if it wasn't for welfare recipients.

Point b

If it were that simple to create business activity then there would be no economic problems ever, all we would have to do is ramp up welfare payments to everybody.

That's a great big leap that you've made from point a) to point b). There are indeed certain types of businesses in certain locations that are heavily dependant on welfare payments to their customers to keep them alive.

Please go back and read what I've actually said on this thread. I've never made that big leap to point b.

 

[Purple]

OK, it seems that Complainer accepts that there is no net economic gain from social welfare spending. He is now concentrating on the point that some businesses benefit from welfare payments. I think we can all agree on that but it’s a side issue and meaningless in the overall economic context.

He has successfully steered the discussion down a side road; it needs to be steered out again

 

[Latrade]

He is now concentrating on the point that some businesses benefit from welfare payments.

Actually it's a valid point, there are businesses that wouldn't exist if it weren't for welfare payments, as a group it's called "the black market".

 

[Chris]

There are indeed certain types of businesses in certain locations that are heavily dependant on welfare payments to their customers to keep them alive.

Please go back and read what I've actually said on this thread. I've never made that big leap to point b.

I don't have to go back, as your statements are still completely and utterly wrong. You are saying that there is economic benefit from providing welfare to people who then go and spend it. Point b is a simple conclusion drawn from your statement that there is economic benefit in taking from one part of the economy in order to give to another part, i.e. welfare payments, which is what you claim in this statement: "Benefits paid from taxes to certain individuals go way beyond those individuals. An awful lot of this money goes into retail, paying for goods and staff. Some of it comes back in tax, particularly VAT and customs duties."

Fact is that if other customers were taxed less there would be more money to spend at the same businesses; the very businesses that have customers on welfare would also be better off if they were not taxed as much to contribute to the welfare program; if other companies were taxed less they would reinvest more providing more jobs for people on welfare to apply for.

What you are doing is simply looking at the one transaction of welfare spender to a business, while completely ignoring all the damage that is done by financing the welfare payment in the first place. Bastiat refers to this as the seen and the unseen, you would do yourself an immense favour by reading some of his works.

 

[Complainer]

You are saying that there is economic benefit from providing welfare to people who then go and spend it.

Where did I say this?

 

[Complainer]

You are saying that there is economic benefit from providing welfare to people who then go and spend it.

Where did I say this?

Fact is that if other customers were taxed less there would be more money to spend at the same businesses; the very businesses that have customers on welfare would also be better off if they were not taxed as much to contribute to the welfare program; if other companies were taxed less they would reinvest more providing more jobs for people on welfare to apply for.

HOw do you conclude that the money would be spent and/or reinvested if not taxed? How much of it would go offshore? How much of it would go into non-productive assets like property? How much of it would be saved?

 

[Chris]

Where did I say this?

Did you actually read the post? I quoted one of your earlier posts.

HOw do you conclude that the money would be spent and/or reinvested if not taxed? How much of it would go offshore? How much of it would go into non-productive assets like property? How much of it would be saved?

With posts like this you are only exposing more of your economic ignorance and ineptitude.
Unless money is kept under the mattress it is in some way used in the economy. Money in savings accounts is used to make loans, which means someone else does the spending either on production/capital goods or consumer goods. The other option is money being directly invested in businesses allowing them to expand.
Property as a non-productive asset, now I really have heard it all. How do you think businesses would be able to operate or expand without existing or new/improving real estate assets? Real estate is one of the most important capital goods to an economy.
If money is leaving the country then it is because of bad economic prospects. Taxing more money out of the economy, in order to "keep it here", only perpetuates that problem and the view of investors who are moving money out of the country.

 

[Firefly]

HOw do you conclude that the money would be spent and/or reinvested if not taxed? How much of it would go offshore? How much of it would go into non-productive assets like property? How much of it would be saved?

It's going off-shore already...tax it less and it would probably stay here. The recent property bubble aside, investing in property is not non-productive...it is providing a service to those not able/willing to buy their own property. Money saved is a good thing...it enables banks to lend for productive reasons.

 

[Complainer]

Did you actually read the post? I quoted one of your earlier posts.

Indeed, I read it quite carefully, which is why I suggested that you go back and read my posts. I did not say what you claim that I said.

With posts like this you are only exposing more of your economic ignorance and ineptitude.
Unless money is kept under the mattress it is in some way used in the economy. Money in savings accounts is used to make loans, which means someone else does the spending either on production/capital goods or consumer goods. The other option is money being directly invested in businesses allowing them to expand.
Property as a non-productive asset, now I really have heard it all. How do you think businesses would be able to operate or expand without existing or new/improving real estate assets? Real estate is one of the most important capital goods to an economy.
If money is leaving the country then it is because of bad economic prospects. Taxing more money out of the economy, in order to "keep it here", only perpetuates that problem and the view of investors who are moving money out of the country.

You might want to read up on the AAM guidelines on personal attacks. On the substantive issue, perhaps you haven't read the papers in the last two years. Perhaps you mightn't be aware that businesses are having huge difficulties getting banks to lend. Perhaps you might not be aware of banks having to build up the capital to meet more stringent requirements. Perhaps you might not have heard of our property bubble?

 

[Sunny]

This thread reached the end a long time ago.....

 

[Firefly]

I beg to differ. The current debate isn't a million miles away from the thread's title.

 

[orka]

You are saying that there is economic benefit from providing welfare to people who then go and spend it.

Where did I say this?

Here?

The primary beneficiaries of welfare are of course the welfare recipients. But unless they are sticking it all under the mattress, there will be, as a matter of fact, downstream economic benefits from that spend.

I think your posts weren’t clear in what they were or weren’t saying so it’s not surprising that Chris, Firefly, Purple, me and probably most other readers read them as what they appeared to say and not what you intended to say. The following also helped posters form their views on what you were trying to say:

Spending from benefits has knock-on economic effects.

Benefits paid from taxes to certain individuals go way beyond those individuals. An awful lot of this money goes into retail, paying for goods and staff. Some of it comes back in tax, particularly VAT and customs duties.

Those businesses that benefit from welfare spending get particular benefits from that spend. Employees in those retail benefits get particular benefits from that spend.

Gents, perhaps you'd like to go back and look at the issue that I'm actually argueing (sic) here. Firefly said “Benefits paid from taxes to certain individuals only benefit the receivers”. I pointed out that, as a matter of fact, this is not true. The retail businesses where benefit recipients spend their money also benefit. That is a simple fact.

Yes, that's true. But the issue is, as a matter of fact, that those particular businesses benefit substantially from spending by welfare recipients.

I think we can all agree that benefits benefit the PARTICULAR shops/services where they are spent as it’s unlikely that the recipients spent in the exact same shops/services that the money would have been spent in if it had stayed in someone else’s pocket and not been extracted as tax. But as a whole, spending in ALL shops/services is the same so there is no economic benefit in providing benefits. Perhaps you could clearly articulate if you think welfare provides economic benefits rather than inviting other posters to explain why/where/how they had reached a conclusion about your opinion on the matter. Then we could go back to the original topic. TVM.

 

[Complainer]

I think your posts weren’t clear in what they were or weren’t saying so it’s not surprising that Chris, Firefly, Purple, me and probably most other readers read them as what they appeared to say and not what you intended to say.

My posts were 100% clear on what they said. They did not constitute a complete cost/benefit analysis of our social welfare system, but I don't think that is the usual standard of evidence. They simply pointed out the downstream benefits of welfare spending - no more and no less.

It is indeed no surprise that the 'usual suspects' read them as what they expected me to be saying, rather than what I actually did say.

I think we can all agree that benefits benefit the PARTICULAR shops/services where they are spent as it’s unlikely that the recipients spent in the exact same shops/services that the money would have been spent in if it had stayed in someone else’s pocket and not been extracted as tax.

So how come that when you say this, you aren't trampled in a rush by the usual suspects seeking to disagree with you on points that you haven't actually made. Why does it take you to say this for us all to agree with it.

Perhaps you could clearly articulate if you think welfare provides economic benefits rather than inviting other posters to explain why/where/how they had reached a conclusion about your opinion on the matter.

No, I won't. I'm not going to feel obliged to write essays covering every possible matter related to every possible posts because the usual suspects want to argue every point, including the points that I don't make.

TVM.

The Virgin Mary?

 

[orka]

So how come that when you say this, you aren't trampled in a rush by the usual suspects seeking to disagree with you on points that you haven't actually made. Why does it take you to say this for us all to agree with it.

I have TVM in my corner...

No, I won't. I'm not going to feel obliged to write essays...

Ah g'wan, a yes/no will suffice.

 

[Purple]

OK, we're all in agreement then; welfare payments offer no economic value add to the economy as a whole and are, at best, neutral.

 

[Firefly]

OK, we're all in agreement then; welfare payments offer no economic value add to the economy as a whole and are, at best, neutral.

At very best. Poverty traps exist and they are as the title of this thread suggests "...discouraging people from taking up jobs". The social welfare rates will have to fall to encourage people to take up jobs. Of course this will be extremely tough for certain people but the alternative is that we have empty low paid jobs and people sitting at home - a double whammy to the tax payers of this country, of which Complainer is one....wouldn't you like to see you tax being spend on better things like special needs assistants?

 

[Chris]

Indeed, I read it quite carefully, which is why I suggested that you go back and read my posts. I did not say what you claim that I said.

Orka has already pointed out where you make claim to benefits of welfare spending and "knock-on economic effects". But be my guest and deny reality.

You might want to read up on the AAM guidelines on personal attacks. On the substantive issue, perhaps you haven't read the papers in the last two years. Perhaps you mightn't be aware that businesses are having huge difficulties getting banks to lend. Perhaps you might not be aware of banks having to build up the capital to meet more stringent requirements. Perhaps you might not have heard of our property bubble?

I made absolutely no personal attack, I have only pointed out fallacies in your posts and serious gaps in your economic knowledge.
How do you think those businesses would get more money if savings were decreased through higher taxation? Decreased savings means less loanable funds, which means more difficulties for businesses. Are you saying that the credit market will be in a better position if the banks didn't have to improve their capital requirements and faced failure? Please clarify this.
And what has the property bubble got to do with this thread or any of the arguments I have made?

I think we can all agree that benefits benefit the PARTICULAR shops/services where they are spent as it’s unlikely that the recipients spent in the exact same shops/services that the money would have been spent in if it had stayed in someone else’s pocket and not been extracted as tax.

Not quite, benefits benefit the recipient. There is no reason to suggest that welfare recipients would suddenly go and do their shopping elsewhere as soon as they have a job.

But as a whole, spending in ALL shops/services is the same so there is no economic benefit in providing benefits.

Yes, there is absolutely no economic benefit in the welfare system.

 

[Complainer]

Poverty traps exist and they are as the title of this thread suggests "...discouraging people from taking up jobs".

The title of this thread does not suggest that poverty traps are discouraging people from taking up jobs. The level of social welfare is not, in itself, a poverty trap. The poverty traps occur when a whole raft of services (e.g. medical card, school transport) are suddenly removed when a person starts earning a low wage.

Of course this will be extremely tough for certain people but the alternative is that we have empty low paid jobs and people sitting at home - a double whammy to the tax payers of this country, of which Complainer is one....wouldn't you like to see you tax being spend on better things like special needs assistants?

Strange how it is OK to bring in policy that will be 'extremely tough for certain people' but if there is any mention of increased taxation or reduced tax breaks, the lambs start bleating about how tough life is for landlords or employers. So in summary, it is OK to bring in policies that are 'extremely tough' on those who are most in need, but not tough on those who are least in need -right?

The choice is not between decent levels of social welfare and SNAs.

Orka has already pointed out where you make claim to benefits of welfare spending and "knock-on economic effects". But be my guest and deny reality.

Orka pointed out that "we can all agree that benefits benefit the PARTICULAR shops/services where they are spent as it’s unlikely that the recipients spent in the exact same shops/services that the money would have been spent in if it had stayed in someone else’s pocket and not been extracted as tax.". This is what I've been saying ad nauseum on this thread - no more, and no less. You have spent several days trying to argue with me on some broader point about the welfare system on which I have made no comment - good, bad or indifferent. Why do you choose to argue with me, and not Orka, when we both say the same thing?

I made absolutely no personal attack, I have only pointed out fallacies in your posts and serious gaps in your economic knowledge.

You accused me of 'economic ineptitude and ignorance. That is a personal attack. You played the man, not the ball.

How do you think those businesses would get more money if savings were decreased through higher taxation? Decreased savings means less loanable funds, which means more difficulties for businesses. Are you saying that the credit market will be in a better position if the banks didn't have to improve their capital requirements and faced failure? Please clarify this.
And what has the property bubble got to do with this thread or any of the arguments I have made?

I simply pointed the flaws in your blanket assumption that untaxed money suddently becomes productive in our economy. It doesn't, or certainly some if it doesn't. Some of it goes overseas. Some of it will be absorbed into the black hole of our banking system.

You seem to be very quick to make blanket assumptions about what happens to untaxed money, and very slow to recognise the reality (as Orka & others have recognised) that welfare spend has benefits for people other than the welfare recipient.

 

[Firefly]

The title of this thread does not suggest that poverty traps are discouraging people from taking up jobs. The level of social welfare is not, in itself, a poverty trap. The poverty traps occur when a whole raft of services (e.g. medical card, school transport) are suddenly removed when a person starts earning a low wage.

From the Irish Times letter in question
"....offered the job to two people, both of whom had been out of work for more than two years. Both said they would take the job but then turned it down saying they were better off on social welfare with rent allowance etc. - even taking account of the back to work allowance."

Looks like a poverty trap to me...but even if it doesn't meet your strict definition, the effect is the same...discouraging people from going back to work.

Strange how it is OK to bring in policy that will be 'extremely tough for certain people' but if there is any mention of increased taxation or reduced tax breaks, the lambs start bleating about how tough life is for landlords or employers. So in summary, it is OK to bring in policies that are 'extremely tough' on those who are most in need, but not tough on those who are least in need -right?

Don't think anyone was bleating. The point was made that not many people engaging in the property letting business are making money so the potential gain from extra taxation is debatable. By all means show us a link to this gold mine - if it's there then I think it should be looked at.

The choice is not between decent levels of social welfare and SNAs.

not directly, but indirectly. As we still haven't found that money-doesn't-grow-on-trees tree there is a finite amount of money that the governent can spend as it sees fit.

 

[cork]

The poverty traps occur when a whole raft of services (e.g. medical card, school transport) are suddenly removed when a person starts earning a low wage.

The most striking thing is that work or training is not encouraged.

Government see trianing allowances as an expense but see social welfare payments as ok.

I know cases where traing courses cut and training centres being idle.