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Author Topic: UK deficit reductions
JWatts
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This is a pretty astounding cut in the size of government:
quote:
Britain will cap payments to jobless families and scrap child benefits for high earners in a sweeping overhaul of the country's welfare system, Treasury chief George Osborne said Monday.

Osborne, who is seeking to save about 86 billion pounds ($135 billion) in government spending over the next five years, said the cost of welfare payments was out of control -- and rewarding some people for staying out of work.

Link

Adjusted for scale (the UK's economy is 15% of the US's) that would be the equivalent of an $878 billion cut over a five year period. It's actually a cut of over 1% of their total GDP.

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Pyrtolin
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Is the UK actually suffering from labor or production shortages that they need to push more people to work?

That's the inherent absurdity in such measures. They're going to end up swamping their labor markets and thus reducing th amount that any given worker can get for their labor while at the same time draining the relative amount money out of their economy faster so that there's less demand for goods, and therefore workers to produce them in the first place. They're just inviting a deflationary spiral here.

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JoshuaD
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Prytolin: Did you really just say that if more people work, it's bad for the economy? Really?
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Rallan
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quote:
Originally posted by Pyrtolin:
Is the UK actually suffering from labor or production shortages that they need to push more people to work?

That's the inherent absurdity in such measures. They're going to end up swamping their labor markets and thus reducing th amount that any given worker can get for their labor while at the same time draining the relative amount money out of their economy faster so that there's less demand for goods, and therefore workers to produce them in the first place. They're just inviting a deflationary spiral here.

The UK's part of the European Union, so it's more than adequately supplied with the sort of entry-level labour that a big welfare cut would theoretically boost.

What this is probably about (and we'll need some of Ornery's British members to weigh in and tell me whether I've got it right or not) is balancing the budget.

The British Government threw humungous scads of cash at its economy during the recent recession to stimulate growth and keep the economy from tanking. And just like virtually every other first world economy, it racked up a humungous budget deficit in the process. Now that the bad times are more or less over they're looking for ways to balance the books so they won't be held back by a massive ongoing debt when times get better, and since the first thing a Conservative government is going to look at when it wants to cut costs is the welfare state. Welfare bums don't vote Conservative, and the Party's ideologically opposed to handouts in the first place.

Also, pedantry note about the Yahoo! article. It's really weird to read about "labor" movements in the UK. That's the American spelling dagnabbit, and the only place it should show its face in any reporting about politics in the Commonwealth should be the Australian Labor Party, who only went with the American spelling because of strong influences from the American labour movement during the party's formative years.

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Pyrtolin
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quote:
Originally posted by JoshuaD:
Prytolin: Did you really just say that if more people work, it's bad for the economy? Really?

If more people are forced to work than there are jobs available it absolutely is bad all around. That's not saying that the promise of profit shouldn't be offered as an incentive to get them to find new ways to be productive, but they're not going to have the time to do that if they're spending their energy fighting for a share of the existing jobs just to avoid poverty.
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Pyrtolin
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quote:
he British Government threw humungous scads of cash at its economy during the recent recession to stimulate growth and keep the economy from tanking. And just like virtually every other first world economy, it racked up a humungous budget deficit in the process. Now that the bad times are more or less over they're looking for ways to balance the books so they won't be held back by a massive ongoing debt when times get better, and since the first thing a Conservative government is going to look at when it wants to cut costs is the welfare state. Welfare bums don't vote Conservative, and the Party's ideologically opposed to handouts in the first place.
That would make sense if Britain had adopted the Euro, but since it's got its own currency it's a bad idea, unless their intent is to stop economic growth. You can only have a debt burden if you're working with someone else's currency, otherwise debt is just a measure of how much currency is available to use.

The only good way to get people off of welfare rolls is to use demand for products to create pressure more jobs that pay better than the welfare benefits; anything else is just going to swamp an already crowded market.

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DonaldD
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I think that the UK is somewhat constrained by EU rules as far as monetary policy is concerned, so I don't think they have as much independence as, say, the USA does, when it comes to 'printing money'.
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cb
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quote:
Originally posted by Pyrtolin:
Is the UK actually suffering from labor or production shortages that they need to push more people to work?

That's the inherent absurdity in such measures. They're going to end up swamping their labor markets and thus reducing th amount that any given worker can get for their labor while at the same time draining the relative amount money out of their economy faster so that there's less demand for goods, and therefore workers to produce them in the first place. They're just inviting a deflationary spiral here.

What then would you suggest...have the government buy up goods to create demand? Print monopoly money to shore up failed economic policies? That was the reasoning behind Obama's Stimulus wasn't it? How's that working for ya?

Britain is doing what all nations will have to do, stop the entitlement spending and get ready for a period of restraint and parsimonious living till the economy reasserts itself.

[ October 07, 2010, 01:00 AM: Message edited by: cb ]

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Daruma28
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quote:
Originally posted by JoshuaD:
Prytolin: Did you really just say that if more people work, it's bad for the economy? Really?

Your ability to translate Engfish is impressive. [LOL]
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Pyrtolin
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quote:
Originally posted by cb:
What then would you suggest...have the government buy up goods to create demand?


That is, in fact on of its essential roles.

quote:
Print monopoly money to shore up failed economic policies?
If you can pay taxes and debts with it, it's not monopoly money. And that is indeed where the fundamental problem lies- the people who could create the most pressure for jobs don't have enough money to realize that desire. Reducing the amount of money they have will only lead to more job cuts since there won't be enough customers to maintain them.
quote:
That was the reasoning behind Obama's Stimulus wasn't it? How's that working for ya?
As well as can be expected for only being a fraction of what it needed to be. We've actually had one of the fastest turnarounds from a recession ever, unfortunately, the hole that we fell into was so deep, even that wasn't nearly enough to get us remotely back on track.

quote:
Britain is doing what all nations will have to do, stop the entitlement spending and get ready for a period of restraint and parsimonious living till the economy reasserts itself.
Nothing treats blood loss like applying leaches. It's suffering from a huge loss of liquidity, the last thing it wants to be doing is draining even more out of the economy by trying to pay down debt till there's no money left.

[ October 07, 2010, 01:23 AM: Message edited by: Pyrtolin ]

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Athelstan
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I’m not a monetary expert by any stretch of the imagination but here’s my take on the situation in the UK. The Bank of England controls UK monetary policy but it is governed by objectives set by the British Government. We are quite capable of getting into our own financial mess without any help from Europe. Now to get out of the mess we’re in there are two schools of thought. The Labour Party wanted to improve the economy first and then pay off the debt whereas the Conservative Party believes unless we pay off the debt first the economy will never recover. The wealthy believe the problems of this country are due to the fact that we have too many people on Welfare whereas the less well off believe it is all the fault of the bankers. The Labour Party, who lost the last General Election, have just elected, with strong support from the Trade Unions, Ed Miliband as leader and he wants Labour to move further to the left. He had a father who was a Marxist, a mother who belongs to Jews for Justice for Palestinians and he recently stated that he does not believe in God but I suppose the CIA already know this. He still seems to be following Labour Policy as he said in a recent speech.

quote:
We should take responsibility for not building a more resilient economy.
But what we should not do as a country is make a bad situation worse by embarking on deficit reduction at a pace and in a way that endangers our recovery.
The starting point for a responsible plan is to halve the deficit over 4 years, but growth is our priority and we must remain vigilant against a downturn.
You see when you cancel thousands of new school buildings at a stroke, it isn't just bad for our kids, it's bad for construction companies at a time when their order books are empty.

Prime Minister Cameron, on the other hand, seems to be backtracking on everything he has said so far but as I’m not a fan my opinion of him is probably biased.
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cb
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quote:
Originally posted by Pyrtolin:
quote:
Originally posted by cb:
What then would you suggest...have the government buy up goods to create demand?


That is, in fact on of its essential roles.

Please tell me where in the Constitution that particular role is spelled out? That, in fact, is the role government has been assigned by progressives that wish government to be a fail-safe for all possible disasters, but it is not what THIS Democratic-Republic was intended to be.

quote:
Print monopoly money to shore up failed economic policies?
If you can pay taxes and debts with it, it's not monopoly money. And that is indeed where the fundamental problem lies- the people who could create the most pressure for jobs don't have enough money to realize that desire. Reducing the amount of money they have will only lead to more job cuts since there won't be enough customers to maintain them.

If there is nothing behind the paper but mountains of debt, then it is monopoly money as there is nothing to secure it. The dollar, in the past was secured by gold, then it was secured by the future productivity of the American people. When our future productivity is being held hostage by trillions of dollars in debt, it is not available to back the dollar.

quote:
That was the reasoning behind Obama's Stimulus wasn't it? How's that working for ya?
As well as can be expected for only being a fraction of what it needed to be. We've actually had one of the fastest turnarounds from a recession ever, unfortunately, the hole that we fell into was so deep, even that wasn't nearly enough to get us remotely back on track.

La, la, la, la I keep hearing this from the progressive left who also think The Great Society didn't go far enough. Just how far in debt do you propose we go before we've spent ourselves out of debt???

quote:
Britain is doing what all nations will have to do, stop the entitlement spending and get ready for a period of restraint and parsimonious living till the economy reasserts itself.
Nothing treats blood loss like applying leaches. It's suffering from a huge loss of liquidity, the last thing it wants to be doing is draining even more out of the economy by trying to pay down debt till there's no money left.

I never said to drain more out of society to pay the debt, I said to stop redistributing the dollars from the rich to the poor through entitlement programs, let the productive members of society keep the money they earn to build more businesses and created more jobs and allow the system to correct itself. It will, if allowed.

[ October 08, 2010, 12:03 AM: Message edited by: cb ]

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LetterRip
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cb,

quote:
I never said to drain more out of society to pay the debt, I said to stop redistributing the dollars from the rich to the poor through entitlement programs, let the productive members of society keep the money they earn to build more businesses and created more jobs and allow the system to correct itself. It will, if allowed.
Actually wealth tends to be redistributed from the middle class to the wealthy and the poor. The wealthy tend to pay less than their share of taxes since taxes should generally be proportional to wealth (benefit from taxes tends to be proportional to wealth).

Also the vast majority of jobs are created by small businesses, not by the wealthy. Also the wealthiest individuals tend to not be very productive, they tend to be good at accumulating wealth, which are not the same.

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cb
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quote:
Actually wealth tends to be redistributed from the middle class to the wealthy and the poor. The wealthy tend to pay less than their share of taxes since taxes should generally be proportional to wealth (benefit from taxes tends to be proportional to wealth).
Article I, § 8, Clause 1:

The Congress shall have power To lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States ;

quote:
Also the vast majority of jobs are created by small businesses, not by the wealthy.
When you say "wealthy" I assume we're talking about the top 5 - 1% income earners, right? This from a very enlightening report @ http://www.taxfoundation.org/news/show/250.html which states, "(In 2008) The top 5 percent earned 34.7 percent of the nation's adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes." The amount of taxes the "rich" pay now is well above their percentage of earned income while 38% of households pay no income tax or have a negative tax liability (due to EITC).

Please tell me when you will be happy. Only when the rich are taxed so deeply that they would qualify for middle class? What incentive would the rich then have to continue to be productive? None.

quote:
Also the wealthiest individuals tend to not be very productive, they tend to be good at accumulating wealth, which are not the same.
PURE speculation with no evidence to support it. Show me your evidence.
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Pyrtolin
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quote:
I never said to drain more out of society to pay the debt, I said to stop redistributing the dollars from the rich to the poor through entitlement programs, let the productive members of society keep the money they earn to build more businesses and created more jobs and allow the system to correct itself. It will, if allowed.
The only way for a government that issues currency to pay down debt is to remove currency from circulation. The governments debt is just a ledger entry that represents the amount of currency in circulation at any given time exactly so that it has the power to remove some from circulation if the economy is swamped.

The rest of your assertion only works is people have enough money to buy things from those wealthy folks. If they already control most of the money in circulation, they have no incentive to create jobs, because no one can pay them more than the cost of creating those jobs to make it worthwhile.

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Pyrtolin
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quote:
"(In 2008) The top 5 percent earned 34.7 percent of the nation's adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes." The amount of taxes the "rich" pay now is well above their percentage of earned income while 38% of households pay no income tax or have a negative tax liability (due to EITC).
Except that it's not income, but the marginal utility that matters for distributing the tax burden. The people who benefit from the EITC barely get positive net income (once living expenses are deducted) after the benefit, never mind enough to build a capital stake in proportion to the work they do while the top 1-5% don't lose any real power to accumulate wealth at all because they can't spend the money fast enough, and instead dump it into redundant savings that do nothing to directly encourage capital growth.
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LetterRip
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cb,

quote:

The Congress shall have power To lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States

Your point being? I made a statement about what the fair distribution of a tax is. The benefits of most of our taxes paid is in proportion to our wealth (for the poor and middle class wealth is strongly correlated with income so a tax on income is a reasonable proxy).

quote:
Please tell me when you will be happy. Only when the rich are taxed so deeply that they would qualify for middle class? What incentive would the rich then have to continue to be productive? None.
The top 1% own 43% of the wealth, I don't think the wealthy should pay any income tax, just a pure tax on wealth would be fine.

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

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NobleHunter
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How would a tax on wealth work?
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