Extract from an opinion by Robert Carling:
In democratic welfare states, the proportion of the electorate that attracts more in social benefits from government than it pays in tax has become so large that candidates who promise to curb the welfare state have a hard time winning elections.
The same issue has been raised in the United Kingdom, where a recent study by the Centre for Policy Studies revealed that 53.4% of households receive more in benefits than they pay in taxes……
The Australian Bureau of Statistics (ABS) has compiled data on total taxes paid [including GST] and total social benefits (cash and in kind) received by households in 2009–10 classified into five slices (quintiles) from bottom to top according to their private income. The first three quintiles (that is, 60% of households) each received more in direct social benefits than they paid in taxes……
via Centre for Independent Studies: Self-sustaining leviathan.
Colin
I thought that is what a government that supports the people at the bottom was supposed to do.
Carling answers this:
“Some things are clear. The welfare state has gone far beyond a ‘safety net’ concept.”
I think it depends on your definition of ‘safety net’. If you simply mean something that stops you dying when you fall then that is one thing. Completely different is a system that allows you to get back up on the trapeze and swing you way through life with everyone else. There are plenty of people on disabilities that will not starve and can couch surf around but that is not the same as having a life or a place to live and a stable platform to reinvent yourself.
Baby bonuses and home grants to the middle class are costing the taxpayer billions of dollars we can’t afford. Our budget is in deficit hence unless we start spending within our means we’ll end up like most of europe ! and then average people will feel the pain of govt. reckless spending.
The ignorance of a number of Australians claiming that the problem is “middle class welfare” have fallen right into the Labor spin trick. The argument for this statement as follows: Families with an average of two children with combined income greater than $65k are net tax payers. Those earning less are are net welfare recipients thanks to the Family Tax Benefit (aka “middle lass welfare”), I hardly think a COMBINED family income of less than $65k can be classified as “middle class” as the term is so ignorantly bandied about. Families with a COMBINED income of over $65k start paying net tax in various forms on an increasing scale. Once the COMBINED net family income reaches over $100k, they start paying the lions share, receive no FTB, and are punished with the medicare levies and surcharges and no government subsidy on their private medical aid. The only respite they get is the “baby bonus” and this is miniscule in the total scheme of things. Effectively those families with COMBINED income above $100k are thus allowed to reduce their heavy taxes paid by a miniscule amount as a “baby bonus” once or twice in their lifetime. This small respite is nothing compared to what they pay to support the families who are net recipients of welfare. Repeat: this is NOT “middle class welfare” . It is effectively allowing the biggest taxpayers to have a little respite as they support the lower income families and dole bludgers. Do you research Lee.
Vince
This is obviously a hot button issue for you as your disdain for those without a job is clear. The important thing you need to understand is that those on low wages or benefits spend their money as soon as they get it , which improves GDP growth.
Just because you don’t have a job , does not necessarily mean you are lazy or a bludger.
Lee
An economy is made up of supply ,demand and the unit of exchange to allow supply and demand to be facilitated. As debt and money are the same thing perhaps you need to be upset with those people who have accumulated money and are not recirculating it back into the economy.If money was used only for what it was designed then there would be no need for governments to keep borrowing from the banks.
“you need to be upset with those people who have accumulated money and are not recirculating it back into the economy”
The only way this happens is when savings are used to pay down debt or are stuffed in a mattress. Savings deposited in a bank are loaned out to capital investors or consumers.
Lee
My apologies for not being clear with my point. If there is simple seamless system where money is flowing effortlessly around the economy. Why is it that governments around the globe , every year are forced to borrow billions of dollars from the banks , that are created out of thin air via the fractional reserve system.
The bottom line is that there is a mall group of families who are buying every thing you can stick a meter on. The middle class ( which is only about 60 years old) is having its net assets reduced rapidly, and will be gone in the next couple of generations.
“Why is it that governments around the globe , every year are forced to borrow billions of dollars from the banks?”
To cover their past mistakes and to buy the next election — on credit — by spending more than they collect in tax revenue.
Lee
That is very simple.There is a small group of families who are accumulating large amounts of cash and assets. and have manipulated the tax codes to avoid taxation. So this removes large amounts of liquidity from the economy, so it is left to government to inject cash/credit into the economy to make up for the shortage.
The other reason for the massive increase of welfare is that the economy in the west is too efficient to provide jobs for many people.
You seem to have the bull by the tail: accumulating large amounts of wealth does not remove liquidity from the economy unless you stuff the cash in a mattress.
There is clearly a short fall in taxation gathering and /or an over payment in welfare. There is equally ,a growing gap in income and asset accumulation between the majority and the few. There is no shortage of demand or supply , so the issue is why is the worlds economy coming to a standstill. The simple answer is that the demand has little liquidity with which to proceed with there purchases.
The simple answer is that aggregate demand has for many years been partly funded by incremental increases in debt. When debt expansion stops, it leaves a hole in aggregate demand. Even worse if debt starts to contract as it did in 2008. That can lead to a 1930s-style deflationary spiral.
Colin
I don’t think there has been a decline in aggregate demand just ask anyone who is homeless. What there is is a mismatch between those with demand and no cash and those with cash but no demand.
Yes. But the number of homeless has increased 🙂
The only thing that you have to understand is that whatever is implemented in the UK get implemented in Australia by the Communists in the ALP and the Greens. There is just a delay of 10-15 years before the ideology is transferred . The outcome is the same though > massive unsustainable and unrepeatable debt, high real unemployment, high social welfare dependency, low value added industrial and agricultural output, declining standard of living, crushing poverty looms.
Count housing as an asset for social security and apply same limit -count housing as cash as well and if over the limit support your self.This would give us some incentive to save for the future instead of spending everything on a house so the goverment pays us to live in.This would also make housing cheaper for the younger generation.
Shirley
The best way to lower your expenses in retirement is to have a mortgage free house. If you want to lower the cost of a house then you have to change the tax code to include capitol gains on rental property.
If you want people to save their money instead of spending it , please advise a safe place to put it.
And finally if every one took your advise and saved instead of spending, growth would stop and then contract.
“if every one took your advise and saved instead of spending, growth would stop and then contract”
Not true. Read The Paradox of Thrift — debunked | goldstocksforex.com
Shirley
Just because one person writes a book does not mean I am wrong. I guess we will just have to agree to differ. You might also like to consider what is happening in Greece at the moment. It is well accepted by economists , that the problem with austerity is that economies shrink.
Good point. Australia has one of the lowest occupation rates (people/bedroom):
From 2011 Census:
In Australia, 89.3% of private dwellings were occupied and 10.7% were unoccupied.
For the 89.3% occupied dwellings:
Average number of bedrooms per dwelling: 3.1
Average number of people per household: 2.6
I’m amazed at comments about debt by people such as iDecimus. His opinion that we had no or little debt under the Howard Gov displays his ignorance and susceptibility to drivel from non-qualified shock jocks and the like. Australia’s debt INCREASED under the Howard government as it has under EVERY government since 1973, Liberal or Labor. Howard and Costello moved it from public debt to private debt. You can argue about the merits of doing this but don’t propagate the lie that debt only increases under a Labor government. Check your facts; go to the Treasury records.
Unfortunately, logical and well qualified debate on financial, economic and scientific issues has been overtaken by people who simply wish to peddle their unfounded political views and it’s getting worse.