Welfare cuts? What cuts?

professore

gcgirl wrote: »

But if you sell to downsize you have to reapply for another mortgage which if you don't have a job you wont get !

Then rent !!!!!

Stark

whatisayis wrote:

You have avoided the question. No one said it was your problem if other people decided to run up bills, but they did... so what is the alternative to them trying to pay them back while on social welfare?

They can do whatever they want with the money they receive. Just don't go whinging for more because they couldn't keep a reign on their own finances. I'll happily avoid any questions on where else they're supposed to get the money because it's not my problem.

whatisayis

Stark wrote: »

They can do whatever they want with the money they receive. Just don't go whinging for more because they couldn't keep a reign on their own finances.

The OP said "I don't believe that social welfare should pay their mortgages, car loans". I was only pointing out that for some people, it is their only option.

whatisayis

professore wrote: »

Then rent !!!!!

And let the government give even more money to the property developers via rent allowance! In Dublin a married couple with one child is entitled to €930 per month rent allowance. Nice little earner for the landlords!

douglashyde

It seems that the lazier you are in this country, the more money you get, providing you can work the system.

That's not to suggest that people on social welfare are lazy, however, the social welfare is handy out while you can't work not as some people seem to think, a way of life.

KerranJast

whatisayis wrote: »

The OP said "I don't believe that social welfare should pay their mortgages, car loans". I was only pointing out that for some people, it is their only option.

I don't know about the OP but most rational people don't care what people on the Dole spend their allowance on (they are entitled to it after all). We just believe the Dole rate should be based on the cost of living rates for important items like fuel, food, schooling for kids, health, rent/mortgage interest*, public transport.
Increasing (or not decreasing in this case) the Dole should not be influenced by more luxury items like the cost of electronics, mortgage rates**, car loans, holidays, socialising etc. The Dole is supposed to provide a modest standard of living while you look for work. It is not supposed to be a straight replacement for your standard of living while you were employed. The State cannot afford that.

*Rent allowance should be given to unemployed people who have a mortgage from before they become unemployed but should only cover paying the interest to the bank, not going towards the purchase price of the house i.e. the unemployed person would effectively be renting from the Bank via the Rent allowance.
** The non-interest part of your monthly mortgage payment.

AlekSmart

There is the increasing realization that perhaps we needed to take heed of Mr Cowens warning some time ago regarding a 20% fall in living standards.

I think the figure was included in a wide ranging speech where there were other more juicy bits for the media to focus upon./

However,if we step back and attempt to rationalize just what that 20% drop translates into then we collectively are looking at major drop in what we have come to expect as our "Lifestyle".

That drop is effective on EVERYBODY.......wage earner,dependant,or welfare dependent...

The reality of having to surrender a significant portion of our lifestyle is not going to be easily achieved,but I reckon it is dawning on some before others

Reality again intrudes as the fact of that a better quality of life is available in other EU countries will soon be impacting on the native Irish.

This time round the old UK safety net is equally kaput as ourselves,so we better hone our Language skills and get on our bikes.

It`s looking increasingly as if Ireland 2010-2020 will be a land peopled by constantly bickering less well qualified or unskilled people who have in many cases been earning the equivalent of a Tradesperson in other saner juristictions.

Now that the beer and crisps supply is threatened,the reality of civil disorder looms very large indeed.
The biggest problem is that we have NO strategy for addressing this problem and are unlikely to develop one if left to our own devices

KerranJast

Canada & Australia are pretty popular destinations at the moment for skilled people. I expect the US and UK to recover over 2-3 years.

Reductions in wages across the board are a good thing. It means the cost of labour is lower, so businesses can charge less for their goods, which means the cost of living decreases further so people are relatively speaking no worse off.

It's reverse of what got us into this mess where people were paid ever increasing wages, thereby increasing costs to business, thereby pushing up prices and consequently the cost of living, which required more wage increases to outstrip the CoL increases. It was a viscous circle.

The reverse is also going to be viscous in the short term but it is very much needed for our medium to long term competitiveness.

Permabear

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whatisayis

KerranJast wrote: »

I don't know about the OP but most rational people don't care what people on the Dole spend their allowance on (they are entitled to it after all). We just believe the Dole rate should be based on the cost of living rates for important items like fuel, food, schooling for kids, health, rent/mortgage interest*, public transport.
Increasing (or not decreasing in this case) the Dole should not be influenced by more luxury items like the cost of electronics, mortgage rates**, car loans, holidays, socialising etc. The Dole is supposed to provide a modest standard of living while you look for work. It is not supposed to be a straight replacement for your standard of living while you were employed. The State cannot afford that.

*Rent allowance should be given to unemployed people who have a mortgage from before they become unemployed but should only cover paying the interest to the bank, not going towards the purchase price of the house i.e. the unemployed person would effectively be renting from the Bank via the Rent allowance.
** The non-interest part of your monthly mortgage payment.

I think you have missed my point. I would never consider debt as a luxury item akin to holidays, socialising, new electronics etc.

I just do not see the economic benefit of having thousands of people handing back their houses to the banks due to inability to pay their mortgage. These people will then be entitled to rent allowance which will cost the taxpayer more and will be of benefit only to the property developers.

Just for the record, I will never be in this position because I have paid off my mortgage so the only vested interest I have in this debate is that of a tax payer who doesn't want any more of my money mismanaged by this government.

whatisayis

donegalfella wrote: »

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So what is your solution to those who have these debts (forget the Sky TV) and find themselves unemployed?

Stark

I would say negogiate with the lenders to suspend collection until the person is employed again. Getting the taxpayer to pay for their irresponsibility is unfair. There simply isn't enough money to throw at every social welfare recipient to cover all possible levels of past debt. Not without making working people financially worse off than people on welfare.

Flamed Diving

namenotavailabl wrote: »

The original poster seems to have missed the fairly obvious flaw in his assertion that social welfare hasn't been cut. The simple inarguable reality is that social welfare rates were cut in a number of areas.

To argue that because inflation in certain areas is negative for the past 12 months is to miss the point- recipients of social welfare are now relatively worse off as a consequence of the budget. In order to 'stand still', the price of goods would need to further decline in proportion to the social welfare cuts. If this doesn't happen, the social welfare reductions mean that the recipients are worse off.

The budget doesn't update itself in real time.

Good lord, I am aghast at how poor the quality of thinking there is in this thread. Did you not even consider this fact?

KerranJast

whatisayis wrote: »

I just do not see the economic benefit of having thousands of people handing back their houses to the banks due to inability to pay their mortgage. These people will then be entitled to rent allowance which will cost the taxpayer more and will be of benefit only to the property developers.

No sane banker is going to put people out on the street without exhausting all available options. The Bank would never be able to sell the property in the short-medium term and they'd prefer to have an income from the property therefore the owner should be able to pay the interest only to the Bank from the Dole allowances.

Permabear

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namenotavailablE

The budget doesn't update itself in real time.

Sorry- I am not sure that I understand what this statement means in the context of the debate (or even whether it's addressed to me!)?

My original point is that if a welfare recipient could purchase, say, a basket of X goods based on welfare rates existing prior to the budget then s/he could not purchase this quantity after the new rates are introduced. Accordingly, s/he is worse off relatively speaking unless the price of the basket of X goods declines in proportion to the reduction in the old rates.

Therefore, s/he has experienced a decline in living standards as a result of the cuts.

Stark

He/she would have experienced an increase in living standards throughout 2009 as a result of the recession while everyone else would have been experiencing a decline due to tax increases and paycuts. The 2010 budget brings their standard of living back to where it was in 2008.

Flamed Diving

namenotavailabl wrote: »

Sorry- I am not sure that I understand what this statement means in the context of the debate (or even whether it's addressed to me!)?

My original point is that if a welfare recipient could purchase, say, a basket of X goods based on welfare rates existing prior to the budget then s/he could not purchase this quantity after the new rates are introduced. Accordingly, s/he is worse off relatively speaking unless the price of the basket of X goods declines in proportion to the reduction in the old rates.

Therefore, s/he has experienced a decline in living standards as a result of the cuts.

Errrr, you really are missing the big picture here. I'm not very confident that I can relay this information to you in a way that will make you see it, because this logic of yours seems ingrained, but here goes.

So, imagine that you work for a company, which produces one good and is the only firm in the economy. All other goods and services in the economy are exogenously determined (economist speak for: from outside forces). So lets say you earn €100 per week, and your company is earning a revenue of €1000 per week. Suddenly, a global recession hits for some reason and the price of all exogenous goods drops by 20% instantaneously. So, your standard of living could rightly be said to rise by around 20%, depending on your preferences. However, because of the recession, global sales of your companies product falls by 10%, so they decide to cut your pay by 10%, in response, as it is against the law to lay people off. In your mind, this person has suffered a 10% loss because of the recession. To anyone who can hold two sets of events in their head simultaneously, this person gained roughly 10%.

The end.

namenotavailablE

@ Stark: Agreed- and I think we are saying much the same thing i.e. as a consequence of the 2010 budget isn't this person now going to experience a decline in living standards relative to how things were immediately prior to the budget?
On January 1, that mythical basket of goods is likely to be the same price as it was on December 31 yet the person's resources are reduced!

@ Flamed Diving- sure, in that simplifed model you outline the purchasing power of the worker has increased. However, I think it may not be as simple in reality. The real world basket of goods consists of many different products subject to variable price pressures. By making certain assumptions, we can each argue our position- the acid test is in the reality of those same assumptions. As a professor once told my class, "If we assume that the moon is made of green cheese, we could probably logically deduce that there is life on the moon!!"

Stark

namenotavailabl wrote: »

@ Stark: Agreed- and I think we are saying much the same thing i.e. as a consequence of the 2010 budget isn't this person now going to experience a decline in living standards relative to how things were immediately prior to the budget?
On January 1, that mythical basket of goods is likely to be the same price as it was on December 31 yet the person's resources are reduced!

This goes back to the point about the budget not updating itself in real time. The person is no worse off than they were in December 2008.

RedPlanet

Haven't read the entire thread but I wonder could they use a voucher system.
Food stamps anyone?

namenotavailablE

This goes back to the point about the budget not updating itself in real time. The person is no worse off than they were in December 2008.

But were they better off in November 2009 or December 2008 given deflation in the period? And won't they be worse off in January 2010 compared to November 2009 UNLESS the price of the goods declines further to compensate for the decline in welfare rates?

Permabear

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Daithinski

donegalfella wrote: »

This post has been deleted.

I have a feeling we all may be missing a bigger point.

There is bickering over how much everybody deserves/does not deserve of "our" slice of the pie.

Maybe the problem is our slice of the pie isn't big enough to go around because the ruling classes Government/big business/bankers have allocated too big a slice to themselves?

An example of this is Companies making big profits that still screw their staff for the benefit of shareholders.

The old maxim the rich get richer, if it holds true with the passing of time the larger percentages of the average joe will be living in poverty. Theres a lot of average joes in Ireland living in relative poverty at the moment. It looks like this is going to be here for the long haul. (hopefully I'm wrong, but I can't see a mechanism in the economy which will change this).


This would appear to be the start of a long term trend... a small percentage of super rich and powerful getting wealthier and more powerful and at the "bottom" a gradually increasing percentage of relative poverty. Sandwiched between there is an increasing pressed upon and over burdened middle band of "middle income/class".

The real enemies of the middle class is these guys Government/big business/bankers. Nothing wrong with making a profit but their greed is iinsatiable. There is nothing to be gained by squabbling and bitching about how much the people signing on are getting. This is not the real issue (IMO).

IMO the real problem is the unequal distribution of wealth.

Stark

Well that's the heart of the left-wing vs right-wing debate. Which is better? Equality at the expense of overall wealth or overall wealth at the expense of inequality? A certain amount of inequality is necessary for growth. Personally I don't mind a bit of relative poverty if it means I don't have to experience actual poverty.

Daithinski

Stark wrote: »

...Personally I don't mind a bit of relative poverty if it means I don't have to experience actual poverty.

No one minds a bit, people start minding if it looks like that is how they are going to live the rest of their life.

The problem is that without doubt, a proportion of the recently unemployed this will be the case.

The race to the bottom has well and truly begun.

The property boom in Ireland facilitated a huge transfer of wealth from the average joe soap (many multiples of his annual earnings) into the bank accounts of the rich.

The national debt of Ireland has been flipped from onto the people of Ireland, to the benefit of the ruling classes. This cannot be undone. Now a lot people are debt saturated and/or unemployed and won't buy. This will slowly destroy our economy.

It will make those with wealth invest it in some other sucker country (probably some emerging economy in the developing world around the pacific rim).

KerranJast

Daithinski wrote: »

The property boom in Ireland facilitated a huge transfer of wealth from the average joe soap (many multiples of his annual earnings) into the bank accounts of the rich.

Transfer of wealth from young to old more like. If people younger than 45 want to find where the wealth of the country from all the property deals has gone, ask ye're parents. It's that generation who bought cheap in the 60s/70s/80s and sold big in the 90s/00s that reaped the real rewards of the Celtic Tiger.

murphaph

Even if the dole is only cut by such a small amount that the recipient receives no decrease in standard of living compared to 2008 this is not enough. It has to be said: The Irish standard of living is too high. A 3 bed semi detached house is an unrealisable dream for millions of Germans and other continentals. They know they will likely live their whole lives in apartments owned by someone else and it doesn't get them down. For what Ireland produces for the rest of the world, the standard of living is ridiculously high in many respects. It needs to adjust itself to reflect how useful Ireland actually is to the rest of the world.

namenotavailablE

I'm attaching an image file showing the issue of welfare cuts v deflation to illustrate the point I was making re welfare cuts. The image uses donegalfella's given values of food deflation of 7.6% for 2009 (I assumed this to be an even decline throughout the period). Columns 4 and 5 show the purchasing power of a fixed welfare rate of €204 in 2009 v €196 in 2010 (measured in terms of '# of baskets which can be purchased' in each year).

It can be seen that the effect of deflation (which I might note I was asking rhetorically about in post #203 of the thread) is that the welfare recipient's purchasing power improved in 2009. This point is not in dispute- essentially, where s/he could purchase 4.08 baskets on income of €204 in January 2009, s/he could purchase 4.42 baskets by December 2009 with the same income.

My point, however, is that the recipient will experience an immediate decline in his/her living standards in January 2010, as the revised welfare rates will result in a lower purchasing power compared to December 2009. Per the illustration, s/he can only purchase 4.24 baskets in January 2010 compared to 4.42 in December 2009 (assuming that the December 2009 prices apply in January 2010- that's obviously open to valid debate).

Accordingly, there is an immediate adverse impact- the purchasing power is brought back to June 2009 levels. Even if the January prices were slightly lower than December 2010 (e.g deflation continuing/ benefit of January sales/ multiples in a price war), the purchasing power is unlikely to match December 2009 levels.

Obviously, for the rest of 2010, the net annual outcome will depend on the impact of inflation/deflation. If prices remain static, the welfare recipient is marginally worse off (less than 0.5% in a year). If prices continue to fall, s/he is ahead, depending on the extent of the fall. If prices rise, s/he is worse off.

I hope that the foregoing can be agreed as an honest attempt at an appraisal of the situation.

Daithinski

murphaph wrote: »

The Irish standard of living is too high. A 3 bed semi detached house is an unrealisable dream for millions of Germans and other continentals.

murphaph wrote: »

They know they will likely live their whole lives in apartments owned by someone else and it doesn't get them down.

I believe they have a good system for renting over there. Maybe this system was ignored here as it could be a disincentive to buy?

murphaph wrote: »

For what Ireland produces for the rest of the world, the standard of living is ridiculously high in many respects. It needs to adjust itself to reflect how useful Ireland actually is to the rest of the world.

I fully agree. But there has to be a transition from one phase to the next. Doing it over a matter of a year or two just won't work. This seems to be what (a vocal minority) of people are calling for.

ie cutting dole levels to UK levels. If this was done loans would be defaulted on left right and centre, the black economy would thrive and chaos would ensue.

Even if dole was cut by 15% this would probably happen. Even this could trigger massive defaults on private debt.

You can only cut government spending so much, then you are back to raising taxes again (to pay to bail out banks, due to defaulting unemployed people), thus hitting the PAYE sector again.

Some people can't understand that government slashing social welfare spending will make them worse off, not better off.

IMO Cutting it a bit year by year is the safest way, it buys a bit of time in the hope that when the world economy rises ours will rise too.