End of the welfare state?

England’s coalition government is getting tough on welfare.  As are other European nations:

Britain announced the most radical overhaul in decades Thursday to its once-generous welfare system, pledging harsh penalties for those who refuse jobs and community work service for the unemployed in return for benefit checks.

Work and Pensions Secretary Iain Duncan Smith unveiled sharp changes to the country’s cradle-to-grave social safety net, which was first introduced after World War II to better protect newborns, families, the jobless and the sick.

Critics have long said the British system offered hefty benefits unavailable to other citizens across Europe, the U.S. and other major economies — encouraging some people to snub modest jobs in favor of an easy life on handouts.

“The message is clear. If you can work, then a life of benefits will no longer be an option,” said Prime Minister David Cameron, whose government last month announced it would slash benefits payments by 18 billion pounds ($29 billion) under a four-year package of spending cuts worth 81 pounds ($128 billion).

Under the new plan, many of the 5 million people who claim jobless benefits in Britain will be ordered to regularly do four weeks of unpaid community work to remain eligible for their 65 pounds ($105) weekly welfare payment. The stints could include manual labor tasks like removing graffiti or gardening in public parks.

Unemployment claimants routinely also receive other welfare payments to help with housing costs and raising children.

The plan is the centerpiece of Cameron’s legislative program, and one of the key elements of his strategy to fix so-called “Broken Britain,” his election slogan for the social problems that he says have blighted the nation’s prospects.

Duncan Smith said under his reforms, those who turn down job offers, fail to show up for job interviews or decline to take part in community projects face tough punishments. Benefits will stop for three months on a first offense, for six months for the second time and for three years after a third breach.

The system is still much more lenient than that in Spain, where a third offense means a person loses their welfare payments for good.

Duncan Smith insists the changes are not just to reduce the country’s budget deficit but are meant to jolt a group of around 1.4 million Britons who have been without a job for about a decade.

“For too long, the success of our welfare system has been judged by the number of people who are on benefits,” said Deputy Prime Minister Nick Clegg. “Our welfare system should be judged by the number of people who are off benefits and into work.”

Britain’s reforms echo a program by Sweden’s center-right government to get more people into the work force and reduce the number of benefit-takers.

Sweden’s motto — “it should pay off to work” — was echoed by Duncan Smith.

via Off the sofa! UK gets tough on welfare.

The ideological crisis of liberalism?

Although many states are hurting financially, the states with the biggest financial problems are the “blue states” like California and New York whose Democratic state legislatures with their liberal policies have brought them to the verge of ruin.  Michael Gerson describes the problem and suggests that they point to a crisis in liberalism:

Most significantly, the blue-state financial misery continues and deepens the ideological crisis of American liberalism. Few politicians in traditionally liberal states now speak about the expanding promise of progressive government and the welfare state. New Jersey is already in conservative revolt. New York’s Democratic governor-elect, Andrew Cuomo, campaigned on a promise of budget cuts without tax increases. The New York congressional delegation shifted significantly in a Republican direction. While California remains in denial – even after a budget crisis that has lasted for a decade – that could rapidly change as well. It may be Democratic governors who are forced by economic reality to limit the size and ambitions of government, delivering a body blow to liberalism itself. If progressive activism can’t survive in these places, it will be difficult for it to survive anywhere.

via Michael Gerson – Blue-state budget crises spell more trouble for Democrats.

But isn’t it also possible that a really severe and prolonged economic crisis might tilt the country to the hard left? For example, what if the government responded to the housing crisis by nationalizing the property of those evil banks and forgiving everyone’s mortgages? Would that not be popular? Yes, this would destroy our whole economic system. But would Americans have the principles to oppose measures that might seem to help them economically but that would be wrong?

A plan to cut the deficit

It is said that Americans want the government to cut spending while also wanting the government to spend more for them.  We will now see how serious the demands to cut the deficit are.

The bipartisan commission appointed by the president to suggest how to trim government spending and get the budget into balance is working on the problem.  The two chairmen have released a report on their suggestions.  (This is not the final report of the commission.)  The two have come up with a plan to save $4 trillion through 2020.  It cuts the military, eliminates earmarks, drops federal subsidies for student loans, cuts Medicare, freezes federal salaries, cuts farm subsidies, and eliminates the option to draw social security until you are 68.  Supposedly, there is something in the proposal to anger everybody.

It will also raise some taxes.  It includes an intriguing reform of the income tax:

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.

via Panel Weighs Deep Cuts in Tax Breaks and Spending – NYTimes.com.

Take a look at the proposed cuts listed in these articles andhere. Or read the entire 50-page report.

Would you be willing to bite this bullet?

Creating money out of thin air

The Federal Reserve has taken some major action in an effort to stimulate the econnomy:

The Federal Reserve escalated its efforts to get the U.S. economic recovery back on track Wednesday, again entering the realm of risky and untested policy in response to the worst downturn in generations.

The plan to pump $600 billion into the financial system is designed to stimulate the economy in large part by lowering mortgage and other interest rates.

Although the approach carries significant risks for both the economy and the central bank’s credibility, the steps announced by Fed policymakers could represent the nation’s best hope for breaking free of sluggish growth, especially with bold initiatives unlikely from a newly divided Congress.

Fed officials concluded that growth is too slow to bring down the 9.6 percent unemployment rate and is at risk of staying that way for some time absent new action. They were also concerned that inflation has been running too low and were looking for a way to encourage modest price increases, which would give consumers and businesses more reason to spend money before its value declined and help energize the economy.

“The pace of recovery in output and employment continues to be slow,” the Fed’s policymaking panel, the Federal Open Market Committee, said in a statement. “Employers remain reluctant to add to payrolls. Housing starts continue to be depressed.”

The Fed usually manages the economy by adjusting short-term interest rates. With those rates already near zero, Fed officials had to dust off a strategy for boosting the economy that debuted during the darkest days of the financial crisis. The Fed plans to create money, essentially out of thin air, and then pump it into the economy by buying Treasury bonds on the open market.

via Fed to buy $600 billion in bonds in effort to boost economic recovery.

I am neither an economist nor an economist’s son, so could someone explain how creating money out of thin air could possibly be a good idea?

Death is better than Taxes

The estate tax kicks back in on December 31, unless Bush’s tax cuts are extended.  Reportedly,  some elderly folks who want to give a big inheritance to their children planning to discontinue  life-saving medical treatments so as to die before that date.  So says Wyoming Congressional representative Cynthia Lummis, reporting that she is hearing this from some of her constituents, specifically, children of those who are planning their deaths.  See   Wyoming Rep. Lummis: Estate tax rise has some planning death.

If this is so, what would be the moral status of that action?   Does it matter that those who choose death would be doing it for the good of their children?

Outsourcing jobs to America

The good thing about becoming a Third World country is that foreign countries will outsource their manufacturing to us.  From The Washington Post:

GREER, S.C. – When German automaker BMW put out the call recently to hire a thousand factory workers here, the people who responded reflected the upheaval occurring in the U.S. economy.

Among the applicants: a former manager of a major distribution center for Target; a consultant who oversaw construction projects in four Western states; a supervisor at a plastics recycling firm. Some held college degrees and resumes in other fields where they made more money.

But they’re all in the factory now making $15 an hour – about half of what the typical German autoworker makes.

The trade debate in the United States usually focuses on the jobs lost to factories in the developing world. But the recession has forced countless skilled workers in this country to consider jobs they would have rejected in the past. They now offer foreign manufacturers a resource that was far less common just a few years ago: cheaper wages for better talent.

“We are a low-wage country compared to Germany,” said Kristin Dziczek, director of the Labor and Industry Group at the Center for Automotive Research. “And that helps put jobs here.”

via A bargain for BMW means jobs for 1,000 in S. Carolina.


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