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The Anti-Austerity Mindset – What's the alternative?


Tea Party Patriot

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I couldn't but help wonder at what type of voter Paul Murphy was trying to appeal to tonight when spoke about having a wide anti-austerity movement in place for the next general election given what appears to be a Labour Party meltdown in the polls.

Now assuming Paul Murphy is appealing to the left I really can’t see why anyone who does the math could be unhappy with the current situation if they are a left wing voter.

Firstly we are borrowing large amounts of money to fund a very high rate of social welfare, costly public services and even for those on the dole massive mortgage protection payments (one of the reasons incidentally the cost of taking up a job is so high). Now to me (and as any regular readers know I am no Labour Party fan boy) the Labour Party is actually doing a good job of protecting their traditional supporters, I think their problem is that at election time they didn’t explain to them what protecting them entailed. The reason Labour are in trouble is they weren’t up front and were populist on this “Labours way not Frankfurt’s way” comes to mind.

So what I would love to know is how we are going to avoid austerity in some form or other. I have heard several proposals mooted from numerous quarters (note while Paul Murphy is mentioned above the below are general proposals from end-austerity supporters I hear regularly and not proposals that I am attributing to Paul Murphy) :

Proposal 1. A Wealth Tax
Large wealth taxes don’t work, with the exception of land and property all other real wealth is easily moved to another jurisdiction. Where a high percentage tax is applied to assets such as land or property is taxed it leads to a vicious spiral in their values as owners are forced to sell to pay the wealth tax buy actual wealthy buyers are reluctant to keep their cash wealth in the jurisdiction to purchase these assets. So in my opinion this can’t work.

Proposal 2. The French Style 75% Tax On Profits / high earners
This will just see an exit of privately owned businesses exiting the country, along with high flying professionals and of course high earning sports starts, celebrities, artists etc. such as Gerard Depardu.

Proposal 3. Default On Our Bank Debt
Firstly I will say I was vehemently opposed to the bank guarantee and still am, but the banks don’t owe the money now, the Irish Government does, it borrowed the money, paid off the banks bondholders and now the banks don’t have any obligations on this. So defaulting on debt is all fine except we could face the situation where Irish assets are sized abroad – see the Argentina battleship. Of course the other fly in the ointment is that we as a nation need to borrow a five figure sum every year for our current spending budget deficit, how that proposing default plan to plug this is beyond comprehension as no one in their right mind will loan us money if we default unilaterally. I will say personally that if they want the short sharp shock that not being able to borrow money will bring that we will by default have to introduce the type of austerity that I would advocate. I still think that what is really necessary is to sit back and wait on the bank debt, the ECB will eventually be forced into quantitative easing, it is simple math, and incidentally not something I like, so inflation proofing is still the order of the day.

So all in all austerity is necessary, I might often criticise the government here on this site, but that is not because of austerity, it is because I believe the mix should be more cuts and less taxes. That said though I still support their efforts to reduce our deficit, and I would prefer to pay higher taxes than to see a mish mash of those who would go off on what on unworkable tangents.

What these people need to learn is that no one likes austerity, personally I hate it, and most other people do as well, but I see the need for it because it is necessary to sort out our finances. It is to me like someone having to have open heart surgery, they most likely hate having to have it but know it is necessary if they want to live.

I still think that come the next election a lot of people will still vote for austerity. Certainly in Fine Gale’s case, they never said they wouldn’t follow an austerity programme when running for office the only place they could fall down is on the mix of cuts ‘v’ taxes, and they will get away with blaming Labour for the taxes.

So at the end of this long rant what do I want? Well I would love to see some theories put forward by those who “want to end austerity” put forward that make sound financial sense and not just the usual cries of “tax the rich” or “default on bank debt”.
 

Iphonista

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Leftie economics - it's all grand until you run out of someone else's money.

Innit?
 

vanla sighs

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I see no problem taxing those earning, for arguments sake, over €100,000 at a higher rate than we currently do. If we can take from the bottom and the middle, those who can least afford it, then we can certainly take from the top, those who can most afford it. You seem to believe we have a legal responsibility for the bank debt, I'd disagree, there's a little thing called odious debt, and that is what we have.
 

Tea Party Patriot

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I see no problem taxing those earning, for arguments sake, over €100,000 at a higher rate than we currently do. If we can take from the bottom and the middle, those who can least afford it, then we can certainly take from the top, those who can most afford it. You seem to believe we have a legal responsibility for the bank debt which was underwritten by FF, I'd disagree, there's a little thing called odious debt, and that is what we have.
But those on over €100,000 already pay 54% tax on everything they earn after this mark, how much further can they be taxed? The thing is to forgo austerity small tax rises on these people will not do the job, large tax rises on them will see a lot of them exit the country.
 

GDPR

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You get the balance right between those who can afford to pay more and those who can't, you offer a targeted stimulus aimed at labour intensive activities and you encourage spending where you can by making it not worth while for those who have it to save too much of it.

Very little of which we are doing at the moment.
 

Tea Party Patriot

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You get the balance right between those who can afford to pay more and those who can't, you offer a targeted stimulus aimed at labour intensive activities and you encourage spending where you can by making it not worth while for those who have it to save too much of it.

Very little of which we are doing at the moment.
I can't agree with you on discouraging saving, in a properly functioning economy savings should in theory still be in circulation and "being spent" as they are loaned to business, consumers etc. from the holding bank.
 

GDPR

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I can't agree with you on discouraging saving, in a properly functioning economy savings should in theory still be in circulation and "being spent" as they are loaned to business, consumers etc. from the holding bank.
But that's not happening and on savings, we are way ahead of our norms.
 

vanla sighs

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But those on over €100,000 already pay 54% tax on everything they earn after this mark, how much further can they be taxed? The thing is to forgo austerity small tax rises on these people will not do the job, large tax rises on them will see a lot of them exit the country.
I think you could safely up it a few percent. Will people earning over €100,000 suddenly flock to leave the country, somehow I doubt it. I'm not talking about forgoing austerity, I am talking about "sharing the pain". Will the person on €100,000 suddenly be unable to afford heat or food or holidays or a car or health cover if there's a few % added on, no, they will still enjoy a comfortable lifestyle - perhaps with a little less saved each month. Now contrast this with the person in the middle or lower end of the ladder. On top of that end tax reliefs. There's a 101 other things they could do to ensure we all "share the pain".
 

vanla sighs

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I can't agree with you on discouraging saving, in a properly functioning economy savings should in theory still be in circulation and "being spent" as they are loaned to business, consumers etc. from the holding bank.
We don't live in a properly functioning economy.
 

viper999

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But that's not happening and on savings, we are way ahead of our norms.

Saving is the new spending, i have zero confidence to spend more than the bare essentials when i see my high street boarded up and so many unemployed, it could be me next so saving is the right thing to do! even though it sh.ite for the local economy,
 

GDPR

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Saving is the new spending, i have zero confidence to spend more than the bare essentials when i see my high street boarded up and so many unemployed, it could be me next so saving is the right thing to do! even though it sh.ite for the local economy,
There are ways to encourage you to have a change of heart there, I think we should be trying some of them.
 

viper999

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with demand low i would cut the vat rate to encourage spending and boost employment but no!! our idiots increased it 2 budgets ago to lower demand, very wise indeed. Any young person should be planning a future outside this waste land, nothing more than a debt serving kip
 
R

Ramps

I think you could safely up it a few percent. Will people earning over €100,000 suddenly flock to leave the country, somehow I doubt it. I'm not talking about forgoing austerity, I am talking about "sharing the pain". Will the person on €100,000 suddenly be unable to afford heat or food or holidays or a car or health cover if there's a few % added on, no, they will still enjoy a comfortable lifestyle - perhaps with a little less saved each month. Now contrast this with the person in the middle or lower end of the ladder. On top of that end tax reliefs. There's a 101 other things they could do to ensure we all "share the pain".
But your theory is based on the assumption that the spending of these extra taxes will be a good thing for the country (i.e. this extra revenue will be wisely spent), and that there is no opportunity cost associated with taking more tax from wealthier citizens.
 

Tea Party Patriot

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Most people who oppose austerity measures, do it on the basis that they don't accept the debt as being fair or legal.
Even without bank debt we still have massive unsustainable borrowings due to current spending, which long term will dwarf anything we gave the banks. How do we close the deficite without austerity?
 

Iphonista

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Taxing the rich won't do much as a revenue raising measure. It's a valid argument that hitting the rich will give those further down the income scale a sense that there is some justice in the system and hence, getting out and rioting isn't necessary. But that's kind of it.
 
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