Welfare. What $$ return (to the economy), do taxpayers get for tax $$ spent on welfare?

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I recall hearing somewhere that the U.S. economy gets more than a dollar return for each dollar spent on welfare. It is likely that I heard this or something similar, here. Can anyone direct me to such data, if, such data exists?

Chknltl's picture
Chknltl
Joined:
Jul. 31, 2007 3:01 pm

Comments

Of course it doesn't exist. For some reason Thom believes ripping the hard earned money from one mans pocket and depositing it into another mans somehow creates wealth.

For every dollar someone receives without earning, another person has to work for without receiving.

Calperson's picture
Calperson
Joined:
Dec. 11, 2010 9:21 am

In economics, it's called the multiplier effect. A simplified explanation::

"Marginal Propensity to Consume, targeting the Multiplier and "benevolent" consumption"

"As has been discussed, the Multiplier relies on the MPC (Marginal Propensity to Consume). The use of the term MPC here, is a reference to the MPC of a country (or similar economic unit) as a whole, and the theory and the mathematical formulae apply to this use of the term. However, individuals have an MPC, and furthermore MPC is not homogeneous across society. Even if it was, the nature of the consumption is not homogeneous. Some consumption may be seen as more benevolent (to the economy) than others. Therefore spending could be targeted where it would do most benefit, and thus generate the highest (closest to 1) MPC. This has traditionally been regarded as construction or other major projects (which also bring a direct benefit in the form of the finished product)."

"Clearly, some sectors of society are likely to have a much higher MPC than others. Someone with above average wealth or income or both may have a very low (short term, at least) MPC of nearly zero - saving most of any extra income."

"But a pensioner, for example, will have an MPC of 1 or even greater than 1. This is because a pensioner is quite likely to spend every penny of any extra income. Further, if the extra income is seen as regular extra income, and guaranteed into the future, the pensioner may actually spend MORE than the extra £1. This would occur where the extra income stream gives confidence that the individual does not need to put aside as much in the form of savings, or perhaps can even dip into existing savings."

"More importantly, this consumption is much more likely to occur in local small business - local shops, pubs and other leisure activities for example. These types of businesses are themselves likely to have a high MPC, and again the nature of their consumption is likely to be in the same, or next tier of businesses, and also of a benevolent nature."

"Other individuals with a high, and benevolent, MPC would include almost anyone on a low income - students, parents with young children, and of course, the unemployed."

http://en.wikipedia.org/wiki/Multiplier_Effect

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The money circulates many times in the economy, generating tax and business revenues everytime its circulated...until ultimately it ends up in the coffers of Walmart, Wall Street or esoteric financial paper generated by the banking system....where it disappears from circulation.The money "disappeared" from Main St. has to be continually replaced.. Soc. Security and other social programs are one way we do that.

Another way we do that is through easy credit. The credit route ultimately collapses when we reach the limit of an inability to repay additional loans,....as now. "Faced by a failure of credit, they have proposed only the lending of more money" - FDR

Retired Monk - "Ideology is a disease".

polycarp2
Joined:
Jul. 31, 2007 3:01 pm

Well then logically, we should have a 100% tax rate, so we can have the maximum multiplier effect.

PeeWee Returns's picture
PeeWee Returns
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Jul. 31, 2007 3:01 pm

Nope. That would upset the balance that has to be maintained beween capital and Main Street. Stepping back from the supply-side extreme doesn't mean embracing a Keynesian extreme.

Or, we can just maintain the course and see when the current ideology finally kicks in and straightens things out...ignoring that its what brought about the economic decline in the first place..

Maybe we can keep on doing what Greece and Latvia are doing...and watch the economy continue to shrink, . Watch tax revenues continue to decline from the shrinkage, and the national debt explode even as cut-backs are put in place.

An official unemployment rate in the 20%-30% range and rising deficits are a distinct possibility. if the Greek/Latvian road to austerity become national policy...

Of course,I realize American exceptionaism makes us immune to economic functioning. LOL..

"Ideological thinking can learn nothing new even if it is something that has just come to pass. " - .Hannah Arendt

Retired Monk - "Ideology is a disease"

..

polycarp2
Joined:
Jul. 31, 2007 3:01 pm

Well then logically we should lower the tax rate to 0%, and according to the right winger tax cuts raise revnues crowd that'll generate an infinite amount of tax dollars.

Phaedrus76's picture
Phaedrus76
Joined:
Sep. 14, 2010 7:21 pm
Quote PeeWee Returns:

Well then logically, we should have a 100% tax rate, so we can have the maximum multiplier effect.

It's called diminishing returns smarty. Why don't you set aside your ideology and learn something.

ah2
Joined:
Dec. 13, 2010 9:00 pm

Welfare dollars and foodstamps are a huge part of the economy. Those individuals on the lower scale of the economic ladder will spend every cent they receive. That adds up to billions of dollars that is now changing hands in our economy. That spending is the demand that creates jobs. Those jobs equal more tax revenue. Cut off Medicare, Medicade, Welfare, Foodstamps, Unemployment benefits and you take billions out of the economy which will lead to more job losses and more business closings. It's a snow ball effect. Those at the top of the food chain are actually sowly choking off their own income. It looks good in the short term but in the long term they are only hurting themselves.

Bush_Wacker's picture
Bush_Wacker
Joined:
Jun. 25, 2011 6:53 am

I posted this in another thread but check out the Gini Coefficient

http://en.wikipedia.org/wiki/Gini_coefficient

Its a measure of wealth disparity in countries.

0 - is total equality, 1 - it total inequality

This is the historical Gini for USA

Gini indices for the United States at various times, according to the US Census Bureau:[8][9][10]

  • 1929: 45.0 (estimated)
  • 1947: 37.6 (estimated)
  • 1967: 39.7 (first year reported)
  • 1968: 38.6 (lowest index reported)
  • 1970: 39.4
  • 1980: 40.3
  • 1990: 42.8
    • (Recalculations made in 1992 added a significant upward shift for later values)
  • 2000: 46.2
  • 2005: 46.9
  • 2006: 47.0 (highest index reported)
  • 2007: 46.3
  • 2008: 46.69
  • 2009: 46.8

At 46.8 we are right in the middle and have not seen significant growth disparity. This is used by CIA, World Bank, IMF and many other organizations to measure geo-economic dispertion in various regions.

Developed economically stable countries like Brazil (6.5% unemployment), China (4.1% unemployment), USA (9% unemployment), India (9.4% unemployment), and UK (7.8% unemployment) are higher on the list. Mexico is high becauce of corruption (5.5% unemployment). Take away... If the economy is strong, the rich make money... But this also benefits the workers through lower unemployment. You make think 9% in USA is high but check out Greece (15.9%) , Spain (21.3%), Ireland (14.6%)....

14CommonSense's picture
14CommonSense
Joined:
Aug. 23, 2010 11:56 am

Only if you consider the middle a comfortable place to be. Tunisia was at 40.1 in 2009, and we all know how well that has been working out for them.

rmunson0
Joined:
Jul. 31, 2007 3:01 pm

So for about 80 years 1929 - 2009 we were with same 10 pts of the center. Where do you feel would should be on the Gini Coefficient Mr. Wizard?

14CommonSense's picture
14CommonSense
Joined:
Aug. 23, 2010 11:56 am

We should probably be at the point where Say's Law isn't so severely disrupted as to collapse an economy.

The ideal is to have income distributed in such a manner that everything that is produced can be bought.

In theory, excess profits...income that isn't spent...is re-invested back into production. Spent back into the economy keeping Say's Law in balance. . In actuality,that isn't so except at the level of small business. The income is extracted from the economy and thrown into financial paper..

Financial capitalism has made theory explaining Industrial Capitalism irrelevant. The theory is no longer in operation.to any large degree except at the level of small business..

Capitalism is nothing more than generating a surplus to maintain or expand production/services. Small business does that. Moneyism.... extractions from the economy that are thrown into financial paper, has nothing to do with that. It contradicts the basic fundamental of capitalism.

Moneyism and Capitalism are two very different things. That distinction isn't being made. Capitalism, generating a surplus to maintain or expand production is being sacrificed at the alter of finance. . The economy is being mined and turned into .. financial paper. We're going splat..

Retired Monk - "Ideology is a disease".

polycarp2
Joined:
Jul. 31, 2007 3:01 pm

Currently Chatting

The other way we're subsidizing Walmart...

Most of us know how taxpayers subsidize Walmart's low wages with billions of dollars in Medicaid, food stamps, and other financial assistance for workers. But, did you know that we're also subsidizing the retail giant by paying the cost of their environmental destruction.

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