Regular Times columist Matthew Parris writes eloquently, if with somewhat sweeping generalisation, about how “we” do not want to hear the truth. “We” do not want change. “We” want things to carry on as they are. “We” want to stay as well off as “we” are, and will snarl and rage at any politician who dares to even hint otherwise. He has a point. Whichever combination of politicians turn out to have lumbered themselves with the grim task of running the next British government will have to cut, cut and cut. So, what should they cut?
Let me prove that Matthew Parris’s generalisations don’t entirely apply to me by suggesting a reduction in some at least of the fluid that I personally now suck from the governmental tit. How about abolishing these?
That thing gives me, at no charge whatever, the run of the entire London Underground network, plus all buses in the same approximate area, plus, if I understand things correctly, free travel on local buses throughout the UK.
I wouldn’t like losing all that, not one bit. But I acknowledge that cuts like this will have to happen, if only to soften the blows a little for others who are being told that they must suffer far worse. Like losing their entire jobs for instance.
Can you, esteemed commenter, suggest other cuts, that you personally would be quite badly hurt by, but which you nevertheless think would be a good thing to do? Or, at least, a cut or cuts that would wound you personally, maybe far worse that losing my “Freedom Pass” would wound me, but which you would find it very hard to argue against? Maybe you have an entire job that you can’t defend and are now ready to admit that you wouldn’t have in a better governed country.
I wonder how Matthew Parris would answer this question.
Or Guy Herbert, whose posting immediately below I had not read when I posted this.
Stupid American chiming in…What is a Freedom Pass and why would it impact you to lose it?
Also, before 9/11 was it called a French Pass? 🙂
Jeff
Free bus travel in London for Under 16’s. I use every weekday.
Also, maybe not so much me, but I know a few friends who’d be affected by the abolition of EMA.(Education maintenance allowance) which is £30 a week + bonuses.
Jeff
For the benefit of you and of all those other wretched Samizdata readers who do not live in London, I have added a brief answer to your question in the original posting, just under the picture.
Thanks for alerting me to the need to do this so speedily.
Everything.
I am young, healthy, with a good enough job to afford private health cover on top of 5% pension contributions and taxes.
I have no children in school, I graduate university in two months. I never use public transport and my little ford fiesta’s suspension handles fine the potholes and country lanes around the tory safe seat where I live already. I can’t imagine how much worse it could get.
Although I’d have to sort out a lot of personal commitments first, I’m ready to be incarcerated in jail for an act of non-violent civil disobedience in support of the principle of private property and the freedom of the individual implied by that principle.
“Free” public health service. (Providing they deregulated the service first and passed on most of the savings to the tax payer).
we’d need to drop the bailouts, the imf funding, the holier-than-thou detrius that says one class of people is too big too fail.
we need to drop the fabrication of context regarding ones’ best interests contrasted against anothers’ while the coffers are being emptied to make another interest payment on 200% (give or take) of gdp in bonds.
we need to realize that no matter how many times someone on television, or ‘in the know’, deign to state we’re only capable of understanding the kiddie table economic theory behind all this, they have the purer understanding of the world while seated at the ‘adult’ table, and all the while shuttling back and forth to the buffet with very little substance to say.
we’d need to drop the self assumed naivete that the experts actually have something worth listening too, that the media has a self interest to challenge or question common dogma in order to maintain a public trust.
and there’s the crux of the matter. trust. we’d need to drop that too if we want to have more than a snowball’s chance in hell of seeing past the public statements to the unsaid reality of the situation.
From the US …
Mortgage Tax Credit, and my Social Security payments when I retire.
Frankly, the first would be painful, but not as painful as it would be to the people who overbought on their McMansions and expected to use the expected appreciation in property value as a proxy for savings. And those people will lose their homes anyway, tax credits or not.
Social Security? There’s no real problem forgoing a benefit that’s gone already. I’d be more than happy to ‘gift’ ever damn cent of Social Security contributions I’ve made here in the US if they promise to never deduct any from me ever again.
Being able to read old editions of the Times online – a service provided by the state-run library. I’d miss that.
1. I benefited from 21 years of education paid for by other tax payers. I think it is wrong that I was able to do this.
2. I currently benefit from health care paid for by other tax payers. Although I’m in the best of health and never use the services, I benefit because I don’t have to buy insurance, and if I was to be hit by a bus today I’d be treated without having to pay. I don’t think I should have this benefit; I should have to buy my own insurance, as I did when I lived in Switzerland.
I think the question is not entirely a correct one.
You might be willing to give up this or that government program that affects you personally, but if you can afford additional expense that will result in – you’re not sufficiently hurt. It is not the case with other users.
In proposing to cut transport pass you don’t really risk your own immobility -because you can afford to pay for buses and the tube – but you are willing to leave other users of the pass immobile. You don’t know how many of them don’t have your income, you don’t know how badly they need the service (after all, you’re not disabled, but many others are).
The same with a commenter who proposed to cut Social Security. I wonder if his elderly parents will be willing to do that – after a lifetime payments to the fund, right when the monthly check from SS is their biggest income? When they finally got to collect on government’ promise? What, they have other sources of income and other savings? Good for them – but other seniors don’t. Do you know how many of them in that situation out there?
It’s all good and noble to be self-sacrificing and to willing to cut this or that benefit – but speak for yourself, and yourself only.
You don’t want to use [ridiculously named] Freedom Pass? Fine, wonderful, you’re an upstanding citizen: just don’t apply for it. You don’t want Social Security: excellent, send to SS department your personal resignation.
But don'[t judge other people’s needs by your own. Don’t presume what you can afford live without others can, too. In deciding FOR them you’ll behave just like the government does: coercing people into doing something they might be against.
Services can be withdrawn on a staged basis – say today that people who are 55 now won’t get a free bus pass when they reach 65. Or that they will be means tested or some other qualification.
Or that child benefits for *new* claimants will only cover the first child.
Or that National Insurance will not be levied on workers under the age of 30 with the proviso that they get no state pension when they retire.
The last one – what better way to reinvigorate the economy and the pension industry in Britain that our Government has done so much to destroy!
In basic terms – a managed retreat of the welfare state to return it to a hand up not a handout.
Alternatively the profligacy will only come to an end when the money runs out – if hordes of pensioners maintained a constant presence on the underground and bus services in that there London, thereby clogging it up, it would become un-workable in short order. Fill yer boots like everyone else is doing.
“Don’t presume what you can afford [to] live without others can, too.”
Tatyana, dear, that is a very noble liberal sentiment. It always feels good to be generous with other people’s money. However, giving up the thrill of vicarious generosity is only the first of the sacrifices we are all going to have to make.
The fact of the matter is that we are all going to have to “do without”. The tax-consuming pensioner is going to have to pay for her own bus fares. The welfare-dependent single mother is going to have to pay her own rent. The tax-paying worker is going to have to make do with a rainy week in miserable Bognor Regis instead of a sun-filled vacation on the beaches of Spain.
Britain, like most of the countries in the western world, has been living above its means — being generous not just with other tax-payers’ money but also with money borrowed from foreigners. Like a person who ran up big bills on credit cards, it was fun while it lasted. Now it is payback time. No more dining at the Ritz, and charging the credit card. Now it is watch your pennies — and beans on toast.
What Tatyana said, with two caveats: first, we don’t know what Brian’s financial situation is and it’s none of our business anyway. Second, the mere fact that people are against something does not make a principled argument. This should be about the least destructive path of correcting wrongs and about plain compassion, not about democracy.
Tatyana,
Social Security? I’m specifically targeting the US Social Security System. The problem is that there’s no money left. None. It’s all IOUs. Would total abolition of the plan hurt seniors now? Sure.
You know who it will hurt even more? The kids just coming online into the job market now. Because while there’s a hope that SS won’t crash and burn in my parent-in-laws lifetimes, there’s not a hope in hell that those kids will receive a single red cent of anything they put in.
What I tried to articulate (but failed at) was that I opt out. We don’t abolish the program (even though on moral grounds, the US Government should send every SS contributor a letter telling them that all the money they ever contributed has been squandered).
I’ve contributed for over 15 years. My wife’s contributed for 30. I say call it quits. I get nothing back. If you believe the propaganda about how Social Security works, I’m giving up all that money. But you know and I know that I’m probably no worse off, because right now, I have the expectation that I may recoup some of it when I finally retire, by pillaging the next generation of contributors.
So, let the kids coming online now pay for the SS benefits to their grandparents, rather than me.
To echo Gareth, the only ‘civilzed’ solution is to have a staged withdrawal of services. In my case, I’m suggesting that I forgo a possible future benefit, by disintermediating the process of my kids feeding my parents-in-law.
Oh, btw, I’ll also forgo the Social Secuirty I was promised as a UK citizen that I also paid into for the other 15 years of my working life, for the same reasons. Those bastards in Westminster squandered that years ago too.
I’m here as long as I think I’m doing more good than harm. That being said, I’d likely quit if they promised to permanently leave my position unfilled.
Tatyana either just doesn’t get it, or is a master dissembler.
She complains that by eliminating the Freedom Pass you’d be taking the choice from those who want to keep it. But considering that the cost of the thing is borne partially by people other than those who use it, you’re taking from them only the ability to force other people to pay for their transportation. So, of course, rather than stopping an ongoing theft, this is “leaving other users of the pass immobile.”
I’ll speak for myself and myself only. I currently collect no direct government benefits whatsoever. I do pay a lot of taxes, including Social Security, with no choice and with the knowledge that I will never collect. If there were an opt-out, I would. But that means no only forgoing any future benefits, but also not being forced to pay fore other people’s current benefits.
Or, in the language of Tatyana and those who think like her, I wish to take away their freedom to steal my money.
Enough people have pummelled Tatyana’s silly post that I don’t need to my add my two cents’ worth. But I will respond to Alisa’s comment: Any time you use “compassion” and “government” in the same sentence the inevitable result is bad policy. Governments cannot be “compassionate”; only people can. If you’re compassionate with your own money, that’s laudable. But when you presume to be compassionate with mine, it’s theft.
Frankly, I’m surprised at both of you.
Laird, screw the government, this is my personal opinion. There are people who are old and sick, whose meager existence depends on the SS check. They don’t steal my money, the government forced/lured these people into this position of dependency, and then stole my money and yours and gave some of it to them so that they wouldn’t starve to death. It may be their own fault for being weak and stupid when they were younger, but it still doesn’t mean that I’m going to support throwing them to the dogs. Among other things, being an individualist means seeing actual individuals behind numbers and theories and ideologies.
Alice, dahlink, I’m no liberal (or, rather, if you insist on calling me that, please preface the word with “classical”). Incidentally, I was not aware that tax-paying workers in Britain are subsidized by government to be able to spend their vacations in Spain instead of Brighton (not the one in Brooklyn, NY).
I am not being “liberal with other people’s money”. But I think Brian is, partially, by advocating, in theory, cutting any program one feels he might live without, with no concern for others who use this program out of legitimate need. I’m well aware that there are armies of useless parasites abusing the system, and big part of that parasitism are the clerks and bureaucrats of the system itself. But to throw baby with the water, in one harsh blow, so to speak (apologies for mixed metaphors) won’t do, either.
Dave, if you want to take away my freedom and to call me dirty names just for voicing a well-explained and legitimate opinion – please come over and try, I’ll even send you my address – but be prepared to NEVER RETURN, you MFer. I am tired of “brave” warriors who threatens me online. Come and you’ll have a chance to see me, a “master dissembler”, in action. And if you don’t like my language – tough, that’s all I can say. Also: I’m not aware of “:those who thinks like me” – my thoughts are my own, borne by my life experience and life-stories of people around me that I observe.
Bod,
I, too, live in US and I, too, pay Social Security, and have been, for 15 years. Involuntarily. I, too, had been donating part of my paycheck to “unemployment insurance’ – also involuntarily. Unfortunately, I am put in a position (by no fault of my own) to having to collect so called “benefits”. Which is simply MY OWN MONEY that were expropriated from me without my consent!
I would absolutely prefer it not to be so; I’d rather be able to keep it and to invest it at my own risk. But nobody asked my opinion.
Nobody asked your in-laws opinion, either. They have contributed a lot of money into that Ponzi scheme. But the fact that it is a scheme and that it is bankrupt does not relieve US Government from their obligation to pay them back. I don’t quite understand your second comment – if you’re saying you, personally, and your wife,want to stop paying into SS and rely only on your own savings – great, fine, as I said before – I applaud you. But do not speak for others – they might NOT have those savings. And to make them to start now is dishonest – because they relied on the government-promised safety net.
Personally, I like Gareth proposal – phased-out, based on proven means, would be the right thing to do. Not “we squandered all your money, so all our promises and all our obligations are non-existent, starting today” shock therapy. Just because someone can pay their bills indefinitely w/o $1300/month SS check, doesn’t mean everybody can.
Alisa, to your 1st objection: agree. It would not be my business, and indeed, it would be presumptuous of me to make guesses about his income – if he himself did not touch on the subject(Link).
I’m not as clear on your 2nd objection; please clarify, if that’s not too laborious for you.
Laird, what’s silly about my objection? That I think it is immoral and downright wrong to expropriate other people’s income and withdraw their legitimate benefits (if their receipt is stemmed out of documented need) just because I myself am in a position, financially, to afford them?
I’m not talking about “compassion” as a government function. I’m talking about contractual obligation that government has with its taxpayers.
Tanya, my second objection was the point that the mere fact that some people object to the discontinuation of the welfare state is not reason enough for the welfare to continue. I also happen to favor Gareth’s approach. Problem is, the way things are going, this whole discussion is purely academic, I’m afraid.
Tatyana – I like your style! Can I ask about something you wrote?
“I’m not talking about “compassion” as a government function. I’m talking about contractual obligation that government has with its taxpayers.”
Extrapolating a huge long way from your name and what you have mentioned about yourself, would it be out of line to suggest that your view on this issue has been influenced by what happened following the break-up of the USSR? When paychecks stopped coming and pensions declined into worthlessness? And a lot of decent people suffered?
None of us want to see needless suffering. Though I confess I would be glad to treat (temporarily) that “Bill of Attainder” stuff with the same contempt that politicians have treated the rest of the Constitution and go hunt down & impoverish the children & grand-children of the scum who voted for the Social Security Ponzi Scheme. Even unto the fourth generation! That would be needed suffering – make future generations of politicians think twice.
Still, who can enforce a contract when the failing party is the government itself? Russian society survived the implosion of communism. Let’s hope that we in the West can do as good a job of surviving the inevitable implosion of Big Government liberalism.
Capital Gains Tax exemption on your first home.
Advert free, tax funded BBC telly and radio.
Lying politicians who won’t give it to us straight.
Bank holidays.
Personal allowances (but with a lower starting rate of tax).
NHS dentistry.(for people of working age)
Farm subsidies.
Free access to museums and galleries.
Kerbside recycling.
I would also happily do without the council snoozepaper that goes to every home in my county. It is such a mine of useful information on how the county council is spending taxes I cannot possibly imagine life without it…
The assurance that should I have a massive family whilst jobless some other mug has to pay for them.
The British Potato Council.
Raindrops on roses and whiskers on kittens. Bright copper kettles and warm woollen mittens.
why do you have to have a freedom pass as a pensioner? Don’t you have other IDs showing you are a pensioner. The issuing of these passes looks like another boondoggle to employ some more useless civil servants. In Philadelphia all pensioners travel free with no ID needing to be shown, however proof of age could be asked for. In Washington DC pensioners go for half fare. In Vancouver pensioners travel on a concession fare, same as children. Again no ID need be shown but if requested your medical card is proof of age, it’s coloured gold for us seniors. In three years of riding no driver has asked for proof of age and I look at least 5 years younger than I am.
The problem here, Tatyana, is that you could level the same (legitimate) accusation at me for wanting the Mortgage Tax Relief abolished. And if I’d selected something else, her objection would be equally valid. I’m not aware of any ‘benefit’ the US government extends to me where I would be the greatest victim of said benefit cuts.
The whole point of modern western government is to undermine civil society so thoroughly, that normal people shrink from doing that which is morally right, in the name of ‘equality’.
And here’s the one point where I do cleave to Rand’s views. As soon as you put the interests of someone else above yourself (and to a fair degree, your own immediate family/clan/tribe etc), you’re utterly fucked, because next thing you know, you’re going to be so tied up in working for other people; people whose only interest in you is to exploit you, that the only way to escape the disease is to die. Or do something as radical as Rand proposed in Atlas Shrugged.
So Tatyana, if you’re sanguine about subsidizing older people who were promised benefits based on assets which no longer exist, I guess you’re equally sanguine about soaking the next generation when your turn comes? I’m sure this isn’t the case, since you yourself referred to it as a Ponzi Scheme. So what’s your solution?
Isn’t it indefensible to knowingly participate in a Ponzi scheme where you know people will suffer when the whole thing blows up?
One last thing – the point is Tatyana – that the money you are receiving as benefits ‘through no fault of your own’ – isn’t your money. You know this – you KNOW this is a Ponzi scheme, and therefore you’re aware that YOUR contributions were spent the week they were exproprated.
And that was the point I sought to make. If my contribution today gets put in grandpa’s pocket tomorrow, and in 20 years time, my kids’ contributions go in my pocket, let’s just simplify things and let my kid make grandpa’s contribution. And as the demographic pyramid shifts, we crank down the benefits that way.
Nobody, least of all me, is indifferent to the fact that you, me, my wife, her parents, and everyone else who has participated in this scam have a moral right to claim benefit based on the (worthless) ‘contract’ they have with Uncle Sam. The problem is that Ponzi schemes don’t ‘fix themselves’ – they get bigger and bigger, until they blow up, hurting more people the longer they go on. And when they do blow up, NOBODY is going to care a tinker’s cuss about whether a bunch of people they don’t know are left destitute in an economy where the purchasing power of whatever money they may have saved is close to zero.
Social Security is like methamphetamine addiction. You can’t get clean overnight; assuming you want to. And what I see is a society that is in denial over its addiction, and when presented with the bare truth, seems to think that maybe losing all your teeth and those lesions aren’t so bad after all.
/rant off
Alice, if you’re the same Alice who moved from UK to TX, then I think might recall me and have a general idea of where I’m coming from – I used to comment on your blog; if not – my apologies.
Well, personally I and the family were not affected by Russian Default, but naturally, I know a lot about it. But it was not that example that I had in mind, just that reading Brian’s post it struck me as a bit of too narrow-focused a question to propose, even theoretically. You might say I object mostly on ethical grounds. I don’t discount a possibility that some of the recipients of benefits are actually what they claim to be – old, sick, disabled, down on their last dollar and on the brink of nervous breakdown. I would prefer these people not to be in the position to beg for government’ cheese, considering the system being so convoluted as mostly fraudsters can navigate it. But I’d rather err to their benefit than take it on my conscience a statement that since I can afford a doctor’s visit, all medical assistance, in all forms and to all people, must be stopped at once.
Bod,
Since I have no idea what Mortgage Tax Relief is, I can’t be advocating for or against it.
I know about local NY Mortgage tax – which is 2.175% taken automatically by the city for every $500,000 mortgage taken by a private person who wishes to purchase a property (which comes to 10,875) I consider it an outrage and definitely would like it to be eliminated.
Generally, my principle is less taxes – the better.
This year I was doing my taxes’ calculations myself, since I can’t afford the services of a tax accountant who was doing the filing for me in all previous years. I used the TurboTax and was stunned at the amount of “credits available – which I wasn’t eligible for, as it turned out. But somebody else surely did. All kinds of weird special interest groups and local state/municipal programs mean somebody was the recipient.
Majority of them are a joke I’d have no hesitation to slash – like subsidy for a local dance group or a credit for Samoans or American Indians who can prove they have started their own business – on top of general “business expenses” track.
You are mistaken on 2 counts:
1)I’m not a recipient of Social Security
2) Recognizing that it is a bankrupt Ponzi scheme does not mean that your in-laws (or you, or me) are not entitled to get our money back. We DID pay for it. The government has no money now? Not my problem. They have to satisfy their obligations. I’m not voluntarily withdrawing my claim. They owe me – not somebody else’s money, but what is rightfully mine. For at least the amount I contributed p- with all the interest it accrued over 15 years I’ve been contributing so far.
You decide to forgive the government their debt to you – fine, that’s your business. But do not presume I have to do it, too.
I don’t want my son paying into the fund he’ll never receive anything from. That’s why I said that Gareth’ solution seems least painful to me.
Tatyana:
Somehow you seem to have read something I didn’t write. I have no desire to take freedom from you or anyone else, merely to stop it being taken from me. I used that phrase because you couched the debate in those terms, as if those who want to reduce government theft are somehow taking from other people, rather than keeping what is theirs.
“Master dissembler” surely is an insult in my book, but a dirty name? Hardly. And any threat was purely in your own imagination.
See, the idea that “the government” owes you money is all well and good, and I even agree with it. But you have no right to demand that they repay that debt with money taken from other people. That’s the big dilemma. Two wrongs…
Tatyana and Gareth are coming at this from a different angle than mine, but… something along those lines. For several reasons:
1) Pure extended selfishness. The Ponzis of the State have already hampered me and mine more than sufficiently. Having snookered many of my kith and kin into a corner – me too, if one considers long-term health provision – and enriched themselves and their friends quite nicely in the process, I have no mind to cheer the kind of ‘austerities’ that will leave us robbed in the dust, and them pontificating over banquets bought with our loot of many years.
2) Morals and solidarity. What I won’t accept for myself and my kin, I can’t propose for other harmless persons in the same or worse positions.
3) Practicality. On the one hand, there is no conceivable change in government – including the revengeful revolutionary kind – that will not leave the poor bleeding suckers bleeding from their losses, and their overseers banqueting. Proposing virtuous cuts in valued services makes precisely as much practical sense as proposing to solve the crisis by ‘efficiency savings’, since neither will occur. The pain that government has a real incentive to deliver will not be mostly of a therapeutic character.
On the other hand, there is no possible chance of getting popular consent for orderly reforms that will cut the legs out from under much of the population. They will exercise their natural self-interest at this point, violently if necessary. A strong and principled government could probably not keep order whilst abruptly dissolving enough fantasy-funded welfare to make a difference. This kind certainly could not.
Without the consent of either the government or the governed, the most you can do is tinker at the fringes; resist further expansion scams; and if you’re really lucky, force a withdrawal in slow enough stages to let previously cornered persons make viable lives in the vacated ground. Which brings us back to Gareth’s suggestion.
There is a problem with this, which I think Brian and others see very clearly. Even if this can somehow be achieved, it’s most unlikely to be enough or to come in time. Social implosion, rather than civil society, beckons in this case. Further, should the retreat be successfully managed by the current oligarchy, it will be on their terms. Nasty, frog-boiling, expropriatory terms. This is also not something to look forward to.
So the only point in talking about what responsible albeit painful policies the State ‘ought’ to adopt… is as a means to increase the cost of, and slow the adoption of, the irresponsible ones we will actually get. The people who are going to have to develop the real replacements for dependency and welfare, are the ones with incentives to do so – namely, the rest of us. Even with the dead weight on our backs, and the robbers’ hands in our pockets.
If we can’t actually invade Nanny State’s social space before she devastates it, all we will get is more desperate people looking covetously over other people’s fences.
It’s not about what our masters ought to do, but what we should and will do despite them.
So my answer to Brian should not be, “Okay, ‘we’ should chuck the BBC then,” – though I think, with some personal regret, that we ought to – but at least some human-scale and concrete thing that I will do.
At the moment, part of what I’m doing is writing a novel which I hope will – along with the entertainment – provoke a few thoughts amongst people who aren’t normally inclined towards libertarianism. The other part is studying microenterprise and strategic issues like fury, because I keep running up against things I just don’t know enough about. That isn’t really action at all, though, or not yet.
What else should I be doing? Lowering consumption; finding more investments that can’t easily be stolen or spoiled. More stuff together with my kith and kin, and other social networks. Short-circuiting illegitimate restrictions and rents on getting any damned thing done. More contributions to charities – real ones. Time and resources set aside for the political resistance: Taxpayer’s Alliance, Manifesto Club, EFF, stuff like that. (I’m a natural non-joiner, but…)
Generalities, and pebbles in ponds. It’s a start, and a start only.
And in its extended sense, it was a bloody good question!
@jamess: “(Providing they deregulated the service first and passed on most of the savings to the tax payer).”
Well that’s just the thing, is it not?
They won’t, and they won’t, respectively.
This is the sting in the tail with these statists: they have already taken the money, and now they can’t deliver, because they handed it all over to their client state, or simply threw it away.
So we are going to have to pay over again for all these things we have already paid for.
As others have pointed out, it’s pretty hard cheese on the many people who can’t actually afford to pay twice.
Dave, there is always a solution to any dilemma.
To yours – take the money from governments’ employees checks and pay off government’s obligations.
Fire useless bureaucrats, committees and subcommittees. Dispose of numerous government real estate. Auction government properties, departments and functions.
But we all know this will never happen by a peaceful process, much like a cancer will not go away nicely, just for asking.
Ironic, isnt it, that the ID pictured is called a ‘Freedom Pass’ when its practical function is to enslave one to the state?
Free public transportation isnt really free, but it at least delivers some benefit to a large number of people. I put forward a policy of continuing cutback of services, with those services benefiting the least number of people, to be cut first, and most deeply.
The fight to roll back the welfare state is unending, and starts anew, every day.
@Tatyana re: Mortgage Tax Relief
It’s a simple and extensive tax break which allows you to offset interest paid on your mortgage against your income tax. So it’s a tax break for people with a mortgage.
I’ve seen estimates that it costs the US about $90bn a year rising to $100bn next year.
It’s a distortion of the housing market, for one thing, and expensive for another. They phased it out in the UK in the late 80s and early 90s.
Having just been through the creeping horror that is a US tax return, a massive simplification of the tax code is massively over due.
Dave O’Neill,
Thanks, I didn’t know it is called that.
I wouldn’t eliminate it. Any tax breaks are good, in my view. The less taxes, the better.
In the post Brian was talking about access to government-provided services one might to give up in order to lessen the budget burden. I don’t see what services a home owner receives when he gets to keep more of his money; it simply means the government gets less of the revenue – and in your eyes, that’s a bad thing?
“Distorting the housing market” …it’s not the mortgage tax exemption that distorts the housing market, it’s the bad-credit/no-credit loan practices that are still encouraged by our government, despite confirmations of the role it played in furthering of the current crisis.
And if we want to lessen the budget burden, the better way (instead of giving them more of our earnings in the form of elimination of the mortgage exemption) would be to reduce government’ spending, a.i. to fire more gov-t employees.
@Tatyana,
I don’t see what services a home owner receives when he gets to keep more of his money; it simply means the government gets less of the revenue – and in your eyes, that’s a bad thing? …it simply means the government gets less of the revenue – and in your eyes, that’s a bad thing?
It is when it’s effectively a means of redistributed income from people without mortgages to people with them.
I don’t own a house in the US – I’ve only lived here a couple of years and buying at the top of a housing bubble struck me as stupid. So, here I am, renting a house, paying a mortgage sized sum of money in rent, paying for local services in my various local utilities and tax bills and I don’t get a tax break? So basically you’ve got a tax payer funded subsidy for mortgage payers…
What’s it for? Either you can afford to pay back the money you are borrowing commercially or you can’t. If you can’t, you borrow less. Except now you’re basically artificially inflating the property market by 20%(ish)…
Which brings me to…
“Distorting the housing market” …it’s not the mortgage tax exemption that distorts the housing market, it’s the bad-credit/no-credit loan practices that are still encouraged by our government, despite confirmations of the role it played in furthering of the current crisis.
Certainly the no-income, no proof of income mortgages were the straw that effectively destroyed the banking sector, but I think you’re confusing them with the regulated mortgage market.
The heart of what became the crisis was hedge funds and others buying up ANY mortgage paper, regulated and un-regulated, and then bundling it all as AAA rated mortgage bonds and then re-selling those.
Some of the brokers in the unregulated market were pulling in a few hundred thousand a month in commissions just for writing mortgages that they knew couldn’t be paid back.
Even now the original “sub prime” market is still running at default rates which are pretty close to the historical norms for the market.
Anyway, I’ll sit here paying extra tax to subsidize my neighbours homes and wait for them to drop another 10-15% when I guess I’ll jump onto that particular gravy train.
BTW – IMO, the crime isn’t so much that we (the tax payers) had to bail out the banking sector. I don’t see that there was much alternative when facing the likes of Citi, BoA and Chase going under. The crime is that nobody is, as yet, sitting in a jail cell for committing fraud against tax payers on such a monumental scale.
To hear, today, that Jamie Dimon is anti regulation on hedge funds when he was one of the people who pushed Hank Paulson into the $750BN TARP deal really really pushes my buttons.
I recommend _Too Big To Fail_ as “light” reading.
Dave makes a few important points, that I’d like to add to. The whole subprime blowup has many fathers, including, and not limited to:
1. House purchasers, being foolish enough to believing that there is such a thing as a free lunch.
2. Lenders who were happy to advise house purchasers that there was
3. ‘Bundlers’ whose teams created securitized products that could be sold, and resold as AAA-rated investments
4. Risk managers who are (for the most part) sacrificial goats, knowingly sitting in their corner offices pulling down high salaries while expecting to be fired as soon as one of the portfolios they watch over go tits up.
5. Ratings agencies who colluded on many levels to rate the resulting instruments as AAA-rated vehicles.
6. Sales teams, driven by management to sell the crap to fools.
7. Institutional Consultants who were complicit in convincing their clients that these products really were low risk.
8. The End Investors who allowed themselves to be suckered into buying them despite common sense telling them they were being sold a pile of shit.
The essential point being that each group deserves blame because they either (A) knew that they’d be rescued by the taxpayer if they fucked up or (B) thought that the firms in group (A) would be rescued and therefore they’d be OK.
Yes. Even many of the house purchasers deserve some blame because by 2004, everyone understood that liars’ loans were there for the taking, and that for most of them, the worst thing that could happen when they default is that they walk away from the house with $0 in their pocket, and no chance of gaining any credit for a few years. In some jurisdictions, they might even get left with the house.
Finally, when the economy changes (for better or worse) mortgages start being refinanced, and some tranches of MBS/CDS instruments were deep-sixed by the level of early prepayment, where investors just paid off the note on their property by legging over into another mortgage. Many quite sophisticated investors are blissfully ignorant of the impact of such ‘early payment risks’, and from having been tangentially involved in that industry for the last 6 years, I can tell you that many financial operations didn’t stress-test their portfolios with that risk factored in.
So, where’s the common thread? Sing it brothers and sisters – it’s the distorting effect of government policy and regulation. Every single one of these lackwits who should be doing time in the big house has someone in Congress, or some specific legislation they can fall back on as an alibi.
Dave O’Neill,
Your calculation is not entirely correct. As someone who has personal experience with both, being a homeowner and a renter, I can say the renters spend much, much less money on their housing.
You say your rent equal average mortgage payment, but you don’t get a tax break the homeowners get.
But all you pay is a rent. You did not make the initial investment at 20% downpayment (let’s for now not look into no-money-down loans, those are wrong – as I said before -and should not be extended). Other expenses that homeowners incur every month are home insurance bill (which could reach the size of a monthly mortgage payment, depending on the geographical location and insurance policy) – and which you, as a renter, do not . They also pay for repairs and maintenance to their property – you do not.
Another expense are the property taxes – in northern NJ, for instance, a 3-bedroom house’ yearly taxes are $9,000 to $12,000 a year, the biggest part of which goes towards local schools – which comes to another $1000 a month, almost close to additional mortgage payment monthly- and which homeowners have to pay regardless if they have children of school age or not. Renters pay nothing – and most of them who rents 3-bdrm houses do sent their children to local school.
Moreover, homeowners are the ones responsible to cleaning up public sidewalks around their property; that’s money and time spent w/o any compensation from renters or the municipality, and a punishable offense if a homeowner neglects to to do it.
Often rent does not include half of the utilities bills that homeowner has to pay: water and sewage, garbage collection, etc. So if your rent, f.i., is $1000 it might include $50 worth of heating fuel worth of utility bill, but your homeowner pays additional $100 for water/sewage, block association fees, etc – which you’re not even aware of, and which he pays even though he does not occupies the house!
Most importantly, you’re envious of the tax break the homeowners have – but you don’t realize the minuscule size of that “tax credit”, which comes to almost nothing when everything is counted. The credit is only to the interest portion, and it only applied to lower their taxable income. Nobody is getting their full mortgage payments back in tax return, you know. It makes economic sense, generally, only in the first 5 years of paying of the mortgage, as the interest portion of the monthly payments declines with each year. So the only people who take advantage of it are the speculators who buy the houses with 0% down and a huge mortgage, and then flip them for profit – during housing boom. Not the regular homeowner who shoulders the lion share of expenses the renters never take part of but enjoy their fruits.
Well first you look astonishingly young to have one of these things Brian – I thought they were for pension people only.
Also I must confess that I did not know they were called “Freedom Passes” – that is spooky.
It reminds me of the move by the Roman Empire (no I was not there – I am using language in the way people interested in the past do).
The Imperial regime took the Republican word “libertas” (liberty – freedom) and mutilated it (Barack Obama would say “fundementally transformed” it) to mean “free bread”.
Not freedom from the state – free stuff from the state. And, yes, this transformation (“bread and games”) started in the Late Republic and was a sign its death was comming. But with the Empire it is seen even on the coins.
Turn over an Imperal coin – and on the back you will often see the word Libertas, under a loaf of bread.
Still “what cuts will you accept”.
O.K. – how about my salary as a member of Kettering Council?
I can not say “I will reduce my expense claims” because I do not claim any expenses. But I do accept the “allowance” (the salary of about three thousand Pounds a year ).
If the Civil Servants and local govenrment officers will give up their wages (or even if they will work for minimum wage – not that I think an arbitary m.w. is a good idea anyway) I will give up my salary.
More hours sitting in the box at Wicksteed Park (rather than going to Council meetings) – why not?
I can not really effect things at meetings anyway – at least only rarely.
“But what about your free health care Paul”.
In case there are any innocent people reading this – British “free health care” is a bit of a myth.
In spite of being very poor I pay for private dental cover (otherwise I would have to deal with my own teeth – as my friend Derek D…. has to) I also pay for my own inhalers.
My mother’s “free health care” was a “nice cup of tea in a real china cup Paul” – oddly enough this did not cure her cancer and she died.
I have little doubt that if I got cancer (say skin cancer from sitting in a glass box out in the open in Wicksteed Park) my “free health care” would be much the same as my mother got.