Is Welfare Efficient?

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Is Welfare Efficient?

#1  Postby Ihavenofingerprints » May 17, 2013 5:57 am

I don't know how to word this question in a way that describes my exact query here, but here is my thought process:

People who receive welfare are unlikely to save that money.

If the money they receive is entirely spent on rent and goods/services then the tax businesses pay in this area (the percentage of the federal budget allocated to welfare) will be repaid by those on welfare.

So it would seem that welfare at the lower levels is less "wealth redistribution" and more of a loan to the poorest people in society to help them get by.

I tried to find academic articles on this topic but struggled. Anyone got any good links that discuss the efficiency or are familiar with the topic?
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Re: Is Welfare Efficient?

#2  Postby epete » May 17, 2013 6:00 am

I've seen reports and articles documenting that welfare spending is one of the best ways to stimulate an economy. As you say, virtually all of it is pumped straight back into the economy.
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Re: Is Welfare Efficient?

#3  Postby babel » May 17, 2013 6:12 am

Ihavenofingerprints wrote:I don't know how to word this question in a way that describes my exact query here, but here is my thought process:

People who receive welfare are unlikely to save that money.

If the money they receive is entirely spent on rent and goods/services then the tax businesses pay in this area (the percentage of the federal budget allocated to welfare) will be repaid by those on welfare.

So it would seem that welfare at the lower levels is less "wealth redistribution" and more of a loan to the poorest people in society to help them get by.

I tried to find academic articles on this topic but struggled. Anyone got any good links that discuss the efficiency or are familiar with the topic?

Another way to look at this is that the government is actually boosting the level of rent landlords can ask. I prefer social housing projects.
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Re: Is Welfare Efficient?

#4  Postby CdesignProponentsist » May 17, 2013 11:46 pm

I would guess, anything that can be done to provide support without actually cutting a check would make it more efficient. Providing job assistance where applicable would be a plus too.
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Re: Is Welfare Efficient?

#5  Postby CdesignProponentsist » May 17, 2013 11:50 pm

epete wrote:I've seen reports and articles documenting that welfare spending is one of the best ways to stimulate an economy. As you say, virtually all of it is pumped straight back into the economy.


From the government to welfare recipient to the crack dealer to the gold watch manufacturer.
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Re: Is Welfare Efficient?

#6  Postby THWOTH » May 18, 2013 12:13 am

:popcorn:
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Re: Is Welfare Efficient?

#7  Postby epete » May 18, 2013 5:43 am

CdesignProponentsist wrote:
epete wrote:I've seen reports and articles documenting that welfare spending is one of the best ways to stimulate an economy. As you say, virtually all of it is pumped straight back into the economy.


From the government to welfare recipient to the crack dealer to the gold watch manufacturer.


Nice bigoted views there. :roll:
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Re: Is Welfare Efficient?

#8  Postby Ihavenofingerprints » May 18, 2013 5:58 am

CdesignProponentsist wrote:
epete wrote:I've seen reports and articles documenting that welfare spending is one of the best ways to stimulate an economy. As you say, virtually all of it is pumped straight back into the economy.


From the government to welfare recipient to the crack dealer to the gold watch manufacturer.


The crack dealer will probably spend half of it on his costs at the local hardware store/shops, and on transporting his product. And as you point out the other half is likely to be spend on goods/assets in the short term because drug dealers are going to get caught if they use a bank account to save money.

This is the sort of thing I'm talking about, most of the welfare cheque ends up with the businesses who pay for it, and we have a hole bunch of people with a higher base living standard as a result. So the process is efficient.

Now don't take this as me encouraging people to spend their welfare cheque on drugs, and don't take this as me accepting the premise that welfare is entirely spent on illegal products. But if we accept that idea then it becomes a decent example of what I'm looking to point out.

That's why I'd also question whether or not public housing is a better idea than giving people money to pay rent with. The point about it going to landlords is a good one, because that isn't an efficient result (because a lot of the money is locked in one sector of the economy and doesn't spread to other businesses who pay tax). But if you build houses for people then that money goes predominantly to construction companies, so it's a similar conclusion. Boosting a labour industry is good for the economy in most cases though.

So just to be clear, an inefficient system is one where taxpayers money is given to these people and then (1) saved in a bank account or (2) taken out of the economy ie: overseas.

ps: if we want to discuss how to stop criminals getting money I can start a thread on that too. I just don't think it has a big impact on this discussion.
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Re: Is Welfare Efficient?

#9  Postby tuco » May 18, 2013 6:40 am

No it is not efficient in a sense that instead of giving people money for nothing it is more efficient giving people something to do even if by artificial, thus inefficient, employment.

For example, in recession it is more efficient to pay portion of wage of employee of a private business than to pay welfare if s/he was to become unemployed. In similar fashion, it is more efficient to give subsidies to employers who employ disabled than to pay disabled welfare. It is also more efficient to let unemployed to perform some municipal duties, like cleaning streets or washing dishes in municipally ran hospice, than to pay welfare. Though a balance of a kind needs to be find in such system.

To get better understanding of welfare spending one could look at different countries with different welfare spending and check correlation for crime rates, drug use, domestic violence etc.
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Re: Is Welfare Efficient?

#10  Postby Swed Simon » May 21, 2013 2:04 am

More welfare reduces absolute poverty, according to a comparison of fifteen countries*. The countries compared were at the time fifteen of the eighteen most affluent countries in the OECD (the others lacked adequate poverty data), so it shouldn't be generalized to be a relevant research when it comes to undeveloped countries. I'd say welfare is efficient in this regard.

*http://www.u.arizona.edu/~lkenwor/sf1999(poverty).pdf
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Re: Is Welfare Efficient?

#11  Postby Loren Michael » May 21, 2013 2:09 am

How do we determine efficiency here? Like, what's the intent with welfare and what is the value we're putting on that?

Are there alternatives to welfare that accomplish those ends at a lower cost?

I think it's kind of hard to talk about this without considering specific policies. Different policies accomplish the same end at different costs and in different circumstances.
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Re: Is Welfare Efficient?

#12  Postby Swed Simon » May 21, 2013 2:14 am

Loren Michael wrote:
Are there alternatives to welfare that accomplish those ends at a lower cost?

If we talk about reducing absolute poverty (in at least developed countries), suggestions on any better alternative would this far be in a state of theoretical considerations rather than empirical such (see my earlier post). What we do know is that countries with relatively less welfare are negatively correlated to reduction of absolute poverty, in comparison to welfare states*.

Developed countries welfare expenditures are also positively correlated to giving more to foreign aid*. An explanation suggested is that welfare states creates a national ideal of giving, and that this ideal ''spills over'' to include other countries. National welfare states (in developed countries) are ''efficient'' for other countries as well.

*http://citation.allacademic.com/meta/p_mla_apa_research_citation/0/9/7/9/0/p97901_index.html?phpsessid=80b15uhhp3dp7ahop91l614e16
*Not to be confused with socialism
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Re: Is Welfare Efficient?

#13  Postby Ihavenofingerprints » May 21, 2013 2:45 am

Loren Michael wrote:How do we determine efficiency here? Like, what's the intent with welfare and what is the value we're putting on that?


There's a couple of things I'm thinking of here.

First of all I was just wondering if businesses get most of the tax they pay in this area back through people spending their welfare money? But now I'm also wondering if giving the poorest welfare increase the number of consumers within an economy, and increases demand enough to benefit the economy more than removing this area of tax altogether.

I know we can just point at societies with a welfare system and show it works. But I'm wondering what it is that makes this system work, so we can know how to maximize it's benefits or reduce it's losses.
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Re: Is Welfare Efficient?

#14  Postby Loren Michael » May 21, 2013 2:49 am

Swed Simon wrote:
Loren Michael wrote:
Are there alternatives to welfare that accomplish those ends at a lower cost?

If we talk about reducing absolute poverty (in at least developed countries), suggestions on any better alternative would this far be in a state of theoretical considerations rather than empirical such (see my earlier post). What we do know is that countries with relatively less welfare are negatively correlated to reduction of absolute poverty, in comparison to welfare states*.

Developed countries welfare expenditures are also positively correlated to giving more to foreign aid*. An explanation suggested is that welfare states creates a national ideal of giving, and that this ideal ''spills over'' to include other countries. National welfare states (in developed countries) are ''efficient'' for other countries as well.

*http://citation.allacademic.com/meta/p_mla_apa_research_citation/0/9/7/9/0/p97901_index.html?phpsessid=80b15uhhp3dp7ahop91l614e16
*Not to be confused with socialism


Well, in America things like patent reform addressing the ridiculous cost of perscription drugs could lead to some massive gains for people at all levels of income.

I'm not sure what we could compare that to though. Would we compare the gains from a single bill of patent reform legislation...? What are our units of consideration here? Patent reform compared to the complete package of welfare of Denmark for example?

I also question the efficacy and nature of foreign aid.
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Re: Is Welfare Efficient?

#15  Postby Loren Michael » May 21, 2013 2:55 am

Ihavenofingerprints wrote:
Loren Michael wrote:How do we determine efficiency here? Like, what's the intent with welfare and what is the value we're putting on that?


There's a couple of things I'm thinking of here.

First of all I was just wondering if businesses get most of the tax they pay in this area back through people spending their welfare money? But now I'm also wondering if giving the poorest welfare increase the number of consumers within an economy, and increases demand enough to benefit the economy more than removing this area of tax altogether.

I know we can just point at societies with a welfare system and show it works. But I'm wondering what it is that makes this system work, so we can know how to maximize it's benefits or reduce it's losses.


I think I see what you're talking about. I'm pretty sympathetic. I don't have particularly well-formed (specific) views on welfare, but I like the outcomes that I see in a lot of places with what I would generally regard as a lot of welfare.

America actually spends a ton on welfare. It mostly is directed at the elderly though. I think there is a lot of room for specific critiques of welfare policies, and I think I'm reading that that's what you're asking about.
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Re: Is Welfare Efficient?

#16  Postby Loren Michael » May 21, 2013 3:00 am

I think one problem is that there isn't really a one-size-fits-all approach, not that anyone here is necessarily suggesting that. But, for example, America has a lot of places with entrenched poverty, with a lot of vicious cycles built in that make a lot of spending do not a lot of good.

Places without said cycles can approach welfare in a very different way. Once you largely get rid of things like violent crime and entrenched poverty, my understanding is that you can start spending a lot less on those issues. Dealing with an active problem and preventing one from arising are things with very different costs.
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Re: Is Welfare Efficient?

#17  Postby Ihavenofingerprints » May 21, 2013 3:07 am

Yeah true it' definitely relative. I think for the meantime I have no issue with a welfare policy (in fact I think they're positive programs) because pensioners and poor people alike spend this money entirely back into the market. Maybe I'll save this question for a lecturer next time I see them.
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Re: Is Welfare Efficient?

#18  Postby Loren Michael » May 21, 2013 3:35 am

I don't have problems with welfare in a general sense either; my primary gripe is keeping it vague, keeping the discussion at the "welfare" level, rather than the "specific policy" outcome. Like you, I wonder about the specifics.
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Re: Is Welfare Efficient?

#19  Postby FACT-MAN-2 » Jun 06, 2013 11:18 pm

Ihavenofingerprints wrote:I don't know how to word this question in a way that describes my exact query here, but here is my thought process:

People who receive welfare are unlikely to save that money.

If the money they receive is entirely spent on rent and goods/services then the tax businesses pay in this area (the percentage of the federal budget allocated to welfare) will be repaid by those on welfare.

So it would seem that welfare at the lower levels is less "wealth redistribution" and more of a loan to the poorest people in society to help them get by.

I tried to find academic articles on this topic but struggled. Anyone got any good links that discuss the efficiency or are familiar with the topic?

“Efficiency” should be measured in more ways than just economically.

I don’t know about the UK but in Canada and the US welfare is something that occurs when families find themselves tapped out or very nearly so, with very poor prospects for improving their lot any time soon.

There was a huge revamping of welfare in the US in 1996 in which those collecting a benefit were given five years to gain employment and get off welfare (and lots of help in doing so). Welfare rolls dropped precipitously and by 2005 were at all time lows.

Then the Great Recession struck and threw millions out of work and by 2009 welfare rolls were on the rise and have remained high since. Even lower ranking members of the armed forces have gone on food stamps.

Now, has welfare spending been efficient in terms of human well being? If it prevented families from sinking into destitute states, if it put food on the table and paid the rent and utilities and helped keep families intact, I think we would say yes, it has been “efficient.” The goal after all is to assist families who are in need and try to give them a financial floor that’s at least at the poverty level.

You seem to be more concerned with whether welfare is economically efficient, rather than humanly efficient. But it seems to me that even if one determined that it wasn’t economically efficient, the idea that it has prevented families from sinking into abject poverty and risking lives, especially children’s lives, it has to be deemed a success and it should be carried on whenever situations call for it.

The job of government is to promulgate legislation that boosts economies in poor neighborhoods and communities and provides ways and means for those living in them to break the cycle and gain some economic foothold that opens up avenues for betterment.

No civilized society can reasonably ignore its worse off people and simply leave them adrift in a sea of economic deterioration and not care what happens to them, although this seems to be exactly what American Tea Baggers and its captive Republican party would suggest we do, even urge and advocate that we do.

Here’s a little background from Wiki:


n the United States, “welfare” is most often used to refer to means-tested cash benefits, especially the Aid to Families with Dependent Children (AFDC) program and its successor, theTemporary

Assistance for Needy Families
Block Grant. Sometimes, especially by critics of government social spending, it is used to refer to all means tested programs, including for example, healthcare through Medicaid and food and nutrition programs (SNAP).[20]

AFDC (originally called Aid to Dependent Children) ADC was created during the Great Depression to alleviate the burden of poverty of families with children and allow widowed mothers to maintain their households. (New Deal employment program such as the Works Progress Administration primarily served men.) Prior to the New Deal, anti-poverty programs were primarily operated by private charities or state or local governments; however, these programs were overwhelmed by the depth of need during the Depression.[21] The United States has no national program of cash assistance for non-disabled poor individuals who are not raising children. The exception to this is permanent alimony, which is still administered in a handful of states including New Jersey, Florida and Oregon. Alimony Reform movements in these states are attempting to end this form of private welfare.[22]

In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act changed the structure of Welfare payments and added new criteria to states that received Welfare funding. After reforms, which President Clinton said would "end Welfare as we know it",[23][dead link] amounts from the federal government were given out in a flat rateper state based on population.[24][dead link] Each state must meet certain criteria to ensure recipients are being encouraged to work themselves out of Welfare. The new program is called Temporary Assistance for Needy Families (TANF).[25][26] It encourages states to require some sort of employment search in exchange for providing funds to individuals, and imposes a five-year lifetime limit on cash assistance.[23][25][27] In FY 2010, 31.8% of TANF families were white, 31.9% were African-American, and 30.0% were Hispanic.[26]

According to the U.S. Census Bureau data released September 13, 2011, the nation's poverty rate rose to 15.1% (46.2 million) in 2010,[28] up from 14.3% (approximately 43.6 million) in 2009 and to its highest level since 1993. In 2008, 13.2% (39.8 million) Americans lived in relative poverty.[29]

It would not appear to be a wise move to either curtail or cut welfare for the poorest among us, else we’d be faced with the prospect of having upwards of 40 million destitute Americans on our hands, not a very pretty picture in what’s allegedly the world’s richest nation. And this despite the fact that economists may deem expenditures for welfare to be “inefficient.” The five year limitation that’s currently in place should probably remain, with some exception for the most egregious cases.

Yet, we get this:

House Majority Leader John Boehner (R-Ohio) could use the same trick he used to avoid the “fiscal cliff” earlier this year: pass a harsher version of the bill through the Tea Party-controlled House with only Republican votes, and then turn around and pass a final compromise version — with lower cuts to food stamps — using mostly Democratic votes. But there’s reason to believe that the Tea Party wing may not stand for such a maneuver — and that the farm bill could die on the vine for the second time in a year.

It’s those food stamps cuts that threaten to doom the whole enchilada. The Senate passed a farm bill last year that included $4 billion in cuts to the food stamp program and likely will again. But splitting the difference with the House version — say, adding another $8 billion in cuts to food stamps — is a non-starter in the Senate. Meanwhile, the Tea Party wing of the House killed the farm bill last year because food stamp cuts weren’t deep enough, so it is unlikely to support less than the $20 billion figure currently in the House version.

Paul Ryan and the Tea Baggers want to cut food stamps $20 billion!

From an article at: http://grist.org/food/undead-farm-bill- ... uffles-on/

In a time of continuing recession, these dopes want to cut SNAP funding by $20 billion! Keep in mind that food stamp funding is a back door subsidy to agriculture, which provides the foodstuffs individual beneficiaries will consume when they use their stamps to “buy” food items. The cash money goes to farmers. Beneficiaries only ever see a form of script. They never see any cash.

There has been a lot of speculation in this thread that took aim at outmoded stereotypes, welfare beneficiaries using their benefits to buy drugs for example, and some of that probably does occur. But the old visage from the 80’s and 90’s of crackhead single mothers being “welfare queens” has largely dissipated because of the new rules promulgated in the 1996 reforms. Today, most families on welfare are simply those who’ve been thrown out of work and have been unable to find gainful employment since, many of whom are white renter families with histories of working at low paying jobs.

The point about SNAP rolls increasing in a time of very sluggish recovery is discussed here:

http://jaredbernsteinblog.com/snap-roll ... -a-reason/


SNAP Rolls: They’re Elevated for a Reason
May 21, 2013 at 9:09 pm

So I’m driving into work the other day, and since 8-10 hours of this stuff isn’t enough for me, I’m listening to wonk radio where this guy is going on about the SNAP, or Food Stamps, program. He’s a knowledgeable guy making a lot of sense, until he goes off and says something to the effect of: unemployment’s coming down, so the SNAP rolls should be coming down too.

It’s not an unreasonable thought, and it probably resonated with lots of listeners (or at least with the three other people in the world listening to this sort of thing at 8am in the morning). The notion that the SNAP rolls are “too high” has also become a bit of a conservative meme.

But it’s wrong in at least two ways. First, because the labor force participation rate has been dropping, in part due to people dropping of out the labor force due to lack of opportunity, the unemployment rate is a less reliable measure of labor slack right now (it’s artificially low because of the dropouts). A better indicator of the weakness of the recovery and the continued need for nutritional support for low-income households is the employment rate—the share of the population employed. And that’s been flat-lining for a while, meaning that job growth has just kept up with population growth. Under those conditions, you’d expect elevated SNAP rolls.

The figure, not included here, makes the case. It shows SNAP recipients as a share of the population compared to the unemployment rate and the employment rate (it’s on the right axis). As you can see, unemployment drifts down but the employment rate stays flat. I’d argue that right now, it’s the latter—employment rates—that captures the weakness in labor demand more so than unemployment.*

Now, if you want to address economic inefficiencies you should probably take a look at the the American Society of Civil Engineers current report on the state of infrastructure in America, in which they estimate that $3.63 trillion is needed over the next seven years to make the necessary upgrades and repairs.

See at http://www.infrastructurereportcard.org ... ve-summary

Their estimates of the costs in losses due to economic inefficiency are nothing short of staggering. For example, 1) the Federal Aviation Administration (FAA) estimates that the national cost of airport congestion and delays was almost $22 billion in 2012. If current federal funding levels are maintained, the FAA anticipates that the cost of congestion and delays to the economy will rise from $34 billion in 2020 to $63 billion by 2040; 2) according to the National Transportation Administration, forty-two percent of America’s major urban highways remain congested, costing the economy an estimated $101 billion in wasted time and fuel annually, and on and on it goes.

I’d think if you were concerned about economic efficiency this is the place where you’d look. Not only is the economy suffering inordinately from inefficiencies in outdated and worn out infrastructure but lives are at stake as well. One bridge or dam failure at the wrong time can kill and injure or maim a lot of people.

Tea Baggers scream for budget cuts but they won’t like it when their family dies in an accident caused by poorly maintained infrastructure. Not sure they know how to connect those dots, though.


Skagit River Bridge Collapse: Interstate 5 Span In Washington State Falls Into The Water
Posted: 05/23/2013 10:46 pm EDT | Updated: 05/24/2013 7:48 am EDT
http://www.huffingtonpost.com/2013/05/2 ... 29496.html

The Interstate 5 Bridge over the Skagit River in Washington state collapsed around 7 p.m. on Thursday, dumping cars and people into the water, KIRO-TV reported.

According to the Trooper Mark Francis, public information officer for the Washington State Patrol, both north and southbound lanes of the interstate were affected.

No fatalities were reported.

Continues…

This bridge carries 77,000 cars a day. It was built in 1955 and was considered to be “functionally obsolete.”

But finally we get the question that goes to my point. Loren Michaels asked:

How do we determine efficiency here? Like, what's the intent with welfare and what is the value we're putting on that?

Are there alternatives to welfare that accomplish those ends at a lower cost?

I think it's kind of hard to talk about this without considering specific policies. Different policies accomplish the same end at different costs and in different circumstances.

There’s never been much by way of policymaking or programs that take a fundamentally different approach to assisting families who are in dire need. At the moment, we have SNAP (food stamps), TANF, and I believe a healthcare program for poor children. Private charities also contribute, although I’m not sure we know to what extent.

There have been job training programs offered in poor communities and “enterprise zones” in which businesses get tax breaks and subsidies to open new businesses in poor communities. By and large, these have been “stop-start-stop-start ” kinds of efforts, though, with no real longer term strategies, mainly owing to lack of consistent funding and probaby a fair degree of corruption.

From http://www.nationalskillscoalition.org/ ... tment-act/

In 1998, Congress passed the Workforce Investment Act (WIA), replacing the Job Training Partnership Act (JTPA) as the largest single source of federal funding for workforce development activities. WIA was to create a universal access system of one-stop career centers, which would provide access to training and employment services for a range of workers, including low-income adults, low-income youth, and dislocated workers.

As part of the American Recovery and Reinvestment Act of 2009, Congress made substantial, badly-needed new investments in WIA. As Congress looks to reauthorize WIA in 2012 it will be an opportunity to help ensure our nation’s workers receive the services and supports they need to go back to work and begin rebuilding our economy. Ensuring that every U.S. worker has at least an industry certification, vocational degree or two years of college should be a national priority.

This page contains overview materials on WIA, as well as analysis and recommendations for reauthorization developed by National Skills Coalition.

Funding is the key to efforts like this, and to my knowledge, WIA was not ever funded to the extent envisioned by its legislators (and hence new funding came from Obama’s American Recovery and Reinvestment Act of 2009). And now, sequestration has hit these programs hard (see at http://www.nationalskillscoalition.org/ ... riefs.html).

Part of the problem with WIA is that unemployment in poor communities is standing at all-time highs, exceeding 30 per cent in many instances. You can give people job training all day long but if there are no jobs to be had … you might just be wasting your money.

I know of no other efforts or programs intended to assist poverty struck families.

A certain percentage of families have always been stuck in poverty in America; there’s never been a time when poverty was at zero per cent. I expect it was probably lowest during the War II boom years. It is an endemic feature of capitalist economies, take a look at Mexico or any number of countries like it that run capitalist economies, they all suffer pretty high rates of poverty.

I’m not sure there’s any long lasting cure for it in the capitalist model. Just take a peek at how bad income inequality has become in the US, with one per cent now controlling more than 40 per cent of the nation’s wealth, and it just keeps getting worse.
Capitalism is obsolete, yet we keep dancing with its corpse.

When will large scale corporate capitalism and government metamorphose to embrace modern thinking and allow us to live sustainably?
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Re: Is Welfare Efficient?

#20  Postby Imagination Theory » Jun 06, 2013 11:23 pm

CdesignProponentsist wrote:
epete wrote:I've seen reports and articles documenting that welfare spending is one of the best ways to stimulate an economy. As you say, virtually all of it is pumped straight back into the economy.


From the government to welfare recipient to the crack dealer to the gold watch manufacturer.


That was uncalled for. Those are stereotypes. I guess people on welfare only do crack and wear gold, they don't eat or rent or shop for clothes and electronics, nope, just crack and gold.
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