Posted: 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.