Imagine children’s allowance was paid not in cash but loaded on to a smart card that could only be spent in domestic shops and couldn’t be spent on certain items, such as cigarettes. Would that be a good idea?
And just in case you think this is an attack on children’s allowance with the insinuation that some people are spending it unwisely, why not include all sorts of tax credits and rebates that are the preserve of the better off?
Why not pay Section 23 relief not in cash or in a smaller tax bill but to calculate how much tax is saved and pay the rebate via a smart card that also has to be spent in the domestic economy rather than second houses in the Algarve?
In this way, both the rich and the average person’s spending would be harnessed in a way which would boost the local economy.
The smart cards could be an equal opportunity enhancer.
The domestic retail economy is in tatters. Most people are employed in small business in this country, so every extra cent spent in the local economy matters enormously.
In normal times, economists argue that the best policy is to leave everything alone and allow the free market to decide who should spend what, where and in what size. But these are not normal times.
The local economy is moribund. People are not spending but are saving whatever they have and the banks are not lending.
So why not incentivise people to spend their allowances and tax credits in the local economy?
By giving those benefiting from state allowances or tax breaks some sort of smart card rather than cash, spending behaviour could be changed dramatically. This could (a) boost the local economy, particularly retailing, and (b) might move money into more productive manufacturing rather than the normal “tax-shelter driven” areas, ie property, again.
Even within the confines of austerity, it is still possible to push the economy in certain directions and persuade people to spend money at home.
Unfortunately, the entire Budget discussion is framed by what is not possible rather than what might be possible even in the context of austerity.
This suggestion could make a very significant difference because there is so much slack in the economy. Economists refer to this slack as the “output gap”. It really refers to how much resources lie idle.
The best measure of this is unemployment. The more people that are unemployed, the greater the waste and the larger the economic impact of each individual spending decision. Economists refer to the impact of each decision as the multiplier. This means when I spend in a shop, the retailer gets my cash and then spends it somewhere else, and then the recipient of his cash spends it somewhere else and so on.
When the economy is on its knees, each new spending decision has a greater impact because it is not adding to spending that was already there, “topping up” so to speak, but it is truly spending what was not there before.
Despite these concepts, which go to the core of modern macro-economics, when I hear the Budget being discussed, all I hear is – amazingly – a conversation focused on the size of the Budget deficit. But the deficit is an outcome, a consequence. It is what falls out at the end after all the spending, all the taxes and all the revenues are totted up.
In this week of the Budget, let’s think about what
a national budget could actually do if you let your mind wander. Quite apart from using smart cards to divert spending in a certain way towards domestic consumption and the local economy, consider what the State itself could do if it bought local.
The Irish State is the biggest consumer in the economy by a long, long way. Therefore, the State can massage the economy in a variety of directions.
One of the ways the State can affect demand is by choosing to buy locally made produce rather than imports. It could not only buy local but could pay quicker than other creditors and, in so doing, it could act as a type of bank for its clients at a time when the banks are not offering working capital.
IF the State were to buy more produce locally and if it were to undertake to pay its bills in one week, rather than the customary three months’ credit terms in Ireland, we could have a source of liquidity in the economy which is now missing without having to extend one loan but by merely accelerating cash-flow turnover.
In normal times, this activist intervention might seem very heavy handed but we are not in normal times. We are in what is called a liquidity trap. This is an economic phenomenon whereby, even at very low to zero interest rates, people don’t want to spend and banks don’t want to lend. Thus without the Government getting involved, the economy is stuck.
The money from children’s allowances and tax credits is being recycled by the State anyway from one set of taxpayers to another, so why not decide to boost local employment by directing spending towards local retailers? If the State giveth, then surely it can directeth?
The retailers will employ more and pay more tax and the cycle will start again at a slightly higher level. Granted some of that money will obviously be spent on imports because we import significant amounts, but the local value added from our spending will be equally significant.
It is at times like this that we should think about what limited measures we can take rather than being fatalistic and suggest there is entirely nothing we can do other than kowtow to someone else’s agenda.
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primero?
The lulas in government do not understand capitals flows , they are the problem.We are seeing massive defaltion , with a shot of infaltion soon to become stagflation .Government is too expensive to run , they are borrowing with no intention of paying back .All we hear is the deficit the deficit when in fact it the rolling debt and interest thats going to maul us to death anyways .
primero “ignition” Some AMAZING news ,for a change !!! http://www.bbc.co.uk/news/science-environment-24429621 BREAKING NEWS!! ACHTUNG!! Science fiction makes a ‘quantum leap’ to science FACT !!welllll, a ‘milestone’ anyway…i will try contain my delight of this news !! a MILESTONE in producing an energy source that is producing MORE energy that what is consumed ! WOW! ITER – “International Thermonuclear Experimental Reactor” A £13 billion construction project at ITER producing the world’s first commercially viable and energy-producing nuclear fusion reactor. CLEAN , SELF-SUSTAINING ,SAFE , ENDLESS , CHEAP fuel for ALL !! IMAGINE that!! A GAME CHANGER! BELIEVE IT!! the financial elite sure… Read more »
“IF the state were to buy more produce locally” I see that every postal address in the state will have a unique I’d by 2015. Why is it that the C(r)apita consortium will be implementing this? Why must successive Irish governments throw money down the drain paying for willfully incompetent software development? The government should be making its software requirements public. Universities and institutes of technology should be collaboratively developing open source solutions for said requirements. This could provide students with much needed work experience and result in secure, free software for the state. Perhaps someone should develop an open… Read more »
Can I compare these smart cards with sophisticated food coupons?
Do you think there are sufficient numbers of people who spend benefits from state allowances or tax breaks so unwisely that we need to implement a new culture of control on domestic spending? Next step is Big Brother that is so widely implemented in Europe.
I think Ireland doesn’t have the resources to control this. Next thing we Ireland is implementing a tax on foreign travel and holidays especially for the old OAPs.
Congrats David on the Kilkenomics line-up. World class. Looking forward to my first visit down there.
Welfare recipients are to tie a bell around their necks. BOI to raise fees! To avoid the increased waiting times in LIDL and ALDI, ops, I meant Tesco and Dunnes Store, that occured after the implementation of the McWilliams proposal that was brought into law in November 2013, all welfare recipients now are to tie a bell around their necks when they go shopping, this way they can be more easily herded to a special check out place all stores are required to have in place by January 2014. Bank of Ireland announced a raise in costs for the special… Read more »
hey,life’s a game of inches and it ‘appears’ to be a worthwhile idea.. it’s a real pity David that you didn’t give some actual figures to demonstrate how “every extra cent spent in the local economy matters enormously”.Then maybe we could be excited. David,you’re a non smoker then i’m guessing ? Good! your wish is to NOT give people the CHOICE to spend their entitlements ,as they wish..very nanny isn’t it? If such pontificating is the order of the day,let’s take others from the list,for example sugar rich foods and drinks? Sugar,aka “the white death” ,causes SO MUCH health problems!That’s… Read more »
The whole thing falls down once you factor in the larger multiples. Tesco et al are only interested in extracting resources from whatever locality they are based, economic mining, extracting Euros for a few shinny trinkets and cheap booze. Tesco et al recycle very little of their turnover back into the local economy. Our “planners” and councils prefer Tesco etc because they pay huge rates, on time. Have you ever driven through a small town with abysmal roads to see a huge Tesco store and think “how?”. Tesco don’t need to bribe or stuff brown envelopes. The Local Authorities see… Read more »
Dev would be proud of you if only they had smart tech back in 1930s
If you had opened with a smart card for tax evaders – Starbucks Google or Bono -and then moved on to smart cards for the plebs – people might be more on side with an old idea.
Why do opinion writers generally talk about the change a budget just when the deal is done?
TD’s to be included in new card system
All expenses for TD’s are to be included as they come from the same public funds that are granted to welfare and other recipients.
TD’s are now restricted to purchase only irish labeled goods, in particular alcohol, hookers, and tobacco.
A call to ban these products was voted against in the Dail, as it was seen to undermine international standards of travelling politicians, however, it was agreed to restrict the goods and services to Irish brands and services only.
New food and heating plan for Welfare card holders Labor TD Gilmore and Jamie Oliver published a new cook book for welfare card holders. The book was an enormous success and was sold out in 2 days. Government has brought into legslation 31 receipts that welfare card holder are able to chose from when they go shopping in their allowed areas. To further imrpove the waiting times at check outs, welfare card holders are to use the outlets only Monday, Tuesday and Thursday from 9AM-11AM. After that and on all other days the checkouts are closed. ESRI data has indicated… Read more »
As far as I can see, most people are spending every cent they have left after debt repayments in the local economy, but it’s just not enough to support all the retailers that set up in business during the boom years. I don’t see how a smartcard system would change that. Less debt (or fewer retailers) is the only thing that will change it. Also, practically everyone would so a deal with their friendly local struggling retailer to spend the smartcard money on whatever they wanted (ie. cigarettes) and have it put through the system as some approved item (ie.… Read more »
Weekly alcohol and Drug test now mandatory In a move to counter welfare smart card fraud, every cardholder now has to particpate in a weekly Drug test. Failure to comply will result in cancellation of the cards. It was established that welfare card holders in rural areas show much higher THC levels compared with urban card holders. The lowest THC levels were found around Dublin, however, it was suggested that they just have a piss poor quality shit available with THC levels per gram as low as 0,024 %. In a further move to tackle welfare fraud voluntaries are asked… Read more »
Free labour, the ultimate stimulus.
The government are providing free labour to the private sector and the public sector via Jobbridge. Really, how can that be bettered as a stimulus to the local economy? Plus, the competitive edge we have over our competitors, for the time being, as they’ll surely copycat our government’s initiative.
The prevalent phenomena of an honest day’s wage for an honest day’s work is suffocating our economy.
Look , this is all ridiculous…. Why don’t we,as a Country INVADE somebody…!..to protect our National interest.? Bingo ! draft everybody on the dole…use Priests as Special advisors..Nuns as Special Forces Retired T.Ds & RTE1 for psychological warfare.We already have millions of Irish around the World we could use to our benefit We have a ample supply of Drones on Lyric FM We could set up An Haliburton Nua & put O’Leary in charge to gain access to natural resources around the World which are already linked to Ireland through History and a serious of underground caverns. This is MEGA..!!… Read more »
I see the importance of education is being brought to the forefront again as I passed My old School the other day I noticed lots of construction going on Monkstown C.B.C..well.thats what it was called then,sure its still the same..without maybe the Christian Brothers..of course. What a fine detention Center it was too..oh how we laughed and jumped & ran & skipped…Those Christian Brothers were such fun guys to be around always looking out for you,…….. making sure when they hammered you with the leather strap that the marks never showed..such considerate people. Yes,Yes …do not be surprised..I had the… Read more »
Ireland to adopt new currency for McW smart cards, the Merkel-Mark from January 2014 on McW card holders are paid in Merkel-Marks. In a move to avoid further distortion of money markets and convoluted activities of FOREX traders Ireland has adopted a new currency for welfare card holders. With this move only a select set of stores and service providers can be paid in Merkel Mark such as the new Merkl-ALDI and Merkel-LIDL. This way it will be impossible to purchase a pack of fags and have the shop owner book potatos, as the shops will not hold goods such… Read more »
David, the idea of managing behaviors is not new. The wacky number plate system to make cars look old, the bin recycling etc etc. But I think the idea of policing exactly what you spend on what (for whatever altruistic reason)runs the danger of creating and eventually embedding a system that is too centrally controlled and too open to temptation in a variety of other ways. I am sure someone has a quotation for it somewhere, something like the best form or government is one where the lunatics at the top cannot do too much damage simply because it is… Read more »
Protest is Futile. They’ll wait a while and then get you.
“Five men and two teenagers arrested over violent incidents outside the Dáil in September”
http://www.rte.ie/news/2013/1010/479523-arrests-dail-protest/
Phew! They are Extremists. What a Relief! For a moment there I thought they had nabbed ordinary citizens.
What about some VAT-deducting cards for visitors to receive at the borders/airports? Make Ireland a cheaper place to come and visit? (Get all the friendly Americans to buy us 50-cent pints ;) )
David your suggestions make a lot of sense but will fall on deaf ears. do you remember the timony armored car invented in trinity collage I think it was in early 80s was it garret Fitzgerald said something about us not making offensive weapons the patent was sold I think to Belgium for 350 punts and a few years after we bought the production line Armored car for the Irish army for well over 1/12 million each I remember saying to friends on our way to London looking for work the mindset of the Irish elite will never change. all… Read more »
btw. My “Kilcenommics smiel attack” from this morning aside… If you think the idea about a labor politician writing a best selling cook book for welfare recipients with a title like “cooking without meat” is a just hung over joke that daunted me this morning, you are mistaken. Back in 2008 in Merkel Land, a labor member and more than controversial Politician due to his otherwise repeatedly xenophobic remarks on citizens not from Germany publsihed exactly this, the first Hartz 4 cookbook, by Thilo Sarazin. Another politician before suggested a shopping list, where and what unemployed should be allowed to… Read more »
“Imagine children’s allowance was paid not in cash but loaded on to a smart card that could only be spent in domestic shops and couldn’t be spent on certain items, such as cigarettes. Would that be a good idea?” No chance. This article is So idiotic I don’t know who I’m more fucked off with; myself for bothering to respond or you for insulting the intelligence of the people on the board. In fact I’m so wound up right now I find I will only be able to respond piece meal, First piece; in a country as totally and utterly… Read more »
Next piece David.
Any chance you’d ask the government for a vat rebate on purchases above a certain threshold of vital items for stressed out citizens whilst simultaneously organising a shopping blitz for a short time say in the RDS for a weekdnd in a month when retail sales are slow to encourage FREE citizens to part with their cash but get value in return?
D.MW suggests smoking should be only illegal if you unemployed everyone else can smoke – I wonder if hash was legal would it be a valid purchase on the ‘smart card’- the anti vice card.
I see the following on the bottom of an add for AIB: “AIB is regulated by the central bank – terms and conditions apply” this now certainly has many new connotations than it before 2007?
‘Green Card’- the healthy card: With the issue of this new card the unemployed will be guaranteed a healthy lifestyle – ‘five a day’ – celery, cabbage, turnips, parsnips and when in season a crab apple for desert all of this can be washed down with nutrient fortified Liffey valley water. your government is also offering holders of the Green Card an opportunity to work for free, as an incentive and to improve productivity your government will increase the amount unpaid work to those that don’t eat or over indulge, in particularly those that restrain themselves from eating the desert… Read more »
The smart card with flying glass steagalls as a logo. sweet!
interesting article David. Having taken some hits on your Bono piece you come straight back with a big government piece about if only “government ‘ was better ‘society’ would be a whole lot better. Sorry wrong again but a theme is definitely evolving on this thread and it revolves around big government and the benefits of the corporate elite like Monsanto etc. Well I am sorry amigo but lots of people around here have seen through this charade of crony/capitalist/neofascist bullshit which you are consistently expousing. You consistently have maintained that the US is in ” recovery” despite every real… Read more »
Red Cross European Poverty Report speaks of 46 million living from food handouts
According to their findings, from 2009-2012 they registered a 75% increase of people in need of food handouts throughout Europe. Around 120 million are endangered of poverty.
Now add to that the 15% US ciizens, round about the same with 49 million on food stamps, and relax when you hear economists the next time speak of green shoots, end of recession, etc.
Report: http://www.ifrc.org/PageFiles/134339/1260300-Economic%20crisis%20Report_EN_LR.pdf
Good Morning ladies & Gentleman Well…As we have now come to the end of another insightful Article..we have time to ponder our remarks and think about how it could have been………. Another day in Court yesterday…watching helplessly as more repossession orders handed down to people who were trying to do a deal…. Another day were arguments were overruled and judgements handed down while banking Barristers try not to look gleeful…… These people,again were not strategic defaulters & were looking for some kind of deal…..not abdictating any responsibility..just trying to get on with life..but our Courts ruled against that……. So if… Read more »
We are not in a liquidity trap. We are in a productivity trap.
Big government? I see nothing wrong it at all. Loads of public representatives who can influence things? Great. Smart cards which are deployed and controlled at country council level who can keep the cash they get from same. Local representation, Local spend and with smartcards using local talent to deploy based on guidelines from a small central government. By the way…this is how Sweden, Finland, France (very strong Majors) …. and to a large extent… China!! works. All have very well talented council structures that take the heat locally. What is problematic is Big CENTRAL government where people’s sense of… Read more »
David,
What you are proposing amounts to a paralell currency. As we are in a currency union, we cannot devalue our currency and we can’t print money. Our taxation policy is the only tool left. We can’t break the rules of the currency union but we can certainly bend them. A system of domestically transferable tax credits could conceivably alleviate the current liquidity problems in our economy. I had the same idea about 3 years ago…
infinitely ?!
WOW!
I thought the news of ITER – “International Thermonuclear Experimental Reactor” was one to be ‘beat’….even Homer nodded eh
Any worthwhile links you might offer to expand on this strategy ?
thanks Will in advance
The lineup for Kilenomics matches the blog alright :
One More Thing: The cat laughs as Kilkenomics gets ready to roll into town (IT today).
There ye can meet old Milton Friedman Chicago Boys and Girls, Deirdre and Donald, and discuss “econmics”. Even Fintan Drury the sports commentator Director of Anglo Irish Bank will be at the Theater.
But the big draw will surely be Dan Ariely, the top US behavioural economist and Wall Street Journal writer.
Cripes, this makes the EU council’s look sane, boys and girls.
Probably not on the Kilkenomics program :
All The World’s A Mine
Part of a series of short videos illustrating the nuclear NAWAPA XXI, Gateway to the Fusion Economy.
NIF (Livermore’s laser fusion program) and ITER (near Bordeaux) are only the 2 best known large efforts.
A Royal Proclamation, incentivising European style :
Dutch King Proclaims End of ‘Welfare State’. A participation society, with Euthanasia on the rise.
And the version from Wall Street :
Bankster Mouthpiece Comes Out as Nazi: We Have A Crisis Because People Are Living Too Long.
From American Banking Association (ABA) president Frank Keating, otherwise known for being an active and outspoken opponent of Glass Steagall.
The so-called US shutdown is turning into a “deal” on cutting life expectancy, for the 90% of course.
So it’s all cleared up then for Kilken”economists”.
Considering the Royal Proclamation above :
Google enjoy a very tasty “Dutch Sandwich” paying €8.6bn in royalties to a Dutch subsidiary last year, then shifted to Bermuda, a tax rate of 5pc not 12.5pc, paying just €17m on revenue of €15.5bn, recording a pre-tax profit of just €137m here for 2012.
500,000 Irish Welfare-Neck-Tie-Bells To be Delivered By German Government! In a surprising development, Angela Merkel agreed to ship 500,000 NTB’s to the Irish government at no cost. A speaker for Enda Kenny welcomed this gift and emphasized the friendship and excellent realtionships to Germany. The NTB’s are prodced by Rheinmetall AG a defense contractor with a superb reputation. There are multifold benefits from the german produce NTB’s, here in particular: 1. Tracking masses of unemployed people on the streets is more easy because they will move at a considerable slower pace than the average citizen. 2. Benefits for long term… Read more »
The ‘beardy’ JOSEPH STIGLITZ: Writes the following this week:
http://www.emergingmarkets.org/Article/3266187/Financial-Markets/JOSEPH-STIGLITZ-Government-intervention-is-desirable.html
In comparison David McWilliams wants to pillory those who are unemployed – a feelgood factor- to point the finger of blame at somebody – void of real solutions.
DMcW gives his game away with “Even within the confines of austerity, it is still possible to push the economy in certain directions and persuade people to spend money at home. Unfortunately, the entire Budget discussion is framed by what is not possible rather than what might be possible even in the context of austerity.” Look at the Wiki Behavioral Economics, Kilkenomics invited speaker Dan Ariel’s specialty, for “The animal as Human analog”. A neat trick to avoid simply saying the economics of animals – further down “Monkey Trading”. From this bestiary “economists” are to nudge and “persuade” citizens? We… Read more »
“Before Wall Street took a bazooka loaded with credit default swaps and toxic mortgage securitizations and fired it directly at the heart of the U.S. economy, we had a very stable banking system. In the five years before the 2008 crash, only 10 banks failed in the United States. Let me repeat that: ten banks went belly up in the entire period between January 2003 through December 2007. Since January 2008 through today, the Federal Deposit Insurance Corporation shows 487 banks have failed, with 22 failures just so far this year. With an average of two bank failures per year… Read more »
Palm Martens again here:
http://wallstreetonparade.com/2013/09/is-president-obama-in-denial-about-the-national-threat-wall-street-poses/
“A bipartisan group of Senators, including Elizabeth Warren and John McCain, have introduced legislation to reinstate the Glass-Steagall Act, which would remove insured deposits from the Wall Street gambling casino. If President Obama genuinely cares about the kind of society he will leave as his legacy to his two young daughters, he will remove his blinders and get behind this legislation.”
part 2 of George Stephanopoulos interview with O’Bama on ABC’s ,”This Week”
http://www.youtube.com/watch?v=1cy-E9D0E5c
12mins short
Those that talk about the unemployed as if they are the cause and not a symptom of negligence need to be put in their place this is a shameful piece of work,a kick in the hart to those men woman and children that are suffering from the negligence and moral criminality by those with duty of care.
This is act treason on a nation by people with a seared concision or none – an emboli virus injected into human decency.
Bonbon, It’s been 18 months or so ago when i discovered DMW’s blog.You and I had an exchange waay back then and you replied to my post regarding the nuclear NAWAPA XXI, a ‘gateway’ to the Fusion Economy and GS too might may have got a mention ;)You replied by saying along the lines of “whatamess,give the young people their hands and minds on mega projects like NAWAPA XXI and anything is possible”… I didn’t give that exchange one more thought after that night, 18 months ago. Then recently however, i was the ‘guest’ of a guest,so to speak, at… Read more »
baking elite = banking elite
not viva Verdi , but close enough for me …
Mozart’s Marriage of Figaro
4mins short
http://www.youtube.com/watch?v=qzuM2XTnpSA