atans1

Spending more on poor & middle class: Not juz ’cause GE coming

In Economy, Political economy, Political governance on 19/06/2015 at 4:49 am

The PAP administration continues to throw our money at ourselves

— Poineer Generation benefits

— smaller SingHealth bills for younger oldies

— extra $ for civil servants

— improving public transport

— “savings” etc etc bonds

Must make Goh Meng Seng, Roy Ngerng, Han Hui Hui and their fellow cybernuts infesting TRE despair, and TOC despair. PAP really spending money on citizens, albeit their own money.

Doubtless post GE, they expect the goodies to stop. And S’poreans will be squeezed again. These will make the cybernuts and TOC happy again, pAP screwing the stupid voters who vote for them.

Well think again. There is a new fashion in economic thinking as this extract shows

[O]n June 15th economists at the IMF released a study assessing the causes and consequences of rising inequality. The authors reckon that while inequality could cause all sorts of problems, governments should be especially concerned about its effects on growth. They estimate that a one percentage point increase in the income share of the top 20% will drag down growth by 0.08 percentage points over five years, while a rise in the income share of the bottom 20% actually boosts growth. But how does inequality affect economic growth rates?

[T]he recent rise in inequality has prompted a new look at its economic costs. Inequality could impair growth if those with low incomes suffer poor health and low productivity as a result, or if, as evidence suggests, the poor struggle to finance investments in education. Inequality could also threaten public confidence in growth-boosting policies like free trade, says Dani Rodrik of the Institute for Advanced Study in Princeton.

More recent work suggests that inequality could lead to economic or financial instability. In a 2010 book Raghuram Rajan, now governor of the Reserve Bank of India, argued that governments often respond to inequality by easing the flow of credit to poorer households. Other recent research suggests American households borrowed heavily prior to the crisis to prop up their consumption. But for this rise in household debt, consumption would have stagnated as a result of poor wage growth. Economic eminences such as Ben Bernanke and Larry Summers argue that inequality may also contribute to the world’s “savings glut”, since the rich are less likely to spend an additional dollar than the poor. As savings pile up, interest rates fall, boosting asset prices, encouraging borrowing and making it more difficult for central banks to manage the economy.

http://www.economist.com/blogs/economist-explains/2015/06/economist-explains-11

The Hard Truths ‘ version is

Economists say that some inequality is needed to propel growth. Without the carrot of large financial rewards, risky entrepreneurship and innovation would grind to a halt. In 1975 Arthur Okun, an American economist, argued that societies cannot have both perfect equality and perfect efficiency, but must choose how much of one to sacrifice for the other. While most economists continue to hold that view …

And we know the author, enforcer of Hard Truths has gone to the hall where Mao, Stalin, Lenin, Churchill and Hitler are dining at the high table.

And we got plenty of $ without resorting to a GST increase (https://atans1.wordpress.com/2015/03/02/after-the-goodies-gst-hikes-acoming-soon/). It’ll come from our NIR

Plenty of money there:

SingFirst is proposing to spend an additional S$6 billion a year – over and above what the government is spending – to tackle what it described as “rising inequality”, funded from the net investment returns (NIR). The NIR allows the government to spend up to 50 per cent of expected long-term real returns on its net assets managed by the Government of Singapore Investment Corporation (GIC), Monetary Authority of Singapore (MAS) and more recently Temasek Holdings.

SingFirst said the money will be spent to provide free education, higher subsidised child care and higher transport subsidies, among other things. The biggest ticket item is an old-age pension of S$300 a month for 600,000 senior citizens. The party also wants to phase out the Goods and Services Taxes (GST) by increasing taxes on higher income individuals.

(CNA)

Doubtless Meng Seng* and friends will be quoting Philip Ang**, their financial expert,  on why there is no NER.

Funny that Tan Jee Say wants to abolish GST. It’s regressive but that can be overcome by real cash rebates to the poor and middle class, not the PAP’s pseudo rebate to the CPF accounts. In general, economists like GST because of its simplicity and because it taxes consumption, not investment or savings.

—-

*After last GE, Meng Seng said he would monitor and report on Bishan GRC’s spending plans, ’cause he said the projects they promised were more than Bishan could afford. Err not heard anything from him.

**When analaysing London commercial property (when trying to slime GIC), he leaves out the rental yield, saying yield is irrelevant. Well the reason why the Arab SWFs and big property investors love London is that it offers good rental yields.

  1. […] Thoughts of a Cynical Investor: Spending more on poor & middle class: Not juz ’cause GE coming – Redwire Times: Kevryn Lim: Who is the NSP’s Latest Belle on the Block and Why Does She […]

  2. maybe juz maybe…… Tan Jee Say listen to the one “voice of reason in TRE” and not to the “heroes of the TRE cybernuts” like Phillip Ang, eh?

    On a more serious note, left to be seen if the PAP reverts to their nasty habit of the scrooge taking back the goodie bags. Besides, all those announced goodies in the budget are stashed in endowments and ringfenced funds – looks good expensed in a single year but miserly amortised over 10-20 years – that’s the PAP way of showing off its socialist credentials, i.e. juz for show.

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