In the state sector what is called the multiplier effect (which is what I have just described) is usually sufficient to cover the whole cost of pay deals – but the government is choosing to ignore this.
If it were then we’ve not have a national debt, would we?
Does he go to explain why the state sector spending my money is a bigger multiplier than me spending my own money, including accounting for deadweight costs?.
If marginal tax rates are higher than 100% …
Or if (another feature of Wilson/Healey) the threat of money becoming virtually worthless as a result of hyperinflation, the pay rise for public sector unions promotes increased spending in the short-term by the maltreated private sector workers and pensioners so that the additional VAT receipts compensate for the rise in government spending.
Been there, seen that, do *not* want a T-shirt. I survived (just about: I was down to under 8st 7lbs without taking any deliberate exercise because I was working too many office hours). I do NOT recommend a repeat.
There are some stupid projects as well Tim.
My favourite is naturally sending all those convicts to Oz, at twice the price of keeping them in the hulks. But I’ll concede that most of them couldn’t make it back to Britain. Though I understand that the Sydney Ducks did bother those wicked rebels in San Francisco.
But I’m sure I’ve read somewhere that the cost to the British taxpayer was one reason the UK was happy to agree to Australian self-government.
Those OECD economists, Jean-Marc Fournier and Asa Johansson , literally wrote a book saying the multiplier doesn’t do that. Subsidies and state pensions being particularly harmful.
But S&P once found the UK would get back over 2 for every 1 spent if it fixed the roads, and spud saw this and ‘if it fixed the roads’ was on the next line over the page.
Blooming good at grant applications, but possibly from practice and experience. Otherwise hard to explain why such an unaware academic has had such a remarkable career.
@ Boganboy
I should like to see the “analysis” that claims the cost of sending them to Australia was twice the cost of keeping them in hulks: what was the assumed mortality rate, and who claimed that it was acceptable?
As to your last paragraph: I think that was “Indian” not “Australian” self-government
@Boganboy,
The main thoroughfare in Cape Town is named after a certain Adderly who travelled to the UK to argue in Westminster that they should continue to ship them to Oz and not save money on a halfway trip by dropping them off in South Africa (as the Poms were threatening to do). The grateful populous named the street after him to thank him for his successful efforts.
john77
As near as I can remember, I got those figures from Shaw’s ‘Convicts and Colonies’. I understand the Duke of Portland was whinging about the costs. I’ve no idea where he got his figures from though.
As for the self-government, the Treasury naturally wished to dump all the costs of the convicts on the colonists, who naturally therefore opposed transportation. So to placate them, the British government gradually allowed more and more legislative power to the colonists. The problem originated with the governor ‘assigning’ convicts as servants to those with influence. When they were shipped to America or the West Indies, their employer had to buy their indenture. Which he could sell to someone else if he pleased. But it wasn’t the lifelong servitude of chattel slavery.
I do remember reading in Fortescue that the British government had considered abandoning the colonies in the 19th century. But then gold was discovered.
Thank you gunker. No one wanted them. Even the Yanks.
Sob, sob!!!
It’s nonsense on stilts but that’s the purpose of it. Propaganda for the mindless and like lemmings they rush off the cliff.
Keynsianism isn’t it? What I’ve never understood is why government spending should have a multiplier but no one ever talks about private spending. There are only goods & services. Either you create them or you don’t
Spud’s ‘prose’ is reminiscent of Ernie Wise’s, “A play wot I wrote”.
@ bis
When I was at school they knew that the multiplier effect existed for private sector spending as well: it just doesn’t often get mentioned in debates about government policy (partly because government policy has little control of or direct impact on private sector spending).
I’d sorta deduced that john, from us getting wealthier all the time. But to prove the multiplier from government spending is a benefit you’d have to show it was greater than the multiplier of spending the money privately. One notes his Spudne4ss never attempts to do that.
@ bis
*I* am not going to show that because it cannot (rigorously and honestly) be shown. Actually nothing much can be shown rigorously because both government and private spending is a great big mish-mash varying from capital spending on manufacturing machinery which has a massive multiplier and spending on foreign holidays that has a multiplier of zero.
Left-wingers frequently claim that redistributive taxation increases consumer spending because those with money to spare spend less of their surplus income than those to whom it is redistributed: this may be true but, firstly, it ignores the inefficiency of the redistribution system where many people below median income are paying income tax in order foe the civil service to give *some* of it (after creaming off a slice) back in “benefits” and secondly, raising taxes to increase public sector pay is redistributive *from the poor to the rich* since public sector workers are, on average, paid higher slaries than those in comparable jobs in the private sector *even before the value of their pensions* so the multiplier comes out *negative* in the case that Murphy is discussing!!
A simpler point is that the multiplier (which may be less than 1 and IIRC can be as low as 0.3) relates to the amount of spending consequent upon the pay rise NOT the amount of tax paid out of which Murphy claims the pay rise can be funded. For the pay rise to be funded out of VAT on consumer purchases or income tax on services supplied the multiplier would ned to be 5x – is he claiming that?
Left-wingers frequently claim that redistributive taxation increases consumer spending because those with money to spare spend less of their surplus income than those to whom it is redistributed:
Sounds like obvious rowlocks because if they’re not spending it, where is it? If they’re not keeping it under the bed, it must be somewhere. If it’s in bank deposit it’s someone else’s loan. If invested, someone’s investment. So it is redistributed.