No taxes – No $900 Bonus!

Just to follow up on my blog about the Rudd Stimulus Package: The Age has reported that some people haven’t recieived the $900 amount even though they lodged a tax return of less than $100,000.

The article provides a few examples of people who aren’t receiving them and casts them in a sympathetic light. I don’t quite agree with the side The Age is representing here and this example proves why:

A Melbourne freelance documentary maker, Kerry, said she was shocked to discover she would not receive the bonus, which she has planned to pay towards her mortgage.

“I could claim on the documentary, which meant the small amount I did pay I got completely reimbursed,” she said. “So even though I’m a low income earner and my children both live at home and I was really depending on that $900, they are aged 19 and 20 so it’s just meant that I haven’t fallen into any of the eligibility areas. ”

“The fact that I’ve fallen through the cracks has absolutely destroyed me”

I can see why it may be unfair that they aren’t receiving the stimulus, but when they receive a large amount of tax deductions do they really need a $900 bonus as well? The use of words such as “shocked” and “destroyed” imply that Kerry is really suffering but the fact is she didn’t pay any tax so should she be eligible for the $900 that we have all paid for in our own taxes?

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Published in: on May 11, 2009 at 6:56 am  Leave a Comment  

The 900 Dollar Answer

 

Kevin Rudd Photo: Bloomberg

Kevin Rudd Photo: Bloomberg

The big question on the media lips – has Kevin Rudd’s Stimulus Package been successful?

 

NSW Treasurer, Michael Costa, said the Rudd Stimulus, worth more than $50 million was a complete disaster  and has failed to create jobs. Costa said the Government had been confused and rushed into the decision in response to the economic crisis.

“The issue comes down to how many jobs did you save from that level of spending, and the cost-benefit of a stimulus becomes an issue,” he told Sky News on Monday. “It also means worthy projects that may well have positioned us for the recovery are not going to be there.

The Sydney Morning Herald reported on Costa’s announcement but did not appear to argue either side. However the article did report on Costa’s criticism against Rudd’s essay in the Monthly Magazine back in February. Rudd gives an analysis of the causes of the global financial crisis in the essay, and by linking Costa’s remarks on this with his criticism of the Stimulus package the SMH could be subtly making a criticism of their own.

I found an article in the Business Spectator quite interesting. The article argues that the increased Government involvement is having a negative affect on the economy and that the Governments “spending spree” is not a sufficient solution to our economic problems.

It is the supply side of the economy that matters most. And yet our current policies actually harm the productive capacity of our economy. The main consequences from current policies will be bigger government, less-efficient government, and more political risk. All of these things are a constraint on the supply-side of the economy.

The article gives evidence to this by reporting that the Commonwealth Government has increased it’s share in the economy from 22% to 28% and has added new layers of Government control. The article goes on to say that this affects our economy because the free market is more efficient than the bureaucracy.

The Heritage Foundation measures economic freedom (small government, free trade, private property, low regulation) and finds that it is correlated with prosperity, democracy, human development, and a clean environment. Countries classified as ‘free’ or ‘mostly free’ have a GDP/capita over $US30,000; while ‘moderately free’ countries have a GDP/capita of around $US15,000; and ‘unfree’ countries are around $US4,000 GDP/capita.

This is a very interesting take and does make one very valid point – economic growth comes from the private sector, not from the politicians and bureaucrats. So is the Stimulus package just another way the Government exerts it’s control on us? By throwing all this money into the economy other projects (such as construction and education) that require funding are likely to receive a lot less. Will this affect the efficiency of these projects?

Before the Stimulus Package went ahead The Age reported on the opposition towards the idea:

Nationals Senate leader Barnaby Joyce accused Prime Minister Kevin Rudd of applying a “pressure salesman trick” on the Australian people. “It’s not his money, it is the Australian people’s money, and there will be the due oversight that is expected of this,” he told reporters in Canberra.

While it has been nice to receive an extra $900 (I’ve actually received two), we cannot deny that it is in fact our own money! It’s good to see the media recognize this and not sensationalize the idea of a “free” payout.

The Australian has also reported on the failure of the Stimulus package saying that one of the reasons behind the payout was to increase Rudd’s popularity with the public in hope to be reelected next semester.

In recent weeks, as it has become clear that the impact of the fiscal stimulus was overstated, the Government has resorted to the feeble claim that things would have been worse without it. Its constant revision of its economic forecast makes it clear that whatever the impact of the fiscal stimulus, at the very least its structure was based on nothing more than guesswork.

The Australian also argues that the Australian public have seen right through the package and are critical of the Government vision as not one piece of national infrastructure has been produced. I tried to put my money back into the economy through retail and such, although there was no massive change in my expenditure and I know a lot of people who either saved the money, or being university students, spent it on alcohol!

So far all of these articles have critiqued the Stimulus package and haven’t looked the any positive arguments towards the issue. Although I do agree with their views I didn’t see any statistics on the unemployment rate and whether or not it has actually fallen, risen or remained stable. I did look at the March-April unemployment rate on a Government website and I could see that it has increased to 5.5% – one piece of evidence that the  Stimulus Package so far hasn’t been beneficial in that area. 

Published in: on May 11, 2009 at 6:39 am  Leave a Comment  

Fiat to pull Chrysler out of Bankruptcy

2006 Chrysler 300 Series Photo: CNN

2006 Chrysler 300 Series Photo: CNN

The collapse of car company Chrysler’s has been the topic of media discussion this week – the American company filing for a Chapter 11 bankruptcy on April 30th. The first car company to go under during the current economic recession has made international news, however I did find some interesting facts about the Chrysler history that makes one think the media could have predicted the downfall of the company.

The Sydney Morning Herald reported that President Barrack Obama had ordered Chrysler to conduct a quick bankruptcy, with an auction for the company’s assests hoping to be completed in 3 weeks. As a result of lenders refusing to reduce debts the company has no money to continue trading but instead of totally closing it’s doors an alliance will be formed with Italian car company Fiat over the following weeks.

The transaction would help create the world’s sixth-largest carmaker, a merger Chrysler wasn’t able to do outside bankruptcy because of opposition by some of its secured lenders.

The SMH said that no other buyers had showed any interest in the company. They also said that this was the fifth largest bankruptcy in American history! I think that’s quite a massive set back to the American economy. And I do think the move should have been more premeditated – Chrysler is a ‘luxury’ car brand with ridiculous prices and not much practicality to the average consumer so who can really afford to splurge on these kind of cars right now?  The US and Canadian Government are going to give the company a total of US $6 billion in taxpayers money to start the new alliance with Fiat. The SMH seems to consider this a positive move as it will keep some jobs for those who originally worked for Chrysler but if I was an American taxpayer I would be a little bit peeved. I would prefer my money to be going towards the education or health system as opposed to a car company.

CNN said that Chrysler was king of the hill only a few years ago with their 300 series, but a string of uninspired products destroyed their reputation.

In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but “one more step on the path to Chrysler’s revival.”

Obama really does have a positive outlook on everything doesn’t he!

I did find a really interesting article on Chrysler from 1983 from the Heritage Foundation and it reported that Chrysler nearly went bankrupt in 1987 but was bailed out by the American Government with $1.2 billion in loan guarantees. The article tries to reveal the myths surrounding the bail out – and raises one serious question about the American Government:

It shows that if the bailout is indeed the model for an American industrial policy the consequences could be disastrous

I agree with this article and think it is relevant to the situation today; does the the American Government need to take a closer look at industrial policy and business-government relationship? With the near bankruptcy in 1983 was the amount invested back then an absoloute waste? Why didn’t the media pick up on this issue sooner? We will have to wait and see how the formation of Fiat and Chrysler pans out…Stay tuned!

Published in: on May 4, 2009 at 10:19 am  Comments (1)