OT: Current Affairs and Politics

[Poupou Escobar]

The cost to the taxpayer isn't worth the handful of jobs getting the stay of execution. Instead of bailing these companies out, create a better environment for new businesses to emerge.

 

[Twizzle]

I dont believe for 1 minute that Branson cant bail Virgin Australia out



the 69-year old Branson's net worth stood at an estimated $4 billion, according to Forbes.

https://www.investopedia.com/ask/answers/032615/how-did-richard-branson-make-his-fortune.asp

 

[Bandwagon]

Why would he?

He doesn't own it.

 

[Gronk]

The cost to the taxpayer isn't worth the handful of jobs getting the stay of execution. Instead of bailing these companies out, create a better environment for new businesses to emerge.

The concept of bailout is market competition. They are looking for a bailout in the form of a loan. Albanese reckons we should go for equity. Hard merkins reckon that because 90% is foreign owned, we should just let it fail and buy it for $10. Once nationalised, we can flog float it later on.

I wonder would we should call it ? Australian Airlines used to be a thing. The roo might be a problem.

 

[Bandwagon]

Major companies that supply services or goods that are essential to our economy should be given cash only in exchange for equity.

That doesn't necessarily mean nationalisation, but it if the stake is high enough, it probably should.

 

[hindy111]

The concept of bailout is market competition. They are looking for a bailout in the form of a loan. Albanese reckons we should go for equity. Hard merkins reckon that because 90% is foreign owned, we should just let it fail and buy it for $10. Once nationalised, we can flog float it later on.

I wonder would we should call it ? Australian Airlines used to be a thing. The roo might be a problem.

View attachment 37465

Hindy111 airlines

 

[crocodile]

Corporations pay 1/4 of the nation's entire tax revenue. I don't see any valid reason why they can't be assisted in bad times at fair value.

 

[Bandwagon]

Corporations pay 1/4 of the nation's entire tax revenue. I don't see any valid reason why they can't be assisted in bad times at fair value.

The argument is that the government is then essentially propping up shareholder value. So for mine that begs the question why should the government mitigate shareholder risk?

If the government simply loans them the money, or indeed just gives them a handout, then that is just transferring the risk from the shareholders to the government ( or us taxpayers if you like )

By demanding equity in return for assistance, the only real result is the erosion of shareholder value, and I reckon that's fair enough. Considered against the alternative of them going under, which completely erases shareholder value, that's not such a bad deal for mine.

 

[Gronk]

Corporations pay 1/4 of the nation's entire tax revenue. I don't see any valid reason why they can't be assisted in bad times at fair value.

The MV manufacturing companies were being continually subsided, however it supported a significant workforce both in the factories and retailers of the big 3. Also in the parts manufacturing sector with smaller companies that supported the assembly plants.

——8<—-
Figures released by Holden show it received $1.8 billion in Federal Government assistance over the past 12 years, compared to $1.1 billion for Ford and $1.2 billion for Toyota.

This equates to Holden receiving an average of $150 million a year compared to Toyota taking $95.8 million a year and Ford getting $87.8 million a year.

—-8<—-

https://www.news.com.au/tony-abbott...y/news-story/4826ae20300fc44584f6a1e3c155cb2a

IIRC support of SPC Ardmona and Cadbury ceased when Abbott was elected.

Are we better off without those plants that have closed ? Abbott used to say that he was against corporate welfare.

Yet simultaneously ....

Figures released earlier this month by the Productivity Commission show the mining industry received $492 million in direct subsidies last year.

https://www.abc.net.au/news/rural/2013-06-25/nrn-dist-mining-subsidies/4778042

Now further reports suggest that ...

Australian governments will give $4.4bn in effective subsidies to Adani’s Carmichael coal project, which would otherwise be “unbankable and unviable”, a new analysis has found.

https://www.theguardian.com/environ...viable-without-44bn-in-subsidies-report-finds

 

[crocodile]

The argument is that the government is then essentially propping up shareholder value. So for mine that begs the question why should the government mitigate shareholder risk?

The point of taxation is to redistribute for societal benefit. Shareholders are no less a cohort of the population as anybody else. They have forgone income because of it along with the associated opportunity cost and deadweight loss. Consider the trade-offs between what you want to keep and what you want to lose. The corporate assistance merely represents its opportunity cost. It is a mistake to consider the absolute cost.

If the government simply loans them the money, or indeed just gives them a handout, then that is just transferring the risk from the shareholders to the government ( or us taxpayers if you like )

By demanding equity in return for assistance, the only real result is the erosion of shareholder value, and I reckon that's fair enough. Considered against the alternative of them going under, which completely erases shareholder value, that's not such a bad deal for mine.

If only it was that simple. You've inadvertently touched on the proposition of opportunity cost by the use of the alternative. This is important since invariably it will be opportunity cost rather than absolute cost that will define the welfare benefit. I'll explain this further when I get around to responding to Mr Gronk a bit later.

 

[Gary Gutful]

See you in a while, crocodile.

 

[Bandwagon]

The point of taxation is to redistribute for societal benefit. Shareholders are no less a cohort of the population as anybody else. They have forgone income because of it along with the associated opportunity cost and deadweight loss.

No more or less than had they derived that income elsewhere, as we know the imputation credit system ensures taxation is paid on these earnings at their marginal rate, effectively eliminating the taxation paid at the corporate level. I think that's a null argument.

Consider the trade-offs between what you want to keep and what you want to lose. The corporate assistance merely represents its opportunity cost. It is a mistake to consider the absolute cost.

We're basically discussing a change in ownership, why would any other metric need to change?

If only it was that simple. You've inadvertently touched on the proposition of opportunity cost by the use of the alternative. This is important since invariably it will be opportunity cost rather than absolute cost that will define the welfare benefit. I'll explain this further when I get around to responding to Mr Gronk a bit later.

Again, it's change in ownership if the government swaps cash for equity, how does this materially change the welfare benefit the operation provides as opposed to simply injecting cash as a loan? The government spends the same money, the outcome for the corporate entity remains the same, the shareholders wear it as a dilution of the value of their shareholding.

 

[hindy111]

See you in a while, crocodile.

You absolute merkin. I was going to use that line.

 

[Gary Gutful]

You absolute merkin. I was going to use that line.

Too slow, dicklord.

 

[The EELiminator]

Australian Airlines used to be a thing. The roo might be a problem.

make it an emu instead then when they are parked next to qantas we can have the coat of arms

 

[crocodile]

The MV manufacturing companies were being continually subsided, however it supported a significant workforce both in the factories and retailers of the big 3. Also in the parts manufacturing sector with smaller companies that supported the assembly plants.

——8<—-
Figures released by Holden show it received $1.8 billion in Federal Government assistance over the past 12 years, compared to $1.1 billion for Ford and $1.2 billion for Toyota.

This equates to Holden receiving an average of $150 million a year compared to Toyota taking $95.8 million a year and Ford getting $87.8 million a year.

—-8<—-

https://www.news.com.au/tony-abbott...y/news-story/4826ae20300fc44584f6a1e3c155cb2a

IIRC support of SPC Ardmona and Cadbury ceased when Abbott was elected.

Are we better off without those plants that have closed ? Abbott used to say that he was against corporate welfare.

Yet simultaneously ....

Figures released earlier this month by the Productivity Commission show the mining industry received $492 million in direct subsidies last year.

https://www.abc.net.au/news/rural/2013-06-25/nrn-dist-mining-subsidies/4778042

Now further reports suggest that ...

Australian governments will give $4.4bn in effective subsidies to Adani’s Carmichael coal project, which would otherwise be “unbankable and unviable”, a new analysis has found.

https://www.theguardian.com/environ...viable-without-44bn-in-subsidies-report-finds

The proposition of opportunity cost rather than absolute cost has already been mentioned. It would pay you to look it up and understand it. It isn't good enough to just read it but also comprehend it as it is not immediately intuitive. In fact, just about every introductory economics textbook will cover opportunity cost in the very first chapter.

As consumers we are faced with buying decisions without thinking about them. Gronk may decide to renovate his house or go on a holiday but can't do both since capital is always limited. The opportunity cost of the holiday is that the renovation can't take place. Economy wide, consumption is therefore skewed to those products that provide the greatest marginal utility for the entire population.

It follows that production must also be dictated by marginal utility. In a society that has unequal distribution of wealth ( as does every nation on the planet ) it is natural that luxury consumption of the more wealthy will take precedence over the basic needs of the poorer cohorts. Classical economists such as Wiener mitigated this problem to some extent by the use of progressive tax systems. The progressive taxes we see today have their roots here.

Unfortunately, by itself progressive taxation affects only the demand side. The supply side needs tweaking as well. This is one of the fundamental reasons why corporate assistance exists. Corporations being taxed and the proceeds redistributed is no different in this respect than the redistribution of personal taxes.

There are a plethora of additional reasons for the existence of corporate assistance that are also important but this one is easily the least understood and conceptually difficult to understand. You will find the notion of opportunity cost everywhere. Saying that corporate welfare exists simply to keep jobs and industries going for no other reason than employment outcomes is seriously misguided. It's a tad more complex than that.

 

[Gronk]

The proposition of opportunity cost rather than absolute cost has already been mentioned. It would pay you to look it up and understand it. It isn't good enough to just read it but also comprehend it as it is not immediately intuitive. In fact, just about every introductory economics textbook will cover opportunity cost in the very first chapter.

As consumers we are faced with buying decisions without thinking about them. Gronk may decide to renovate his house or go on a holiday but can't do both since capital is always limited. The opportunity cost of the holiday is that the renovation can't take place. Economy wide, consumption is therefore skewed to those products that provide the greatest marginal utility for the entire population.

It follows that production must also be dictated by marginal utility. In a society that has unequal distribution of wealth ( as does every nation on the planet ) it is natural that luxury consumption of the more wealthy will take precedence over the basic needs of the poorer cohorts. Classical economists such as Wiener mitigated this problem to some extent by the use of progressive tax systems. The progressive taxes we see today have their roots here.

Unfortunately, by itself progressive taxation affects only the demand side. The supply side needs tweaking as well. This is one of the fundamental reasons why corporate assistance exists. Corporations being taxed and the proceeds redistributed is no different in this respect than the redistribution of personal taxes.

There are a plethora of additional reasons for the existence of corporate assistance that are also important but this one is easily the least understood and conceptually difficult to understand. You will find the notion of opportunity cost everywhere. Saying that corporate welfare exists simply to keep jobs and industries going for no other reason than employment outcomes is seriously misguided. It's a tad more complex than that.

Thanks for the heads up. I’ll just get an economics degree and then respond. Wait right there.

 

[crocodile]

Thanks for the heads up. I’ll just get an economics degree and then respond. Wait right there.

It was meant to be a lay explanation.

 

[Gary Gutful]

Note to self - don't get into an economics discussion with crocodile. He will make you look silly.

 

[Eelogical]

Note to self - don't get into an economics discussion with crocodile. He will make you look silly.

Yes, yes. Thick skinned and all. There are more important things on the agenda, like the Coffs Harbour by-pass. The well oiled machinations of government at it's finest. Canberra by the sea, yet they are nearing 20 years before work will even be started. Hell of a place.