Who is the safest in a recession - Home Owner or Renter?

dopester

!!!!!!? wrote: »

Though personally I'm more worried about what state the benefits system will be in a few years down the line. I reckon it's pretty unsustainable and decent handouts simply won't be available in which case you'll have to have provided for yourself.

Ahh. I see you already were thinking the same.

dopester

I'm sorry about this... but I have to ask, because so many people here seem have some fantasy-land vision of how it plays out in the deep recession / depression with the benefits system.

Is it really reasonable to expect UK Gov to continue paying high levels of unemployment benefits, or high levels of income support or whatever afterwards, with very generous levels of housing benefit, whilst supporting the gigantic beast of an hugely expensive NHS --- when the economy (UK and elsewhere) is under severe pressures?

If we take a look across at America... we find New York, the US third most populous state, with around 19.5 million people, and a gross state product in 2006 of $1.02 trillion (ranking behind California) in real "crisis" budget trouble - and well down on tax receipts.

http://seekingalpha.com/article/87958-new-york-s-economic-crisis-banks-play-significant-role

The New York Times is reporting Paterson Warns of Economic Crisis.

July 30, 2008

In a rare, brief televised address, Gov. David A. Paterson announced on Tuesday afternoon that he would call the Legislature into an emergency session on Aug. 19 to address what he called an economic and budget crisis confronting New York State as a result of plummeting revenues and rising costs.

The new governor avoided any mention of new taxes, instead arguing forcefully for austerity. He said he was calling on the Legislature to reduce the size of the state workforce; cut agency spending; reduce property taxes for homeowners; aid New Yorkers with the soaring costs of home energy; and even consider public-private partnerships that would take over state assets.

“Revenues are dropping dramatically,” the governor added. At the start of May, the state budget office projected a cumulative deficit of $21.5 billion over the next three years. Now, just two months later, that estimate has risen to $26.2 billion — “a staggering 22 percent increase in less than 90 days.”

Mr. Paterson offered another example of the rapid deterioration in the state’s finances. In June 2007, he said, the 16 banks that pay the most on their business profits remitted $173 million to the state treasury. “This June, just a month ago, they sent us $5 million — a 97 percent decrease,” he said.

New York Times review and analysis.

New York Times

July 29, 2008, 5:22 pm Paterson Warns of Economic Crisis

“Our economic woes are so severe that I wanted to talk to you personally this evening about where we stand,” he said. “The fact is we confront harsh times. Let me be honest, this situation will get worse before it gets better but the time to act is now.”

Mr. Paterson, who was the Democratic minority leader in the State Senate before being elected lieutenant governor in 2006, alluded to the longtime dysfunction in state government. “For too long we have done less with more — and paid more for less,” he said.

He vowed, “We will cut spending. Government will learn to do more with less.”

He called for help from business and labor leaders and New York’s representatives in Washington to support him.

He added, “It is time for New York and other governments to cut up our credit cards. The era of ‘buy now and pay later, and later’ is over. The faster we address this crisis, the faster and stronger we will emerge from it.”

Video of Governor Paterson clearly explaining the extent of the "crisis" (In the old proper context of the word).
http://www.youtube.com/watch?v=HY6wjDdiUdU

Am I alone in my projections that the UK faces similar severe budget strains?

The impression I get here is people assuming the UK Gov can continue paying for everything like it currently is.

Whereas New York seems to be following the only logical course open to it... retrenchment. As it has done in previous recessions and depressions.

And casting an eye over to California... here too we see budget strains all over the place. Here is just one for about unemployment funding.

Deficit looms for California's unemployment benefit fund

The unemployment fund's shortfall could reach $1.6 billion by the end of 2009.

By Marc Lifsher, Los Angeles Times Staff Writer

September 1, 2008

SACRAMENTO -- -- With joblessness at a 12-year high and expected to head higher, California's fund for paying unemployment benefits is about to go broke.

The fund, sustained mainly by taxes on employers, is projected to be deeply in the red as soon as March.

And the administration of Gov. Arnold Schwarzenegger is alarmed that it may have to keep the fund afloat by borrowing from the federal government and using state money to pay nearly $100 million in interest over two years.

At stake is the stability of a 73-year-old program that began during the Depression. In July, California paid unemployment benefits worth $567.4 million and received 267,000 new claims for jobless benefits.

Under the program, eligible workers can receive maximum benefits of $450 a week, depending on their previous earnings. Benefits last as long as 26 weeks, and many out-of-work people can qualify for a 13-week extension, recently approved by Congress.

"What we've always consistently said is that the fund would eventually go broke," Bronow said.

The idea of reducing the level of unemployment payments angers organized labor. "Cutting benefits in the middle of a recession would be economically devastating," said Angie Wei, a lobbyist for the California Federation of Labor. "It would be politically stupid, and we will not stand for it."

http://www.latimes.com/business/careers/work/la-fi-unemployment1-2008sep01,0,5623705.story

They may have to stand for it. It could be a big drop in living standards from having all the latest bits of gear, holidays, new cars in the boom times, to a return to the soup kitchens for those who've put nothing aside.

There you apparently get 26 weeks entitlement... but over here it seems people assume benefits, some of them paid over the very long term, can not be changed, slashed or radically altered to meet current financial circumstances. I would include housing benefit in line for big cuts as well, which would bring shock to landlords.

If the Government doesn't have the money, it seems to me they will slash expenditure costs.

And I expect these budget pressures form part of Alastair Darling's thoughts for the future in his interview last month with the press.

Darling warns that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". To deepen the sense of gloom, he adds: "And I think it's going to be more profound and long-lasting than people thought."

PayDay

Dithering_Dad wrote: »

I have never received state benefits, other than child tax credits and child benefit,

Child tax credits are a means tested welfare payment for those that don't have enough money coming in to provide for their children.

Dithering_Dad wrote: »

I personally have absolutely no qualms in claiming back some of my hard-earned tax money that I've put into the system over the many years I've been working.

As you have brought this subject up. I find it strange when people justify years of claiming welfare as, 'they put into the system while they were working'. The "system" not only pays welfare payments, it pays for things like schools and the NHS too. If you are claiming welfare top ups while you work, then you will be taking more out of the system than you pay into it.

Jonbvn

PayDay wrote: »

Child tax credits are a means tested welfare payment for those that don't have enough money coming in to provide for their children.

The above is not strictly true. You can claim CTC with an income of less than GBP60k.

PayDay

Jonbvn wrote: »

The above is not strictly true. You can claim CTC with an income of less than GBP60k.

That is the figure that the government says you need to be able to keep your children out of poverty. It is a means tested welfare payment.

Dithering_Dad

Guy_Montag wrote: »

Interesting discussion - the example given, in my mind, favours the home-owner.

There could be other examples which favour the renter - as !!!!!!? suggested - the homeowner could have mortgaged up to the eyeballs on IO & have no equity, in which case the renter is in a better position.

Alternatively if neither the HO nor the renter have dependents then the renter can move to an area (possibly abroad) less affected.

I know that if I lose my job, currently, I'm stuffed for benefits so I have worked out some options:

1) I live frugally anyway, so can I find another job in the area, (even one paying less) quickly.
2) If that's not possible can I move somewhere where work may be available - either in the UK or check immigration options for English speaking nations & work out where in the EEA I can go. (For example Nokia, despite being Finnish, conducts most of its business in English).
3) What benefits can I get? Should I buy a house just so I can claim. Is that possible?
4) Go live somewhere cheap with easy entry requirements: Sri Lanka, Thailand, Spain, until it all blows over.

I actually thought that in the example scenario, the system was equally unfair to both, but in different ways. The home owner gets all of his interest paid (upto a value of £175k) while the renter receives a set amount that may not cover his current rent, forcing him to either move or make up the difference. Whereas the renter will receive housing benefit for as long as he requires it, the home owner only gets his mortgage interest paid for 2 years.

If you changed the example so that the home owner had mewed all his equity and so was in neg equity, you'd have to change the renter so that he was equally imprudent with his money. Perhaps give him credit card debt?

In this case, the home owner would still be better off because the goverment would pick up the tab for his mewed debt via the mortgage interest payment (upto £175k) whereas the renter would get his rent paid, but have to find the cash for the credit card repayment himself - another inequality.

This was the point of the thread really, to make us aware of the various benefits out there (I'm assuming that most are like me and have no idea what they're entitled to) and to highlight the inequities of the current benefit system.

lostinrates

OK, having read the above I feel that the whole thing (and I think its a great post) is sadly indicative of our lack of self respect (as a nation, and individually) and attitude to funding and, again, overcomplicated taxation system.

I am probably, possibly? eligable for some benefit as a sick person. I'v never tried to claim it, I don't know if my savings would count against me or DH salary etc etc tc. I don't know.

I have a deeply, deeply held belief that their is NOTHING shameful in taking from the state if you need it, but something incredibly sordid about taking if you don't. When I was profoundly ill I was lucky I had savings to fall back on (and the immense support of DH who was then the very new boyfriend). As soon as I possibly could I started working (it was advised I did not, but part of getting well is a positive mental attitude). I worked in a role that was, to me, new and exciting and front line and importantly: casual. I could work five days a week if able, or none if I couldn't. The point is, there was work there: again, slightly easier because I was in London, not in the sticks, I've all but given up finding employment here....

Our fiscal and benefit system is full of 'claim backs' and loopholes and ways to save and it seems incredibly over omplicated, favouring those who can pay to find the loopholes and those who are almost lifestyle takers. The fact, whether valid or not, we have a generation of young women who think getting pregnant is their ticket to housing and income, and the fact we have a working and middle class who too believe that girls believe this is indicative to me of how far adrift from where it should be our social thinking is on this.

I would, without guilt or shame, take if I needed, but I don't need, I have a DH in work and savings, and a family who have provided shelter for us.

Dithering_Dad

PayDay wrote: »

Child tax credits are a means tested welfare payment for those that don't have enough money coming in to provide for their children.

I didn't say they weren't. I just listed the only government benfits that I'd ever personally received.

PayDay wrote: »

As you have brought this subject up. I find it strange when people justify years of claiming welfare as, 'they put into the system while they were working'. The "system" not only pays welfare payments, it pays for things like schools and the NHS too. If you are claiming welfare top ups while you work, then you will be taking more out of the system than you pay into it.

So what do you advise, that people who have lost their jobs and actively looking for for work should not claim welfare out of principle? Or are you saying that welfare is just for people who havn't 'put anything into the system'? Are you also saying people shouldn't claim 'top-ups' while working, also out of principle?

You have a very principled approach to life, but I'm assuming that you don't have children? In my book, the responsible parent does whatever he can for his family, and this includes holding onto as much of his income as he can in order to care for them. Tax credits are simply a way of giving a tax cut to parents. If the government gave you a tax cut, are you really expecting us to believe that out of principle, you'd refuse and tell them to keep the money and spend it on hospitals and schools?

Actually to be fair, if one could specify where your tax goes, I'd be happy to pay more. Unfortunately your 'principle tax' would be more likely to be wasted on business consultants, MP's expenses and pensions, foreign wars, and the million other bottomless pits our taxes go into.

lostinrates

Dithering_Dad wrote: »

In my book, the responsible parent does whatever he can for his family, and this includes holding onto as much of his income as he can in order to care for them. Tax credits are simply a way of giving a tax cut to parents. .

My parents, nor DH's, accpeted child benefit.

Dithering_Dad

dopester wrote: »

I'm sorry about this... but I have to ask, because so many people here seem have some fantasy-land vision of how it plays out in the deep recession / depression with the benefits system.

Is it really reasonable to expect UK Gov to continue paying high levels of unemployment benefits, or high levels of income support or whatever afterwards, with very generous levels of housing benefit, whilst supporting the gigantic beast of an hugely expensive NHS --- when the economy (UK and elsewhere) is under severe pressures?

If we take a look across at America... we find New York, the US third most populous state, with around 19.5 million people, and a gross state product in 2006 of $1.02 trillion (ranking behind California) in real "crisis" budget trouble - and well down on tax receipts.

http://seekingalpha.com/article/87958-new-york-s-economic-crisis-banks-play-significant-role

New York Times review and analysis.
Video of Governor Paterson clearly explaining the extent of the "crisis" (In the old proper context of the word).
http://www.youtube.com/watch?v=HY6wjDdiUdU

Am I alone in my projections that the UK faces similar severe budget strains?

The impression I get here is people assuming the UK Gov can continue paying for everything like it currently is.

Whereas New York seems to be following the only logical course open to it... retrenchment. As it has done in previous recessions and depressions.

And casting an eye over to California... here too we see budget strains all over the place. Here is just one for about unemployment funding.

http://www.latimes.com/business/careers/work/la-fi-unemployment1-2008sep01,0,5623705.story

They may have to stand for it. It could be a big drop in living standards from having all the latest bits of gear, holidays, new cars in the boom times, to a return to the soup kitchens for those who've put nothing aside.

There you apparently get 26 weeks entitlement... but over here it seems people assume benefits, some of them paid over the very long term, can not be changed, slashed or radically altered to meet current financial circumstances. I would include housing benefit in line for big cuts as well, which would bring shock to landlords.

If the Government doesn't have the money, it seems to me they will slash expenditure costs.

And I expect these budget pressures form part of Alastair Darling's thoughts for the future in his interview last month with the press.

All we can go on is what happened during the last recession when we had 3/4/6 million (depending on whose statistics you were reading) on the dole. The government didn't close down the benefit system then and I doubt it will during this recession.