Meanwhile in Croatia- poor people are getting debts cleared
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Young_Chitlin
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Croatia is doing one of the most utopian economic experiments you can imagine: it is clearing its poorest citizens of all their debts. Is this a good idea? Yes. Is it the only idea? Not at all.
Croatia's plan offers a small-scale experiment in debt forgiveness in the real world, and will be closely watched by those who hate the idea and those who love it alike. The details, via the Washington Post, are this: the nation is forgiving the debts of its 60,000 poorest citizens, as long as those debts are less than $5,100, the person's income is less than $138 (around 3% of the total debt), and the person doesn't own property or have any savings. In other words, they are wiping out modest debts of the truly destitute.
A benefit of debt relief is that a government can do it without spending any cash directly. The Croation government convinced various public and private creditors to swallow the losses themselves, for the good of the overall economy—"municipal authorities, utility and telecoms providers, tax authorities and banks" are among those writing off debts, according to the FT. Critics warn that the plan could cause more people to run up debts of their own. That's a concern, but Croatia found it to be less of a concern than the huge percentage of their population that was debt-riddled and unable to contribute to the national economic spending.
For context, the debt forgiven amounts to somewhere between 1% and 7% of the nation's total debt. It is a fairly small sliver. If you were to project the same program out to America, it would cover about 4 million American citizens, and even if it covered only 1% of total household debt, it would be a $120 billion program. Cheaper than reparations, but not an insubstantial sum.
Debt forgiveness is a good way to give hope to the hopelessly indebted. But Croatia's program is too small to make a real dent—even though it is still far too generous to ever pass Congress here in the USA, where food stamps are still considered an egregious government handout in some quarters. Fortunately, even if debt forgiveness is politically unpalatable here (for now), there are still other ways to accomplish basically the same goal, at least somewhat:
Allow student debt to be written off in bankruptcy.
Bring back the WPA—a massive government jobs program.
Tax very high incomes a lot and push the revenue towards education and social programs that benefit the poor and middle class.
Abolish regressive taxes like the payroll tax and get rid of tax loopholes like the capital gains tax that benefit the rich and not the poor.
Socialism can be accomplished in many ways. Debt forgiveness is just one. The goal is fairness and opportunity for all. We won't be seeing any of these soon. (Barack Obama's new budget proposes some very minor versions of these goals and all of them were immediately declared "political nonstarters," except maybe the infrastructure jobs program.) America, after all, is no Croatia.
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Wow that's awesome, how come cheap ass American state and federal agencies aren't doing this
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Because it may turn out to be a really ? idea. Let see it run its course before wide spread adoption.
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Because it may turn out to be a really ? idea. Let see it run its course before wide spread adoption.
The big fear is that some people may run up big debts on purpose but if there's a deadline of some kind, then that problem can be eliminated. There's some people who don't deserve a bail out but some do, especially considering so many students and families can't pay off mortgages and student loans since so many of the new jobs being created these days are part time and don't pay well. Consumer spending dropped down to 2009 levels according to Wall Street for most of 2014, those are levels near the Great Recession. -
Because it may turn out to be a really ? idea. Let see it run its course before wide spread adoption.
I will look for any follow up articles -
It's a bad idea...because now their government is creating moral hazards...just like America has done.
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This is a great concept. I hope there are prerequisites to this program like a class on "financial literacy". Otherwise the people will give their money right back to the system that is keeping them poor and in debt.
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Young_Chitlin wrote: »
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Croatia Forgives Debt Of 60,000 Poor Citizens
February 11, 2015 by Mark DeNicola.
We live in a world where so many of us are ruled by debt. We work long hours to earn as much as we possibly can but still find ourselves drowning in mortgage payments and credit card bills. As far away as “freedom” may be for most of us, it is still a distant light at the end of the tunnel – something that is attainable… eventually.
In a bold move to help those whose light faded long ago, the Croatian government – under the leadership of its Prime Minister Zoran Milanovic – has decided to forgive the debt of 60,000 of its poorest citizens. Meaning that 60,000 Croatians will be given the opportunity for a fresh start, something that the Croatian government hopes will both set them personally on the right path and also stimulate the country’s economy through new spending.
To qualify for the forgiveness, the collective monthly income of a family (without savings or assets) must not exceed 2,500 Croatian Kuna -approximately $367 US dollars – while the collective monthly income of an individual must be under 1270 hrk ($187 US).
With this unheard of move, Croatia becomes the first country in the European Union to ever offer debt forgiveness to any of its citizens.
“We are doing all we can to make people’s lives easier in this protracted and strenuous crisis and give them a chance for a fresh start.” – Prime Minister Zoran Milanovic
To both protect itself and to also encourage its citizens to use this grace wisely, the Croatian government has stated that it will only be available to each household or individual this one time.
How Much Of Our Debt Is Necessary?
As much as many of us may be inclined to point the finger of blame at the system, saying that it is not designed for us to avoid debt, there is no denying that our spending habits and decisions also play a role. Even the basic essentials in life can certainly be expensive, but do we truly need everything we currently have and are striving to attain/ own?
One potential little reality check is the rise in popularity of tiny homes. (To find out more about them, read this great article put together by Jeff of the CE team: Sell Your ? , Pay Off Your Debt, And Do What You Love! This Makes It All Possible)
I’m not suggesting that we all pack up our current lives and move into a tiny home, but I am encouraging us to consider this alternative lifestyle as a reminder of how little we truly need. Let it inspire you to look at your own life and see what changes you can make to help bring that light at the end of the tunnel at least a little bit closer.
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We at CE are curious to hear your thoughts on this move by the Croatian government. Would you like to see debt forgiveness granted to a percentage of the poorest in your country? Or do you see this as unearned for those slated to receive it? -
Syrians too! Getting monthly stipends, free housing , medical and education if they make it out alive. Ex was 1/2 Syrian and they recently had a special on PBS too. $ all over the place. Who can't come up off that.
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Can we do this for Phoenix Arizonians?
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Syrians too! Getting monthly stipends, free housing , medical and education if they make it out alive. Ex was 1/2 Syrian and they recently had a special on PBS too. $ all over the place. Who can't come up off that.
Yeah, recent Syrian refugees who come to America get very nice benefits, and meanwhile so many Americans are homeless and don't get any real help from the government. It's pretty amazing when you think about it but then again, America did help screw up Syria in many ways. So maybe it's fair, I don't know
