Colin Espiner’s back with his first blog of the year. It’s so much fun having him back. In his first outing, he comes up with four suggestions for government action in the year ahead. Since the government doesn’t seem to have any other ideas, let’s look at two of them:
End interest-free student loans
Yeah, let’s put tertiary education out of the reach of tens of thousands of young people every year. That’s the way to build a high skill, high wage economy. If my loan had borne interest I would have been forced to take any job I could find, placing salary ahead of career development, and wouldn’t have been able to travel. In fact, I probably would have just skipped the country rather than start my working life trying desperately to pay off the interest. That’s what my older sister did because the crippling debt left her with no choices in New Zealand.
With interest on loans it takes so long, even on a good salary, to clear the loan that you’re well into your thirties before you can even look at saving up to buy a house. Meanwhile, the baby-boomers, who got their education free, are buying up all the houses and you end up with a less educated, property-less generation. Nah, good idea, Colin. Well thought out.
Stop those earning over $100,000 claiming Working for Families payments.
Bill English famously said of WFF: “Don didn’t understand it, neither did John, actually”. Seems Colin still doesn’t.
So I’ll go through the simple mathematical conundrum again. If we want WFF to provide a decent tax credit to families and have a shallow abatement rate so that taxpayers don’t face too high marginal tax rates (remember, the Right really hate them because they disincentivise working more) then small payments are going to continue until relatively high incomes. The only solutions are: reduce the payments for everyone (the baby & bathwater solution), increase the abatement rate across the board (which will really get the righties’ knickers in a twist and any economist will tell you is a bad idea), or have an abrupt cut-off which is seriously dumb. For example, if you cut off WFF at $100,000, a family with three kids would lose $988 a year in tax credits when their income goes from $100,000 to $100,001. They really would be better off working less. Got to remember those perverse incentives, Colin.
Nothing is perfect. The negative side-effect of having a few well-off families getting WFF (if I remember right it was 1,000 families getting $1 million in total) is outweighed by the negative effects of preventing it – this was considered when the policy was designed, after all.
Now, to be fair to Colin his silly suggestions did arise from a serious observation:
No, I’m starting to think it’s our prime minister who has his work cut out this year. When even the Right-leaning business publication the National Business Reviewstarts telling National to get on with the job, you know that the tolerance of National’s natural constituency for its steady-as-she-goes approach is coming to an end….there’s a difference between planning things and actually implementing them, and that’s going to be the litmus test of this administration this year. In 2009 Key proved himself to be a political manager almost of Helen Clark’s calibre. In 2010, we’ll get to see whether he can match her in getting things done as well
The Right and the Left disagree completely on most issues in terms of what we think the government should be doing. What no-one wants is a do-nothing government that spends half its time on holiday and the other half in photo ops. But that’s the government we’ve got.