Contrast

Written By: - Date published: 5:36 pm, June 22nd, 2008 - 72 comments
Categories: Media - Tags: , ,

National has been going on about the number of comms staff at the Ministry of Social Development. Rather than ask ‘what do these people actually do that the Government employs them, rather than undertaking other spending or giving bigger tax cuts?’, Bill Ralston parrots the Nats’ line and gives us:

“The Ministry of Social Development ….provides social services to more than one million New Zealanders… A quarter of the country have somehow managed to become state beneficiaries.”

Yeah, Bill: 500,000 of them a super-annuitants, 100,000 are single mothers on low incomes, 80,000 are invalids with serious physical or mental disabilities, 45,000 are too sick to work, and 17,500 are unemployed, 134,000 people get student loan payments, 52,000 get student allowances, and 1.1 million low-income people have a community services card. What a sad world where we make sure the elderly, disabled, sick , students, and the poor have a living income. I found those numbers by going to the front page of the MSD website. Maybe, you should have done some basic research rather than assume those million people are bludgers.

Matt McCarten, in contrast, has a well-argued piece that looks at the big issues and condemns the trivial issues that Parliament has concerned itself with:

“Despite the increasing challenge of oil running out and the impending environmental catastrophe, it seems our politicians would rather distract us with anti-tagging legislation, retracting KiwiSaver brochures, paying too much for hui and using women as a cynical election gimmick.”

Well worth a read. McCarten, that is.

72 comments on “Contrast”

  1. T-rex 1

    Nice work Clinton 🙂 I like a good righteous smackdown.

    I’ve just found a new blog here – http://nextbigfuture.com

    It’s cheering me up, there’s a lot of cool sh*t happening around the world to offset things like chronic oil shortages.

  2. Ambulance/Cliff

    If we were richer, we wouldn’t have so many people to take care of.

    The elderly would have been able to save for their retirement.
    The sick would get healthcare.
    Students could take on a loan, with interest, knowing they won’t have a problem paying it off when they get a job.

  3. bill brown 3

    yeah,

    and if Ifs and ands were pots and pans we’d have no need for tinkers.

  4. Lew 4

    peteremcc: “If we were richer, we wouldn’t have so many people to take care of.”

    This is a fallacy. Wealth is normative: you’re only wealthy or poor compared to the market. The nature of prices in a free market is to rise as high as the market can bear, which means a fair chunk of the population are always going to find themselves below the cut.

    This is essentially a complicated way of saying that when everyone’s a millionaire, nobody’s rich.

    Your statement is correct if by `we’ you mean these sorts of improvements would be experienced by the sort of people who mostly read weblogs: pakeha, middle-class, male, educated. In fact, you’re sort of arguing that it’s currently those people (who earn the bulk of the money) currently `taking care of’ everyone else.

    I like my `we’ to be a bit broader.

    L

  5. randal 5

    name one thng that will be bettter if national “take control”?

  6. “Parliament’s social services select committee heard this week that the MSD spends more than $50 million a year on obtaining policy advice from other people, which it then turns around and hands to the Government. It performs its role as advisory middleman despite employing some 350 policy advisers itself. Presumably these several hundred internal policy advisers advise the ministry on which policy advisers to employ on contract.”

    This is particularly disturbing. Why does MSD need to employ 350 policy advisors AND spend $50,000,000 on contractors ?

    [Here’s an idea, Byran. rather than assume that’s ‘disturbing’, how about find out what those people do? MSD administers 20% of Govt spending – super payments, benefit payments, other low income assistance, as well as employng social workers. A $12 billion budget should not be administered on the cheap, you need policy staff to make sure it’s been done in the best way possible. SP]

  7. Ridiculous Lew.

    For a start, New Zealand imports a lot of our goods. If everyone in New Zealand was 10x as rich as they are now, sure some prices would go up, but Chinese imports wouldn’t suddenly jump to 10x the price.

    Even the poorest New Zealander’s are rich compared to even the richest New Zealander’s a hundred years ago. And technological advances have greatly improved everyone’s lives.

  8. i can’t randal. they’d be just as bad!

  9. This is particularly disturbing. Why does MSD need to employ 350 policy advisors AND spend $50,000,000 on contractors ?

    Because if it didn’t spend 50 million (gosh doesnt 50,000,000 look nice, maybe try without the commas next time, you might trick some people into thinking its 500 million) on external contractors it would have to employ how ever more at what woudl probably end up costing far more than 50 million extra.

  10. Felix 10

    There’s no point even responding to ‘tards like Bryan and peter; they have a fundamental objection to any government at all (yes, yes) and no matter how big or small the amount of spend they piss and moan as if they were paying for it all themselves.

    Bryan even advocates doing away with entire ministries on the basis that they only help some people (brown ones for example) and he’s not one of them (wah wah, I’m not a woman so why should I be paying for women’s affairs).

    And they spout this crap as if they were the first to think of it. Like we haven’t been hearing it ad nauseam since the 80s. Like they’re here to enlighten us with their hackneyed neoliberal bullshit.

    Jesus, you’d think there were no right wing blogs for them to display their banality on.

    /rant

  11. Lew 11

    peteremcc: “Ridiculous Lew.”

    I presume the presence of a comma here, and that the adjective refers to my argument, not to me.

    “For a start, New Zealand imports a lot of our goods.”

    Sure does, and exports even more.

    “If everyone in New Zealand was 10x as rich as they are now, sure some prices would go up, but Chinese imports wouldn’t suddenly jump to 10x the price.”

    So everyone would be able to buy Chinese goods. That’s not what I’m talking about: I’m talking about goods and services which are generated and consumed within the same marker; i.e, New Zealand: health, education, etc. Those were the examples you chose, so your line on Chinese goods is doubly disingenuous.

    “Even the poorest New Zealander’s are rich compared to even the richest New Zealander’s a hundred years ago. And technological advances have greatly improved everyone’s lives.”

    This is a function of time rather than the details of economic policy, and is true of every industrialised country in the world. On its own it tells us nothing.

    Felix: “There’s no point even responding to ‘tards like Bryan and peter”

    This is the first I’ve seen of Peter and I’m inclined to judge people on their arguments, not on their position on the political compass.

    L

  12. andy 12

    Petermcc

    If I got minimum wage of a $6,000 per week I would be rich! But my rent would be $3,500 and my food would be $1,500 and power 1,000 per month etc..

    Imagine the cost of housing if the people at fletchers who make wood earned 6k per week and the super market stacker was on a 4k and your builder charged you $400 per hour.

    you get the picture hopefully.

    yes you may be able to buy ‘cheap’ stuff from china but the labor and rent component would be a massive overhead, think $100.00 shops not $1 shops..

  13. Phil 13

    “500,000 of them a super-annuitants, 100,000 a single mothers on low incomes, 80,000 are invalids with serious physical or mental disabilities, 45,000 are too sick to work, and 17,500 are unemployed, 134,000 people get student loan payments, 52,000 get student allowances, and 1.1 million low-income people have a community services card. ”

    Remind me again how long we’ve had the MSD?
    Remind me again how long we’ve had old, sick, unemployed, the disabled, and students in NZ?

  14. Janet 14

    What about those businesspeople and big corporations who end up getting a large proportion of the money paid out by MSD and other govt agencies to low income people? I am referring to private landlords who receive the rent they want via the accommodation supplement, the big corporate aged care providers, the private early childhood industry, the various NGOs who are contracted to provide services. These are the real state beneficiaries!

  15. coge 15

    You lefties have such all encompassing scarcity mentalities. That’s all you will ever end up with, abunant scarcity. Such planning is disasterous, particularly in small countries. NZ needs to punch above it’s weight. All you lot can offer are hairshirt solutions. Now your chickens are coming home to roost. Nine years of chronic waste & income distribution, & what have you got to show for it? What are your internal polls saying about this?

  16. Stephen 16

    And what does National have to show for nine years of not-really-popular right wing policies…leftism!

  17. r0b 17

    Nine years of chronic waste & income distribution, & what have you got to show for it?

    Cheers coge – thanks for asking. We have unemployment down to 30 year lows, crime down, numbers on benefits down, economy growing, Working for Families, superannuation increases, minimum wage raised every year, four weeks leave, 20 hours free early childhood education, fair rents, interest free loans for students, poverty / childhood poverty rates down, suicide rates down, cheaper doctors vists, and employment law which stopped the widening wage gap with Australia. An independent and sane foreign policy. Planning for the long term future via Cullen Fund and KiwiSaver. Strengthening the economy with state owned assets (Air NZ, KiwiBank, Railways, breaking up the Telecom monopoly, back to ACC).

    And not least we have a strong economy well placed to survive the current international financial crisis. Though it is very early days even new policies like KiwiSaver are starting to show their potential in this respect: http://www.stuff.co.nz/4592706a13.html

    All in all, an outstanding record. Expect more of the same if Team Left wins a fourth term.

  18. Skeptic 18

    Why is it that according to the Standard the number of beneficiaries has declined so rapidly, yet the need for communications consultants to tell the public how wonderful MSD is has increased so dramatically?

    50 million on external policy advice is horrendous.

  19. lprent 19

    The point that Steve was making is that it doesn’t really matter what in the hell the Nat’s claim will happen. Those super payments, dpb payments, invalid and sick payments, student loans, low incomes subsidies etc will still be there. The people who receive them will still be there.

    However, in the past the Nat’s tactic has to cut the civil service in these areas. If people do not know what they are entitled to, they can’t claim. That helps the Nat’s in giving peanut taxcuts to their envious supporters.

    It is exactly the same rationale they use with the electoral commission. They always cut their budget because if people aren’t enrolled, then they can’t vote the Nat’s out.

    Very short-term thinkers and mean-spirited are the Nat’s. If you keep people in poverty and make it as hard as possible for them, then it is that much harder for them and their children to contribute to society later.

  20. higherstandard 20

    Lynn

    Your argument is somewhat tortological.

  21. again, lew and andy, that’s crazy to claim what you are.

    of course a 10x increase in everyones wages, but what if the increase were 1.5x, so that everyone earnt similiar to what they do in australia now. or if it were 2x, so that everyone earned what some states in the US do.

    your claiming that if everyone were to earn more, we’d be no better off. but it is blatantly clear that there are other countries where everyone earns more, and they are better off, and there are other countries where everyone earns less and they’re worse off.

    your argument could be used to support a reduction in everyones wages because, hey, we’d all be relatively the same.

    your only argument against this seems to be that you weren’t referring to overseas goods, only those within New Zealand. Well thats all fine, but doubly ridiculous. If NZ didn’t import anything, then sure, it wouldn’t matter if everyone was richer. But we do, and it does. Think the recent oil prices for example. If everyone earned twice as much, then the doubling of petrol prices wouldn’t be hurting them as much.

    and finally, the key misundertanding that you have all had, that seems to be quite common. why does everyone being rich automatically mean they’re all earning more (i will concede that i used this as one example though). if many of the products that NZ’ers bought, suddenly dropped in price, then everyone is now richer. if it becomes easier to build a house, then people have more time and money to spend elsewhere. making everyone richer doesn’t have to involve increasing everyones incomes, it could be as simple as reducing their cost of living. ‘rich’ is relative too.

  22. of course a 10x increase in everyones wages IS AN EXTREEM EXAMPLE*

  23. bill brown 23

    And where’s all this money coming from? I know, why don’t we get the RB to add a zero to the end of every note they print – and of course if you’ve got some in your wallet feel free to put it on yourself, in pen of course.

    Cool – everyone’s ten times richer.

    Now, the challenge is to find the flaws in my argument.

    P.S.

    I chose your EXTREEM (sic) example to save all the crossing out and decimal places needed for anything less than 10X.

  24. Skeptic 24

    Lynne you should really try and stick to the technical stuff. You have said so many times that you only deal with technical stuff and that argument shows why.

    Steve Pierson’s posts are not a defence for massive bureaucratic waste as is happening in the MSD. Simply shrugging off the increase in bureaucracy by saying: “Look how many people we look after!” is stupid. That is no excuse for waste. You cannot argue on the one hand that Labour has reduced beneficiary numbers and then justify the appalling increase in spin doctors. Frankly it makes people very suspicious.

    This is typical of the posts at the Standard. Telling the public that there most important issues, the cost of living and violent crime, aren’t actual issues at all and they are stupid for believing they are important issues, is not going to win you any votes. It just shows how out of touch with reality you are.

    It’s no wonder National are ahead of Labour by 26 percent in the polls. Haven’t had a rogue poll posting for a while, or one saying how polls are all wrong. Must be about time for one.

    captcha: “less Engel”. Quite.

  25. Ari 25

    HS- Tautological is the word for necessarily true. Tortology would be the study of German cakes. 😀

    And how does the fact that parts of her argument are tautologies reduce the validity of her argument? Tautologies are actually sometimes a valuable point in a good debate, especially as you might require them to justify a more complicated part of your environment (ie. the Nats aren’t looking to reduce the number of people served by MSD, they just want to make MSD look like a target for cuts)

    Really, the Nats are just bagging MSD because as a socially concerned ministry, they will have difficulty running it effectively, and want to make it look as though that’s Labour’s fault, not theirs.

  26. higherstandard 26

    Bill

    I believe Peter is arguing for increased prosperity due to increased productivity and export earnings – I doubt anyone on either side of the political spectrum would argue against this ?

    Ari – mmmmmm cake – there must be a Marie Antoinette joke in there somewhere

  27. Lew 27

    coge: “You lefties have such all encompassing scarcity mentalities.
    That’s all you will ever end up with, abunant scarcity. Such planning is disasterous, particularly in small countries.”

    NZ isn’t like most other small countries. Don’t come the Singapore line here.

    “NZ needs to punch above it’s weight.”

    I concur!

    “All you lot can offer are hairshirt solutions.”

    As opposed to what? Think Big?

    “Now your chickens are coming home to roost. Nine years of chronic waste”

    … which nobody can seem to quantify.

    “& income distribution,”

    … which is working as intended.

    “& what have you got to show for it?”

    Plenty, as r0b says!

    “What are your internal polls saying about this?”

    Policy by focus group? Say it ain’t so!

    L

  28. bill brown 28

    HS – I’m arguing for the fact that he makes the statement “lets make everyone richer” without actually saying how.

    At least I gave a constructive starting point 😉

  29. vto 29

    Hey standard folk, I do admire your courage and selective optimism in the face of impending doom but it seems as if the bulk of NZ disagrees with your outlook on this govts results, going by recent polls.

    A half-full cup approach is to be commended tho, even if the tide is as yet still only halfway out (its point of most rapid movt).

  30. Lew 30

    peteremcc: I’m not claiming that raising incomes is a bad thing, I’m claiming it’s a bad thing if it comes at the expense of government-provided social services which is what you suggest. The point was to call attention to the `rising tide lifts all boats’ fallacy you began with.

    higherstandard: “I believe Peter is arguing for increased prosperity due to increased productivity and export earnings – I doubt anyone on either side of the political spectrum would argue against this ?”

    Absolutely right, nobody sane would be. The question is whether it can be achieved without leaving the elderly, sick, unemployable and students (plus others, etc) in the financial lurch. I think it can be, but not by leaving those people to the tender mercies of the free market (which is what Peter implied).

    L

  31. Phil.. what is your point? That we shouldn’t have income support for the elderly, poor, sick, and disabled? Back to the good old days of slums and beggars?

  32. Pascal's bookie 32

    name one thng that will be bettter if national “take control’?

    Whaleoil will have nothing to talk about.

  33. andy 33

    petermcc

    I understand your argument, but its not quite as simple as making us richer period.

    I agree we need to lift ‘productivity’ in all sectors, that will make the country more wealthy.

    IMO we as a nation need to upskill the existing workforce, lower the barriers to education, direct young people into trades not just uni’s.

    The big but is business, IMO business is not well served by its own lobby group. NZ business (lets use telecom) needs to invest more in training in unison with govt. At present telecom has problems finding engineers, see the problem they are looking for them not actually training them.

    Business has a short term mentality, it is cheaper to hire two people to do heavy lifting than buy a new fork hoist, this lowers business productivity but is the most ‘cost effective’ short term profit based solution. Govt needs to change the way it interacts with business to help change this too..

    So all in all we need to work as a country to improve outcomes for all in the community and not pick on any one area…

  34. vto 34

    Re this topic – I agree the vulnerable must be supported by society. But I think those that come up against the standard line in this area see this govt as having concentrated too much on this sector and done nothing to assist with lifting the entire economy. WFF is a classic – people on the top tax rate because they are the rich are deemed too poor to survive without govt assistance and require a benefit a-la wff (this makes people laugh).

    Now of course, you will come out with the usual things that labout has done which are supposed to have helped but generally if you speak to most business people (who are the one that actually create the wealth and goodies) they will all say the same thing about this govt – zip has been seriously undertaken to assist with business in this country. This govt is perceived, and quite rightly (‘rich prick’ again), as being anti-biz.

    The left is seen as not really knowing much at all about how to create wealth. And that is hardly surprising given the nature of its support and leadership having pretty much zero experience in this area.

    (please dont come out assuming I hate beneficiaries or the weak or anything else. It is an observation only.)

  35. T-rex 35

    Andy – Interestingly, increasing the minimum wage actually saves business from itself in this regard. If you don’t have cheap labour, the short term thinking is less rewarding, so investment in productivity improvement mechanisms is more likely, so we all become richer in a real way (rather than peters adding zeros way).

    Peter – moneys just a relative measure. If you want to make a builder twice as rich in real terms (or make a house cost half as much), make him twice as productive.

  36. r0b 36

    A half-full cup approach is to be commended tho

    Cheers vto. Knowing that we’re working in the best interests of NZ gives us plenty of strength and optimism.

  37. Felix 37

    Lew,

    I maintain that the morning’s discourse so far has shown peter to indeed be slightly retarded and that you are in fact wasting your time.

  38. lprent 38

    vto: I’d argue that the Nat’s are even worse at creating wealth than Labour is. At least based on past experience.

    The best thing a government can do is to make sure that the infrastructure and resources in the economy are adequate to the task of growing the economy. A couple of fairly major incidents come to mind about the Nat’s previous stewardship.

    Muldoon and auckland infrastructure – If they don’t vote me me then why should I spend money there (and then spent money on SMP’s and Think Big instead).

    Bolger and Shipley. Lets see what happens when we cut benefits, surely it will be better for the economy. How unexpected to have a 5 year recession and generations of unemployed.

    I’d argue that the Nat’s are considerably worse at running an economy because they are too short-sighted to look at the downstream effects. Now you can argue that Key is better – but how can anyone tell if they don’t release policy? Who is going to vote for the shallow man?

  39. Matthew Pilott 39

    vto, any family in the highest income area (WfF going up to $120k or thereabouts) has to have about 6 wee tackers running about the place.

    A) there’s probably about two families in this situation that you’re having a big laugh about, so right back at you

    B) having six children isn’t cheap. What’s wrong with a tax credit for that? (apart from arguing that that’s an excessive number of sprogs in the first place, a point to which I’m more ambivalent)

    If you’re merely talking of families earning in the 39% threashold, I don’t know what you’re laughing about. Having children isn’t cheap. The government has decided that tax credits should be targeted at families with children. Why would you make the highest tax rate the main criteria for which you judge whether someone is worth of WfF? Wouldn’t quality of life be a more useful starting point?

    Take a moment to do some research and you’ll see that this is not an uncommon practice. Word on the street is that the US government, that last Socialist bastion, gives tax credits for children.

    One further point – government isn’t about ‘creating wealth’ but enabling it. There’s plenty of evidence that Labour can do it (labour is funding research a hell of a lot more than National ever did – what do you think of that?). I’ve seen nought for National thus far.

  40. vto 40

    Iprent: your points have some validity. I have a deep cynicism re politicians to do much at all. It is the nature of our political system and its own short term nature. Pollies do what is required to get voted back, not necessarily what is good for the long term interests of the country.

    Muldoon was Muldoon and plenty argue he had more of a left-wing approach to governance than traditional nat approach. 1991 benefit cuts have not been reversed and your description of their effect is imo not accurate.

    Know what I think would spark busines in this country big time? Massive tax cuts for business – slash to say 10%. Most biz folk I know would simply re-invest. And be motiviated to get more active due to being able to keep, and more importantly work with, more of what they generate. The place would go crazy when combined with NZers hard-working and enterprising nature. Provided the govts books still balance in some way, and there is plenty of argument out there that tax cuts do actually allow this to happen.

    This is a large and often debated area that also generates many side-issues. But that is my opinion and my belief.

    Why don’t we try it? If it doesn’t work just put the taxes back up again… There we go, problem solved. Let’s give 10% biz taxes a go.

  41. vto 41

    Mr Pilott, just seen your post. We dont often agree but I do with this comment of yours.. “government isn’t about ‘creating wealth’ but enabling it. “

  42. peteremcc: I’m not claiming that raising incomes is a bad thing, I’m claiming it’s a bad thing if it comes at the expense of government-provided social services which is what you suggest.

    i didn’t anywhere in my argument say anywhere that we should get rid of these social services, simply that if we were richer we wouldn’t need them.

    concentrating on these services is the short term approach that you all seem to be critising businesses for. economic growth is the long term solution that the government should be focussin on.

    Business has a short term mentality, it is cheaper to hire two people to do heavy lifting than buy a new fork hoist, this lowers business productivity but is the most ‘cost effective’ short term profit based solution. Govt needs to change the way it interacts with business to help change this too..

    This was a telling comment…

    no sane business owner would sacrifice long term growth and productivity for short term profit. Take for example share prices, they’re not determined by the companies’ existing profites, but what they are likely to be in the future – though maybe you will contest this?

    The relative cost of two workers or a machine really depends on the situation. If the business is only expecting to have a lot of heavy lifting to do for a few weeks, why would they buy a machine. If they are planning to have lifting to do for the long term, a few years or more say, then i’m sure they would buy the machine. But im sure you must understand all this, so why are you claiming that businesses will always go for the most short term profit?

    Government certainly does need to change the way it interacts with business too, Take the example of Telecom that has been discussed on this thread. Why on earth would telecom now choose to invest in broadband infrastructure, when it’s just had the government force it to share its network with all the other ISPs? Why would other companies bother to do any investment in Cable or wireless technologies, when the governemnt has just given them access to the network that telecom invested in?

    Oh and i must remember to bookmark this page, it’s not often you hear someone on the standard complaining about a businesses hiring two employees instead of just buying a machine that would be more productive!

  43. vto, the same arguments apply for cutting peronsal taxes to 10%.

    lower taxes encourage hard work, stimulate the economy, and create more, better, higher paying jobs.

    the left used to think of taxes as the public paying for public goods, which overall I wouldn’t be too opposed to. they worked out what public goods needed to be paid for, and taxed accordingly.

    nowerdays, the left think of taxes as a re-distribution tool. this explains why taxes are now as high as is electorally possible, to allow for the greatest re-distribution.

  44. bill brown 44

    “…simply that if we were richer we wouldn’t need them.”

    And how do we do that? Shut our eyes and wish really hard?

    “If the business is only expecting to have a lot of heavy lifting to do for a few weeks, why would they buy a machine”

    You seem to advocate that they should get a new worker for a couple of weeks instead. Perhaps this would be helped by giving them the push after 90 days for no reason.

    “Why on earth would telecom now choose to invest in broadband infrastructure, when it’s just had the government force it to share its network with all the other ISPs?”

    Seen this?

    3500 new NZ houses to be connected to fibre

  45. ants 45

    lprent – “Very short-term thinkers and mean-spirited are the Nat’s. ”

    That depends on what way you look at the situation. Where I’m standing Labour takes away the incentive to work hard by having over 25% of the country on some sort of benefit, and then by spending ~43% of every dollar the average kiwi earns.

    If you work harder to better yourself, your benefit gets taken away OR if you work REALLY hard and become successful, you get shafted because the government ends up spending half of what you earn.

    There is no way that these sorts of policies are a breeding ground for long term success. The policies aren’t mean spiritied, just unbelievably selfish – as they’re aimed at making as many people as possible dependent on the state, and spending peoples money for them.

    Its pretty obvious that the results of these policies are coming home to roost now – everythings falling apart at the seams.

  46. andy 46

    petermcc

    was very simplistic point I made (have seen it happen), not all businesses will choose this option. We are a country of small businesses so big up front costs of machines are sometimes to big. I am all for automation as it allows business to expand and then employ more people working smarter not harder. To be fair I would love us all to be richer.

    Because we have a lot of poorly educated workers sometimes it is more effective to hire cheap people in the place of machines.

    I am not sure just lowering taxes will ‘fix’ these types of problems, we maybe need to lower tax for capital expenditure and rebates for upskilling workers?

  47. T-rex 47

    if you work REALLY hard and become successful, you get shafted because the government ends up spending half of what you earn.

    I remember from a while back you were saying you expected to have your house freehold by your early 30’s Ants, despite having your wife at home looking after your kids. I’m not trying to detract from your acheivement, but you’re not exactly getting ‘shafted’.

  48. Stephen 48

    I’ve never really known how cutting my taxes will get me to work harder…

  49. lprent 49

    ants: You’re making the common ‘right’ assumption – that people given a choice between working or ‘bludging’ would prefer to bludge.

    I’ve never seen any evidence that this is anything other than a conservative myth. In my experience if decent jobs are offered with reasonable wages, then people will take them – even when the economic benefit to them is slightly worse off than being on a benefit.

    In the 90’s the National government started what could only be described as a punitive drive to try to force people off benefits. They did this by dropping the value of benefits, and adding some of the most thick headed harassing measures you could think of.

    I watched people on the DPB put up with the time-wasting appointments at WINS when they had to take time off retraining courses to attend them. It has to have been the most stupid bone-headed mean-spirited things I’ve ever seen. It was a direct response to the types of bigoted idiots that inhabit talkback (or whales blog). It was purely punitive because their circumstances didn’t change month by month. They were usually restricted by their kids being pre-school, and if at school by the lack of after-school care.

    On the same note. You have to remember that it takes money to job-hunt. Being unexpectedly (the most common condition) made redundant without redundancy payments and then stood down for 6 weeks before getting any incoming cash was idiotic.

    Most people are usually extended and don’t have 6 weeks income in the bank. In a period of high unemployment you don’t spend what money you have rushing around to look for a job if you know it is probable to be more than 6 weeks before you get a job.

    Similarly if you know that there is a 6 week stand-down, you don’t take jobs with dodgy employers who will dump you into 6 week stand downs. It is safer to safer on the dole.

    So the Nat’s mean-spirited attitudes about benefits put people into a poverty trap and left them there. It’d have been cheaper to put them on the dole as soon as possible. But the Nat’s tend to be ruled by talkback bigotry rather than their brains.

  50. Pascal's bookie 50

    Iprent, and then you add ‘market rents’ for state housing into the mix…

  51. T-rex 51

    In my experience if decent jobs are offered with reasonable wages, then people will take them – even when the economic benefit to them is slightly worse off than being on a benefit.

    I’ve got to say, it’s completely retarded that this situation can exist. Why would you ever put an effective marginal tax rate over 100% on someone looking for work?

    I agree that people will typically take a decent job even if there IS a slight cost to it, but why would anyone ever create such a cost?

  52. vto 52

    Oh well, seems like there not much appetite on here for trying out biz taxes at 10% and if it don’t work put them back up.

    Continue with same old same old, no matter red or blue.

    useless.

  53. r0b 53

    vto, there is no evidence that lower taxes results in faster growth. If anything there is evidence to the contrary.

    It’s hard to sort out what is really going on because over the short term all the data is so noisy. So you need examine trends over decades (within a single country), and / or compare different countries. See for example: http://www.huppi.com/kangaroo/L-taxgrowth.htm

    The highest period of growth in U.S. history (1933-1973) also saw its highest tax rates on the rich: 70 to 91 percent.

    Almost all rich nations have higher general taxes than the U.S., and they are growing faster as well.

    Here’s a discussion of some more recent stuff in the American context:
    http://www.cbpp.org/9-27-06tax.htm

    Myth 3: The economy has grown strongly over the past several years because of the tax cuts.

    Reality: The 2001-2007 economic expansion was sub-par overall, and job and wage growth were anemic.

    Members of the Administration routinely tout statistics regarding recent economic growth, then credit the President’s tax cuts with what they portray as a stellar economic performance. But as a general rule, it is difficult or impossible to infer the effect of a given tax cut from looking at a few years of economic data, simply because so many factors other than tax policy influence the economy. What the data do show clearly is that, despite major tax cuts in 2001, 2002, 2003, 2004, and 2006, the economy’s performance between 2001 and 2007 was from stellar.

    In short, probably not much point in trying a 10% business tax because (1) there’s no evidence it would work and (2) it would leave social services with a big funding shortfall.

  54. T-rex 54

    I was actually thinking about dramatically reducing the company tax rate last night.

    The main argument I could think of against it was that it detracts from ability to provide R&D grants, which are of huge assistance in helping fringe technology, especially disruptive (and potentially displacing) technology, become mainstream. So 30% doesn’t seem too unreasonable.

    I’ve got no real problem with dropping it though, so long as the after tax profits aren’t all shipped off overseas. Which, of course, they probably would be.

    Result.

  55. vto 55

    rOb, as you say it is noisy evidence camouflaging whatever the real effect is.

    I was trying to avoid a debate about the evidence on whether it would work. I am sure countless studies have been done concluding in both directions.

    I personally would like to see it tried, because my instinctuality tells me it would go off. As I said higher up, provided govt can still balance the books (and there plenty of argument around that dropping taxes can result in increased tax take). Not talking about personal taxes – so any envious folk out there can forget about pandering to fat-cats.

    If it doesn’t work after say a 5 year period then put the taxes back up. (I am sure any govt could survive that sort of period).

    So, looking at your “(1) there’s no evidence it would work” its noisy either way the ‘evidence’ points as you say yourself. And if it turns out to have no effect then put the rate back up.

    And looking at your “(2) it would leave social services with a big funding shortfall.” there is evidence to the contrary. And again, if it didn’t work put the rate back up. A govt will survive.

    Look, I know I tend to approach things in a manner that may appear simplistic compared to you and others, but the fundamental settings and approaches must be right first. I think too much analysis today looks at the detail before the larger settings. The questions are answered in the wrong order, leading to tangled up decisions.

    One thing I learned years ago from working very closely with one of NZ’s most successful business people is that it is not knowing the answers that is important, it is knowing the questions. The answers can always be found. Knowing what the right question is at the right time is far more crucial.

  56. Stephen 56

    And what would qualify as ‘not working’? What consequences will you accept as the result of such an experiment on the citizens of a whole country – how much are you willing to risk? I’m not saying don’t do it, but there are always consequences…

  57. vto 57

    What is the risk Stephen, you tell me? I am suggesting that it is done and none of the precious social policy settings are touched.

    What is the risk? I don’t see a lot of risk.

  58. lprent 58

    vto: I’d be in favor of 10% taxes on profits that are reinvested in the same organization. But of course that is effectively the case at present. If you use ‘profits’ for expansion then they are not profits as far as the IRD is concerned. So you only pay whatever the GST component is.

    But I gather that is not what you are proposing. The likely effect is that a lower tax rate would probably encourage de-investment from companies. Because at present there is an incentive to retain profits and grow the company. Under your system there would probably be an incentive to remit them out of the company.

    Now if you could propose a method that profits taken out of a firm are taxed at 10% if and only if they are reinvested locally, I’d be interested. In practice I think that is an exercise for enhancing lawyer and accountants incomes.

  59. Stephen 59

    How would no ‘social settings’ not be touched? I know that tax from business comprises several billion dollars in the budget, so that would have to be cut. I suppose you’re going to throw the Laffer curve at me now…

  60. vto 60

    Iprent, fair enough, sort of. What you are asking is a follow-on issue, or a side question to the main issue. Of some relevance but not determinative. It requires some thought and consideration and perhaps attending to. But the answer to your question should not derail the issue of slashing the rate to 10% for a period. Which, from what I can gather from your post you think would / could be a good thing.

    As to the detail of your question – sounds tricky and as you say good for lawyers and accountants. There may well be a way of accommodating something along those lines. Need to ask a tax lawyer or accountant (ha ha) as I imagine tax treaties and those sorts of things would arise.

    I dont think though that it would encourage de-investment from companies. To the contrary actually, I think it would encourage investment – and that was the starting point for my suggestion (“Most biz folk I know would simply re-invest. And be motiviated to get more active due to being able to keep, and more importantly work with, more of what they generate. The place would go crazy when combined with NZers hard-working and enterprising nature”).

    Glad you seem to agree that fundamentally it is a sound idea.

    2c more – why dont labour introduce this as a policy for the election? Might be a circuit-breaker..

  61. r0b 61

    vto: I was trying to avoid a debate about the evidence on whether it would work.

    Then you’re on the wrong blog comrade!

    (and there plenty of argument around that dropping taxes can result in increased tax take).

    Of course there is, for obvious reasons, but it probably isn’t true:
    http://www.cbpp.org/9-27-06tax.htm

    Myth 1: Tax cuts “pay for themselves”.

    Reality: A study by the President’s own Treasury Department confirmed the common-sense view shared by economists across the political spectrum: cutting taxes decreases revenues.

    But when Treasury Department staff simulated the economic effects of extending the President’s tax cuts, they found that, at best, the tax cuts would have modest positive effects on the economy; these economic gains would pay for at most 10 percent of the tax cuts’ total cost.

    The claim that tax cuts pay for themselves also is contradicted by the historical record. In 1981, Congress substantially lowered marginal income-tax rates on the well off, while in 1990 and 1993, Congress raised marginal rates on the well off. The economy grew at virtually the same rate in the 1990s as in the 1980s (adjusted for inflation and population growth), but revenues grew about twice as fast in the 1990s, when tax rates were increased, as in the 1980s, when tax rates were cut. Similarly, since the 2001 tax cuts, the economy has grown at about the same pace as during the equivalent period of the 1990s business cycle, but revenues have grown far more slowly. (http://www.cbpp.org/3-8-06tax.htm)

    As I said higher up, provided govt can still balance the books

    Aye there’s the rub. I don’t know enough about the tax take split, but I suggest that it would leave a big gap in social services. Not an experiment to be undertaken lightly.

    In passing, note that Labour recently cut company tax. National have never done so, and voted against it this time. Why?

    Captcha: “today complex” – yes it is…

  62. r0b 62

    PS – There we go – corporate tax makes up 17% of the government’s income: http://en.wikipedia.org/wiki/Taxation_in_New_Zealand

  63. r0b 63

    Sorry if this dual posts.

    PS – There we go, corporate tax makes up 17% of the government’s income: http://en.wikipedia.org/wiki/Taxation_in_New_Zealand

  64. vto 64

    rOb, gotta race out the door. What you raise is another secondary issue, but of course perhaps a more relevant one – the effect on the govts coffers. The main issue is the positive effect on business and hence most every community in NZ. Me? I would do it – but that’s me. Its worth giving t a crack.

    I think, provided any effects can be mitigated or simply carried or managed for a period, then most everyone would agree it is a good idea ya? If so, lets work out a way. Too much at stake not to.

    Gotta fly – biz to do and shirt to keep from being torn from my back in these brutal times..

  65. Lew 65

    peteremcc: “i didn’t anywhere in my argument say anywhere that we should get rid of these social services, simply that if we were richer we wouldn’t need them.”

    Who’s this `we’ to whom you’re referring, again? My point is that any `we’ which encompasses people unable (temporarily or otherwise) to earn enough to participate fully in the private sector will need these services. Others will also be able to use them as an option. Since the rising tide you describe will tend to lift prices, the private sector will necessarily tend to be priced above what many people (though perhaps not most people) can afford. In this case, one of two things must be broadly true: 1. public sector services are robust enough to allow people to maintain a minimally decent standard of living/education/care; or 2. those services provide the absolute bare minimum for survival. Perhaps 2 here is acceptable to you – to me it’s not. I consider what we have at the moment is 1 (though many would consider it closer to 2).

    vto: So let’s not focus on the facts of whether it would work or not. Notwithstanding Stephen’s excellent point about what would constitute `working’ (after all, Stalin industrialised his country in a decade, anyone would consider that a roaring success if not for the tens of millions who starved), and notwithstanding Peter’s point that the same rationales could and would be applied to personal taxes, notwithstanding my skepticism as to whether massive tax cut will indeed drive massive productivity, reinvestment and economic growth – and notwithstanding the very dubious notion that it would increase the gross tax take and therefore increase government funding of social policy imperatives, this is basically a gamble with civilisation as we know it in NZ. If it works, great. If it fails, there’s a major flaw in your plan:

    “If it doesn’t work after say a 5 year period then put the taxes back up.”

    The flaw is that this would never happen.

    The major problem with the implementation of Communism is in the fact that Marx’s schema requires power to be temporarily concentrated in the hands of the few for the good of the many, and then relinquished. So far in history we have never seen those in power in a Communist regime relinquish it back to the people, and it’s this fact which causes Marxists to argue that we’ve never seen `real’ communism, so we can’t rule it out as an economic system yet. This is technically correct, but its use as an argument for communism is plainly ridiculous since it is the simple fact that the system relies upon those invested with absolute power relinquishing it that means the system cannot work. What you propose is identical in principle. What government could campaign on the basis of a 20 percentage-point (in fact, 200%) tax increase without finding itself subject to massive capital strike?

    L

  66. lprent 66

    vto: I was really just pointing out the main flaw. So far you’ve made it look like a way to leak even more capital either out of NZ or into speculating on houses. That latter of course currently has a very low tax rate.

    From memory the tax take from business is in the order of 20% of revenue. So rather than rely on the benevolence of the business owners in investing (yeah right), I’d suggest raising taxes elsewhere to cover the potential shortfall. Then we won’t get hit by the inevitable lags in revenue streams even if we assume that there will be an increase in revenue from increased investment. Usually the lags are in the order of 5-10 years.

    Let me see – increase the land transfer tax on houses – that would be a good starter. Maybe a massive tax on over-spec cars?

    Suggestions anyone?

  67. vto 67

    Iprent and Lew, unfortunately I have a very busy day so cannot partake anymore..

    But Iprent, the whole idea is the opposite of a capital leak. It would encourage capital investment, that is the whole point. As for revenue lag – a technical matter to be worked through. Gotta keep the big picture in focus and fit other matters around that.

    Lew, I dont agree it would be difficult to put the tax rate back up. If it wasn’t working then the people wold demand it – just get old envy-man Cullen onto it. And anyway that same suggestion was made on here re wages and workers rights last week, i.e. bed them in now so another govt cannot reverse the policy easily.

    Anyway enough – imo it should be tried. It is done elsewhere. Ireland springs to mind (no doubt all sorts of excuses will pop upat that mention tho). All I’ve got back is a constant stream of usual excuses. BE BOLD PEOPLE! You know, economic transformation and all that.

    As far as I can see the only genuine excuse to not try it is the effect on govt revenue, and as I said earlier govt is big enough and ugly enough to lookl after itself. At least for a short period.

    Or just carry on tinkering and drifting down the OECD ladder (hang on, we meant to be in the top half by now according to Clark)… its your choice.

  68. r0b 68

    Vto, nothing wrong with calls to be bold I guess, but you still haven’t explained how the gap in the government’s income would be filled.

    And you haven’t answered my question. Labour recently cut company tax. National have never done so, and voted against it this time. Why?

  69. lprent 69

    It isn’t the government I’d be concerned about. It is the superannuiants. They currently have the largest single block of government money in the system in several different forms. The national super, cullen fund, and kiwisaver.

    Now assume that your plan doesn’t work and there is a no increase in business tax take. Tell me what the government will effectively cut or cap. Hospitals? schools? or super payments in one form or another.

    It will be the latter, and most likely in such a way to defer the costs for a decade or so. Now that is a high risk.

    I’d propose that to do what you’re after, revenue gets raised somewhere else. Then if you’re wrong and I’m right, nothing substantial gets fucked up a few decades down the track for millions of people.

    Governments aren’t there to play experimental games. They’re there to manage risks for society and the economy.

    Now back to the point – so where do you want to raise taxes to pay for your experiment.

  70. vto 70

    Ok ok, look I dont have the detailed answer to that question of how the govt books are balanced. As I said right at the start. My proposal was a fundamental / philosphical one trying to look at how business in NZ could get a real rocket under it and actually reflect NZers enterprising and hard-working nature. And boost communities around the country.

    That was why I tried to avoid getting lost in the side issues. But you keep trying to drag me into that morass!

    But here goes a rough and ready attack at it: If biz revenue is 17% at 30% tax rate and that rate gets slashed to 10% then the 17%, with biz not growing at all, would slash to 6% leaving a shortfall of 11%. As far as I know that 11% is about $4billion. How much has the surplus averaged the last few years?????

    And then when you take into acocunt the amount business would grow and other taxes (eg GST) that would increase as a result then I think the boox could be balanced in some way. Remember, the ‘foregone’ revenue doesn;t actually disappear from the economy. Its still in there spinning around and churning through the wallets, and getting siphoned off by the govt in the multitude of other taxes.

    Actually, having done that summation right now on the spot I think it could work. And also, if the govt has an ability to go into a little more debt (horror!!) to cover some as well.

    And its only 5 years, so… there we go.

    Well worth it for the massive benefits that would / could accumulate. The way to look at it?.. if the books could be balanced then why wouldn;t we? And I just balanced them. Maybe I should move to Wgtn and join the Treasury or somefink.

    You know, I have often wondered why the ‘left’ and ‘right’ philosophies and abilities, which are often complementary, dont get together more often. (is that what happenned with Act? more horror!! but perhaps on the right type of thought track?). Again, our political structure tends to get in the way methinks.

    Convinced yet?

    (lew rOb and others, you have asked other questions too but family demands at mo)

  71. r0b 71

    Ok ok, look I dont have the detailed answer to that question of how the govt books are balanced.

    Well at least you then went and did some sums on it, so good for you.

    As I said right at the start. My proposal was a fundamental / philosphical one trying to look at how business in NZ could get a real rocket under it … That was why I tried to avoid getting lost in the side issues. But you keep trying to drag me into that morass!

    Sorry, but it’s true what they say, the devil really is in the details. Having big sweeping ideas is easy if you don’t have to deal with the consequences.

    Here’s an example for you. What say I propose the following: —
    “That all employers be required to raise wages by 20%. This should incentivise workers, put a real rocket under them, increase productivity no end! It’s certainly worth a try don’t you think? If it doesn’t work we can always put wages back down again. I think we should give this idea a try, but I don’t want to get bogged down in any details about it.”
    — Hmmm, see how that might be a problem?

    How much has the surplus averaged the last few years?????

    Not enough — see how quickly it all evaporated when the international economy got the jitters? Thank goodness Cullen has been a prudent manager of our economy, and that New Zealand is well placed to weather the current international financial crisis.

    And again, to put this in terms of my example, how much have business profits averaged over the last few years? They can all afford to put the wages up!

    Convinced yet?

    If you could tell me how it can be done without damaging government income and therefore social services, then sure, why not. Are you convinced of my wages example?

    you have asked other questions too but family demands at mo

    Family first, always.

  72. vto 72

    rOb, quick fire response..

    Shortfall about 4billion. I suspect easily half of that would be hoovered up through other taxes, so down to 2billion. Increased business as a result of the decreased tax rate would soak up some more. Deal done. I suspect it could easily be funded.

    Taxing wealth creation / income production makes little sense, so lets get rid of it. Tax something else instead like pollution, or consumption, or McDonalds, but not the wealth creatioon / income production sector. That surely makes sense ya? And therefore, slowly (or rapidly as I susggest) move towards its deletion.

    The saying ‘the devil is in the details’ doesn’t apply to everything and I think it has limited application in the idea (and level of debate) I have been trying to push here. You know, in business it is very often the case that detail gets in the way and if you spend too much time on it nothing will happen – try getting lawyers and accountants (the detail experts) to do some business deal. Doesn’t happen. They come in after the deal is done and tidy up the details.

    Re your wage analogy, I don’t think its a good comparison for various reasons. But hey I think it has merit in some form – isn’t that what Henry Ford did with his workers? He needed someone to buy his cars so he put up wages to help with that. Isn’t he credited with a large part of the creation of a middle class?

    Well, if I haven;t convinced anyone on here I have at least convinced myself and will now take this idea and bore my mates and colleagues and family with it.. ha ha

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