Saturday, January 30, 2010

Maximum rent

Stephen Franks is musing about the proposed property tax and its effect on the rental market/ housing availability. Which prompted this comment from me (I risk broadcasting the idea to deter National, not to encourage the statists);

I have also pondered this in a vague sort of way. A great deal of rent is currently paid for with the accommodation supplement ( $1 billion annually). If rents rise as a result of a property tax, under this government's approach of compensating the 'poor' for any rise in their living costs, the accommodation supplement will also have to go up. How much of the extra revenue raised will be offset by the extra expenditure?

The Left puts up two irreconcilable demands. As you put it "soak the rich", and subsidise the poor. But while the landlord has freedom of pricing, nothing has been achieved except more cash transfer. The same happens with employment. While on one hand the Left wants workers topped up by the state, they also rail against subsidising the employer. Hence a minimum wage is legislated.

So don't be surprised if the Left start talking about a maximum rent. If National go down this road they will have to contend with this demand, and as Mr Key has already fiercely asserted that the 'poor' will be compensated for any rise in GST, he will be in a very weak defensive position.

Friday, January 29, 2010

More is broken than just the tax system

Writing in today's NZ Herald, Susan St John succeeds in showing how complex and counter-productive the state's attempts to redistribute wealth have become. But because the writer believes in the notion of state responsibility for income equality she is merely hoping that the government can come up with a better design on the back of "an adequate and comprehensive review."

Perhaps, instead, it is time to examine the beliefs behind government-mandated redistribution - or put more crudely, robbing Peter to pay Paul.

There are two broad ways that wealth gets redistributed. Through taxation and transfers, or through work and shared profit. Over the past 40 years the trend has been towards the first method. State cash transfers have grown steadily. That growth has brought with it more and more complexity as more and more people want a piece of the pie. It is undeniable that whenever a new 'benefit' is introduced it isn't long before there are calls to extend it, either by generosity or by eligibility. A recent example is Paid Parental Leave. Not happy with the current status, lobbyists want 52 weeks instead of 14 and fathers to be paid as well. (Notice here that the prime lobbyist, the Families Commission, is also, after a fashion, a recipient of cash transfers.)

So why is it that government continues to increase the rate of transfer - from the frugal 19th century beginnings of welfare through to the recent Working For Families - yet inequality, according to St John, keeps growing? It is now apparently at an unacceptable level.

The problem lies in the method. When people work for their income there is a return to both employer and employee. The sum of wealth is added to. When people do not work but receive income from the state, the sum of wealth is diminished. This means there is a very obvious limit on how much the state can transfer.

Add to this the disincentive factor. It is reflected in the vast number of people now receiving some form of welfare. If the state is offering cash, the need and desire to work is reduced.

Which is how we have arrived at the current "mess", to use Ms St Johns description. But the only question being asked is, how can the state keep giving people money and keep them working? Trying to solve that conundrum has resulted in the very complicated interface between the cash transfer and taxation system.

Somehow NZ has to pull back from the current pathway and fiddling with the tax system isn't the answer. Taking money off people just to give it back (and more) is patently silly and inefficient. Paying people benefits from a very young age thus locking them into the cash transfer system for years is socially and economically counter-productive.

There are better ways to organise a society. Better economic brains than mine have put up ideas worth exploring. Flat tax, tax-free income thresholds, negative income tax, private social security provision, individualised social security accounts, etc.

But underlying all of these ideas is a philosophy of minimal government intervention. If simplicity and equity are paramount we need less taxation, less taxation machinery, less churning and less transfer - not more.

Thursday, January 28, 2010

Goff's speech - warning

Don't waste your time reading it.

Spun to be something it wasn't.

In a nutshell;

The recovery. All should share in it. Every NZer wants to work and should be paid at least $15 an hour. State sector chiefs shouldn't be paid more than $400,000 though. Rich bankers and CEOs of finance companies should be dealt with. The rich should pay their way and benefit fraudsters should be cracked down on (so National can't use them to cut social services.) No child should be left behind because all parents want the best for their children. But the community is responsible for stepping in where parents fail. Three strikes sucks and a promise to address Maori and Pacific educational failure. Tax reform must be fair. Beat the R&D funding drum.

Stephen Franks was wrong. More's the pity.

Grassroots Labour's Kaine Thompson says Labour lost the last election because voters became bored with them. Nothing in this speech is going to change that. If this is his best, Phil Goff should pursue a new direction in life.

Lord, I am tired of vapid politicians.

Goff to define a 'welfare rort'

It is very hard to read this and remain composed;

Labour leader Phil Goff is expected to ramp up his rhetoric against welfare rorts and vested interests in a speech in which he needs to put Labour back on the front foot after a year in the poll doldrums.

....He is expected to return to his theme of personal responsibility – taking aim at those who "rip off" the system, rich or poor. Among those in his sights will be wealthy Kiwis exposed by a tax working group last week to be hiding income to qualify for benefits.

It will be fascinating to hear how Goff defines a "welfare rort". He can hardly use the high profile examples National has been parading, when the whole point of this 'state of the nation' speech is to differentiate the party he leads.

Make no mistake. It is Labour that has time and time again given society programmes that are open to exploitation. They are warned of the unintended consequences but always press ahead in the interests of 'social justice' and vote-buying. They gave us Working For Families and now he is going to rail at the matter of it being ripped off.

And "personal responsibility"? It is a long, long time since Labour philosophy and policy has been synonymous with personal responsibility. Personal responsibility is only for the suckers who keep the show on the road in spite of extensive government efforts to demoralise and disincentivise the lot of us.

Another sickening animal story

An aggrieved neighbour takes the law into his own hands and slaughters 33 dogs. This is exactly the reason why the idea of vigilantism sparks deep reservations within me.

If there was a problem with these dogs (as yet unproven) they should have been destroyed humanely.

The whole story is utterly sickening and sad. The owner is clearly something of an eccentric man who has chosen a lifestyle most people wouldn't understand. But apart from not registering his dogs, which would have been financially beyond him, what harm was he doing anybody else?

The guy that committed this atrocity is the headcase. He may well have been heartbroken over the loss of his pet but as such should have understood something of the way Mr Hargraves might have felt about his own animals.

Wednesday, January 27, 2010

Benefits by region

My analysis of the latest benefit data;

Things to note;

1/ The DPB has the highest numbers in all bar two regions.
2/ The Canterbury and Southern regions have disproportionately high numbers on invalid benefits (and high ratios due to psychological and psychiatric reasons). These are the only regions where there are more people on IB than DPB.
3/ Auckland is the only region that has more sickness beneficiaries than invalid beneficiaries.
4/ The growth in sickness benefits has been very high over the past year averaging 16 percent nationally, compared to 4 percent in the previous year. It is highest in the Waikato which also features the highest DPB growth.
5/ Wellington, home of government, has the lowest unemployment benefit growth; Canterbury the highest.

You may notice and want to comment on other aspects of the data. But the graphs do not paint a very bright picture.

Tuesday, January 26, 2010

Abdominal abomination

The call for publicly-funded stomach stapling is just abominable. Not that it doesn't already go on to a degree but talking it up as an 'entitlement' is just a green light to get fat and then take the easy way out. And 2 National MPs have backed up the call. Obviously individual responsibility doesn't apply to what you choose to put away on a daily basis. But then it doesn't apply to much else with this particular version of a National government.

Yesterday I blogged about just how tight the health budget is. There are many people who are going to be living in pain because they have degenerative unavoidable conditions. MacDoctor told us last week that he is having a devil of a time getting patients in to see a hospital specialist.

But that is the economic ethics of publicly funded health. If you are old you are a burden. If you are young you are an investment. No matter if you failed to control the behaviour that caused the need for a $28,000 operation.

Turia says;

"We already pay billions of dollars for the care of diabetics ... All of that is huge money that the state has to pay."

Here's a radical idea. Avoid the frigging diabetes in the first place or pay for the op yourself.

Monday, January 25, 2010

Unspeakably horrible stories of cruelty

The story of the man feeding kittens to his pitbull has been widely canvassed but I only just came across this one. It's chilling.

I saw and heard the sister of the man who fed kittens to his pitbull saying he was just being stupid. She valued their lives just about as much as he did. A certain type of people don't care about themselves (except in the most base way) and don't care about others - human or otherwise. Quite commonly, they are parents.

Health spending - the rationing can only increase

It would be possible to embark on a similar exercise using NZ statistics but let's just rely on the work the Australian Treasury has already done. According to the Age;

FEDERAL Government spending per person on health will rise in real terms from $2290 today to $7210 in 2050, with state governments at risk of being overwhelmed by rising costs, Prime Minister Kevin Rudd has said.

Treasury projects that, on present trends, the total health spending of all states will exceed all of their tax revenues, excluding the GST, by 2045-46, and possibly earlier in some states.

Our government spending is currently $2876 per person. This cannot be compared directly because in Australia the states spend individually on top of the federal government. But it is the projected increase that is important.

In the mix are new technology, price inflation and, most importantly, the ageing population. If a much bigger chunk of the population is 'old' the average spend increases. This is progressively happening against a backdrop of recession or the lag from it.

I understand that our DHBs have been told that they are only getting a little over 1 percent of increased funding this year. It is already very tight. And it's going to get much tighter.

So it is no surprise that the government is going to fight the Human Right's ruling regarding payment for the care of disabled adult children by their parents or that some DHBs are looking for other sources of revenue.

Just as an aside looking at the health spending projections there is no allowance for an increase ($13.4 billion in 2010 to ...$13.4 billion in 2015). On the other hand social security and welfare spending equivalent figures are $21.1 billion to 24.6. Why the big difference? Yes some of the welfare increase is Super but that means the country is forecasting for old-age pensions but not the healthcare needs of the pensioners. That's a worry. I would prefer to see budget limitations being put on Work and Income. When is that going to happen?

Sunday, January 24, 2010

Well said Muriel

Beautifully put;

There are around 340,000 private rental dwellings in New Zealand, many owned by mum and dad investors who have put their savings into rental property as part of their retirement plan. Any decision by John Key and National to punitively punish these people – because the government can’t get its own spending under control – is contemptible. As is any further attempt to politically portray them as pariahs.

From Muriel Newman's weekly column.

Marriage makes a difference

What is it about marriage? Social liberals don't much care for the state-sanctioned traditional custom. Modernists wanted to dispense with 'the piece of paper'. Helen Clark apparently loathed the idea of marriage.

Marriage is a very public promise. You hear folk say it means nothing these days. People don't expect it to last. But on an individual basis, I am certain many do. De facto relationships have their place, especially for the young, but they aren't really about commitment (I generalise).

I am a big fan of the institution of marriage but stop short of saying the government should get involved in promoting it. It is government involvement in the private lives of people that has played a significant part in undermining marriage.

Crusader Rabbit drew my attention to this news out of the UK, a similar society to NZ. Only 3 percent of unmarried couples stayed together until their child was 16.

The only similar NZ information I have ever come across is;

According to Jan Pryor, director of the Roy McKenzie Centre for the Study of Families (and now Chief Families Commissioner) only about 12 to 13 percent of kids’ parents live together but aren’t married.

Mr and Mrs Average, Dominion Post, July 26, 2008

The divergence of percentages may be explained by a lack of age specification.

So why does any of this matter?

When starchy phrases like out-of-wedlock birth or illegitimacy rates or even unmarried parenthood are used, lots of folk get up in arms. They claim that the terms are irrelevant because many children are born to unmarried parents who are nevertheless in stable and committed relationships. This research turns that on its head.

NZ is approaching an unmarried birth percentage of 50. It isn't uncommon for parents to marry after the birth of their children but neither is it uncommon for them to split when the going gets tough. That is a sad development. It is an emotionally and financially costly business. And the costs are socialised.

Sure, married parents split up to, but less frequently. So marriage makes a difference.