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.

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.

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.

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.

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.

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?

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.

Proof that most people are politically ignorant

A very funny piece of satire posted by Adolf at No Minister reminded me of a few thoughts I had had regarding the Massachusetts victory (isn't it great how you can put in a few letters vaguely resembling the state name and the spell checker obliges?)

Was there ever a more glaring illustration of how politically ignorant most people are?

Barack Obama was voted in on a wave of feel-good romanticism. No doubt many felt bighearted and broad-minded simply by voting in the first black President. Did they care or know what Obama's politics were? I don't think so. It was symbolism and idealism all the way to the polls.

But how quickly his popularity has waned as his plans have actually permeated the almost-impenetrable political conciousness of many, thanks to a huge effort on behalf of those individuals and groups who have relentlessly written about, lobbied and rallied against Obamacare, which would represent a huge step towards what America has rejected since its constitution was written.

There is a lot wrong with the US but there is still an understanding of individual freedom simmering away. They have been through, and are still going through, very tough times. But out of adversity, good will often result. A reawakening of what their founding fathers believed in may be that good. I hope so.

Record rise in sickness benefit numbers

Media Release

RECORD RISE IN SICKNESS BENEFIT NUMBERS
Friday, January 22, 2010

Statistics released today by the Ministry of Social Development show that numbers on the sickness benefit have jumped by 8,000 or 16 percent in the past year. That is the largest yearly increase recorded since the sickness benefit became available in the 1930s.

Welfare commentator Lindsay Mitchell believes this is as much a reflection of the recession as an increasing incidence of sickness or accidents.

"Looking at the profile of people on the sickness benefit, compared to five years ago they are younger, fewer have worked in the past year and more have a psychological or psychiatric incapacity. Often depression and stress can relate to being unemployed."

"The government needs to take great care at this time not to let people who should be on an unemployment benefit migrate to one of the longer term benefits like sickness, invalid or domestic purposes benefits. As the economy recovers numbers on the unemployment benefit can be expected to fall. But people on other benefits have a much greater likelihood of becoming entrenched."

Increasing benefits to compensate for GST rise - stupid

Another day of reading the news and shaking the head. Keys says if GST rises, so will benefits. That's only fair.

A wealth of research shows behavioural changes according to benefit payment rates. For example, the rate of single parenthood rises with an increase in the relevant benefit payment.

Do those people reacting to a higher benefit spend time analysing why the benefit payment has been increased? And if they did they would figure that benefits have increased relative to low wages. There is no mechanism for lifting low wages to compensate for increased GST (unless the government lifts the minimum wage but that hasn't been suggested - yet).

By the time the behavioural change is factored in, the extra revenue from increased GST (only $200 million after adjusting benefits, Working For Families and pensions) could disappear. If there was just a 3 percent rise in working age people claiming a benefit, the advantage would vanish. Any higher percentage growth and the government's position worsens.

This really is a pathetic government. Face facts Mr Key. We got by before WFF and all the other increased spending Labour introduced. We got by before the feminist, minority and human rights lobbies started using the benefit system to further their causes resulting in an explosion in welfare receipt. We need real tax reform and that can only happen with real spending reform. But you are not the man for that job.

Moreover, if you are talking about increasing WFF then you are, by your own previous definition, talking about increasing "communism by stealth."

A cruel example of the "limitations of law"

The state of Victoria has a higher population than NZ but fewer road fatalities. Last year they had a record low in road deaths.

But a terrible accident at the weekend killed five young people. Typical aspects all present. Young, male driver. Limited licence requirements flouted. High speed. Alcohol.

STEVEN Johnstone, the 19-year-old driver in Sunday's horror crash that claimed five young lives in Mill Park, makes a chilling case study on the limits of the law. The apprentice roof tiler had a speeding conviction in the past year and was only allowed to carry one passenger, according to police.

Instead, his car was crammed with six people as it slammed into an oak tree at 140 km/h after hurtling through the intersection of Childs and Plenty roads.

This is followed by a discussion of the limitations of the law, what has been tried so far and what direction the police may go in next.

The Deputy Police Commissioner was similarly unmoved by the call to destroy cars.

"I intuitively understand why people want to crush cars, but again I go back to the evidence that 99 per cent of people that lose their cars in the first instance don't reoffend."

(Cars can be impounded for up to 48 hours for a first speeding offence.)

The highly readable piece goes on to describe how there is a risk-taking type who shouldn't be behind the wheel and efforts to identify them are being stepped up. Academics are talking about brain scans. The police are talking about working more closely with health professionals and educationalists. The police have apparently "veered into the realm of psychology".

The thing is, even when you identify the 'type', how do you stop him from getting behind the wheel of a car, whether he owns it or not?

You would have more success trying to persuade other people not to get in a car with him. Ultimately, you cannot save people from themselves.

The Supreme Court

What a great analogy for well-intentioned policy gone awry; the hallmark of big government.

The plan ...











The outcome ....


(Outcome pinched from Kiwiblog.)

Airfares for fatties inflate

Air France-KLM is going to begin charging obese people 75 percent of the cost of buying a ticket for the adjacent seat. But I wonder how they are going to define obese? I think KLM is missing a more creative opportunity and solution. I am quite small and wouldn't mind doing a deal with a fattie. They can encroach on half of my seat if they pay half of my fare. It's a win-win. And I'd rather sit next to a fatty than someone who never shuts up.

9 on dole for 20 years - so what?

So, Stuff tells us, 9 people have been on the unemployment benefit for more than 20 years. This unimpressive piece of trivia hides more than it reveals about the general degree of dependence on benefits. I believe the Ministry does not want that known because they have never conducted the research or supplied data in a form that would reveal its extent. But US and Australian research would indicate the level is likely to be high.

Looking at just the DPB for example 10,700 people have received that benefit continuously for 10 or more years; 15,800 have received that benefit or any other continuously for 10 or more years.

But many people have breaks off a benefit where they might work a period or form a relationship temporarily. They then drop out of the numbers that have been continuously on benefit. That doesn't mean their level of dependence is significantly less over a long period or over a lifetime. At June 2007 43,866 people on the DPB were reliant for a second (third, fourth etc) time. Many of them would not be featuring in the continuously dependent for 10 years or more despite having been cumulatively dependent for 10 or more years.

Bearing this significant short-coming in mind, across all benefits 37,300 people have been reliant continuously on their current benefit for 10 years or more; 62,000 have been reliant on their current or any other benefit for 10 years or more.

The highest rate of long-term dependence naturally features among invalid beneficiaries, but it is followed by the DPB. As partnered women with dependent children have higher employment rates than unpartnered, it is safe to conclude that single mothers are dependent on the state for longer than partnered women depend on their spouses or de factos.

It should be the other way around. But I see Paula Bennett is stalling again about introducing work-testing - the government is "still working on its welfare manifestos" - the very least National should be doing.

Three strikes - an anti-climax

ACT has just issued a press release entitled; 'Three strikes' to become law.

ACT Leader Rodney Hide was today pleased to announce that ACT's 'Three Strikes' policy is to be incorporated into the Government's Sentencing and Parole Reform Bill for passing into law.

The deal that is acceptable to National seems well short of what ACT wanted.

David Garrett says;

"The key issues were the list of 'strike' offences, whether there should be a three or five year sentence to qualify for a 'strike' or just a conviction, and whether the 'Third Strike' would mean 'life' or the 'max',"

As the release reads, the sentence settled on to qualify the conviction as a 'strike' is 7 years.

And as far as I can ascertain the third strike simply delivers the maximum sentence without parole.

(You can make the comments).

Early education - is it really all it's cracked up to be?

Apparently a new evaluation of the long-standing early education programme for low income children in the US has shown that there is very little difference in outcomes between those that are enrolled and those who were not. Rather than rely on the report about the report I had a very quick look at the actual evaluation;

In sum, this report finds that providing access to Head Start has benefits for both 3-year-olds and 4-year-olds in the cognitive, health, and parenting domains, and for 3-year-olds in the social-emotional domain. However, the benefits of access to Head Start at age four are largely absent by 1st grade for the program population as a whole. For 3-year-olds, there are few sustained benefits, although access to the program may lead to improved parent-child relationships through 1st grade, a potentially important finding for children’s longer term development.

Importantly this is an evaluation through to 1st grade only. A further report is pending into outcomes by 3rd grade.

Head Start has been going since 1965 and was instituted as part of Lyndon Johnson's War on Poverty.

It costs nearly $US7 billion and 60 percent of enrolled children are non-white.

I guess what interests me is other countries have modelled educational/social policies after Head Start. In NZ there has been increasing focus on and professionalisation of early education across the board. No doubt there will be many studies that show a positive effect. But when it comes to low income children in particular, I would think that the home environment and the parental input are more influential. Perhaps there is only so much intervention can (generally) achieve - and if this study is anything to go by - the difference may be disappointingly modest.

(Of course, it could also be argued that the quality of education and environment of Head Start needs to be extended through to later grades or that there is something wrong with US schools or that children are less malleable as they get older. I am beginning to wonder if I should even hit the publish button....but there isn't anything else that caught my interest today.)