Robert Lucas on the irrelevance of income redistribution to the Great Enrichment
15 Apr 2015 Leave a comment
The Scottish National Party manifesto
15 Apr 2015 Leave a comment
in income redistribution, Public Choice, rentseeking Tags: British general election, British politics, Scotland, Scottish National party
SNP manifesto. #PrivateEye http://t.co/oD3iuyajBl—
Wire Spy (@wirespyuk) April 02, 2015
Hillary is running as some sort of class war warrior against the big end of town
14 Apr 2015 Leave a comment
in income redistribution, politics - USA, Public Choice, rentseeking Tags: 2016 presidential election, campaign finance report form, expressive voting, Hillary Clinton, median voter theorem, rational ignorance, rational irrationality, special interests
Top 20 Hillary Clinton campaign contributors, 1999-2014, in case you were wondering. http://t.co/c8KTOkJ30X—
Downtown Josh Brown (@ReformedBroker) April 14, 2015
The NZ Greens want to introduce food stamps, but only for part of the year?!
12 Apr 2015 Leave a comment
in income redistribution, politics - New Zealand, politics - USA, poverty and inequality, Public Choice Tags: expressive voting, food stamps, Left-wing hypocrisy, rational ignorance, rational irrationality, school breakfast programs, soup kitchens, welfare reform, welfare state
The welfare state has a long history of providing some of its support to the needy in kind rather than in cash. This can range from soup kitchens to public housing as well as food stamps.
In the USA, food stamps provide provide food-purchasing assistance for low- and no-income people living. Food stamps can only be exchanged for food.
Instead of requiring the poor and needy to attend a soup kitchen, they can be given vouchers to buy food at supermarkets and take it home and cook at themselves. These days some sort of debit card system can be used where purchases are restricted to food at supermarkets and other participating retailers.
A close parallel with food stamps, properly understood, is free school breakfast programs. The welfare state is providing in-kind support to hungry children. This is done at school, to ensure that the children eat the meals.
Rather than rely on their parents to spend their welfare benefits and income support on food for their children, the food is given directly to the children when they arrive at school in the morning. In New Zealand, these free school breakfast programs are restricted to schools in low income areas.
There is a Feed the Kids Bill in Parliament sponsored by the Green Party. I have frequently criticised this proposal as it doesn’t provide breakfast to needy children at the weekends and school holidays. They are left to go hungry. Abandoned by their so called social justice champions through lack of imagination and self-awareness.
If children are showing up at school without their breakfast on a regular basis, their parents should reported that the child protection authorities for intervention. This can start with budget advice and assistance with applying for any additional and emergency financial support they are eligible for from Work and Income New Zealand.
Soup kitchens not only provides people with food, it provides various other assistance to help people to get back on their feet.
If you were proposing a food stamps program in New Zealand because children are going hungry, you’ll be laughed at if you suggested it should only apply the part of the year such as during the school term.
That is precisely what the Greens are doing. The only difference is how they are organised the provision of in-kind support to children, this case, food. Instead of their parents collecting a debit card that can only be used to buy food, the food is eaten by their children at school.
A Guaranteed Minimum Income for New Zealand? The Treasury costings
12 Apr 2015 Leave a comment
in income redistribution, politics - New Zealand, politics - USA, welfare reform
The Treasury modelled a Guaranteed Minimum income (GMI) at the request of the Welfare Working Group in 2010. A GMI paying $300 per week – the mean benefit income among those on benefits – would cost $44.5 billion (model 1) or $52.6 billion if we extended it to super annuitants as a replacement for NZ Superannuation or old age pension (model 2). The former could be covered by a flat personal income tax rate of 45.4%; the latter, 48.6%.
Full fiscal neutrality would require tax rates of 50.6% and 54.4% – the lower tax rates would be just enough to cover the transfers, but income tax revenues are currently also used to fund more than just transfers.
If we recognize that most parents are beneficiaries via Working for Families and compensate them for their loss with a $86 per child per week payment (model 3), we get a $57.1 billion fiscal cost and a personal tax rate of 50% (or 55.7% for fiscal neutrality).
Treasury noted that many beneficiaries (including the disabled, carers and sole parents) currently receive more than $300 per week and would be made financially worse off under a GMI scheme.
Treasury also warned about potential adverse labour supply responses to the necessary higher personal income tax rates. The large gap between company and personal tax rates would increase IRD’s enforcement costs.
In 1987, Finance Minister Roger Douglas announced a Guaranteed Minimum Family Income Scheme to accompany a new 22% flat income tax. The idea did not go ahead.
Richard Nixon also proposed a guaranteed minimum family income plan in 1969 to replace the Aid to Families with Dependent Children (AIDC) scheme at the behest of future Senator Daniel Patrick Moynihan. This was based on the negative income tax proposals of Milton Friedman and George Stigler. Nixon’s plan passed the House but not the Senate after 3 years of infighting.
The final outcome was the earned income tax credit (EITC) in 1975 that was expanded significantly in the 1990s to become the largest single federal income transfer programme. One attraction of the EITC is that because its benefits rise positively with earnings up to the phase-out point, so it can have a positive rather than negative effect on work incentives for workers on a low wage.
Low incomes don’t matter much to cell phone and smart phone access for teens
11 Apr 2015 Leave a comment
Who has the smallest Anglo-Saxon welfare state of them all?
02 Apr 2015 1 Comment
in income redistribution, labour economics, politics - Australia, politics - New Zealand, politics - USA, welfare reform Tags: social insurance, social safety nets, welfare reform, welfare state
I have reanalysed data published by the Peterson Institute on the true levels of social expenditure across the industrialised countries for the Anglo-Saxon countries.
Figure 1: gross public social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
When you just look at gross public social expenditure, New Zealand is in the middle of the pack with the United Kingdom having the largest spending. There are not particularly large differences across social spending in the Anglo-Saxon welfare states.
Figure 2: Gross public social expenditure and the effects of taxation in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
There is not much change when you include the effects of taxation on consumption by benefit recipients.
Figure 3: Net after-tax public and private social expenditure in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
When private mandatory social spending is included, such as employer sponsored health cover, there is considerable change with United States leaping to the front and New Zealand dropping to the bottom. The USA has the largest and most expensive is health sector in the world so they are leaping of the front, either because healthcare is expensive in United States or people in the United States are not constrained by government rationing to spend less than they would prefer on their own healthcare. Let’s leave that war of ideas for another day.
Figure 4: Net after-tax total social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
On the face of it, New Zealand has the smallest Anglo-Saxon welfare state while the United States has the largest. A more accurate measure of the relative sizes of these Anglo-Saxon welfare states would require the wisdom of Solomon in measuring waste and underfunding in the respective systems and more trust than you should have in services sector in purchasing power parity adjustments.
For those that are interested, the OECD-wide gross social spending and net after-tax total social spending are reproduced below in figures 5 and 6.
Figure 5: Net after-tax total social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
The Figure 5 data on the OECD wide welfare state sizes shows that when you add private spending, including social spending mandated by law, the US has the second largest OECD social safety net as Kirkegaard said in his Peterson Institute paper:
Taking the full effects of tax systems and social spending from both private and public sources into account, the United States is seen to be devoting more resources toward social purposes than is generally acknowledged. In fact, only the French spend more than Americans, while the alleged welfare-addicted Scandinavians and Europeans spend less on average.
Figure 6: Gross public social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
Via The US welfare state and safety net are bigger than you think. But who are they helping? – AEI | Pethokoukis Blog » AEIdeas and POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies
Gordon Tullock explains his theory of popular revolutions and palace coups
01 Apr 2015 Leave a comment
in economics of bureaucracy, Gordon Tullock, income redistribution, Public Choice, rentseeking Tags: Arab Spring, autocracy, military coups, palace coups, popular revolutions
[I]n most revolutions, the people who overthrow the existing government were high officials in that government before the revolution.
If they were deeply depressed by the nature of the previous government’s policies, it seems unlikely that they could have given enough cooperation in those policies to have risen to high rank. People who hold high, but not supreme, rank in a despotism are less likely to be unhappy with the policy of that despotism than are people who are outside the government.
Thus, if we believed in the public good motivation of revolutions, we would anticipate that these high officials would be less likely than outsiders to attempt to overthrow the government.
From the private benefit theory of revolutions, however, the contrary deduction would be drawn. The largest profits from revolution are apt to come to those people who are (a) most likely to end up at the head of the government, and (b) most likely to be successful in overthrow of the existing government. They have the highest present discounted gain from the revolution and lowest present discounted cost.
Thus, from the private goods theory of revolution, we would anticipate senior officials who have a particularly good chance of success in overthrowing the government and a fair certainty of being at high rank in the new government, if they are successful, to be the most common type of revolutionaries.
Partisan Politics and the Inequality Gap — Atlantic Mobile
01 Apr 2015 Leave a comment
in applied price theory, applied welfare economics, income redistribution, Public Choice, rentseeking Tags: top 1%
NZ is in the middle of the pack in reducing poverty rates through redistribution
16 Mar 2015 Leave a comment
in income redistribution, labour economics, politics - Australia, politics - New Zealand, politics - USA, poverty and inequality, welfare reform Tags: child poverty, welfare state
The figure shows pre-transfer and post-transfer poverty rates among OECD countries (mostly the advanced economies). The former (pre-transfer) are the market-driven poverty rates, before the tax and transfer systems kick in.
Source: OECD, *Poverty thresholds: 50% of median income.
Bias in the bias against inheriting riches
14 Mar 2015 Leave a comment
in income redistribution, sports economics Tags: expressive politics, expressive voting, top 1%
Utopia, you are standing in it! 
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