“@MaxCRoser: The cost of solar power 1977-2013 in $/watt
(Source: http://t.co/e40JnDJFTY) http://t.co/3XO5CI9zYT”
— University Web (@UniversityWeb) April 5, 2015
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.
The power of ordinary citizens to effect change when there is federalism and upper houses
11 Apr 2015 Leave a comment
in constitutional political economy, election campaigns, politics - Australia, politics - New Zealand, Public Choice
The latest counting in the New South Wales Legislative Council election shows the ease in which ordinary citizens can form a political party and be elected to Parliament when there is federalism and an upper house elected by proportional representation.
Five of the six Australian states have an upper house. In four of those states, the electoral system is proportional representation, with results in the election of many small parties.
In Tasmania, my home state, the Legislative Council as single member constituencies with two or three vacancies filled every year but is full of independents elected the six-year terms. The political parties having no chance of getting candidates elected in front of them. The Tasmanian voters simply don’t vote for party candidates in the Legislative Council elections. Out of 15 members, there is one Liberal Party member, and two members from the Labour Party
In the current New South Wales Legislative Council election, the favourite to win the last seat, and with it the balance of power in the upper house is a previously unheard of No Land Tax party. The Shooters and Fishers party is electing another member this year in New South Wales. The Christian Democrats also have two members.
In Victoria, the Australian Sex Party finally got a candidate elected to the upper house late last year through the courtesy of proportional representation.
Other small parties in the Victorian Legislative Council are the Shooters and Fishers Party with two members, the Democratic Labour Party with one member and a party of never heard of, Vote 1 Local Jobs, with the last seat. These small parties share the balance of power.
The South Australian Legislative Council includes two members from the No Pokies Party, two members from the Family First Party, and one from the Death with Dignity party. Again, this motley crew shares the balance of power.
Western Australian Legislative Council has a government majority, but there is one member from the Shooters and Fishers Party.
The crossbench in the Australian Senate is made up of eight independents and small parties. Several Australian senators on the crossbenchers are completely mad and ignorant; in one certain case, as thick as two short planks. This doesn’t harm, in the case of Jackie Lambie, her chances of being re-elected to the Senate for Tasmania for another six-year term in 2019. A number of Tasmanian voters, including members of my family, value her honesty, though they do admit she is not very bright and is rather rough around the edges.
The strength of democracy lies in the ability of small groups of concerned and thoughtful citizens to band together and change things by running for office and winning elections. That is how new Australian parties such as the ALP, the country party, DLP, Australian democrats and Greens changed Australia. One Nation even had its 15 minutes of fame. Most of these parties started in someone’s living room, full of concerned citizens aggrieved with the status quo.
In Australian elections in recent years, about a quarter of the electorate do not give their vote in upper house selections to the major parties: the Labour Party, the Liberal Party and the Australian Greens. That is fertile ground for small parties to flourish.
So fertile ground is the Australian Senate that the big parties want to change the election system to make it harder for the small parties to swap preferences to get elected through proportional representation and make it much harder to register a political party in the first place.
As would be expected, the far left parties get nowhere in the upper houses of the Australian State parliaments, despite the benefits of proportional representation and preferential voting. These upper houses are filled with small parties from both the left and the right, populist parties all, but the battle cry of socialism just doesn’t resonate with the Australian electorate.
Same thing happened in New Zealand in its recent parliamentary elections. New Zealand has no upper house, but does have proportional representation for the House of Representatives.
A pre-existing hard left party well-funded by a millionaire with an agenda to avoid extradition to the USA got 1.2% of the party vote, but it lost its electorate seat and so is out of Parliament since late last year’s general election.
Australia has the most targeted welfare state
10 Apr 2015 2 Comments
in politics - Australia, politics - New Zealand, politics - USA, poverty and inequality, welfare reform Tags: welfare state
In Mexico, most cash-based public social benefits go to households in the highest income quintile, per OECD. http://t.co/xykkPkDVZs—
Catherine Rampell (@crampell) November 24, 2014
When will the New Zealand living wage exceed the median wage?
09 Apr 2015 Leave a comment
in labour economics, minimum wage, politics - New Zealand Tags: Leftover Left, living wage
The Left over Left have increased the living wage in New Zealand to $19.25 per hour for 2015. This increase was after a living wage of $18.80 for 2014 and $18.40 for 2013.
This latest increase increases the living wage by 2.39%, which is faster than the 1.7% increase in the median wage last year. This means sooner or later the living wage will grow to exceed the median wage in New Zealand.
Sources: New Zealand Income Survey 2014 and Living Wage Movement.
If both the median and living wage is continuing to increase at the most recent year’s rates, as shown in the above graph, the overtaking point will be 2037.
According to the calculations of the Living Wage movement, earning the living wage in a full-time job in New Zealand with a second earner in the household working only 20 hours affords their two children, including a teenager, Sky TV, pets, international travel, video games and 10 hours childcare.
How can New Zealand blamed distance for its woes when international technology diffusion is speeding up
09 Apr 2015 Leave a comment
in development economics, economic growth, growth disasters, growth miracles, macroeconomics, politics - New Zealand Tags: borderless world, catch up, geography, international technology diffusion, lost decades, tyranny of distance
It took 100yrs for steamship technology to spread from rich to poor nations. Today tech diffuses almost instantly http://t.co/Jz3gVk8bqQ—
Laurence Chandy (@laurencechandy) February 03, 2015
More evidence of mass kidnapping of environmental activists
08 Apr 2015 Leave a comment
in environmental economics, environmentalism, international economic law, international economics, International law, law and economics, politics - Australia, politics - New Zealand, politics - USA Tags: green hypocrisy, ozone layer
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Why aren’t they in the streets celebrating the recovery of the ozone layer, pursuant to an international treaty negotiated by the Reagan administration that banned CFCs as soon as they were not required any longer in developed countries:
International efforts to control the gases, particularly among developed countries, began to occur in the mid-1980s as new information appeared that strengthened the link between CFCs and the deterioration of stratospheric ozone. This increased the expected benefits of international action.
At the same time, domestic political opposition began to diminish when Du Pont announced they would no longer make CFCs. A reason for Du Pont’s attitude change was that European firms had increased their share of the CFC market, and in response Du Pont had developed CFC substitutes.
Accordingly, since international controls on CFCs provided them a competitive advantage, Du Pont announced that they would no longer make CFCs and the company lobbied the U.S. Congress for international regulation.
Under the 1987 Montreal Protocol, world leaders agreed to phase out CFCs, and eventually the hole in the ozone layer stopped expanding. In 2014, a UN assessment found that the ozone layer is just now starting to heal — and should be back to its 1980 levels by 2050 or so.
New Zealand and Australia in The Economist House-Price Index
07 Apr 2015 Leave a comment
in economics of regulation, politics - Australia, politics - New Zealand, urban economics
Everything seemed to go wrong regarding housing prices in New Zealand in about the year 2000, which was the year after the election of a Labour government. Labour parties are supposed to stand for a better deal for the ordinary worker. Clearly, they did not when housing prices run away because of restrictions on land supply.
@NZNationalParty housing policy defies the laws of supply and demand for land
05 Apr 2015 1 Comment
in applied price theory, economics of regulation, politics - New Zealand, urban economics Tags: housing affordability, RMA, supply of land, zoning
If homebuyers access additional lines of funding because they can tap into their KiwiSaver retirement savings, they will use this to bid up the price of housing and land.
If the supply of land is fixed or otherwise constrained from expanding much, such as by the Resource Management Act and the metropolitan urban limit in Auckland, the only thing that will happen is that the price will go up with more money chasing the same amount of land and housing.
The price of land and housing must go up in the absence of some reforms that increase the supply of land. Rather than increase access to housing among those with don’t own a house, allowing homebuyers to access their KiwiSaver retirement savings entrenches the prospects of Generation Rent.
Trans-Tasman trends in real equivalised mean household income since 1982
04 Apr 2015 Leave a comment
in business cycles, economic growth, global financial crisis (GFC), macroeconomics, politics - Australia, politics - New Zealand Tags: GFC, Rogernomics, Trans-Tasman income gap
@JimRose69872629 @JohnQuiggin @pagdavidson Largest fall in real mean incomes in NZ was in the early 1990s http://t.co/DDVgeMIGsj—
Peter Whiteford (@WhitefordPeter) April 04, 2015
Real household mean incomes rose during Rogernomics; fell during the deep recession at the beginning of the early 1990s; then rose strongly until 2009 and the onset of the Global Financial Crisis.
Trans-Tasman populations since 1881
03 Apr 2015 Leave a comment
in economic history, politics - Australia, politics - New Zealand, population economics
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
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