Middle Class Welfare from Labour
Phil Goff’s latest plan is to borrow more money from overseas, so that people can get the dole – even if their partner is earning a million dollars a year.
I prefer welfare to be targeted towards those who are in real need. I fully accept that if a family has both parents earning say $100,000, then it is difficult if one of them loses their job. Their spending has to adjust. But at the end of the day they still have a family income of $100,000 and that is not the priority for welfare.
Labour seem genetically incapable of coming up with any economic proposal that does not involve borrowing more money to spend more money. As an example Fitch Ratings recently put NZ on negative outlook and said:
Against this backdrop of external vulnerability, more aggressive restoration of public finances through fiscal prudence will be needed to raise the national savings rate to counter weak private savings.
So Fitch have clearly said the Government needs to spend less, and borrow less or we will have a credit rating downgrade. And what is Labour’s response to this:
“National’s problem is that many of its policy changes so far go in precisely the wrong direction. Cuts to KiwiSaver and the Super Fund deferrals in particular will worsen the crucial savings gap,” David Cunliffe said.
So Fitch warn against excessive public borrowing, and Labour’s response is to advocate borrowing an extra $3 billion a year!!
As I said they seem genetically incapable of coming up with any solution, apart from borrow and spend. No matter what the problem is, their solution is always the same.
July 20th, 2009 at 7:03 am
David, you know as well as anyone else that National’s cuts to the Super Fund will hurt our national savings rate and, in expectation, worsen New Zealand’s debt position by many billions of dollars. You have seen the Treasury estimates on this, and so have Fitch. It is interesting to see that Fitch did not put us on negative watch prior to the Great Super Fund Torch Up in the 2009 budget, but did put us on negative watch soon afterward.
[DPF: Fitch says it wants the Government to borrow less. You are confusing the difference between NZ and Crown borrowings]
July 20th, 2009 at 7:10 am
@Rob – wtf? How does borrowing to make deposits in the Super Fund make ANY change to the (net) savings rate?
July 20th, 2009 at 7:17 am
KiwiGreg – Consult the Treasury estimates. The amount of money that would have been saved in the Super Fund, including compounded returns, exceeds the total cost of borrowing the money in those models. Therefore the net position, in expectation, improves.
July 20th, 2009 at 7:20 am
Further to my first comment, here is a snippet from the TVNZ story on the negative watch:
“The previous government started the Kiwisaver scheme and New Zealand Superannuation Fund to improve savings but it was “probably not enough”.”
If the credit agency says programs are “probably not enough,” that is not an invitation to cut them. That statement gives more credence to Cunliffe’s view that the act of cutting these programs, which Fitch liked but wanted more of, may have helped with the negative watch decision.
July 20th, 2009 at 7:29 am
Does the Treasury report
(a) attempt to validate this assumption by say, comparing the NZ Super Funds perfomance to the forecast gains when the scheme started? Or are we just expected to ‘bet the farm’ on this model being correct?
(b) consider the negative feedbacks on private household private savings via-
(i) higher debt servicing and a weaker economy
(ii) belief in the fiction that the NZ Super Scheme replaces the need for increased savings by households.
Rob, the argument that we should borrow money to save requires that many things swing in our favour at the right time and sequence. It’s like “Think Big”.
In this instance, it’s a reckless use of funding that would be better diverted to growing the economy. Borrowing for saving is just up there as one of the top 5 dumbest things to come out of this Labour opposition.
July 20th, 2009 at 8:05 am
Borrow to Save.
Borrow to Spend.
Fiscal constraint out the window.
Never mind the consequences.
Labour’s ‘cunning’ plan for a socialist paradise.
Worked in Soviet Russia too.
Gueez these plonkers have their heads so far up their collective arses they can’t distinguish night from day.
Dawn is a long long long way off for Goff’s mob.
July 20th, 2009 at 8:06 am
Rob , treasury are clowns if they made such a prediction. Or, maybe treasury has an inside line with bernard madoffs cousin?
If I had the option of paying off the mortgage, or investing in shares, I know what I’d do. Sadly Cullen has saddled us with a large mortgage and no income.
I find it hilarious how you lefties are screaming for the government to invest in shares. It is a strange world where the left are clamouring to give money to ‘corporate greedies’.
[DPF: It is worst than that. The correct analosy is that you are spending $10,000 a year more than you earn. Your bank overdraft is at maximum and you have a mortgage. Not only are you not paying off your mortgage. You are having to borrow $10K a year against your mortgage just to pay for the groceries. And Rob wants you to borrow an extra $2k a year against your house, to invest in Wall Street]
July 20th, 2009 at 8:11 am
Oh for s*cks sake, if a credit agency says anything slightly derogatory it means, politely, that ‘it’ is a piece if shit, but you know that and thats why you came back for an arse covering comment.
And as for old treasury models, what discount rates were they based on? In what year? What would the IRR say now?
Goff is so off base with his welfare for the middle classes its not funny – He is insane.
And what gives credence to Cunliffes ramblings? Your half baked philsophical debates with yourself on the topic? I hope you understand what your spinning because no-one else does sunshine.
Labour are irrelevant
July 20th, 2009 at 8:50 am
Who cares what the credit agencies say. They’re all discredited and are being sued overseas as a result. Having said that why should I pay for Labour to borrow so someone can get the dole? Let the individual borrow themselves, or if we had flat taxes at ~15% maybe people could save or get their own income insurance. Now that’s a wacky thought aye, people actually looking after themselves and their families!
July 20th, 2009 at 8:53 am
no gooner, what ‘it’ actually means is that ‘it’ “gives more credence to Cunliffe’s view that the act of cutting these programs (kiwi saver contributions), which Fitch liked (according to whats his face) but wanted more of (dittto), may have helped with the negative watch decision (according to Cunliffe)”.
Well, I haven’t heard any tenuous arguments, move along nothing to see, Labour are sound.
July 20th, 2009 at 8:55 am
The middle class could look after themselves IF taxes were lower. But Labour’s philosophy is to keep taxes high so everyone has to rely on welfare except for the rich.
July 20th, 2009 at 9:06 am
who here is honestly shocked by this latest gem from the biggest group of troughers in NZ. So many in Labour have never had a real job, or if they did like Goff it was so long ago, they either don’t know or have forgotten what it is like to bend your back to make just enough to feed your kids. As a result money is less than a mere object, made worse by the fact that all the money they deal with is stolen from others. F@#k them
BBTB
July 20th, 2009 at 9:48 am
Rob Salmond>Consult the Treasury estimates.
If Treasury are so smart, then rather than fund them out of the normal government budget we could cut off all funding, let them borrow as much as they like, and they can live (including staff salaries) off the difference between their investment earnings and the interest they pay. Of course Treasury staff would be happy to stand behind their analysis by being personally responsible for the debt if it all goes bad.
But then no one at Treasury predicted that the Cullen fund would, over the course of its life, actually lose money. People aren’t advocating giving Bernie Madoff or Enron more of our money on the basis that they were making good returns before they lost everything, so we’ll just assume the losses were an aberration and predict good returns for the future. But there are still people who are stupid enough to think that NZ should borrow to “invest” in a money losing Cullen Fund. Absolutely unbelievable!
The only people who profitied from the Cullen Fund were financiers, and the people who flogged overpriced assets to the Fund before they lost a lot of their value. Why you’d want the NZ Government to, essentially, subsidise these groups is a complete mystery to me.
July 20th, 2009 at 10:28 am
It’s easy for Goff as opposition leader to advocate this kind of nonsense – it’s an “all care and no responsibility” role – such a proposal doesn’t have to be costed, there are no accountabilities, and it’s never going to happen. But it allows Goff to scratch an itch. I guess that’s why Winston Peters was such a good opposition politician than a government one. Criticising the status quo comes naturally – changing it is hard work!
July 20th, 2009 at 12:07 pm
Goffs suggestion to pay earners the dole has huge implications.
If WINZ does not know what the high income of the partner of a newly redundant person is – they cant stick it into their system as it will abate the benefit – there’s nothing stopping the beneficiary claiming Working for Families, accommodation supplements or even food grants, as explained here.
July 20th, 2009 at 12:16 pm
Alas, the comment “probably not enough” is polite code for “ineffectual” and “unlikely to succeed”.
The Kiwisaver scheme was very successful at drawing out funds from private superannuation schemes and moving them to kiwsaver. Any effect on national savings rate is at best, yet to come. At worse it was ineffective policy. But I’m relaxed about kiwisaver. I hope that it does work. We are all in ‘the same boat’ here.
The NZ Super Fund had the effect of lifting national savings at a time when private debt was soaring. Private debt is now dropping (since early 2008). And without the surpluses on hand to ’save’, replacing falling private debt with increased public debt is again, heading nowhere. OTOH, those surpluses could have been used in other productivity-enhancing activities or at supporting reductions in private debt through more aggressive tax cuts.
I don’t think the case for the NZ Super Fund was anywhere as justifiable as that for Kiwisaver. And now, the logic of borrowing to put more into it during a period of ailing financial markets is just too dumb for words. All it says is that the Labour finance people are cretinously stupid, or opportunistic whores willing to gamble on our futures for electoral gain.
July 20th, 2009 at 12:38 pm
As I blogged here, I support Goff’s idea – except it doesn’t go far enough. I don’t see why it should only be for the duration of the recession.
Tax is on an individual basis, so is weekly compensation from ACC. So why not welfare? And it doesn’t have to be funded from borrowing. Cancel the most recent tax cut – the people on million dollar incomes don’t need that any more than they need their partners getting the unemployment benefit if they lose their jobs.
July 20th, 2009 at 12:43 pm
“the people on million dollar incomes don’t need that ..”
Who are you to judge what other people need? A busybody like you should concentrate on living your own and stop interfering with the lives of others.
Save your sanctimonious attitude for the Green blog.
July 20th, 2009 at 12:53 pm
> even if their partner is earning a million dollars a year.
How many millionaires do you know whose partners are unemployed? Any? You’re starting to sound like Michael Cullen. Remember his comment about rich pricks?
You ignore the fact that many people – few of whom are millionaries – are being made redundant and are unemployed. Why should their partners have to support them? The dole is only $190 a week. If we cannot afford to pay that to all those who are unemployed, there is something seriously wrong.
[DPF: I would rather families always live off their own income, than come running to other taxpayers. I want welfare reserved for those genuinely in need]
July 20th, 2009 at 12:55 pm
David – You know full well that the analogy you give is stupid, as Keith Ng pointed out to you the last time you tried it. He critique sits, in gory detail, here.
[DPF: ANd I stand by my position, that borrowing extra money when running a deficit, is risky and even reckless. Dr Cullen was very clear the Fund was designed to be funded out of surpluses. It was never a get rich scheme where you borrow money to invest]
July 20th, 2009 at 1:09 pm
The delta between government cost of funds and long run rates of return is essentially due to risk. Obviously if you model bad things never happening it is a guaranteed path to national prosperity.
On topic – anything which increases the cost of working (tax for instance) or reduces the cost of not working (welfare, for instance) will reduce one and increase the other. I’m pretty sure the economic problems NZ faces aren’t due to too many people working.
July 20th, 2009 at 1:22 pm
David: What a pickle we are in – here’s you quoting Michael Cullen and me citing the Treasury! But I am glad you are no longer defending that analogy.
July 20th, 2009 at 6:52 pm
So we are concerned about paying unemployment benefit when one partner earns a zillion but what about the people I met today. He a store man on basic rates i.e. $15.00 /hr. She similar until recently. 4 kids. one primary one intermediate, 2 high school. Modest house with a mortgage at 8% for a further year. Two older kids are working for a few hours a week.
Now she has lost her job and is struggling hard to find another. They put a lot of effort into their kids and schools etc i.e. generally the kind of good citizen we want.
He has always worked, she has worked full time since her last child went to school and part time before that.
Both have paid their taxes. They do want their kids to go to Uni.
So we don’t have a high income earner to lean on.
They do get WFF but that still leaves a big gap from where they were.
Do we help them on the basis of fairness and the fact that as a working person both paid their share of tax or do we trash them because like Liarbor the other party see them as bludger as opposed to rich pricks.
Hmmm You can probably see the unfairness of the issue and the contrasting attitudes depending on which side of the divide you sit.
Some of us would look at it from a principled point of view.
July 20th, 2009 at 7:37 pm
Re: Me @ 8:53am on the 20th.
Gads sake!, I was taking the piss.
July 20th, 2009 at 8:06 pm
Worth taking a look at the comments at the Herald.
Lot of support with good explanations for the idea.
NZer’s are not all stupid and not all politically disposed to slagging each other. .
http://blogs.nzherald.co.nz/blog/your-views/2009/6/29/should-you-be-able-get-dole-if-your-partner-stilll-working/?c_id=1501154&objectid=10581385&commentpage=1
July 20th, 2009 at 8:34 pm
the example of a wife of a person on anywhere near a million dollars is not a big issue because
1) there are so few people on that sort of income. Total cost would be almost nothing for that income and higher.
2) such people have to be actively seeking jobs – a case worker could be more than a benifit sized painin the arse to such a person. (Although I suggest they should tighten up the laws regarding benefits to force such people to jump through a few extra hoops.)
3) in the long run you jsut marginally increase taxes to cover it – and since your giving the rebate back to rich people it can be neutral across whatever criteria you feel is important.
4) It can remove all sorts of market distortions that drive people to do ‘irrational’ things like divorcing and pretending to be seperate when actually ‘married’, and failing to take extra work because of abatement rates due to partners income. (both of which seem to be pretty common).
5) cheaper and easier to manage and enforce and asses the benefit.
6) more predictable income – ie you wont get a bill at the end of the year if your partner gets a bonus.
7) more closely resembles the realities of modern life where (ironically) this system has heled to disolve the family unit and husbands and wives tend to have semi-seperate finances.
July 20th, 2009 at 9:04 pm
A graph that should make the real workers of NZ spit blood.
Does not include workers paid by the government either, so democracy in NZ is finished.
And people wonder why I despise the totalitarian left. This country is in deep shit and its all down to them.
http://www.interest.co.nz/images/workers-per-beneficiary.gif