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Brush with fame

August 31st, 2005

Among the things I did in New York was visit Tim Smeeding, an economist at Syracuse University who works on income distribution and related issues. Coincidentally, he’s quoted in this NYT story today on the continuing increase in the US poverty rate.

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  1. Don
    August 31st, 2005 at 21:43 | #1

    I wonder how Smeeding feels about the flack coming from places like Heritage.

    After the numbers some out the debate seems to go something like this:

    Obviously we need higher rates of economic growth – those poor people need jobs. Better cut taxes and minimum wages now!

    And those numbers aren’t as bad as they look. Let’s not rush to conclusions. It’s only those mid-westerners who seem to be having trouble. And ethnically speaking, it’s the whites who are suffering — since when did bleeding heart liberals ever care about white people?

    The numbers exagerate the problem anyway. They don’t count all the welfare benefits people are getting — food stamps and all that stuff. Come to think of it, that’s probably why they’re not working enough to stop being poor. Better cut welfare too!

    And they’re not counting individuals, they’re counting households. That makes things look worse. Also, do you know how many ‘poor’ people have 3 cars, a dvd player and a big screen television? I mean they call them poor but it’s not anywhere near as bad as the way my great granddaddy used to live… and that didn’t do him or my granddad any harm either.

    So… to the extent that there’s any problem at all — and I’m not admitting there is — it means we’ve got to get that government off the backs of business so we can get some growth going.

  2. Joseph Clark
    August 31st, 2005 at 22:35 | #2

    amen!

  3. observa
    August 31st, 2005 at 22:42 | #3
  4. Don
    August 31st, 2005 at 23:28 | #4

    Before anybody gets the wrong idea, that comment above was meant to be a parody.

  5. observa
    September 1st, 2005 at 00:12 | #5

    I’m fairly sure the article John Ray links to is not meant to be a parody. It might have some relevance to John’s observed data.

  6. observa
    September 1st, 2005 at 10:46 | #6

    Caught a headline this morning that 40% of Australian households now receive more in social security payments than they pay in taxes. In other words, down your average street every 3 households are subsidising 2 neighbouring ones to some degree. A failure of values or just good old Aussie neighbourliness?

  7. September 1st, 2005 at 12:09 | #7

    “A failure of values?” Why, is it Australian values to let them become homeless and move to shanty towns? Perhaps it’s the new neoliberal “values” (the driving down of wages, user-pays everything, HECS and Tafe fees, increasing medical costs, the cost of privatised transport etc…) that has driven their real income down?

    What about the wealthy households who pay minimal tax through clever-clever siphoning of funds through family trusts etc, then claim Family Benefit part B on the non working spouse (and childcare rebate for the private nanny)?

  8. September 1st, 2005 at 12:10 | #8

    Oh, I forgot, my taxes are helping to pay for my wealthier neighbour’s 30% private medical insurance rebate, and the increasing grants to their private schools… and the list goes on…

  9. September 1st, 2005 at 13:56 | #9

    Following on from Helen’s comments, why is it that the whole lame discussion about tax cuts has no connection with the “real world” where most of us live?
    Instead, try this for a bit of honest tax talk:

    “…tax cuts for upper income earners would already cost $4.08 billion in 2005-06 and $6.23 billion in 2006-07.

    “Rather than satisfy the thirst of the greedy, this has simply provoked calls for more,” he said.

    Senator Brown said the Australian Council of Social Services (ACOSS) reported the rich had been given $8.2 billion in unfair tax breaks in 2004 due to loopholes in the tax system.

    He said the tax cut debate had been hijacked by the rich corporate sector “as if the rest of the country didn’t exist”.

    “In a country in which we’re talking a lot about values, it’s not one of this nation’s ethics to give to the rich and take from the poor,” Senator Brown said.

    “If (Treasurer) Peter Costello can say a couple of months ago that tax cuts at the upper end would simply flow to multi-millionaires, why has it got to be left to the Greens to say it now?”
    Internal libs leadership battles? Of course!

    It reminds me of Abott’s recent experience when in hospital, after having to pay all these extras on his health insurance coverage, he realised that extra “reforms” to that system are required, not enough incentives for consumers, etc. Remember, this is the health minister we are talking about! He had to get hit himself to make him retrieve his head from his anus, to look around to the real world!

    Yet it is not “market failure”, when the whole market has been designed and set up this way purposefully. It is leadership failure! Basically, after billions of subsidies, huge government protection, etc., private health funds only excel at increasing their own profit and externalising risks and public costs, while minimising their own. Surprise, surprise.

    Meanwhile, the public health system still ends up covering most people anyway (who hide their private health cards, trying to get through on ol’ Medicare when in emergency rooms!).

    These private health businesses are useless for the vast majority of Australians, meanwhile they make huge profits, but that was their only single objective.

    So the corporate welfare continues…

  10. observa
    September 1st, 2005 at 14:17 | #10

    Helen, I presume the 3 subsidising the 2 was a nett figure, taking into account all taxation and social security transfer payments, in which case it’s hard to imagine on average any of the 3 households would be a nett subsidiser of the other 2 households private health insurance, private school fees and the like, although it’s possible for a few household circumstances. We are talking about averages here and 3 subsidising 2, does seem like an unusually low ratio for a well to do country like Australia. I would have expected something much higher like 5, 6 or even 10 to 1 here.

  11. derrida derider
    September 2nd, 2005 at 13:06 | #11

    observa, your figure is true but misleading because it includes only income tax and *cash* benefits. Once you include indirect taxes (GST, State taxes and council rates) and indirect benefits (defence? roads? police? hospitals? etc) – as you should if you’re interested in who is a net contributor and who is a net receiver – the picture would look very different. Unfortunately, though, the full calculation is impossible because of formidable conceptual and practical difficulties (the former even more severe than the latter) – although the ABS purports to do it every few years (their Fiscal Incidence Study).

    Even on a cash basis, though, you oughtta point out that most of those net receivers are retirees and the bulk of the rest have small children. Which brings up another important point – all of us are net recipients, and the great bulk of us are net givers, at some point in their lives.

  12. Ian Gould
    September 2nd, 2005 at 18:02 | #12

    Observa,

    Are you aware that a single retiree living alone counts as a “household”"

    Puts a slightly different slant on that “40% of households receive more in benefits than they pay in taxes” doesn’t it?

  13. observa
    September 3rd, 2005 at 01:18 | #13

    Firstly I only picked up the headline, so I don’t know who or how it was calculated. Anyone know? If true it is a snapshot in time and we do know households have been getting smaller(more sole occupants) If these are mainly retirees, then clearly an aging demographic will worsen the dependency which intuitively seems high now. The methodology may not include indirect taxes, but if it didn’t that would only make the the true dependency worse.

    ..”all of us are net recipients, and the great bulk of us are net givers, at some point in their lives.”
    True but such a snapshot is an accurate long term picture as to dependency, providing demographics and household size are not changing and as I said, logically an aging population would increase that dependency. Question is-what is the past situation and is dependency increasing? the Centre for Independent Studies(Peter Saunders )has done work on the size of tax/welfare ‘churning’, but presumably that is not relevant here due to netting out anyway.

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