Prebutting the CIS: Lifters and leaners, yet again

John Quiggin19 Comments

Robert Carling of the Centre for Independent Studies has just released a paper, with the title “Voting for a Living“, an even more offensive reprise of Joe Hockey’s “lifters and leaners” rhetoric of a few years ago. The Oz (no link) ran a report by  with the opening claim

The top fifth of households by ­income are almost entirely supporting the bottom 60 per cent of earners

Of course, this is absurd. The actual CIS paper centres on the fact that 60 per cent of the population receive more in benefits and public services like health and education than they pay in taxes, while the top 20 per cent pay more in taxes than they get back. The claim then is that the parasitic 60 per cent are voting for a redistributive state. That’s a long way from “almost entirely supporting”.

If this sounds familiar it’s because  Creighton made almost identical claims in 2014. I rebutted them at the time, in a piece for the Guardian. The key point is that,  since government spending and taxation must be approximately equal[1], we collectively get back from government what we pay in, whether this takes the form of cash payments or public services. So, if services are provided more or less equally, those with an income below  (above) the mean will get back more (less) then they put in. Add in the fact that, thanks to income inequality, mean income is higher than median, and you get the Carling result automatically.

The current version of the paper extends the 2014 analysis in a couple of ways. First, it has a broader coverage of revenue (including GST) and expenditure (including health and education). Second, it includes a claim that the position of the median household has shifted since the 1980s, from being roughly in balance to being net recipients. However, a closer look suggests that all of this change occurred between 1983 and 1993 that is, under the Hawke-Keating government. And, since there’s no data before 1983, we can’t say much about longer term trends.

The other notable change is that the report is even clearer in stating that there is no legitimate basis for asking high income earners to contribute to society as a whole, for example to reduce income inequality.

Shorter Carling and Creighton:  High income earners pay more tax than everyone else and that’s bad.

All this contrasts strikingly with last week’s rightwing talking points, making much of the relatively limited growth of inequality in Australia due, almost entirely, to the redistributive policies introduced under Hawke and Keating. The Oz was all over this, and one of their sources was none other than Robert Carling

 

fn1. A couple of qualifications on this, which work in opposite directions. Some government spending  is financed by growth in debt and income other than taxes, which means that, on average, by the Carling calculation, we get back more then we pay. On the other hand, some spending categories, such as defence, aren’t included, which goes the other way.

The pension age is already high enough

John Quiggin30 Comments

In the light of Scott Morrison’s latest exercise in jettisoning unpopular commitments, in this case the proposal to raise the pension age to 70, I thought I would relink this piece on the Intergenerational Report, from the Abbott-Hockey era. The crucial observation is that, had the increase gone ahead, it would have cancelled out all of the increase in conditional life expectancy at pension age for women since the pension was introduced back in 1907, and most of the increase for men. The only real problem in retirement incomes policy is the lavish concessional treatment of superannuation.

Our financial system only works for the 1%. It will take another crash to fix it

John Quiggin18 Comments

That’s the title of my latest article in The Guardian. Opening paras

The royal commission into banks has uncovered fraud and misconduct on a massive scale, amounting to nearly $1bn and perhaps more. The usual defences of “bad apples” and “rogue advisers” have fallen apart as it becomes evident the problems are systemic, driven by relentless pressure from the top to maximise profits at all costs.

The royal commission into misconduct in the banking, superannuation and financial services industry has shown that dishonesty and sharp practice are endemic in the retail banking and finance sector. But if retail banking, involving direct personal contact with customers, is plagued with fraud and malpractice, what can we say about the wholesale criminality

A billion dollars sounds like a lot but it pales into insignificance compared to the repeated frauds that have been exposed in global financial markets, and the much greater volume that is almost certainly going undetected. Moreover, while misconduct in retail banking raises important issues of consumer protection, fraud in the broader financial system calls the entire market system into question.

Conclusion “We will probably have to wait for another crash before the power of the financial system can be tamed.”

Economics in Two Lessons: Acknowledgements

John Quiggin4 Comments

Nearly seven years after I started, I’ve finally submitted the manuscript of Economics in Two Lessons to Princeton University Press. There’s still a lot of work to be done in turning it into a published book, and some changes are still needed, but this is as close to a milestone as I’m going to get.

Over the fold are the Acknowledgements. As I mention, I’m sure to have omitted someone, so if you have contributed comments and your name is missing, please point this out. Also, if there’s anyone commenting under a pseudonym who’d like me to use their real name, or vice versa, I’ll be happy to make the change.

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Our least significant PMs

John Quiggin28 Comments

My son Daniel pointed me a Facebook post starting from the fact that Gough Whitlam and Malcolm Turnbull served almost identical periods as PM, and comparing their achievements. Of course, there is nothing to compare.  I can’t find the post now (another reason to hate the displacement of blogs by Facebook and Twitter) but I thought I’d give my own prize for Australia’s least significant PM. The main ground rules are that I’m counting only achievements as PM, and I’m not judging whether these achievements were good or bad.

And the award goes to …Read More »

LNP not racist enough for Longman?

John Quiggin18 Comments

The Liberals’ disastrous result in the recent Longman by-election obviously played a major role in bringing an effective end to Malcolm Turnbull’s Prime Ministership. But the lesson drawn from the outcome by nearly all political pundits, and particularly those on the political right seems to me to be totally unfounded.

The central claim is that the Liberals lost votes to One Nation, which more accurately reflected the views of their conservative basis. The corollary is that to win seats in Queensland the LNP needs to become more overtly racist, most obviously by elevating Peter Dutton to the leadership.

I won’t comment on the morality of this, but simply on the electoral mathematics. Let’s look at the electoral results for Longman, conveniently collected by Wikipedia. First, compare the by-election to the 2016 result. Obviously, the LNP vote collapsed. But what’s more striking is that the combined LNP-ONP coalition vote also fell by around 3 percentage points, while the Labor-Green coalition gained 5 per cent. The combined vote for each side was about 44 per cent. So, even if ONP preferences had flowed more strongly to the LNP, the outcome would have been very close.

The other part of the argument seems to be that Longman is representative of Australia, or at least Queensland as a whole. In reality, it’s classic One Nation territory*. In its first outing  in the 1998 Queensland election, One Nation won the state seat of Caboolture (central to Longman), one of only a handful of wins in the South-east. In the  Federal election the same year, One Nation got 18 per cent of the vote, more than this time around. That compares to a Queensland average of 14 per cent and a national average of 8 per cent. Interestingly, the One Nation vote in Dickson (now held by Dutton) was just 8 per cent.

The real problem is not that LNP voters as a group have suddenly become racists (or, at best, anti-anti-racists), but that the party’s members, activists and intellectual base have done so, but have had to conceal or blur the fact until relatively recently**.  That’s why they are eager to adopt an interpretation of the Longman outcome that justifies them in coming out.

 

* To be absolutely clear, I don’t mean that most, or even a large minority of residents of Longman are racists or Hanson fans. Rather, whereas the average proportion of such people in Australia is around 10 per cent, in Longman its closer to 20. Whenever a Hanson-type candidate looks plausible, they can expect to get a fair few of those votes.

** I tried to think of someone who could reasonably be described as a small-l liberal in the way this term was once used. My best candidates were Peter van Onselen and Chris Berg, neither of whom really fit the bill in the way that, say, Ian McPhee did. Any others?