The title of the post is the headline from the TVNZ story from tonight’s news.
Questioned by ONE News political editor Guyon Espiner, the Finance Minister said the government is concerned about the gap between rich and poor but admitted the Budget will not alter the current divide.
Such a missed opportunity to go beyond “having concerns” to actually doing something. It has been talked about on this site and elsewhere that The Spirit Level and other research shows that more equal societies are in fact more prosperous societies. It feels like common sense to me that if we harness everyone’s potential that our collective well-being will increase.
Sadly this Budget relies on some pretty out-dated views about tax cuts leading to growth. There is no certainty around that, and more than a little evidence that quite the opposite will occur. There is almost no likelihood of sustainable growth with this government’s approach, but given that the environment basically did not rate a mention in the Budget speech, perhaps that is no surprise.
This was not a Budget done in the shadow of the recession as last year. There was a chance to address inequality and map out a path to sustainable growth. Sadly, neither chance was taken.
What do you miss Spud?
Helen Clark’s leadership, Cullen’s financial steering, the warm feeling that I would get at night knowing that they had won the last election…
Gonna be a very cold decade or two then Spud.
English rather fluffed it and only later in the interview did he make the distinction between the static effects (namely what happens on the day) and the dynamic effects (what happens over time). The real way to reduce inequality is to reduce the numbers of people on benefit. Even if on day one the distribution of wealth doesn’t change much, but over time the economy grows faster and unemployment drops then this is much the best outcome in terms of improving equality. 10,000 more people off UB and in jobs has to be a good result.
Sheesh Spud,you must have a cried a river on Election night…I didn’t realise that Labour campaigned on inequality that night. I thought Labour campaigned not to trust John Key.
Interestingly Matt McCarten panned the budget for the very reason of inequality – but took the opportunity to have a swipe at Goff and Labour too.
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10646838
As for “tax cuts leading to growth” NACT doesn’t know how to generate growth in the economy because they are not economic builders, they are economic gamers.
@Fisi – Nah, Labour is going to come back and kick butt!
@Simon – Labour got unemployment down!
@Indiana – very depressing night, much booze, no solace
G
FF!!!
Dug up this old gem (my emphasis):
“The “vision” that Dr Bibby says we need has to be chosen carefully. If Mr Hodgson has caught the national mood correctly, there will be no consensus for a vision of an affluent, well-educated elite which fails to lift the wellbeing of those who are not “nerds” too.
When a questioner at the conference challenged him, saying there was nothing wrong with elitism in science, Mr Hodgson agreed.
“Elitism in science is to be valued. Entrepreneurship in science is to be valued,” he said.
“As we do that, we want to make sure that the rich/poor gap does not lead to a situation where … rich and important people have to take their children to school in a security van.”
That, at least, is a vision of a world we don’t want. Turning that around into a positive vision of a society that is both innovative and in line with our culture may be the first step on a distinctive New Zealand road to economic success.”
And much has been posted on here about Sam Bowles’ writings on the American ‘guard economy’. I’d be interested to know similar figures for NZ.
- http://tuvalu.santafe.edu/research/publications/workingpapers/05-07-030.pdf
- ScienceDirect – Jayadev & Bowles – Guard Labor
Study enough of history and you soon realise that slavery, the ultimate exploitation of the few over the many, has been the the norm and not the anomaly and that without great vigilance it repeatedly reverts to type.
To condone slavery is to invite it, we have by predatory lending cycles of boom, bust, receivership at the hands of slave-minded bankers been forced to open our borders to slave made goods, it was said that floating exchange rates would see a rebalancing between surplus and deficit nations, it hasn’t occured due to financial quackery, this has all but wiped out our local manufacturing which was supposed to be our very means of repaying our existing debt.
“The real way to reduce inequality is to reduce the numbers of people on benefit.” With the Reserve Banks mandate set around inflation, Don Brash said it very clearly, we cannot have full employment with inflation as the guide/yardstick.
I have to chuckle at English saying it’s about layng a platform, not about the day. He’s right of course, but John Key and he are happy to use the 14 hour poll to trumpet they have 80% support for their budget. It’s those kinds of manipulations and double-speak which annoy me, from ALL parties ad politicians.
John Key said
“He said people such as Trade Me founder Sam Morgan, who infamously said he pays virtually no tax, can now focus on investing in economic growth and new jobs, rather than trying to dodge the tax system.”
Classy John, you calling him a rich prick or somethin???
And John, how is your investment in economic groth and new jobs coming along, personally I mean???
Sam created trademe, a company employing real people, and creating a mechanism for people to by and sell…you know, real stuff. Remind me what John Key did???
John Key was a currency trader I believe. These firms are usually quite large and international firms that employ thousands of people from traders, accountants, lawyers, risk analysis, IT people, clerical staff, catering staff, HR, compliance, courier services, internal post systems, PAs, temps and many many more, all of whom pay tax and contribute to the economy, regardless of how much they earn. These companies rely on traders to do their job, which in turn keeps the company running and employing all these people. Governments rely on these banks more than you think and despite the rhetoric about bank failings recently, all have traded legally under government financial regulations. These traders set up teams, which need support and in turn employ more people.
Currency trading isn’t rocket science, millions of people do it from their own homes.
Trading currency from your own home is not rocket science, no. But these big firms have preprogrammed systems which can complete tens of thousands of trades a second to take advantage of the smallest price movements. And they hire math PhD’s to analyse where patterns are headed before anyone else can figure it out.
So the trade where buying and selling occurs isn’t rocket science, but a lot of stuff just behind it can be.
Don’t forget that these failed investment banks traded under government financial regulations yes, but they are a set of regs which the banks themselves have lobbied strenuously and often times successfully to weaken.
There is never a loss in adding a bit of Maggie to the conversation, who has an excellent point addressing this very question.
http://www.youtube.com/watch?v=okHGCz6xxiw
Where can I find that the objective of the Budget was to reduce the “inequality gap”? Help please
And when did “equality of opportunity” morph into “equality of outcome” or “equality of wealth”????
@Tracy – “He said people such as Trade Me founder Sam Morgan, who infamously said he pays virtually no tax,”.
Thank you JK – In what part of the budget did you put capital gains tax for selling a business and living off the proceeds? This was what Sam Morgan was pointing out, I would guess he has enough to use a tax haven to make his investment income.
They do indeed, but until recently much of it was still a manual process, I know, I used to work for an interdealer broker (not as a trader I must add and not for an investment bank).
And you’re right Loota, they did lobby hard but governments reaped the tax dollars generated with little complaint.
Tapu Misa is good on this in this morning’s Herald: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10647045
And the usual “reductio ad Stalinum” responses would be amusing, if they weren’t so deadly serious.
Note Farrar’ spin on this – inequality is out, social mobility is in – pernicious nonsense, but perhaps a sign that the inequality issue is biting.
Of course the Budget will not alter the inequality gap – it is far too wide now to be brought back.
How can it when it is the first budget in a decade that recognises our current economic climate, that the cost of living has changed dramatically since 1999?
How can one possibly reverse the doubling of uptake at the foodbanks over the past 10 years, with the middle classes slipping into the lower income bracket due to static wages, high taxes and massive increases in the cost of living…..all the while the rich list saw an increase of 300% in its membership?
Where are the solutions?
Rebecca – my sense is we need a new approach. It cannot be possibly only one of two existing ways. national isnt selling us anything new, and again, I am prepared to give them 12 months to see if it grows the nation the jobs etc… I just will try to find a source other than national to prove it to me.
“”The question is for a household, are they prepared to pay $3 a week for the insurance premium of our environment and I think the answer to that is yes,” he told TVNZ’s Breakfast. ”
Hmmmm so national DO care about the premium that is our environment, they want to mine schedule 4 land, don’t they????
So, the minimum wage earner gets about $4 a week in tax cuts…but $3 goes in ETS? Then petrol, then ACC levies…
ETS along with that shonky Kyoto agreement makes me wild! There are other things New Zealanders can do to show we are serious about looking after our environment and reducing our carbon footprint.
It makes me wild that we are expected to pay so for something that the cows are mostly responsible for in this country and something that in the big scheme of things, little old NZ actually has so little impact in – I’d be prepared to pay for something like the ETS when the Americans & Chinese start recognising how much they damage the climate…such as cleaning up that plastic filled sea near California and that horrific oil spill.
In terms of economy, jobs etc – yes I am with you Tracey. We need a new, fresh approach rather than the same old rhetoric dressed up in fancy 21st century language.
What the dickens?
Darn bad quoting sorry.
Fixed…
Rebecca said
I hear that ETS is understandably pretty unpopular amongst the National rank and file.
Perhaps we can show that we are serious about looking after our environment by showing a commitment to caring for our Schedule 4 land in perpetuity.
Whooops.
LOL
Rebecca and Loota fight, this could take some time. 
Spud, I prefer the term “engage in animated online discussion”
Anyways its nothing personal just swapping ideas
Rebecca said:
Maybe we can describe this as the Marie Antoinette principle?
Drivers of increasing socioeconomic disparities are pretty well known, we also know that they are bad for everyone rich and poor alike, I don’t think we need to throw in the towel quite yet.
Loota: I’m all for an “animated online discussion”!
Whether we throw in the towel will be determined by whether any viable solutions are put forward – this problem has been increasing over the past 10 years yet little has been done to actually address it in a real that that makes a real difference to ordinary New Zealanders.
There has been lots of lovely sugary rhetoric accompanied by a few sticky plasters, but nothing to actually address the underlining issues such as we have become a society that is reliant on a 3rd party to produce pretty much everything we consume which has made us poorer in terms of how much money we have in our pocket and in terms of skills.
Poor these days actually means real poverty – struggling to get even the basics in life (no breakfast etc).
I am sure this is worse than 20 or so years ago when poor was often limited to not having much money, but you still got by by growing your own veges and sewing your own clothes.
It’s all very obvious – I have been posting for months that the tax cuts were a necessary part of the National programme – they cannot move onto asset sales in the second term without them.
The money handed out in the tax cuts to the few ($430M to those on over $150,000) is to enable them to buy up public assets. They will save the $430M – $2B over 5 years, for this purpose – there will be precious little invested in growing the economy. And this increasing privatisation to the higher income earners will occur till they are sold off.
When they are all sold off and we have no remaining public assets – we have no assets to borrow against (ever tried to borrow without any assets?) and thus we will have effectively lost economic sovereignty – every economic cycle downturn will come with the risk of needing to have books that look those of a corporate managing costs in co-operation with lenders.
The asset stripping is designed to necessitate small lean and mean government and a political economy dependent on foreign funding. It’s effectively the attempt to end the prospect of a democratic people choosing to run a social democracy – as this is seen as a threat from the many to the self-interest of the few. It is about a democratic threat to privilege being seen off.
SPC – yikes that’s a pretty cynical view. I hope it’s cynical and not an accurate outline of the future.
I could have added, the reason there is no CG tax is because when they buy up the public assets and flick them on to foreigners – they will make a large profit and as Sam Morgan would say not one dollar to be paid in tax.
SPC – then why didn’t Labour introduce a CG tax? And why are they not suggesting one now?
@Loota – 2.53 – I meant fight in a good way, but withdraw and accept your point.
Rebecca, I suspect Labour finds it hard enough to hold middle ground NZ without being seen as rich envy by punishing people who can afford property. In a funny way national can get away with it more easily, politically speaking, because property owners are “their own”.
Cullen, who could have been a pin up boy in past National Governments for his conservative economic steering, still found it hard to be seen as a friend to middle/upper middle NZ, particularly self employed and high income.
Tracey – yes because Cullen kept their taxes far too high for far too long!
Hmmm interesting that investment property owners would be considered as voters who lean to the right – my understanding that these people are by & large the baby boomers, the same people who bought up all our first homes, took advantage of the loose LAQC rules & kept Labour in government for 2 terms too many.
Cullen saved us from having a worse recession.
Yes Spud. Labour used that tax money to run surpluses and pay off debt.
See what happened in Greece and the UK when they used their tax money up, borrowed more, and then the world financial crisis hit? Not pretty.
NACT is coasting along on Cullen’s financial management.
In fact, Dr Cullen remarked that if he was in Europe he’d be labelled an “Iron Chancellor”.
@Tracey: maybe it’s the ‘Nixon in China’ thing?
re: SPC
^ +1
Can I just say, I do not know a single investment property owner in my circle of friends, or family. I would classify that circle as largely middle NZ. Certainly we were all approached, cold called with offers of negative gearing etc etc, but none of us dirty baby boomers took up the offer… I’m not a baby boomer, by the way, far too young for that
Wealth inequality is a natural phenomena and no government wealth redistribution can make a difference. It is a fact of life and we should accept the way it is. This is the view of econophysicist Victor Yakovenko, from University of Maryland, which was summarized in a short article here in 2005 from New York Times Magazine (NYTM) which I have pasted it below:
(balance deleted, people can follow the link if they are interested, Grant)
FF said:
Actually, rain and earthquakes are natural phenomena.
Re: wealth inequality, its only gross wealth inequality of an overweight magnitude which is of true concern. I don’t have a formal definition but once you get incomes 30x, 40x, 50x the median wage while others in society operate at a subsistence level then we begin to run into problems.
I can mitigate any naturally occuring wealth inequality by referring all to the Greens support for a comprehensive CGT. Then by posing the form I prefer.
The problem with a comprehensive CGT (as assessed by Treasury to raise on average $4.5B pa over the long term) is that it does not necessarily raise money in the short term and nor is the revenue flow easy to forecast.
There are ways to make the income flow both immediate and more predictable.
My preference is to place a 1% annual land tax on rental property and farmland in lieu of a CGT liability.
For example property and land would be valued at the year in which the CGT began for liability on the capital gain – but losses would only occur if the property was sold for less than the original cost (adjusted for inflation IF the same was done for interest income). If there was no CGT liability the land tax paid would stand. If there was a CGT liability, then prior land tax payments would be deducted before the balance was payable (if the land tax was paid was greater than the total CGT liability, then the land tax paid would stand). Tbis is slightly one-sided (in the interests of the government) but is fair when one considers the untaxed CG that most asset holders have already made and which would be exempt from any CGT.
The same system would not apply to shares – as there is on-going tax on dividends each year.