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Last Updated: Aug 15th, 2008 - 11:26:43

Newsletters : 2005 Newsletters : 10 June 2005
Thought for the Day

We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Winston Churchill

Jun 9, 2005, 10:37

 Newsletters : 2005 Newsletters : 10 June 2005
Letter to the Editor
The Editor
Dominion Post
Wellington

Dear Editor,

I noted in your paper today the article entitled “Fewer below the Poverty Line”. In there you note that the Ministry of Social Development drew the poverty line at 60% of the median household income. Now 60% of $46,000 is $27,600 so I guess that the Ministry of Social Development is saying that households earning less than $27,600 must be living in poverty.

How does the Ministry of Social Development expect pensioners to survive on a pension of $13,000 a year – less than half the poverty line? Yet they do, which suggests that having a poverty line set at $27,600 is nonsense. A better measure of poverty is the living standards measure proposed by the Ministry of Social Development itself. This shows just 4% of the population in the bottom category – very restricted living standards.

It is also interesting to note this statement from the Statistics Department “It is the judgement of the Government Statistician, and the advice of the 1991 Review of Income and Wealth Statistics, that a poverty line should not be an official statistic. A poverty line tells nothing of the changes in the degree of deprivation by those below it and risks oversimplifying our understanding of poverty”.

The Poverty Line concept seems to have come from the UN and may be pertinent to developing countries but has little relevance to developed nations.

Surely your paper would do us all a service if you were to ask your journalists to do some research and a little original thinking and save us from this litany of unconnected statements which shed little light on anything in particular. Reproducing state handouts is hardly cutting edge journalism.


Yours sincerely,

Phil Scott

Parties for Growth Incorporated
P O Box 10-282
Wellington
Telephone 64 4 972 4365
Mobile 64 027 229 1519
phil@partiesforgrowth.org.nz
www.partiesforgrowth.org.nz


Jun 10, 2005, 12:57

 Newsletters : 2005 Newsletters : 10 June 2005
Trouble in France
France's economy

The French government and public have historically distrusted market forces, so the state is heavily involved in the economy. But on occasion even Jacques Chirac, France's president, is willing to admit that “the state cannot decide everything.” (It does not help that the state has had nine finance ministers in the past ten years.) Even the 35-hour week, passed into law in 1998, has been heavily diluted.

Jean-Pierre Raffarin, the prime minister, has been able to pass some much-needed reforms of the pension system in the face of stiff opposition from trade unions, but more will be needed, and health care is also costly. France spent years violating the European Union's stability and growth pact, which required a budget deficit of less than 3% of GDP, before the EU finally announced an overhaul of the pact in September 2004. Even so, thanks to buoyant consumer spending between 2000 and 2004, France is in better economic shape than its neighbour, Germany; the two countries have in common unemployment rates topping 10%.

This is the European country that Helen wants to emulate. Lots of big government with socialist ideals. It is interesting watching as a very wealthy country slowly goes downhill trying to live up to the socialist utopia. They are occasionally forced to make realistic decisions (the dreaded "Market Forces" strike again) but the unions and the population in general have just got used to a high standard of living without having to work too hard. They will not tolerate any dilution of their privileges.

This can only end in tears. Read the story from The Economist.

Jun 10, 2005, 11:46

 Newsletters : 2005 Newsletters : 10 June 2005
Follow the Incentives

I have always thought that it was absurd to tax salaries and wages. Surely we want a country of wealthy people with the freedoms to enjoy life as they wish. In 1900 New Zealand was the second wealthiest country in the world and for the previous 60 years (since our founding) we had zero income tax. Could there possibly be a connection?

Income tax started very low at something like 5% and was only increased gradually. By 1950 we had dropped one place to third in the world and then the welfare state kicked in and income tax rose to be 66% by the time Muldoon was in full flight with his command and control economy. This nearly bankrupted us and reduced us to number 37 in the world.

The obvious conclusion to draw from this is that people will stop working if the incentives are reduced enough. If people stop working the standard of living for everybody goes down and the country has trouble paying its way in the world - and certainly can't afford to pay for world class doctors and academics and business people as it might wish.

I have read that socialists think that increasing income tax makes people work harder because they must do this if they want to keep the same standard of living as before. Cullen therefore concludes that when he increases taxes people will work harder and he will have more money for the welfare state. This may be so for a while until people get to understand what is happening. Then we go back to the old regime under Muldoon and we develop a larger "black" economy - that is, people swap work with each other or pay cash for a job so avoiding GST as well as Income Tax.

The economy becomes distorted as people work in ways to defeat the tax system.

People will follow the incentives. This was one of the points made by John Key in his address to us this week. The National Party seems to now have a very real understanding of how people behave and how economics works in real life. It can all be summed up in the thought - "People follow the incentives".

Get the incentives right and all else follows. The unfortunate thing with socialists and other "command and control" politicians is that they think that it is their job to force people to do "what is good for them". Even God gave us free will! Yet still we have socialists and other do-gooders legislating and regulating our lives away so that we all conform to their particular concept of the ideal state - them in charge.

Vote for freedom and for the parties that understand how to get growth into the economy. Nanny state, political correctness and social engineering are just ploys of the Command and Control government.

This election should be fun!
Jun 9, 2005, 10:40

Can we fix it?