Tuesday, 9 February 2010

Fisking that “step change” [update 4]

It used to be called a “sea change.” Before that it was a “paradigm shift.” But all a “step change” really means is an admission that the way things are done isn’t working, so we have to try something new.

But is that really what Mr “I’m-Ambitious-For-New-Zealand” will be offering New Zealand this afternoon in his programme for the coming year?

To put it simply, the country’s businesses have been mired in shackles, knee-capped by nannying, and hamstrung by hefty taxes.  And John Boy’s solution to that is going to be  . . . well, don’t hold your breath. At a time when the world’s economy is still mired in the Great Recession and none of the old nostrums are working, it’s going to be more rules and new taxes and more of the same old, same old, isn’t it.

So not very hopeful at all, is it.

There are manifesto promises that haven’t been delivered, giving (as Lindsay Mitchell says about National’s welfare promises) “an opportunity to keep rolling them out as 'new' announcements.”  This is known as spin.

And there are manifesto promises that were never going to be delivered, like those manifesto promises to cut back the nanny state, which it’s now clear you’ll never see from these boys, and to give you big tax cuts—which as you might recall as they’re rolled out this afternoon never ever came with the public advisory that any cuts you might see in your taxes will be balanced out by new ones.  So this must be known as lying.

So amidst a sea of broken promises and a morass of spin and froth, will anything proffered this afternoon bring a “step change”? Or a “paradigm shift”? Or will it just be a shift with the ‘f’ missing?  Let’s take a look this afternoon. Bernard Hickey, among others, will be live blogging the announcements as they come, and (as time permits) I’ll be fisking what I see.

Stay tuned.

UPDATE 1: Just clearing the decks here, setting the tone for this afternoon with these two quotes:

    1. "Taxes are the price we pay for civilization
      – Oliver Wendell Holmes
    2. Taxation is the price we pay for failing to build a civilized society, since taxation represents force.”
      Mark Skousen

Two competing worldviews, only one of which is correct.

Which one do you think will be taken out for a ride this afternoon?

Do you think anyone in that National caucus room, or anyone at all in the commentariat who is talking up all the new taxes, understands either the moral point above or the practical point made by Winston Churchill?

_quote 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.”

UPDATE 2: Said John Key this morning: “I want to make sure that in my time in office I make a difference to making New Zealand a wealthier country, where our kids want to stay here.” So based on that standard . . .

UPDATE 3: As H.L. Mencken once observed,

    _quoteWhen a new source of taxation is found it never means, in practice, that
the old source is abandoned. It merely means that the politicians
have two ways of milking the taxpayer where they had one before."

It appears the National Party are following that course. We have another promise of income tax cuts; and with it we have the promise of a hike in GST.  We have some promise of tax relief, and the promise with it of extra spending.  We have a promise of welfare “reform,” but a clear signal that the middle-class welfare reform of Welfare For Working Families (which John Boy once called “communism by stealth”) will be untouched.

If we take those two views of civilisation above, it’s clear from some the “highlights” of John Boy’s speech which is the one of which they approve.

  • No plan to pay off the ever-increasing debt, perhaps by reducing govt spending, but more plans to spend more--and a hike in the only tax that everybody pays.
  • No Capital Gains or Land Tax, but some sort of Property Tax to sweep more people into the grey ones’ net. (Remember how they promised before the election to “force” property owners to build on undeveloped land?  Expect something along those lines.)
  • GST hiked to 15%, with some sort of change made to Income Tax to “compensate.”
  • No change to Welfare for For Working Families—and more taxpayers’ dollars thrown at welfare beneficiaries to “compensate” for the hike in GST.
  • No change to Welfare for For Working Families—but (somehow) will work out how to “compensate” WFF taxpayers on effective marginal tax rates of around 95% for the additional burden of the GST hike .
  • Will now pick winners in Research and Development and throw millions of taxpayers’ dollars around.
  • Will (somehow) free up mining and resource exploration.
  • Will throw billions more taxpayers’ dollars at Conservation to shut the Greens up about mining in Conservation land.
  • Will throw the Public Works Act at property owners getting in the way of infrastructure developments, especially those involving water storage and irrigation.
  • Will improve business’s access to capital, by doing whatever Mark Weldon says.
  • Will throw billions more taxpayers’ dollars at nationalised broadband and other infrastructure—over the next five years, that will be $25 billion plus cock-ups.
  • Will “reform” the welfare system to “get people back into work” (just as Lindsay Mitchell said they would), but will not be touching either the Minimum wage or Youth Rates, which are keeping so many people out of work.
  • Will thrown billions more dollars at education.
  • Says nothing at all about banning planners “ring-fencing” cities (thereby hiking up land prices) but will ban the “excessive proliferation” of liquor stores.

So much for “step change.” This looks like more of the same, only more so.

The fundamental point that must be said again and again was made by Henry Hazlitt:

    _quoteThe mounting burden of taxation not only undermines individual incentives to increased work and earnings, but in a score of ways discourages capital accumulation and distorts, unbalances, and shrinks production. Total real wealth and income is made smaller than it would otherwise be. On net balance there is more poverty rather than less."

Shuffling around that mounting burden does nothing for prosperity.  What is necessary is removing it.

A responsible government would have done that.

That they didn’t tells you precisely how “ambitious” they really are.

UPDATE 4: Comment around the traps on what was signalled as John Boy’s “most important speech since he entered Parliament in 2002”:

  • David Farrar gives it a B.  But he would have given it a B+ if they’d promised even more theft.
  • Phil Goff says “it’s Alan Bollard 1, John Key 0.”  Which is not far from the truth, really.
  • Bernard Hickey summarises the anti-climactic speech: “John Key has just sent Generations X and Y a clear message. Leave the country now.” But Bernard was hoping for swinging taxes on property owners. . .


  1. Very funny that the "tax is the price we pay for civilisation" was actually brought up in parliament.

    I don't think Key made many friends today. The cheerleaders will have a hard time.

  2. Got me thinking of 3 words:

    Sing A Pore.

  3. “New Zealand, we are in crisis. As a nation we are rumbling down the path of economic doom. We are spending and planning to spend so much of your money on sustaining our 2nd world status that to do nothing would be immoral.

    A land of such potential.
    Forget Australia – we could be the Switzerland of the Pacific.

    New Zealand, further to our election promises, today I am lowering your tax rates dramatically, and comprehensively.

    How do we do this?

    We are cutting huge swathes into the lumbering unproductive behemoth that are New Zealand state services.
    We are offering you the option of deciding which state services you wish to pay for – and – receive. Subsequently, they will right-size, offering real competition and choice.

    We believe you are best placed to make decisions on how to spend your money.

    After all – it is your money.”

    John Key

  4. Forget Australia – we could be the Switzerland of the Pacific.

    Yeah right.

    We are offering you the option of deciding which state services you wish to pay for – and – receive.


    It is really very simple:

    As of now there is zero corporate tax and zero fbt.
    As of now GST is 20% - it will be reduced when we are regularly producing 10Bn surpluses per year, not until then
    As of now we have a flat 30% income tax on the first 30,000, then zero% tax thereafter. Nobody pays more than $10,000 income tax ever.
    As of now there are no benefits whatsoever - dole
    dpb super invalids wff all the rest
    As of now all state hospitals schools polytechs wanagna universities airnz kiwirail nzpost are closed,
    As of now any remaining civil servants have a 30% pay cut.

    As of now, the next election is in 2020. The Maori seats are gone. Only those with personal incomes over 250,000 may vote.

    That's how you do it.

  5. The day that hope died in NZ. Labour suck, we know that. National suck too, but I always had this tiny hope in the back of my mind that they might do some things right. Key's response to the smacking referendum pretty much killed that, and now this pathetic, do nothing "plan" has nailed the coffin shut. NZ is on a downhill slide that we won't escape until the taxpayers revolt and stop handing over their hard-earned to the bozos in the Beehive.

  6. There aren't anywhere near enough taxpayers left Sam...

  7. He shouldn't have wasted his time.

    National is truly back to form, the conservative do-nothing tinker party.

    Unless voters demand it, the next serious chance for uplifting New Zealand will come with the next serious economic crisis. That wont be for another generation.

    There will be ever increasing government waste from picking losers, mediocre centrally planned and provided education and healthcare, a continued growing underclass of hopelessness and a largely low value commodity based economy struggling to get market access to a world that ignores it.

    Not enough to encourage me to return to the highly taxed, low value currency backwater when there are opportunities in the US and Europe.

    There is nothing in this to remotely encourage me to return.

  8. Scott, you can't tell me that the UK, Europe or US are any better. It is true that the Nats are a useless inert bunch of cowardly fibbers. It is also true that the vast majority of those of us that know that continued tax and spend policies are disgusting will also uselessly and inertly just roll over and suck it up or go overseas and roll over and suck up other disgusting policies over there. Sooner or later we have to stand up and fight. Actions speak louder than winging.

    At least the US has a Tea Party movement. We do not have such a tradition here in New Zealand so that form of protest would perhaps not resonate here. So if you are ready to not behave like useless inert cowardly Nats (and ACT who support them), what form would your protest take? The first thing you can do is come up with ideas please. We need actions to illustrate and educate and a slogan or name for a movement that would resonate within the Kiwi culture. Then we need to get off our buts and out into the streets. All it would take to frighten those vote hungry Nats is a bit of very loud noise if we can get a decent number of people to make that noise. Come on think but remember just thinking and talking will not be enough to change anything.

  9. Sally said...
    Sooner or later we have to stand up and fight. Actions speak louder than winging.

    Sally good comment and also I am just curious Sally, who's WE that you refer to here?

    Do you mean for objectivists only or you mean to be inclusive of those who don't like coercion from the government regardless whether those people are:

    - Christians
    - Moslems
    - Tongans
    - Obese
    - Ugly
    - Attractive
    - Gays
    - Skinny
    - ...

    The WE that you referred to, must include those that hold anti-state coercion and not objectivist club only. You need people, because it is people that drive the changes. A good idea with no people to spread the message is useless.

    See, I am no objectivist (I agree with some of it), but that doesn't mean that I can't be included in that WE, that you referred to above.

  10. Oh no! Falafulu Fisi I would hate to give that impression. We must gather in EVERYONE who is sick of, or should be sick of, carrying the burden. That's the key - depicting working people of all cultures who can no longer carry the burden. Not easy.

  11. What made you think you couldn't be "we", FF? Did Sally imply it was for objectivists only?

    Note I've used lower case "o" in objectivists. I think Objectivism is excellent. How can one argue with a philosophy which doesn't espouse anything except "let reality shape reason, and reason dictate action"? It's not a cult, or a set of contradictory beliefs like religion, it's just a term defining a mode of thought and action based on objective reality. I'd like to say "I'm an objectivist", but I don't want to ascribe negative, cultish, or groupthink connotations to myself by doing so. Also, as Peter has commented (though I'm paraphrasing) here before, although the concept of objectivism is extremely simple, the implications are vast and integrating them "perfectly" can take years. I'm certainly not there yet. Complexity of implementation and integration aside, what's not to like? What is there to disagree with? :)

    Note: I nearly deleted everything after my initial question to FF, as it's not really relevant to this question. Sod it though. Let the ramble stand. People can correct or discuss as they like or not. I think it's important (as I think does FF) for all who love freedom to stand together on this, and I'd hate a philosophical label to divide us.

  12. Sean Fitzpatrick10 Feb 2010, 12:46:00

    @Falafulu Fisi

    I think everyone is welcome - as I have said previously I am not an objectivist just as many other Libz are not either.

  13. Facebook members join this group and spread the word.

  14. Sally, the difference between NZ and the UK/US is that the range of opportunities over here is so much better. Nanny State is on a grander scale in the UK, but for all of that I can earn a currency which has a far higher value, am a stone's throw away from dozens of interesting places, have a huge variety of work and it isn't that much harder to set up business in the UK or US than in NZ.

    For NZ to attract the people it should want, it needs to be low tax so that the much lower incomes, low value currency and the comparative dearth of variety (and high cost of imports) are offset by keeping more of your money, and feeling less hamstrung by bureaucracy. What it remains is an agriculture and tourism based low value economy, which costs NZ in not being able to meet expectations for health care, high value imports and the like.

    It has stagnated, and is begging for market access to the US and China to keep the treadmill running. It could be a fleet of foot innovative little corner of the world that attracts Aussies tired of its productive sluggishness, it's not.

    I think NZ perhaps needs a movement, driven by Libz but not Libz itself, which is about less government. Some basic goals about shrinking the state to less than 15% of GDP, low flat tax, no new taxes, etc.

  15. I agree Scott. I saw this potential movement as a stand alone thing to be able to gain wide appeal.
    I am picturing street theatre events rolling out across the country. People come dressed in their work clothes, carrying some sort of heavy load on their shoulders and looking exhausted. We would have scrolls listing the 400 plus govt departments and quangos and onlookers could be asked to participate in a poll voting on which can have reduced budget and which ones could be cut altogether. The message being that the govt. cant tell us that govt. spending can't be cut. The results could be summed up into a petition to parliament. Also reminding people that this govt. promised tax cuts as is well illustrated here in some NotPC posts. I can set up a separate website with all this material gathered together. What do you all think?


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