On reflection

Taken out of context it’s a pretty robust speech and policy agenda with a fairly orthodox right-wing ideology. Fixing up all the crazy tax loopholes for the rich that Labour ignored for ten years is sensible stuff; switching taxation away from labour and towards consumption is a reasonable solution to the challenge of gathering tax revenue from our aging (soon to be retiring) population.

None of this is ’step-change’, catch-Australia-in-15-years stuff though and that’s what the PM promised to deliver. His response to Alan Bollard’s dim view of plan-Australia was that he had a bold plan to execute a step-change. A day later he reveals he’s looking at various options.

Most of the rest of the speech is about the government announcing stuff they’ve already announced, or various economic aspirations (mining, back office hub) they’ve been talking about for over a year.

It’d be interesting to know why the policy around taxation is still so tentative: they’re dead sure about a controversial plan to dig up conservation land but awfully vague about what they’re doing with income tax thresholds and property tax. No mention at all of company tax or trusts.

It could be that the government knows what it wants to do but has some horse-trading with it’s coalition partners before they’ll sign off on it. Previously they’ve been able to play ACT and the Maori Party off against each other, but you can’t do that with the budget – and both parties are likely to want things that the other will strenuously oppose. So the details could be tricky and the final result more schizophrenic than the outline sketched by the PM.

The speech was better written than Key’s speeches were last year: very clear, less adjectives, no passive voice, sneaky writers tricks like floating opposites and linked transitions. I bet they farmed it out to a PR company.

The Sun King stumbles

They haven’t decided what they’re going to do yet, just what they’re not going to do.

Nothing about LAQCs, nothing about company tax, nothing about trusts or aligning rates. Vague promise to change the way property investment is taxed (while ruling out the TWGs various recommendations) and pablum about looking at high income earners and WFF.

The build-up to the speech was a huge strategic blunder; it was supposed to prove that Key has a grand plan and can make the hard decisions, instead it’s done the opposite. Goff’s response has been spectacular – the high point of his leadership.

The Sun King Speaks

I’m in the lab for most of the afternoon but if anyone is following Key’s speech then feel free to leave cheers/jeers/howls of outrage in the comments.

Are you gonna bark all day, little doggy, or are you gonna bite?

The Prime Minister has his big speech tomorrow. Usually English is the details guy and Key is all about the vision thing, but there’s a growing awareness that Key’s grand schemes are like the gold coins in fairy stories that evaporate in sunlight – so I think this speech will be longer on policy and shorter on promises to end suffering, or conquer Mars, or whatever.

I’m pretty sure they’ll close the loopholes around property tax; the signals have been loud and clear. I can’t see them raising GST at this stage in the game – that seems like a second term policy, along with scaling back WFF. They may change the laws around disclosure and transparency around finance advisors and managed funds to incentivize suckers investors out of property and into the rigged casino of New Zealand’s capital markets.

I have no idea what they’ll do with income tax – but I can’t see Key agreeing to cancel income taxes for middle income earners one year and then introduce new tax cuts for the top brackets a year later. I will be fascinated to see what happens to the statistics around average income if they close the loopholes allowing high earners to scam the system using property investments. Maybe our incomes aren’t as low as we think.

I also doubt they’ll introduce a land tax or capital gains tax: it’s too risky, too ambitious. But I imagine that’s still a debate that’s going on within the government and that Treasury are frantically crunching the numbers/blindfolding monkeys and casting I Ching hexagrams, so I expect Key to be vague on these points.

Opinions now with extra haiku

Oh snail,
climb Mt. Fuji,
but slowly, slowly

I was pretty happy to see Bollard put the kibosh on the plan to catch up with Australia in his Q & A interview yesterday. The challenge was so grandiose it lent itself to fantastic, bet-the-pension-fund-to-win-back-the-payroll style solutions.

The stage is too big for the drama

lprent has a post up responding to Poneke’s blogs about climate change, and some of his points reminded me of a famous lecture by Richard Feynman on science. He said:

We have learned a lot from experience about how to handle some of
the ways we fool ourselves. One example: Millikan measured the
charge on an electron by an experiment with falling oil drops, and
got an answer which we now know not to be quite right. It’s a
little bit off, because he had the incorrect value for the
viscosity of air. It’s interesting to look at the history of
measurements of the charge of the electron, after Millikan. If you
plot them as a function of time, you find that one is a little
bigger than Millikan’s, and the next one’s a little bit bigger than
that, and the next one’s a little bit bigger than that, until
finally they settle down to a number which is higher.

Why didn’t they discover that the new number was higher right away?
It’s a thing that scientists are ashamed of–this history–because
it’s apparent that people did things like this: When they got a
number that was too high above Millikan’s, they thought something
must be wrong–and they would look for and find a reason why
something might be wrong. When they got a number closer to
Millikan’s value they didn’t look so hard. And so they eliminated
the numbers that were too far off, and did other things like that.

Governments don’t draft policy relating to negatively charged particles but if they did then we’d probably have had a huge ‘controversy’ about what the real charge of an electron was, how the lepton hoax was part of a global conspiracy, whether the weak nuclear interaction was real or faked, allegations that quantum mechanics was just drummed up to get grant money and so on. Science and scientists should strike for perfection – but they’ll never attain it, and it’s not responsible to ignore scientific findings on the basis of trivial mistakes in the process.

Feynman’s whole lecture is worth reading. The word genius gets thrown around a lot these days, but he really was a stone cold genius.

No dark sarcasm

Michael Laws’ weekly column begins:

IT IS easy to dislike schoolteachers. They are reviled for many reasons – fair and unfair – but the principal rationale seems to be that they are our first contact with external authority.

It’s another point that should be factored into the national standards debate: the right seems to really, really hate teachers. Laws goes on to explain that he particularly loathes primary school teachers because they’re mostly woman; David Farrar keeps comparing primary teachers to the coal miners under Thatcher.

Back in reality most people really like teachers, and in surveys of most admired profession they’re always in the top five, but the consensus on the right is that they’re evil (presumably because they’re unionised and mostly female) and that the best way to improve the education system would be to ’smash’ their union. So there maybe some deluded groupthink behind the governments current strategy.

The biggest barrier to the ’smash the union’ strategy is they have the most effective industrial action of almost any profession in the workforce. If the teachers strike about half a million parents need to stay at home or find day care. Even if you do smash their union there’s a world wide shortage of teachers – ours will just move to (heavily unionised) Australia where they’re paid considerably more.

That doesn’t mean that the teachers union should exercise veto power over the education system, just that the profession is very popular and that their union is very powerful; the government is proceding as if neither of those things were true.

National Standards: Raw Anecdata

I went to a barbeque yesterday and a number of the guests happened to be primary school teachers. So to distract myself from the Robbie Williams CD playing on the stereo and the flock of new mums desperate to describe their baby’s sleeping and feeding schedules to me in soul-eating detail I chatted to the teachers about national standards. I don’t know how representative of the general profession they were, but they all agreed on the following points:

• They’re not really opposed to a national standards in general, they just think the policy that’s been implemented is genuinely terrible, for much the same reasons John Hattie outlines here, although Hattie doesn’t use the term ‘fucking retard’ to describe the Minister.
• On that note, they don’t think much of Tolley. Their objection wasn’t political or ideological, more that they felt she knows nothing about education, isn’t interested in listening to anyone who does but intends to make significant changes to the national education system.
• They didn’t really care if the newspapers published league tables. (Maybe they all teach at good schools?)
• They explained that schools already know who their troubled students are and made an effort to communicate with their parents, but the parents of struggling students were inevitably uninterested in meeting with teachers to discuss problems or make an effort to help their children.

The government sees this as a political issue in which the teachers unions are the bad guys because they’re preventing reform of the education system, the unions also see it politically – there’s some sinister hidden agenda to privitise schools or something – but the teachers saw it as a management issue in which an executive they feel is uninformed and incompetent is dictating to them how they should perform their jobs.

By way of analogy, imagine if Sue Kedgley somehow became Minister of Health and cheerfully told all the doctors in the country that they had to treat their patients with crystals and homeopathy, refusing point-blank to negotiate.

The doctors would ‘object’, and the debate would quickly be politicised, with the opposition lining up to support the doctors and Kedgley declaring that the health system was about what’s best for patients not best for doctors, blaming resistance on an evil conspiracy of pharmaceutical companies – while the doctors threatened to strike and the government’s supporters demanded to know who really ran the health system, the Minister or the right-wing senior doctors union?

So just like the national standards issue, this would look like a politicised, ideological struggle with the usual idiots lining up to take the usual sides – but the core of the debate has nothing to do with politics.

Holiday Message

The Dim-Post wishes all of it’s readers a divisive Waitangi Day.

Just go away

Don Brash has an op-ed in the Dom-Post about how to improve our economy.

Well all know what Brash thinks, so I won’t bother linking to it – but it did remind me of an interesting article I came across recently while looking back through old microfilm of the Dominion back in February of 2000:

Brash a ‘nightmare’ with appalling record – Australian media.

Reserve Bank governor Don Brash is “a nightmare” with an appalling record of managing monetary policy, according to an Australian media report this week.

But a New Zealand economist has spring to his defense and the Reserve Bank rejects the criticism.

Australian Financial Review columnist Brian Toohey says if Dr Brash’s Australian counterpart, Ian Macfarlane, had followed the same path he would have triggered a recession in response to the Asian Financial crisis. Yet, Mr Toohey says, Dr Brash “still behaves as if he’s God’s gift to central banking”.

“Worse still, there is no effective way he can be removed even though it now seems clear the New Zealand economy will continue to under perform while he keeps his job,” he says.

Dr Brash’s decision to increase interest rates on January 19, just two hours before the official inflation figures for the December quarter showed that inflation had increased 0.2 per cent, was just the latest in a long line of gaffs, Mr Toohey says. Dr Brash had forecast a strong increase of 0.9 per cent.

“With typical insouciance, he claimed the magnitude of the error didn’t matter because he set interest rates with the medium term future in mind.

“No plausible explanation was given as to why he should be any better at forecasting the future if he can be so wide off the mark when it comes to the immediate past.”

Mr Toohey says other examples of where Dr Brash got it wrong included his claim in 1998 that the economy was growing satisfactorily when it fact it had gone sharply backwards and the reliance of a “peculiar monetary policy index as a basis for setting monetary policy”.

The index was replaced with an official cash rate in March.

(Printed in The Dominion, page 3. Wed 2nd February, 2000, by Roeland van den Bergh. Emphasis mine.)

The contemporary CW seems to be that Brash was a respected economist who tarnished himself when he entered the fray of politics, so it’s interesting to see that one of the most respected finance journalists in Australia saw him as a ‘nightmare’ years before he stepped down. (I was out of the country for most of the 90’s, so Brash didn’t really show up on my radar until he took over the Nats in 2003.)

Brash was Reserve Bank governor for fourteen years: 1988 – 2002, and it seems that coincides pretty closely to the time New Zealand’s economy underperformed Australia’s by a spectacular degree. (If anyone can point me towards a chart on this point (I think Marty at The Standard posted one) either supporting or refuting this claim I’d be happy to post it.)