I think you economic types might like this article about New Zealand.

[Muzzle Tough]

This is a very interesting article on the success of recent reforms in New Zealand. The entire article is so fascinating, I don't want to just post an excerpt. Very interesting!

http://www.hillsdale.edu/newimprimis/2004/april/april_printable.htm

[Dogmudgeon]

1. In case you were wondering

Here's what it's about:

Rolling Back Government: Lessons from New Zealand
Maurice P. McTigue

...

The following is adapted from a lecture delivered on February 11, 2004, on the Hillsdale campus, during a five-day seminar on “The Conditions of Free-Market Capitalism,” co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.

Same old wine, brand new wineskins.

--p!

[Muzzle Tough]

2. Anyone with a real interest in ECONOMICS........

.... would be fascinated by the SPECIFIC things that are listed in the article.

The specific details in the article are very, very interesting, IF you are a person with an interest in economics.

I would welcome any opinions from left wingers, liberals, and socialists who have actually read the entire article, as long as their comments are about the specific details that are talked about in the article.

[SariesNightly]

3. So the libertarians were right after all

I see the lecture was supported by the Mises Institute. Austrian economics is indeed fascinating, and there's no better time than our debt busting now to willingly explore this alternative.

http://www.mises.org/

Elections: The Ultimate Sinkhole
Billions and billions were spent to elect our leaders, and Erich Mattei draws attention to the sheer waste of it all. While there is indeed much debate surrounding the legitimate existence of government and the functions it is to serve, one undeniable fact of the political process is that there are scores of inescapable costs and expenses that accompany the process, and these, being anti-productive non-market phenomena, are arguably the most burdensome..

[Muzzle Tough]

6. Welcome to DU!

People who read abut Austrian economics wil realize the economic policies of the Republican Party have nothing in common with real capitalism.

Even the Green Party wants to get rid of corporate welfare, which is something that Republicans would never do.

We need "corporate welfare reform." In fact, that should be a Democratic campaign for the 2008 election.

[Paleocon]

13. I consider myself an Austrian when it comes to Economics...

It's the only system I've seen or read about that actually makes sense...

[idlisambar]

4. OK. I'll bite

First of all, though I know very little of New Zealand, a simple web search will reveal that there is no consensus regarding the success of the reform program initiated in 1984. Here is one article taking the contrary position.....

http://www.commondreams.org/views/081500-106.htm

Second, regarding the individual points, I don't think anyone would argue with the notion of cutting out needless waste in government. I think it would be wonderful if government programs in the United States were subjected to more scrutiny, no doubt there are clever solutions to many problems that are not considered because of political and bureaucratic entrenchment -- the military alone offers a feast for waste-cutters.

Nevertheless, concerning the overall ideological point, the libertarian notion that a small government is a goal in and of itself does not impress. More important to me than the size of government is its effectiveness. The question that I ask is whether resources are being devoted to meet the needs and desires of society (present and future), and that is the basis upon which I judge the mechanisms, whether public, private, or some combination of the two.

Lastly, when people speak of the growth of "government", usually they are talking about entitlement programs like Social Security, Medicare, Medicaid, etc. But I think it is misleading to speak of the growth of such programs as growth of government per se -- these are zero-sum redistributions of resources from the young and able to the retired and the poor. The government is really just the intermediary in the overall transaction.

[Muzzle Tough]

5. Thanks for that interesting link.

I read the whole thing. Very interesting. Thanks.

[jwcomer]

7. The devil's in the details

I apologize that I don't have the time to do a more thorough analysis. Some of the details are spun persuasively but do not necessarily support the authors conclusions.

My one example (again lack of time) is to look at the quoted changes in taxes and tax burden.

Facts Given:
1984 taxes 44% of GDP
2004 taxes 27% of GDP
2004 tax income 20% greater than 1984

Conclusion: Reagen is right about lowering taxes.

Or is he?
It isn't hard to show that a GDP growth rate of 3.4% per annum over the period would exactly account for the 'Facts Given'. Any benefit should be measured according to whether this 3.4% growth is greater than or less than the GDP growth rate from 1964 to 1984. Suppose that the prior period had a growth of 3.8%, then we could not conclude that Reagen was right. We could only conclude that the GDP growth over the period was sufficient for the overall tax revenue to increase in spite of the tax cuts. I don't know the actual GDP growth rate for the earlier period.

Another 'Fact Given' is that the per capita income rank dropped from 3rd to 27th place from an unspecified point int he 1950's to 1984. Without context that sound bad. However, it should be pointed out that New Zealand was not ravaged by WWII. The 1950's are the worst possible reference point as during this time the economies of Europe were devastated and slowly rebuilding. A better reference point would either be immediately before WWII or before the Great Depression.

I stopped reading the article because I felt I was being deliberately misled by an author intent on deceiving me, and possibly himself, with 'facts' and 'figures' that may not be telling a honest story.

regards,
Walton

[Muzzle Tough]

8. My response

Thanks for your comments.

While Reagan cut income tax rates, he also increased the Social Security tax rate.

No one really knows what tax rate yields maximum tax revenue. Obviously, you get zero tax revenue if all income is taxed at 0%. And you also get zero tax revenue if all income is taxed at 100%. So the tax rate that yields maximum tax revenue must be somewhere in between the two.

Clinton showed that increasing the top tax rate to 39.6% doesn't wreck the economy. I think a top tax rate in that area seemed to work pretty well.

[bemildred]

9. The top rate in the early 60s was 91%.

http://home.att.net/~Resurgence/TaxTimeline.htm#federal

The economy was booming then, we were awash in tax money.
The conclusion is?

[TO Kid]

11. But how many actually paid that?

The more significant barometer would be the total taxes paid versus total income. Individual rates for specific situations are not an accurate measure of the tax burden on the economy.

[bemildred]

12. Not many.

When the marginal rate gets high enough, other things are found
to do with the money, like investment and research, stuff you can
write off.

But I was simply pointing out that as a matter of simple observation
confiscatory progressive rates are not in themselves automatically
bad for the economy, the government or much of anybody. But one can
see the same thing in Europe and most other "advanced" nations now.

And one can predict that here "faith based" economic "thinkers" that
believe high progressive income taxation is a bad thing will raise
a bunch of distractions and change the subject since the observable
facts are inconvenient to their faith.

[TO Kid]

10. NZ had no choice

I saw an interview of the Finance minister at the time they begain the reforms. They initiated the process in a Cabinet meeting when the minister pointed out that a very large bond issue (close to $1 billion IIRC) was set to mature the following week and they had no money at all to pay it.

Aside from that, in many countries the phenomenon of the "tax wall" has been encountered wherein increases in tax rates where accompanied by immediate, substantial decreases in revenue. For example, in Ontario the income tax rates were increased several times between 1990 and 1995 and revenues plummeted- there is a strong sentiment that the tax rates prolonged our recession by at least a year. The tax cuts implemented after 1996 were accompanied by rising employment and strong revenue growth. An even more interesting example was the tobacco tax- the federal and provincial governments cut tobacco taxes in half but saw no substantial change in revenue- smoking rates remained constant but the black market for cigarettes collapsed overnight.

[NNadir]

23. Sigh...

You will not welcome my comments, since I will not bother to read the entire article, since I already know what it says. Afterall, I used to buy into this kind of stuff, but then my acne cleared up and I started growing facial hair.

All I can do is shake my head and sigh...

Anyone over 19 who hasn't outgrown Ayn Rand fantasies wouldn't understand the specific response to such pathetic thinking, so why respond or bother to read it...

Oh, I am so glad that our right wing, reactionary, liberatarians want to talk about practical results based government based with accountability.

Iraq anyone?

Let us pray...

[Dark]

14. Well, could you explain this?

So we used most of the surplus to pay off debt, and debt went from 63 percent down to 17 percent of GDP.

Sounds like us LIBERAL'S plan, doesn't it? Libertarians and conservatives are the ones in the republican party increasing debt.

[Lone_Wolf_Moderate]

15. Capitalism, in one easy lesson.

If only are politicians could figure this out. The whole problem with the way a lot of our government works, and the way we think about government, is that we've created a government culture almost, in which we almost seek government, instead of asking ourselves whether the government is even fit to handle this problem, or whether we can supplement it with private support. Even with the essential needs of the nation (economy, defense, education, health care, etc), we should try to not only strive for efficiency, but start shutting down useless or wrong-headed programs, that do more harm than good.

"Government, in its best state, is a necessary evil- in its worst, an intolerable one."

-Thomas Paine

[Paleocon]

16. LOL...

Wrong forum...

[Lone_Wolf_Moderate]

17. Huh? Do you mean I'm in the wrong forum?

Explain.

[Paleocon]

18. Sorry...

Yes, I think you are in the wrong forum. While I share a lot in common with most DUers I don't think the average DUer sees the purpose of government the way that you (or I) do.

I am here primarily because DU represents the oppostion party to the regime that is currently in power. You know, the enemy of my enemy is my friend??? Right now I see the NeoCons as our common enemy and am trying to find common ground on which I can build with DUers to get rid of them.

I tend toward the "libertarian/paleoconservative" point of view and don't think you'll find many limited government types around here. (Except me)

Happy New Year!

[Lone_Wolf_Moderate]

19. Well, I'm probably not nearly as conservative as you,

but I do believe that we rely too much on government at times. I've alwys seen myself as a moderate on fiscal and economic issues, and you're right-- as the username suggests-- It gets kind of lonely up here.

Except for you of course.

[Paleocon]

20. In that case, it's nice to meet you.

Look forward to seeing you in the forums!

:toast:

[Lone_Wolf_Moderate]

21. Cool. I'll see you around.

[B0S0X87]

22. Paleocon and LoneWolf: fellow fiscal conservative here

Nice to know I'm not the only one.

[DaedelusNemo]

24. Seems like a no-brainer to minimize waste

I suppose the argument has been used so often for nefarious purposes as to give it a taint in the eyes of many.

[B0S0X87]

Thats a very poetic way of putting it, my good sir

I'm sure everyone wants to minimize waste and pork barrel, but that's really not plausible given how legislators feast on crap like that to look good for their constituents. However, when I said I'm a fiscal conservative, I meant that I'm probably a lot less socialist in terms of economic policy than most people here. I'm not pro-business; I just have some libertarian tendencies when it comes to spending and policy.

[DaedelusNemo]

26. Ah! Poesy.

So, where do you set your dividing line? What's the most socialist thing you support? How do you decide?

Most people agree that the 'truly needy' should be helped; there the argument is about who qualifies as truly needy. Then again, there is spending intended to increase opportunity, such as loans for small businesses and so forth. The argument there is whether the boost given to the economy is worth the tax cost (or possibly whether, even if so, if it should be done.) I'm drawing a blank right now on other categories other than 'waste'.

In general, i'm in sympathy with the notions not only that the truly needy shouldn't be abandoned, but that the 'American Dream' of opportunity should be made real; that is, that people ought to be able to get ahead by working hard. Does our disagreement involve these ends, do you think, or rather the specific means to attain them?

I think of myself as pretty libertarian - i tend to score as heavily left-libertarian on those online quizzes. Still, i'm certainly not as libertarian as many who call themselves that (and strike me as economic anarchists.) It seems to me that there are some things - a few - that gov't is in a better position to do than anyone else; that is, large-scale problems for which profitable solutions cannot be found, or large-scale investments for which the original investor would get too small a part of the overall return to turn a profit. The question then, to me, is how much of a problem is enough of one to call in gov't, and which investments are wanted. I'd like to hear ya'll's thoughts on any of this.

[B0S0X87]

27. I usually get left-libertarian too

Probably the most socialist thing I support would be health insurance for all Americans, but I haven't seen a proposal on the subject worth supporting.

[DaedelusNemo]

28. What would a supportable system require?

I'm not sure we're so different - affordable health care for all Americans is my favored formulation, and that's about where i pitch my socialization. Perhaps we disagree on education - i think that's one of the best investments we could possibly be making, given that manufacturing is becoming easily done elsewhere and it's the high-skill jobs we need in this country.

My basic standard for any gov't plan is that it is sustainable, doesn't cripple anything, doesn't interfere unnecessarily. If we come up with something like that which can guarantee that everyone can get health care, i'm for it. Beyond that, i would want to take out all the waste and expense i could, but doing that would require some changes in the industry to take out some of the outrageous practices and profit-taking that go on there.

[B0S0X87]

29. Public education is important and I support it

I guess I don't even think of it as a "socialized" program. However, I don't believe the current idea of throwing more and more money into the system and giving kids yearly standardized tests is the way to go.

[DaedelusNemo]

30. We'll have to work harder if we want to find an argument then

I think, to be honest, that most people who lean libertarian are a lot more compatible with democrats than either realizes, and that some effort on the part of the democrats to woo the libertarian-minded (with policy, not just rhetoric) would be a great way to split them from the authoritarian theocrat branch of the republican party. It's not hard to run more libertarian than Bush on personal freedom and big government these days.

I agree spending money doesn't help if it's not done intelligently, but it seems plausible to me that among the problems with education is that in many places there isn't enough money - or, at the least, it's being misapplied. Teachers need incentive so we'll have more of them, and they need more incentive to do a better job or to go where they're needed. Frankly, the state of buildings and equipment in some places is godawful. There's just so much variation from district to district - some places spend gobs of money and other people scrape. Still and all, we spend a lot less on education than we do on plenty of other things that really aren't as important.

But i do think that the whole way education is approached in this country - entirely apart from funding - is in some sort of serious problem.

[B0S0X87]

31. I didn't know you wanted an argument

A libertarian turn would be good for the democrats. It would woo more "traditional conservatives" who are pissed with Bush's spending policies and the Christian Right's dominance of the GOP as well as many people who value personal freedom. Check out westerndemocrat.com to see what I mean.

[DaedelusNemo]

38. Just thought it was funny - we expect to disagree because of the labels

we carry around. But when you get down to actual policy, there's broad agreement. I certainly agree with what you're saying. I'll check out the site.

[B0S0X87]

25. double post

my bad

[Paleocon]

37. Right back at you!

:toast:

[German-Lefty]

32. Wrong about the EU.

Along these lines, there was a very interesting circumstance in Ireland just two years ago. The European Union, led by France, was highly critical of Irish tax policy – particularly on corporations – because the Irish had reduced their tax on corporations from 48 percent to 12 percent and business was flooding into Ireland. The European Union wanted to impose a penalty on Ireland in the form of a 17 percent corporate tax hike to bring them into line with other European countries. Needless to say, the Irish didn’t buy that. The European community responded by saying that what the Irish were doing was unfair and uncompetitive. The Irish Minister of Finance agreed: He pointed out that Ireland was charging corporations 12 percent, while charging its citizens only 10 percent. So Ireland reduced the tax rate to 10 percent for corporations as well. There’s another one the French lost!
I agree with the French. If Ireland or Luxembourg drops its corporate tax rate, all the corps in the EU want to move their headquarters there. They still use German labor, roads, and what not, but they don't want to pay for it. That's unfair.

What's makes it more annoying is all the EU money the other countries donated to Ireland to build up their economy over the last couple years, which guess what came from our high taxes. Not that I have anything against the Irish. Ireland and Portugal needed help, now that we've built them up, we'll get to work on the east block.

[GOPFighter]

33. I've got lots of mixed feelings here

First off, Hillsdale College is a Baptist college that appears to be more interested in conservative politics than examining the teachings of Jesus. Their website this month honors our good "friend" Zell Miller. I'm willing to bet the Mercatus Center at George Mason University is funded by large corporations devoted to eradicating any and all government regulations so they can more efficiently pick the consumer's pockets. As you can guess, I'm immediately prejudiced against anything this article says.

On the other hand (as much as I gag when writing this) anyone who thinks progressives have all the answers and everyone else's ideas are crap, is an idiot. We don't have all the right answers, so we must keep an open mind and listen to everyone and evaluate their ideas in light of our ideals. So I found many of the author's points intriguing.

However as a federal employee, I see government in a different light than most others. Remember, unlike private companies, the government cannot take out touchy-feely ads in newsmagazines to make us, the federal government, look good. In fact most Americans, even progressives, appear to think the federal government is a huge bloated, unnecessary hole in the floor where their tax money gets thrown, never to be seen again. How would you know differently? We have no mechanism for letting you know what we do on a daily basis.

I manage a government program. I've been in charge of it for about five years. Since then I've managed to cut our budget by about 30% and improved our services at the same time. In my agency, this kind of intelligent management is not unusual. But you will never hear a politician stand up and praise our labors, because no one gets elected by praising the government.

I dare say none of you know just how many vital services the government provides the American public because most are done in the background. You benefit from them but don't even know they are being performed. Just one example: Do you know that after a major hurricane, ships can't enter an affected harbor until the bottom is surveyed. If ships can't enter, then fuel, food and many other necessities can't be delivered. How many days of fuel do you think most regions of America have on hand before they run out? How many days of food do you think is in warehouses for distribution. After a major storm the government has teams on hand to quickly examine the bottom, locate hazards and assist in opening up the port for commerce. The relatively few people who know what the government did are thankful, but the rest of the country just bitches about that $0.00034 that came out of his paycheck in taxes.

Our country's economy is a delicate balancing act with government providing most of the infrastructure. I sometimes get off at the thought of giving conservatives and libertarians what they want - no government. Yeah, the private sector can do a lot of what we do, but then they will have you, the consumer, by the balls and once they do, will charge you far more than what the government does it for. Do you really think the private sector has a heart? Do you think they give a damn if the poorest of us perish? Hell no. Their bottom line is profit.

GOPFighter

[idlisambar]

36. "giving libertarians what they want"

I have the same thoughts. It would be interesting to see what a society based around libertarian ideals would look like. My guess is that it wouldn't look good, but it would be an interesting experiment.

[umass1993]

34. I read your article and I was not impressed

only ideologues like yourself would think that it meant anything.

I read the numbers. What matters to the people of New Zealand, and indeed anywhere, is quality of life.

The US posts impressive numbers. But are people living the quality they could be living?

Your attitude is premised upon the wrong assumption. People don't exist to create economies. Economies exist to serve people.

Completely competetive economies suffer from deficiencies and inefficiencies as do cooperative economies.

To throw out either of these tools is just plain stupid.

Muzzle Tough, people like you tire me. You think you are so smart, when you are consuming "critical analysis" aimed at the sheople. Go to
ideas.repec.org and read some real papers. Be an adult for crying out loud, rather than just a blabbermouth.

nuff said

[On the Road]

35. Many of the Proposals Sound Good

I think Democrats should take advantage of "reinventing government" rather than cede the issue to Republicans and rely on static left/right positions. Jimmy Carter supported zero-based budgeting (similar to what the article prescribes) and deregulation of airlines, trucking, and banking. It helped him win. Republicans are vulnerable. They have not lived up to their economic rhetoric under the Bush administration, and instead have been corporatist, bureaucratic, and unimaginative.

There tends to be a knee-jerk reaction by many Democrats that a specific issue has to result in a corresponding piece of legislation: for example, if technical hiring is down, create a federally-funded retraining program. In the long run, this is better for creating political headlines than for arriving at long-term solutions.

The most important thing about a progressive government is how well its policies change the living standard of all its citizens, regardless of how it happens. The first choice is always to control and regulate as little as possible, but to intervene if those measures are insufficient. It sometimes takes strong leadership to do that because it usually comes at a political cost. Having an evenly divided electorate hinders the process in the US because neither party can afford to lose votes from any large interest group.

Take agricultural subsidies, for example. It sounds like the NZ decision to reduce subsidies was correct. Subsidies are not efficient and should probably be reduced in the US. Sounds like a Republican position, but the Bush administration pursued a pork-barrel bureaucratic redistributive policy and supported and got $75B in farm subsidies. There are many avenues to having moderately-priced food and self-sufficient farmer without giving away that kind on money.

Different solutions may work for different countries. Sounds like NZ used to be statist and the current system provides for the welfare of its citizens better. In Europe, unions are strong, but consumption taxes and unemployment are high. In Japan, unions are weaker, but prices for many goods and services are charged on a sliding scale depending on income, so that people can always afford the basics even if they don't have as much spending money. Ireland's method was to increase employment by lowering corporate taxes to attract European business. That is working for them, but they're a marginal country next to a huge European market. Because wages are so much higher in Europe, Ireland can undercut them while still raising the quality of life for its own citizens.

Many successful strategies in other countries would not work in the US. Corporate taxes have been lowered, but investment is still leaving. Unions are weaker, increasing jobs but decreasing wages -- the net result is a declining standard of living for the working classes. New Zealand is a small coherent country without a dominant ruling class, high immigration. That makes the kind of policies written about easier to implement successfully.

I can't speak to the tax policy, although I wouldn't support a 10% national sales tax. I do think that while the policies in the article sound good, you cannot simply draw the conclusion that government should simply get out of the way of the private economy. The government has to regulate and control the private so that it provides for the good of all its citizens while putting as few impediments as possible in the way of economic growth.