The end of the Age of Entitlement

Find below Joe Hockey’s recent speech on “the End of the Age of Entitlement”. It’s a good speech with which I agree in principle. It is the first time I’ve seen an Australian political leader acknowledge that the world has changed after the GFC and that henceforth nations will be judged upon the relative performance of their current accounts. Well, Hockey doesn’t go that far because he can’t bring himself to mention excessive private sector debt, which as a major cause of the excessive government debt he excoriates so fully, but he’s at least approaching the right ball park in discussing the end of Western profligacy. His comparison of Western nations with Asian discipline is also kind of ludicrous given so much of that outcome is based upon government control of the economy via currency controls and other mechanisms. But I don’t want to be too hard on the bloke. We don’t get this kind of big picture stuff too often.

“THE END OF THE AGE OF ENTITLEMENT”
SPEECH NOTES FOR AN ADDRESS TO THE INISTITUTE OF ECONOMIC AFFAIRS

London

17 APRlL 2012

Introduction

I wish to thank my friends at the Institute of Economic Affairs for the opportunity to discuss an issue that has been the source of much debate in this forum for sometime….that is, the end of an era of popular universal entitlement.

There is nothing much new in the debate other than the fact that action has now been forced on governments as a result of the recent financial crisis. Years of warnings have been ignored but the reality can no longer be avoided.

Despite an ageing population and a higher standard of living than that enjoyed by our children, western democracies in particular have been reluctant to wind back universal access to payments and entitlements from the state.

As we have already witnessed, it is not popular to take entitlements away from millions of voters in countries with frequent elections.

It is ironic that the entitlement system seems to be most obvious and prevalent in some of the most democratic societies. Most undemocratic nations are simply unable to afford the largesse of universal entitlement systems.

So, ultimately the fiscal impact of popular programs must be brought to account no matter what the political values of the government are or how popular a spending program may be.

Let me put it to you this way: The Age of Entitlement is over.

We should not take this as cause for despair.  It is our market based economies which have forced this change on unwilling participants.

What we have seen is that the market is mandating policy changes that common sense and years of lectures from small government advocates have failed to achieve.

And we have subsequently witnessed over the last twelve months a raging battle.  This has been a battle between the fiscal reality of paying for what you spend, set against the expectation of majority public opinion that each generation will receive the same or increased support from the state than their forebears.

The entitlements bestowed on tens of millions of people by successive governments, fuelled by short-term electoral cycles and the politics of outbidding your opponents is, in essence, undermining our ability to ensure democracy, fair representation and economic sustainability for future generations.

Perhaps we could re-apply noted British philosopher, AC Grayling’s words on liberty to our debate by declaring that we may record that the age of entitlement might have passed its best point, “after so brief a period of flourishing…”

And flourish it did.

Government spending on a range of social programs including education, health, housing, subsidised transport, social safety nets and retirement benefits has reached extraordinary levels as a percentage of GDP.

However an inadequate level of revenue has forced nations into levels of indebtedness that, in an age of slowing growth and ageing population, are simply unsustainable.

The social contract between government and its citizens needs to be urgently and significantly redefined. The reality is that we cannot have greater government services and more government involvement in our lives coupled with significantly lower taxation.

As a community we need to redefine the responsibility of government and its citizens to provide for themselves, both during their working lives and into retirement.

As part of this process, we must emphasise that government spending should be funded from revenue rather than by borrowing from future generations in whatever form that may take.

The Problem

Entitlement is a concept that corrodes the very heart of the process of free enterprise that drives our economies.

All of us would agree that there are some basic community entitlements.  For generations we have all sought to define those basic rights.

For example, in the United States constitution the founding fathers determined that citizens are entitled to life, liberty and the pursuit of happiness.

You will remember it was Margaret Thatcher who interpreted community entitlements as the right for our children to “grow tall and some taller than others if they have the ability in them to do so”.[1]

This broader and timeless conservative definition of our end game lays down some foundations for the role of government.

Equality of opportunity rather than equality of outcome is my preferred model for contemporary society.

Thankfully the modern capitalist economy is centred around the satisfaction of personal wants and needs. Commercial transactions are at the core of the system.  And it is a simple and proven formula for willing buyers to engage with willing sellers. If we want a product or service we go and buy it with the dividend from the fruits of our own labour.  The producer is happy and the customer is satisfied.

The problem arises however when there is a belief that one person has a right to a good or service that someone else will pay for.  It is this sense of entitlement that afflicts not only individuals but also entire societies. And governments are to blame for portraying taxpayer’s money as something removed from the labour of another person.

In our collective effort to win votes, political leaders deliberately portray a new spending commitment as if it is coming out of their own personal bank account. Political leaders rarely thank taxpayers for their funding of the policy.

To pay for all these good policy initiatives, governments have taken the easy option and borrowed money from that mysterious and amorphous group defined as “bondholders”.

We all know this is simply a case of borrowing money from the taxpayers of tomorrow for spending initiatives of today. Of course I say with irony, it gets even better when some governments borrow more money to pay the interest on current debt so existing taxpayers and voters will never notice the pain. This is the public sector equivalent of those much maligned ponzi schemes.

The sovereign debt problems we are seeing in Europe and the US today are the outcome of countries wanting a lifestyle they cannot afford but are quite happy to borrow from others to pay for.

Of course in recent months in some countries in Europe the “borrowings” have turned into permanent transfers of wealth as those countries have become unable – or unwilling – to repay the loans.

Richer countries are either writing off the debt of poorer countries or they are subsidising the debt repayments with sophisticated transfer payments.

As a parent I want to give my children everything they wish for.

As a democratically elected legislator I want to give my constituents everything they wish for.

The hardest task in life is to say NO to someone you care about.

So perhaps what we are witnessing is a chronic failure of the democratic process.

A weak government tends to give its citizens everything they wish for. A strong government has the will to say NO!

Being profligate is easy and politically popular in the short term, particularly when the political cost of raising sufficient revenue is avoided by resorting to debt.

But painless revenue makes for reckless spending.

Whether it is defence, law and order, income support, social programs and so on, the outcome is the same.  Eventually the piper has to be paid.

Since World War 2 western communities have enjoyed prosperity that has exceeded all expectations. This has been fuelled by innovation, materialism, globalisation, free trade and debt.

Of course these are not malevolent developments. Rather they are the lauded natural outcomes of a free and successful society.

Moreover these initiatives, which have fuelled a massive improvement in global economic productivity, have driven the age of prosperity. Arguably this has delivered the most dramatic improvement in the material quality of life since the beginning of humanity.

In effect the rapid rise in private prosperity has been matched with demands for an equal improvement in state provided prosperity.

This is understandable. We all want the best available health care, the best education, the best pharmaceuticals and so on.

The difference is that the handbrake on private demand is income.

Unless a consumer can borrow money, it is their income and wealth which determines whether they can buy a new television or renovate the family home.

But for governments with seemingly unlimited capacity to borrow money, that handbrake on expenditure is not real.

While the Keynesian model of Government-led stimulus during the inevitable downturns in the economic cycle is well documented, governments who have turned on the fiscal tap seem completely incapable of turning it off when the cycle turns upwards.

So we have witnessed a continual over-commitment in many countries, funded by the lure of cheap and easily obtainable debt.

It is a problem which is not new. We might think by now we would have learnt the lessons.  But clearly that is not the case.

A Tale of Two Systems

In September last year I travelled to Hong Kong – a city of 7 million[2] - which sits at the edge of the Pearl River Delta – home to over 100 million additional residents. As a Special Administrative Region, Hong Kong is now serving as a conduit between China and its global trading partners, particularly those with business directly to the north.

So even though its destiny has changed, Hong Kong continues to maintain its own currency, laws and Parliament but is now totally wed at the hip to Beijing.

Without a social safety net, Hong Kong offers its citizens a top personal income tax rate of 17% and corporate tax rates of 16.5%. Unemployment is a low 3.4%[3], inflation 4.7%[4] and the growth rate still respectable at over 4%[5]. Government debt is moderate[6] and although there is still poverty, the family unit is very much intact and social welfare is largely unknown.

The system there is that you work hard, your parents look after the kids, you look after your grandkids and you save as you work for 40 years to fund your retirement. The society is focussed on making sure people can look after themselves well into old age.

The concept of filial piety, from the Confucian classic Xiao Jing, is thriving today right across Asia. It is also the very best and most enduring guide for community and social infrastructure.

The Hong Kong experience is not unusual in Asia. Characteristics such as low inflation, low unemployment, modest government debt, minimal unfunded benefits and entitlements, and significant growth are powering a whole range of emerging markets and developing an Asian middle class that will grow to some two and a half billion people by 2030[7].

The sense of government entitlement in these countries is low. You get what you work for. Your tax payments are not excessive and there is an enormous incentive to work harder and earn more if you want to.

By western standards this highly constrained public safety net may, at times, seem brutal.  But it works and it is financially sustainable.

Contrast this with what we find in Europe, the UK and the USA.

All of them have enormous entitlement systems spanning education, health, income support, retirement benefits, unemployment benefits and so on.  Some countries are more generous than others and in many instances the recipients of the largest amount of unfunded entitlements are former employees of the Government.

In all these areas people are enjoying benefits which are not paid for by them, but paid for by someone else – either the taxes of those who are working and producing income, or future generations who are going to be left to pay the debt used to pay for these services.

Despite tax rates much higher than in Hong Kong, government revenue in these economies still falls well short of meeting current government spending initiatives.

The difference is made up by the public sector borrowing money.  And more often than not we are borrowing money from people such as the citizens of Hong Kong.

You would have to say that this is a flawed formula. For western democracies the party is over.

Our most deeply exposed western economies can no longer continue to accumulate debt without constraint. The ongoing credit crisis in Europe seems a very long way from resolution. Ultimately, spending on entitlements becomes a structural problem for fiscal policy.

In the United States for example, the excess of government expenditure over receipts is enormous. The Government has $15 trillion of Federal gross debt and it’s going up by $1.5 trillion a year because expenditure is $6.2 trillion a year and receipts $4.8 trillion[8].  Obviously with interest rates at near zero levels the cost of debt is limited but sooner or later it must end in tears.

So why is it that western nations are so deeply indebted and so tragically unfunded when it comes to meeting their future obligations in the face of an ageing demographic and longer life expectancies?

Both sides of the western political spectrum are to blame.

As the electoral pendulum has swung between socialist and conservative sides of politics, the socialist governments, often winning electoral success thanks to the funding from unions, have created a huge array of entitlements for selected classes of individuals, particularly and ironically employees of government and members of unions.

These entitlements have now begun to hang like a millstone around the neck of governments, mortgaging the economic future of many Western nations and their enterprises for generations to come.

I will give you a classic example.  In Boston USA, there’s a certain former police captain who retired aged 55 some 20 years ago after a 32 year career on the force. During that period he managed to contribute some $73,000 to his defined benefit pension plan, a plan which gives you a percentage of your salary for life when you retire.  On retirement he started receiving 100% of his retirement salary, namely $55,000.

He is now 75, which means he has collected some $1.1 million in benefits.  And it looks like he’ll live until he’s at least 90 or even older, so that’s almost another $1.0 million over 15 years. It’s more than he earned in 32 years and he contributed just $73,000 to help pay for it. Either taxpayers pay the bill or the government has to borrow to pay for the entitlement.

When the electoral pendulum swings, conservative governments have come in promising to fix the problem but in most instances have just trimmed around the edges without addressing the real problem of the growing entitlement burden.

And the greatest Catch 22 of modern democratic politics is that socialist governments are blindly wedded to increases in expenditure while conservative governments are blindly wedded to not increasing taxes. So once the cycle of economic growth comes to its inevitable end, the problem is exacerbated.

Perhaps the real problem is the exuberant excesses of politicians who do not seem to understand or care about the fact that like a household, a nation needs to balance its budget over time and needs to make sure it can cover its future commitments.

This has already reached dangerous levels with some OECD countries like France spending close to 30% of their GDP on public social expenditure.

Other countries get by with much less.  Korea only spends 10% of GDP on public social expenditure with Australia at 16% of GDP, the USA at 20% and the United Kingdom at 23%.[9]

The bottom line is that our communities need to make a tough decision. We cannot choose both higher entitlements and lower taxes. We must make a decision one way or the other. We can take more and more of our citizen’s money and spend it for them, or we can take less of it and rationalise government services.

But it is a decision that must be made …and soon.

This challenge is compounding in scale as an ageing population in many industrialised countries is making even further demands on the entitlement system.

Europe for example, has the highest proportion of over 60s of any region in the world. And while 22% of the population in Europe is currently over 60, this number is forecast to rise to 35% by 2050.

Plans for the future of Europe have assumed strong economic growth, but it is highly uncertain how growth will be achieved as the fiscal burden associated with rising health and aged care costs, as well as a generous pension scheme, continues to grow.

According to a study commissioned by the European Central Bank[10], 19 EU countries had almost 30 trillion Euros of unfunded entitlement obligations for their existing populations. Of this 30 trillion Euros, France has liabilities of 6.7 trillion and Germany 7.6 trillion.

These liabilities will continue to grow without significant reform. And, by the way, I don’t see how a debate in France about lowering the retirement age from 62 to 60 will help address these challenges.

A lower level of entitlement means countries are free to allow business and individuals to be successful. It reduces taxation, meaning individuals spend less of their time working for the state, and more of their time working for themselves and their family.

An economy that impedes individual ambition – whether through higher taxation, the lack of opportunity in employment, or restricted social mobility – is one that enforces the barriers of class, rather than reduces them.

Governments should ensure that the actions they take will leave their citizens better off because, naturally, that will reduce the desire for ‘entitlements’. The role of government must be to help people to the starting line, while accepting that some will then run faster than others.

Everyone should know that they grow up in a country where it is possible, through hard work and diligence, to achieve their dreams.

Naturally the Americans call this the American Dream, but it is similarly played out across the globe, including in emerging economies in Asia.

The Australian Experience

As the child of a father who came to Australia in 1948 as a refugee from Palestine and built himself into a successful businessman, I know that being successful in Australia is not the product of belonging to rich and prosperous families, but rather is the result of hard work and diligence.

In fact those stories are most often repeated in countries without extreme interventionist governments. For example, over 80 per cent of the millionaires in the United States are the first generation in their family to be millionaires.

But Australia has had its fair share of irresponsible governments.  In 1996 the incoming conservative government inherited a budget in a weakened state.  The previous Labor administration had racked up a succession of budget deficits and $96bn of net debt, about 17% of GDP.  (I know that figure is not large by the current experience of most countries in Europe, but trust me, the repayment task was a challenge.)

It took nine years of budget surpluses and asset sales to repay the debt.  That is three election cycles in Australia.

It took another two years of hard fiscal rectitude to build up a stock of net assets equivalent to 4% of GDP.  In total that is a long period of sustained fiscal austerity.

Australia has not completely avoided the problems of other western democracies because it still has a lot of spending by government which many voters see as their entitlement.

However, over the years there have been a number of key decisions to reduce spending to manageable levels.

Australia has sought to reduce the burden on government of providing aged pensions through a compulsory system of savings for retirement.  Retirees must rely first on the benefits they have accumulated rather than on government income support.  And retirement benefits to government employees and politicians are no longer provided on a defined benefit basis but on a contributions basis so they only get back the principal and earnings on what they have put in.

The government is also gradually raising the age at which government benefits can be accessed, from 60 to 67 for women and from 65 to 67 for men from 1 July 2023.

Most importantly, the net government assets of $45 billion arduously built up by the previous conservative government were set aside into a Future Fund.  The funds cannot be touched by the government for everyday expenditure.  Rather, the fund can only be accessed to pay for the previously unfunded entitlements of federal public servants so as to reduce the burden on taxpayers.

That was an initiative of great foresight.  It is, if you like, Australia’s sovereign wealth fund with the explicit purpose of boosting the sustainability of the budget through time.

The Road Back

So where do we go from here?

There is really only one solution in the long term, and that is for countries to live within their means.

We must rebuild fiscal discipline.  Budget surpluses must be restored, ideally until the debt is repaid.

This can only be achieved by cutting spending or by raising taxes.  And given the general acceptance that the increased drag from higher taxes would compromise economic growth, the clear mandate is to lower expenditure.

This is lovely rhetoric but to actually do it needs some very harsh political and social decisions.

To be bold, I have some suggestions.

The first is that people need to work longer before they access retirement benefits. When the age pension was introduced in Australia at age 65, life expectancy was 55. Today life expectancy is in the 80’s.

So you can understand how I was shocked to hear that one of the policy promises of one of the main French Presidential Election candidates, François Hollande, is to bring the official retirement age back down to 60 from 62.

Second, there have to be universal compulsory retirement schemes into which employees and employers must contribute so that after a man or woman has worked for 40 or more years they have set aside an amount that can provide them with a reasonable income for a further 15-20 years at least.

Defined benefit schemes need to be phased out worldwide, including in Australia, whether they are for public servants or private sector employees. In addition, all government funded pensions and other such payments must be means tested so that people who do not need them do not get them.

Third, there needs to be clear thinking about which services should be provided by governments and whether government funded services should be entirely free or have some affordable co payment.  Many will argue that certain government services should be free and universal but the problem with any free good is that it will be overconsumed and underappreciated.

For example, in Australia, health services are partly funded through compulsory levies, paid either to the government or to private health insurers.

Across the Western world we have saddled our nations and our children with a debt burden that is simply unsustainable. It is time for strong political and economic leadership to clean up this mess properly, not with a series of band aids and political spin but with genuine economic and social reform.

The age of unlimited and unfunded entitlement to government services and income support is over. It’s as over in Greece as it is in Italy, in Spain, and in the USA.

There also needs to be a rethinking of government borrowing.  Some might argue that some low level of debt is not a bad thing.  I believe that is a dangerous proposition.   Once some level of debt is accepted it becomes too tempting to opt for just a little more.  Pretty soon a little debt becomes a big problem.

Also, there is a significant cost to servicing debt.  Even in Australia, where net debt as a percentage of GDP is lower than in Europe, interest costs on net debt are approaching $7 billion a year.  That is enough to build 7 new teaching hospitals every year.

The message is that every dollar of debt has an opportunity cost.

Another aspect of the problem is that credit is no longer easily accessible for the private sector or the public sector.

And the credit market no longer automatically favours the public sector. Ironically more and more sovereigns are seen as a greater credit risk than many international companies. I would think the experience of the past few years has been something of a reality check.  Lenders now know that even today advanced western economies can default on their debts.

In today’s global financial system it is the financial markets, both domestic and international, which impose fiscal discipline on countries.  A country which is viewed as approaching its safe limit for debt will find it increasingly difficult to borrow additional funds at an affordable rate.  Eventually the capital markets will close.

We are now in an era where lenders are much more wary about credit risk.  I view this as a healthy development.

Lenders have a more active role to play in policing public policy and ensuring that countries do not exceed their capacity to service and repay debt.

This is playing out most dramatically in Europe where the European Commission and the European Central Bank are either directly or indirectly heavily influencing public policy in Greece, Italy, Spain and Portugal to name a few.

It is also worth noting that the system of regulation of banks and other deposit taking institutions is artificially boosting demand for sovereign credits with mandated liquidity requirements generally emphasising a prominent role for government securities.

Governments have been too prepared to exploit the resultant lower borrowing costs.

And whilst securities issued by sovereigns have traditionally been viewed as the safest and most liquid assets, I am not sure that it is still the view of investors in Europe today.

Concluding Comments

The road back to fiscal sustainability will not be easy.

It will involve reducing the provision of so called “free” government services to those who feel they are entitled to receive them.

It will involve reducing government spending to be lower than government revenue for a long time.

It is likely to result in a lowering of the standard of living for whole societies as they learn to live within their means.

The political challenge will be to convince the electorate of the need for fiscal pain and to ensure that the burden is equally shared.

Already in the UK and parts of Europe we have seen the social unrest that can result when fiscal austerity bites.

But the alternative is unthinkable.

The Western world cannot continue on its current path of borrowing to fund its excessive lifestyle.  The problem of fiscal sustainability will only get worse.

Eventually lenders will cry enough is enough and turn off the credit tap.  And when that happens the economic, financial, social and political dislocations are likely to be catastrophic.

The Western world is at the most important economic cross road in its history – Governments must accept their responsibilities to fiscal discipline and the prudent use of their citizens hard earned monies, or they need to accept that the demise of western economies will be forced upon them in a dramatic, unpredictable and possibly violent way.

Adam Smith’s free hand is perfectly capable of forming a fist to punish nations who ignore the fundamental rules.  Unfortunately I think Adam’s down at the gym right now and in training for one almighty whack.

Restoring fiscal credibility will be hard.    But it is essential we learn to live within our means.

The Age of Entitlement should never have been allowed to become a fiscal nightmare. But now that it has, Governments around the world must reign in their excesses and learn to live within their means. All of our futures depend on it.

Here is what Hockey told the ABC afterwards, courtesy of the AFR:

Opposition treasury spokesman Joe Hockey said the Coalition would review all welfare benefits, which make up a third of the federal budget, as it tries to find savings and reduce the size of government.

Mr Hockey, in London, says the age of entitlement is over and that the Coalition would look at each benefit on a “case-by-case” basis as it tries to replicate Asian examples rather than those in Europe and the United States.

“The age of entitlement is coming to an end,” Mr Hockey told the ABC’s Lateline program. “We need to be vigilant. We can afford to look at it on a case-by-case basis as they arise, but we need to reduce the size of the state.”

The Coalition, which wants to abolish the mining and carbon taxes while keeping some of the things they pay for, is targeting savings as it portrays itself as a better economic manager that will have lower levels of debt than Labor.

Labor is looking at cutting spending to deliver its 2012-13 budget surplus as global financial volatility and low confidence trims tax revenue.

Mr Hockey would not say which benefits the Coalition might reduce or scrap.

“I’m not going to be cherry-picking Australian initiatives,” Mr Hockey said.

“Welfare represents around a third of the entire Australian budget, it is an enormous cost burden.”

146 Responses to “ “The end of the Age of Entitlement”

  1. Deo says:

    I was surprised yesterday when seeing him interviewed in ABC Lateline with this good speech. Knowing his track-record up till now with his populist and stupid comments e.g. bank bashing on interest rate, I could not believe that this speech is actually his own idea.

    In addition, seeing him struggled with tough questions from Lateline’s Tony Jones seems to confirm that this is not really his own idea. Surely he has good advisor(s) helping him in this speech ;-)

    • snagard says:

      +1

      He’s said some pretty dumb things in the past, but there’s some good stuff and it at least attempts to be a bit even handed when distributing the blame (though when he focuses on Australia, he conveniently highlights the Future Fund as a Coalition achievement but neglects to mention who started compulsory super, for example).

      It’s a bit moot though, unless and until this carries over into actual, substantive policy prescriptions for Australia – which interestingly he declined to provide. It’s all well and good to say this in a speech in London, but let’s see him (or for that matter, any politician) tell the hard truths in an election campaign.

    • deweyite says:

      Picking on “dole bludgers” (or “entitlement” as he had decided to spin it) is as populist as it comes in Australia, taking aim as those livin’ la vida loca on $17 on hour.

      Anyone with any sense of history will understand that this is an attack on those who’re the most vulnerable, and without a strong voice in public debate.

      While the real and damaging public waste (negative gearing, politicians benefits, generous funding to elite private schools etc etc) will go untouched for fear of middle class backlash (see Mark Latham).

  2. Baldrick says:

    So Joe suggests removing all taxes does he? Or just the ones on business, while ramping up those on the populace? Obviously, the Libs only reason to tax is so they have pork to spend to get them,selves re-elected. Of course, if you approach their “small govt, no tax, no spend” concept logically, it also suggests that we should have- wait for it- no government! Personally, I’m not adverse to that, so long as they go the whole hog.

    • JoeBlow says:

      A non sequitur, combined with an excluded middle fallacy….

      ‘business’ does not pay tax in any way shape or form, people do. The incidence of corporate income taxation falls mostly on those poor buggers working for it.

  3. Hewell says:

    Has he always had this idea?
    tbh, I’m quite surprised to hear this from Joe, or any politician.
    Seems like he’s not as dumb as claimed by some people after all.

    • Ranier Wolfcastle says:

      I doubt very much he is dumb in an absolute IQ sense — but his record thus far indicates he just reads what his writers give to him. He doesn’t appear to have taken the time to develop an informed understanding of these issues.

      I don’t see any reason to believe he would be any better than Swan.

  4. DT says:

    I’d believe it more if Joe wasn’t part of the government that promoted this attitude through its middle class welfare policies.

    Of course he’s right, although I strongly doubt his commitment to follow through, given that same middle class forms the basis of the Liberal party vote.

  5. Lucius says:

    Fantastic sentiments. Though I do find it slightly irritating that this kind of philosophy is considered ‘conservative’. The simple concept of individual responsibility is just a particularly pure form of liberalism. Indeed, the potential changes being outlined could even be viewed as radical in the current climate.

    • Lucius says:

      I might add that “Equality of opportunity rather than equality of outcome” is all well and good provided the outcomes are not grossly inequitable. However, when outcomes are seriously skewed, I strongly favour little to no taxation on society’s poorer constituents rather than handouts. This seems to be a self-evidently sensible policy.

      • Karan says:

        ‘handouts’ are generally to those who don’t have any taxes to pay in the first place, or to make the bottom rungs of the pay ladder more progressive.

  6. ceteris paribus says:

    People can judge for themselves whether or not Hockey is up to it as a used car salesman, let alone as our next Treasurer, by watching him being interviewed by Tony Jones on Lateline (www.abc.net.au Iview).

    A few further comments:
    1. Of course, Hockey’s support of means testing is a necessity. Pity Hockey voted sgainst the means-testing of the private health care insurance rebate.

    2. The most profligate upper and middle class welfare came thru’ the last Howard (and Hockey government)- think radical loosening of the means test- (while at the same time being too miserable to raise the base rate of the pension for those with no savings), think no tax paid on super after 60 years, based upon age and not need, think of the lack of limits on super tax concessions/welfare for the wealthy etc. etc. etc.

    3. Hockey lauds the “filial peity” of the Asian nations as a basis for welfare. Well, let me tell you, if Hockey was left to fend for himself in Asia, without his welfare cache of pollie super entitlements, travel expenses, salary, cars, trips etc., he would not appear as prosperous as he does today in good old Australia.

    I really don’t know what annoys me more- the idiocy or the hypocrisy of his statements.

    Thank God that Australia largely remains a civil society which for the most part tries to look out for everyone. It is a true blessing.

    • Sean G says:

      Spot on. It’s the classic Howard dog whistle assuring wealthy and middle class people that all their welfare entitlements will remain in place while those nasty undeserving poor people will be whacked for six.

      Hockey has voted against means-testing private health subsidies; he’s also been in favour of funding useless wars overseas, subsidies to big companies like Rio Tinto (diesel fuel rebate) and increasing the money flow away from public education towards inefficient private schools. Hockey is a hypocrite of the worst order: He only wants entitlements to those who they deem to be worthy of it like the super-wealthy. Bob Menzies would be rolling in his grave if he could see what the Liberals have become.

      Gives you an idea about the shape of a future Abbott government; Medicare and Centrelink entitlements will be stripped but you can bet that the politician snout will be even deeper in that taxpayer trough!

    • RickW-MB says:

      He gives the example of the Boston police captain – a guy who probably had his life on the line at least a few times in a long career. A more apt example would be his entitlements. How much has Joe contributed to his eventual package.

      What are the entitlements of John, Peter, Paul, Bob, Gough, Malcolm and the vast number of other polies, state and federal, who have made little or no contribution to their luxurious entitlements.

      The police captain’s pension is paltry compared with Anna Bligh. She had a political career of 17 years for which she gets a lifetime pension of AUD150k in current terms. If she lives till 90, roughly 40 years on pension, Queenslanders will fork out AUD6M in current terms. This is true entitlement for the ruling class.

      Joe would have a great deal more credibility if he committed all Australians to self funded retirement including polies, servicemen, government employees. Fix his own nest first rather than using an example from the USA.

      • JoeBlow says:

        Applying a 99% income levy to all defined benefit pensions above say 2/3rds of the average industrial wage has a certain inevitability to it.

        Very easy to spin in terms of providing extra assistance to ‘the poor’.

        Applying a immediate 250% levy (out of both income and fund)on everything above minimum wage to any healthy individual who draws a defined benefit pension below retirement age would be even better.

        By applying it to all defined benefit schemes, hard for the public sector to say it’s targeting them alone.

    • dumb_non_economist says:

      CP,
      I take it you don’t agree with most of the +ve comments here, and I’m with you.

      Take Hong Kong for starters having lived there for 6 yrs, did he not get out past his 6* hotel lobby. A large slab of Hong kongers do it tough, medical and dental is almost non existent while living in what can only be described as marginally better than poky slums. If you’re born into a poor family don’t expect to get the education to get yourself out.

      As to wanting to give his children everything they wish for!!!! I certainly don’t, everything they actually need, YES. Love and affection and my time, plus a good education. No PS/iPhone/iPad, if they want that they have to “learn to earn.” They have not been brought up to be consumers.

      Equality of Opportunity: Well, that starts at birth. I started a BIG rant, but fortunately for you I deleted it! Suffice to say E of O should not depend on luck of the draw; i.e. who you are born to.

      Most of which he complains about he, Howard and Costello are guilty of expanding.

      ALL benefits should be means tested.

      CP, Sorry, but I believe your last para died and was buried some time ago.

      • dumb_non_economist says:

        Australia has entered the “Age of Self.”

      • 3d1k says:

        It entered that long ago – it’s been Gimme Gimme Gimme for years.

      • Sweeper says:

        Yeah his Hong Kong anecdote was way off. If he was there in Sep last year, inflation would have been been about 8% (due to the linked exchange rate), not 4.7%.

        Also the idea that Hong Kong is a libertarian paradise is a myth. Yes they have low taxes and welfare expenditure. But the government still has a strong presence in the economy.

      • Seekvalue says:

        +1 Well said. Most people don’t realise that the more equitable a society become the more happier its people (less crime, better health outcomer, higher education ouctomes etc).

        If Joe had come out saying that we will make society more equitable and thus will review current welfare program, I would have supported him some what (though my opinion of him as a village i***t has not changed). But to say that there is an entitlement society here in Australia, whom exactly is he speaking about?

    • 3d1k says:

      These comments above perfectly highlight the difficulty faced by any political party contemplating even modest modification of cradle to grave welfare.

      In essence, selfish and hypocritical. These commenters will not bear the burden but their children, grandchildren and generations into the future will. It is not sustainable without either ever-spiralling government debt and/or continued increases in taxation. Someone has to pay.

      A safety net remains, but those capable of supporting their own needs must do so.

      • The Prince says:

        Sounds like straight out of a playbook again 3d1k.

        Might need to brush up on this: http://yourlogicalfallacyis.com/home

      • flawse says:

        playbook?

        Woooo! Steady on Prince. Anyone who has social beliefs or thoughts beyond hand out can’t comment here? 3d1k tolerates more personal abuse in this forum than anyone else.

        The problem here is the whole society has a sense of entitlement…try taking away the weekly visit to the fingernail shop or the daily latte!
        Generally in these comments there is a tone of the Libs protecting the privileged and that’s their sole aim. I mean that’s the equivalent of a Right wing person calling a socialist a stalinist! It’s all unacceptable and one would have hoped debate in this forum would have maintained the tone and level HnH set for it in his post. It didn’t.
        So why are we singling out 3d1k? Because 3d1k thinks a bit differently? That’s jolly dangerous.
        The point 3d1k has been made through history. My first reading of the problem started with Plato!

        As a country, we over consume, over pay ourselves and presume we are entitled to continue to live beyond our means and that the rest of the world should work so we can do so. In this I agree with some who have commented. We really seriously need to look at the structure of the whole society. Even further we need to have a close look at ourselves.

      • Booboo Bingbang says:

        +1 again flawse

      • Deenominator says:

        I count tu quoque, slippery slope and appeal to authority. But then I fall to the fallacy fallacy..

        Having said that I do agree there needs to be an overhaul of the whole structure. If we were such a lucky country we wouldn’t all be up to our necks in debt and or unemployed etc..

      • dumb_non_economist says:

        Flawse,
        I don’t agree with your take on the comments. I agree with your last para and I agree with some of 2d0k’s comments further down the page. I just don’t believe Hockey & Co will apply any adjustment welfare wise equally or fairly. I can state I’m not the recipient of any gov largesse, neither should I be!
        There’s more business/investor class welfare as there is people welfare. Passing by neg gearing, how about the 50% CG cut after 12mths! Use it myself, but it’s not deserved, should be more like 5 yrs. B & H for 12 mths isn’t “investing.” Well, maybe I should change my comment on not receiving gov largesse after all!!

      • Julius says:

        “We really seriously need to look at the structure of the whole society.”

        Yes, Flawse, precisely.

        The whole of our society – not just the bit that involves social welfare.

        Incidentally, I can’t see anywhere that Prince says that 3D1K can’t comment here.
        In fact, quite the contrary – I’ve seen threads on this site where it was hard for anyone else to get a word in edgeways :-)

      • flawse says:

        DNE…I should clarify and say I thought the Hockey speech was just plain BS!!! Some sort of right wing motherhood statement…I don’t know…the best definition is BS!

        I just worry about extremist comments one form or another!

      • Julius says:

        As usual, 3D, you have cherry-picked the comments of others, and synthesised an attitude that simply does not exist.

        The discussion seems to be less about whether the entitlement mentality needs to be addressed, and more about what is considered an “entitlement”.

        You have clearly made up your mind on the subject when you say “….contemplating even modest modification of cradle to grave welfare.”

        An entitlement, in your view, and that of Joe Hockey no doubt, appears to be anything to do with welfare.

        Are there no business “entitlements” that might be considered?
        Not in your cosy little corner of the world, I suspect.

        Hockeys’ speech raises many excellent and long-neglected issues that will require urgent attention in the near future. But the discussion must include all aspects of government largesse – not just those directed at the little bloke.

        Of course, the speech would have been infinitely more powerful in its impact if it had been delivered by someone with a long, proven, and dedicated track-record to the cause. As it stands, I have visions of someone like Clive Palmer delivering a speech on the environmental evils of coal mining.

        For pure hypocrisy, let us take:

        “Second, there have to be universal compulsory retirement schemes into which employees and employers must contribute so that after a man or woman has worked for 40 or more years they have set aside an amount that can provide them with a reasonable income for a further 15-20 years at least.”

        Which party fought tooth and nail against the introduction of compulsory superannuation in Australia, and has fought every increase in the levy since its introduction?

        Hockey draws comparisons with Asian nations. When I worked in Singapore in the 90s, every Singaporean contributed 20% of their salary to the Central Provident Fund, and this was matched by a 20% contribution from the Singapore government.
        Try and get that one through a Liberal parliament and see how far you get.

        This is a discussion that Australia must have – on that much we agree.

        But it must be a broad-ranging discussion, and all “entitlements” (read government handouts to anybody) must be on the table. If the discussion of “entitlement” is restricted to “welfare”, then the discussion is over before it starts.

        That, as I see it, is the perfectly valid and logical point being made in many of the comments on this thread.

      • flawse says:

        “Are there no business “entitlements” that might be considered?
        Not in your cosy little corner of the world, I suspect.”

        So Julius why is this different to anything 3d1k said?

        You are taking a presumption about a person and turning that presumption into a statement of greed by that person. Do you actually know 3d1k’s personal circumstances?

      • Julius says:

        Flawse,

        I thinnk you’d better have a nice warm cup of tea, a Bex, and a good lie down.

        And when you’re done, have a good, careful read of my posting again.

        Do I know 3D1Ks personal circumstances? Of course not – not the least bit interested.

        Do I know 3D1Ks leanings, and the manner in which he expresses them on this forum? You betcha!!

        And that is where my comments were directed.

      • flawse says:

        So you know for a fact that 3d1k ‘HE’ occupies a nice little corner of the world.

        Further don’t insult me again please with the Bex and lie down. You just illustrated my point about your post.

  7. Tarric says:

    I fear that those who need to be “supported” by the government are going to be the ones who suffer while middle class welfare remains too politically difficult to touch.

    The family tax benefit pays over $5,500 a year for each child between 13 and 19.
    I don’t know the exact numbers but that sure is a lot of welfare payments going to people who don’t need it.

    I can practically guarantee that the “Family Tax Benefit” wont be touched because its political dynamite, taking perhaps 10k a year away from “working families” isnt going to win elections.

    I plan on having kids one day but I don’t expect the government to pay for their keep, that’s my job.

    • Hubert Cumberdale says:

      Totally agree with Tarric. I heard a discussion about the Lateline interview on the radio (haven’t had a chance to watch it yet) and Sloppy Joe baulked at suggestions that the baby bonus might be dumped or that company tax breaks might cease. It seems that they have the unemployed firmly in their sights. This will be popular with the A Current Affair-viewing masses until they join the ranks of the unemployed themselves.

    • JoeBlow says:

      Agreed,

      Similar hue and cry in the UK when financial reality hit home.

      However their approach to clawing it back was asinine.

      Taxing it at the appropriate marginal rate would be a start.

    • Lighter Fluid says:

      All this middle-class welfare wouldn’t have been necessary if we didn’t condone continuously rising house prices and continuously rising private debt.

      I imagine most households would have been better off 10-15 years ago with lower mortgage repayments and no Family Tax Benefits.

      Middle class welfare has arisen because households are ‘doin it tough’ because they have too much debt. Government supports the housing boom with one hand, and with the other tries to re-dress the burden it creates with head-patting quasi-socialist subsidies and handouts.

      Somehow I don’t think Hockey will be unraveling the Politico-housing complex anytime soon, but he’ll stamp out anything that smells like soft-core socialism.

      The hypocrisy of all sides is mind boggling.

      • Goldilocks says:

        I look at it from a similar perspective to you. Now not only the poor but large parts of middle class need the benefits they are used to or the house of cards begins to wobble and fall apart. The ones who can’t survive without social welfare -the severly ill, truly poor and the unemployed- need higher benefits to survive in this era and the rest should probably sell some assets and earn their living without extra benefits.
        I suppose this speech at least opens up the discussion, which has a long way to go.

        In some ways it is ironic to see social welfare regarded as a pure source of waste and to look to Asian countries as examples of a better model. Sure they provide more competitive business but the society is divided to the extreme! Is that really the desired future for our children and grandchildren?

        Nordic countries have had their egalitarian system providing free health care and education for decades -even during the 70s and 90s- and have been pretty stable economically overall, apart from the severe recession/depression of the early 90s. They do not provide a florid ground for aspiring billionnaires though. The income differences are much less extreme than elsewhere in the world, corruption low and society stable.

        It will be interesting to see what the future holds for both the east and the west.
        Crony capitalism does not seem to work (US?). Communism is a failed idealistic ideology not applicable to real life at all (History of Russia). Socialism feeds laziness, entitlement and lack of ambition (Europe to some degree?). Yet some social welfare and educational equality for all provide grounds for a successful and stable society.

        Personally I think that corruption needs to be weeded well and truly from all countries that wish to provide a pleasant future for the next generations.

      • 3d1k says:

        Much of this I agree with. Many do rely on a range of welfare payments to survive (and not just those solely reliant). As I say, special interests are the economy – across the board.

        In my view, the scale of entitlements are simply not sustainable. Change will eventually occur because of the inevitability of the collapse of sustainability. Better to open the door to discussion than slam it shut as a ‘no go’.

        Gillard already out there saying “it’s the end of medicare, family payments, carer’s allowances” etc. Stock standard scaremongering designed to put a big fat lock on the door for good. Always a reversion to some sort of them v us. I despair we will never move beyond.

      • dumb_non_economist says:

        2d0k,
        Where has anyone argued for it to continue? I just will not take Hockey at face value on this until he and Abbott are upfront about what they propose to cut.
        As to self interest BEING the economy, that is rubbish. It is because government hasn’t had the balls to take it on or they tax it to high heaven to buy votes for re-election.

      • Mav says:

        3d1k, I think you are reaching a bit with that false equivalence.

        There a huge mining pit of differences between …

        Special interests advocating on behalf of wealthy, self-interested individuals that are part of the tiny, but powerful richest 1%

        Versus

        Special interests advocating on behalf of those who have virtually nothing or those of the blue collar working class that are part of bottom half of our society.

        IMHO, you are basically implying $1= 1 vote, rather than 1 person = 1 vote.

      • 3d1k says:

        Mav, I would be happy to discuss further but a whole bunch of my comments have just been deleted. :(

      • drsmithy says:

        Gillard already out there saying “it’s the end of medicare, family payments, carer’s allowances” etc.

        Quite reasonable given the Liberals philosophical opposition to those sorts of things.

        Always a reversion to some sort of them v us. I despair we will never move beyond.

        Not a reversion, a response. Hockey is the one espousing “them vs us”, here.

  8. Age of Entitlement?

    I’d call it Age of Overconfidence inspired by a six decade Western Bull market.

    The new Age should be called “Oh s*!t, our levers don’t work!”

  9. russellsmith55 says:

    Finally a win-win suggestion from the Hock?

    Your everyday-liberal-voter will rally behind it too. Not because they understand what it means or why its good, but because it sounds like a ‘dole bludger’ beat-up.

  10. 3d1k says:

    A baby step in the right direction. At least timely that the points raised should be discussed – it will be a mammoth task to turn around the sense of entitlement in relation to cradle to grave welfare. Essentially the welfare component of tenets of social democracy is not sustainable into the future without placing great burden on future generations to fund/repay. Expectations to entitlement must be modified and expenditures decreased. Future debate does not augur well when already this morning I heard the Dep Treasurer(?) saying it represented an attack on the poorest in the community, a removal of the social safety net yada yada yada. No one is talking of that but serious attention need be paid to what is referred to a middle class welfare (baby bonus, Family A&B and a raft of other payments).

    Hockey may wish to prove intent on this matter by announcing the reduction and/or end to various of these measures. But we all know neither political party in this country will seriously address the issues and hope to retain government. Not at least without a couple of years ‘education’ of the populace and media.

    As I said, a baby step.

    • dumb_non_economist says:

      2d0k,
      I’m sorry, but it will be an attack on those on the lowest rung. They haven’t the balls to go after middle/high income welfare or vested business interests. If they did have any balls they say that’s exactly how it should be, by that I mean vested interest is their story, they live off it!

      • 3d1k says:

        To my mind all of those things should be considered. As I said, a baby step. Until it can be discussed openly, the views of all sides of the debate expressed and considered I see the ideas presented going nowhere. They will probably be bogged down in standard left/right rhetoric, extremes on either side having the loudest say. You can see that via the comments thread here.

        I am politically centrist libertarian (on some issues left leaning others right). I believe in an affordable sustainable social welfare safety net.

        This is a fun quiz to see where you stand (thanks Alex Heyworth):

        http://www.politicalcompass.org/test

      • Jason says:

        It’s a good test, not sure how accurate it is though. I also scored pretty centrist (maybe 1/4 of the way towards libertarian), pretty close to where the Greens were rated in the 2010 election…

        http://www.politicalcompass.org/aus2010

      • The Lorax says:

        I am politically centrist libertarian (on some issues left leaning others right)

        That’s a joke right. What do you define at the political centre? Reagan? Thatcher?

      • drsmithy says:

        This is a fun quiz to see where you stand (thanks Alex Heyworth):

        What’s even more fun is finding out that the only parties in Australia remotely aligned with 3d1k’s “centrist libertarian” beliefs are the Greens or the Democrats.

      • 3d1k says:

        What a jokester you are Dr Smithy. Democracts don’t exist in any practical sense and the Greens are socialist or worse.

        Read this and you’ll get a better idea:
        http://www.politicalcompass.org/analysis2

        My personal result was virtually centre (left/right) fairly strongly libertarian (authoritarian/libertarian).

        My guess is there are a lot of commenters here at MB left authoritarian, to judge by views expressed.

      • drsmithy says:

        Read this and you’ll get a better idea:
        If you bother to open the links I posted, you’ll see that the analysis from the political compass is that the Greens and Democrats are centre-libertarian centre-left and centre-libertarian centre-right, respectively.

        My personal result was virtually centre (left/right) fairly strongly libertarian (authoritarian/libertarian).
        Hopefully I don’t need to point out that both Labor and Liberals are strongly authoritarian (the latter much more so, of course) and right to far right, respectively.

      • The Lorax says:

        I did the test again and found myself hanging out with Ghandi, Mandela and the Dalai Lama. Pretty good company I reckon.

        I think the MineBot must have done a different test where the chart is centered around Thatcher.

      • Jason says:

        3d1k according to that same test in a left/right sense you lie between the Democrats and the Greens. Nothing to be ashamed of, really.

      • drsmithy says:

        I did the test again and found myself hanging out with Ghandi, Mandela and the Dalai Lama. Pretty good company I reckon.

        I’ve done the political compass questions on and off for 5-odd years now, and while I was originally around the area the Democrats appear for the 2007 election (centrist libertarian right), but I’ve slowly and steadily moved over to the centrist-left, into the spot where the Greens were for the 2010 election.

      • Karan says:

        I’m with you Lorax, and I don’t even consider myself as lefty as the Greens. Needs calibration.

      • dumb_non_economist says:

        2d0k,
        Ok, just got down to this comment.
        Have done this the last time, middle left lower square, supposedly!!

  11. pabster says:

    Wow. Never let the facts get in the way of a good ideological rant hey?

    “Both sides of the Western political spectrum were to blame for the entitlement mentality. Socialist governments had created a huge array of entitlements, and conservative governments had promised to fix the problem but just trimmed round the edges.”

    This from the party that gave us the baby bonus, the family tax benefit, the child care benefit, and the Medicare safety net and which is proposing the salary equivalent maternity leave scheme. Seems ‘entitlements’ are ok when they delivered to the middle class or the wealthy during boom years when the government should be saving.

    But beyond the disconnection with reality, he also said that: ”

    ”Contrast this with what we find in Europe, the United Kingdom and the United States. All of them have enormous entitlement systems spanning education, health, income support, retirement benefits, unemployment benefits.”

    Did he really just imply that health and education were entitlements that were a bad thing? That the US where you can be bankrupted for getting sick has excessive entitlements? The issue in the US is the way the system operates because it allows private sector players to tear massive amounts of cash from the public purse while delivering little benefit. That’s why they railed against Obamacare which delivers better coverage at lower cost.

    After all the ‘progress’ since industrialisation, if we can’t expect a society where education and health care are provided for all and that a safety net exists to protect those who have fallen on hard times then I should check out now because it sounds like a throwback to feudal times.

  12. Jumping jack flash says:

    Attacking the “lazy dole bludgers” and the “middle class welfare” recipients is easy. It’s popular. It’ll get people cheering.

    But Hockey and I both know that nothing will be done to address the real problem, the 800K+ people that are sitting back, living it up on the DSP.

    No government would poke that hornet’s nest, because no government wants to be responsible for raising the “unemployment rate” from moving “unemployable” able-bodied pensioners back onto Newstart.

    My brother is trying to get off the pension and back onto Newstart. The funny looks he gets at Centrelink are priceless. It has been found through extensive testing there is nothing wrong with him, but nobody can tell us exactly why he was put on the DSP by his GP 10 years ago. He has been basically told by centrelink to stop asking questions, go home, and enjoy the free government money.

    But I know why. It was called “Clever Johnny’s economic miracle”.

    And those helpful GPs were paid with insurance money from compulsory private health insurance.

    • 3d1k says:

      DSP is a disgrace but manages to improve unemployment figures….

    • drsmithy says:

      Attacking the “lazy dole bludgers” and the “middle class welfare” recipients is easy. It’s popular. It’ll get people cheering.

      Rest assured there is nothing popular whatsoever about attacking middle class welfare. Just look at the shrieks that ensue whenever someone suggests we abolish negative gearing or means test (not even remove) the private healthcare rebate.

    • Karan says:

      +1 to this

      “Since being sent to the Opposition benches in 2007, the Coalition has fought almost every effort by Labor to means-test or otherwise curb welfare entitlements.

      Apart from supporting budget crackdowns on the proliferation of such benefits as the disability support pension, it has opposed any move by the government to go after so-called middle-class welfare, moves the government says are vital to keep spending sustainable.”

      Let’s see some action before we believe the rhetoric.

  13. Aristophrenia says:

    This article made me seriously ill – I had to stop reading it.

    The social contract he refers to is of course Rousseau, The Social Contract – it was at that point I KNEW this was written by an academic most likely from a US think tank – this is trickle down economics, Chicago school rhetoric 101 – and makes me viscerally ill to see it is making a comeback.

    I am so sick and tired of reading this kind of moronic bullshit – that’s all it is.

    I am someone who has spent twenty years studying this kind of thing academically with two Masters Degrees and three undergraduate degrees ranging from International Relations, Modern Political theory right through to Economics. And this is the most mundane, intellectually defunct thinking which comes directly from the American far right, directly from American think tanks, Chicago school economics and places like PNAC, Heritage Foundation and the CATO institute.

    There are plenty of Western Nations with significantly better social security nets that are vastly better than Australia’s which also happen to be significantly wealthier AS A RESULT and have the highest standard of living on earth.

    The failings of social security and welfare around the world is NOT a consequence of people getting handouts etc – people are not failing to compete. The issues are a direct result of governments supporting businesses in their mad rush to outsource jobs to these third world nations as governments are solely focused on the interests of business and have completely lost sight of their primary responsibility – the citizens and people. Corporations are becoming global monoliths, they are outsourcing their entire workforce to foreign nations which is the equivalent of a declaration of war as the entire economies are being destroyed.

    Nations such as America have been paying into their social security as a separate fund, this fund was capable of returning welfare payments to Americans well into the 22nd century – yes completely self funded – however – it was being dipped into for things like unfunded wars, unfunded tax breaks etc – and it was THIS that has caused to issues the us now faces. The notion of American unfunded liabilities is the biggest lie ever peddled. All of this while taxpayer money is primarily being used for military and corporate welfare – by far almost 80% of taxpayer money goes on these two items alone. In a country where those same corporations are outsourcing not just their workers, executives, engineers, manufacturing to foreign companies but are now also outsourcing their profits. Its a disgrace.

    The same can be said for the UK with its insane levels of military spending, insane levels of off shoring, insane levels of tax breaks, avoidance schemes, corporate welfare, corporate subsidies, corporate money troughs – all the while blaming the working class. Seriously disgusting attitude.

    The only reason Asia and China are doing so well is we allowed western companies to outsource western jobs at the expense of western economies for he profit and benefit of a very tiny elite few. Thats the reality.

    A long time ago we decided that people should be paid a living wage for their work, holidays, health benefits etc and all of this was factored into the cost of manufacturing. We had longer lasting, better made, more reliable, serviceable products which were vastly cheaper as they lasted a life time instead of 5 years. All of this was sacrificed – labor laws, health, benefits, jobs, and now social security and next health care and finally our entire economies so that major corporations could outsource our economy to third world nations for their private profits – a huge and vast wealth transfer from the nation and its people to private interests.

    All of this is backed up by the facts – all of it.

    Articles and attitudes like this make me sick to my stomache – seriously disgusting levels of stupidity.

    • The Prince says:

      I’m not getting any work done with comments to read like this and briefly’s….puts my faith back into the comments thread again after awhile listening to turfing and bickering.

      Keep up the good work chaps and chapette’s.

      • Mav says:

        +1000 to Aristophrenia

        And Touchwood. If I were you, I would lock out responses to Aristophrenia’s post – a criticism of trickle down economics, Chicago school rhetoric 101, PNAC, Heritage Foundation and the CATO institute.. all in in one post!! – I can only guess what the responses will be like!!

    • RodZone says:

      I agree, Aristo. If there are to be cuts made let’s start with the pollies hugely excessive benefits. It is noticeable that handouts start at the top and cuts start at the bottom even when the elites messed up.

      Two years ago I said that the CDS scandal would be put on the US taxpayers and I see that is now true. Probably 700 trillion bucks. That’s the biggest problem as this will trigger with interest rate rises in the USA. Makes all other debts,costs and taxes trivial but, as usual, the banks will be saved. If Joe can keep us away from this mess he will be a hero.

      I note that nowadays the words “political solution” can be substituted for any of the following: disgraceful, self-serving, vote gathering, elite benefitting, thoughtless etc. You all get the drift?

      • Aristophrenia says:

        Absolutely.

        There is a fantastic book called why rich countries are rich and poor countries are poor (very sorry if this is seen as marketing, its not my book, its just awesome) and explains what developmentalism is, the truth about relative trade imbalances, the natural attrition in the means of productive (innovations, productivity gains, cheaper costs etc).

        There are other books which detail the Asian approach to development which most western classical economist deride as the root cause of the Great Depression (trade wars etc), which explains clearly what is happening in Asia (they are looking out for their nations, and use their businesses and corporations to further their nations unlike Australia / US / UK which use their nations to further their corporations and wealthy).

        Eric Reinhart I believe – truly required reading.

      • SP says:

        Hi Aristo,

        Can you post a reading list of what you recommend beyond the Reinhart book? (which is an incredible read).

        I’d be interested to find out your recommendations.

        Cheers.

    • SP says:

      I really liked what you just wrote. I wish I had time for an extensive reply. Thank you for that.

      There must be a more equitable way than just leaving it all to business. Like a discredited economic model, you can’t assume that corporations are going to be nice reasonable ones and actually care about the community and its best interests. Unfortunately you can’t also allow the politicians to care about the community either. They are too easily swayed by PR fed to the media as news, which is biased in favour of the highest bidder. It is due to this collusion that we see our dearth of political leadership in this nation.

      Whilst I feel that there needs to be responsibility for ones actions, this should not come at the expense of social equality. Therefore I see speeches such as rather dangerous for they will be embraced by the people who stand to lose the most from it. It will be the middle class who not only lose their at times unjust benefits bestowed upon them by the government, but also potentially their jobs as more and more positions are offshored in the name of profit maintenance. This has been occurring in the US and the UK.

      In a study one of my professors is conducting for the OECD, in the UK the skills level required for a previously non-graduate job, requires a graduate. THis is not because of the skills required from such studies, just because the graduate jobs have been offshored. I see this as very dangerous as this flows through the economic stratas of society to the very bottom whose number will just increase. We are creating a society which will potentially mirror those seen in developing countries such as Brazil where the rich become richer and the poor and middle class just get left behind fighting for the odd jobs that haven’t been sent overseas. I put it to you, who is important to the rich people staying in business? There is a limit to how far you can push down the middle and lower classes before they can spend no more. Have they really considered the social and economic consequences of this?

      Some would say that we are different to the UK, however given what I have seen from the study, we are heading down a similar path. We are mirroring their changes that started in the Thatcher years and are the ever widening social gaps that you see today. I can not see from both sides of politics any solutions or political will to change. As PF mentioned this morning I may have a boy scout approach to it, however debate creates discussion and somewhere in the middle we can find a resolution that takes into account the lives of all of us.

      • Aristophrenia says:

        Well said, and this is precisely what is happening. What we are witnessing is a globalization of the labor market, a deregulation of the benefits western nations have built up over two centuries. The deregulation of the labor market is designed PRECISELY as a means to lower the most significant cost to corporations – labor and wages.

        This is all occurring at the same time that protectionism for corporations is being made hermetic and irrevocable through means such as IP laws, (SOPA and anti piracy laws in the US is a prime example), World Trade laws, institutionalization of corporate mandated compensation claims against sovereign nations, a complete dismantling of all privacy laws, remove of illegal search laws etc via the digital communications in order to maximize corporate control over their positions of power through invasive practices and control of content and consumption. Terrifying stuff. I did several thesis on the role of corporate militarization and the destruction of western sovereignty through a return to corporate merchantalism as seen through the Virginia and East / West Indies trading companies – and piracy as it happens.

        The root cause of all these issues is something you touch on – intelligence.

        Australia simply does not have intelligent politicians – we have politicians as politicians, career political movers – I simply can not think of a single intelligent politician in Australia since Barry Jones, Malcom Fraser and Paul Keating – not one.

        Whats more Australia’s predilection for denigrating and ostracising intelligence and academia has taken a whole new turn for the despicable. I was roundly derided by a table of people the other day as my opinions sounded decidedly “bookish”, as opposed to what ? Arrogant unfounded uninformed shibboleths seemed to be the preference to a well educated balanced conclusions. I was gutted with despair. So people are aligning themselves, finding common ground with moronic, stupid leaders which both parties offer in spades, as a form of identifying with their own stupidity.

        It is truly the hallmark of a nation on the precipice of unstoppable decline. Giving away all productive advantages through technology, sciences, intelligence and education in favor of destroying all that in the pursuit of the most low brow short term gain – digging up rocks.

        The irony is that people do not realise that Korea was an absolute BACKWATER only 20-30 years ago, I mean people lived with candles, dirt floors and kero stoves. Japan had been bombed into the the middle of Hades, Taiwan was a no go zone etc, etc – however they all regarded education and intelligence with great reverence and are now dominating the planet – as do the Chinese.

        Probably the most successful nation is the diaspora of the Jewish, who central tenet is the acquisition of knowledge and education – as a nation who has been dispossessed more so than most they have come to learn that this is the one thing that can never be taken away and can always be used to rebuild.

        Australia is now a nation of anti-intellectuals, anti-academic asinine fools – the surest sign in all of history of a nation on the verge of radical decline.

      • Aristophrenia says:

        Forgot to add – Norway which is has the best of every life indicator you can imagine Andres Brevik aside, decided its oil and resources wealth should be shared by its people (similar to the Asian philosphy of country first before corporate and private wealth), in order to best decide how the national wealth should be controlled the government appointed Philosophers to govern things – yes philosophers. Why, because these are the best thinkers, that’s their job – they are professional thinkers.

        The same is happening right across Northern European nations – nations who are SMASHING IT.

        The irony is that much of Asia is also intellectually governed by philosophical tenets as opposed to purely Christian religions tenets loosely coupled with capitalistic hoarding.

      • SP says:

        Again I agree. I have been much maligned for continuing my studies whilst combing work and Navy Reserve Commitments.

        We do not have a culture of continuing self development. A lot of my experience comes from Latin America. They can not understand how Australians can not be interested in developing ones self. They have to, as without the education they can not get anywhere. They live in the type of society that Mr Hockey is advocating and it isn’t fair at all. So they understand that in the end education is power. Where I am completing a Masters Thesis at the moment a minority of the students are Australian. Education is key to critical thought which without we are as a nation are a rudderless ship.

        I believe that Australians are as capable and intelligent as the best of them. My issue is with the education system. We are spitting out people who are unable to think. They are told what to think in class and prepared for exams that determine corporate styled rankings of schools.

        This is not their fault really, it is on the back of successive governments who have not invested in them. Unfortunately this is not an election winner due to the short term mindset. My question is why are we giving tax breaks so that people can lose money for 20 years on an investment property when we can’t even educate our primary school children properly?

        There is vast amounts of evidence that the level of schooling has worsened here. Our children and hence people have been let down. The Economist summed up our universities last year as being like an Australian wine, good but not great. I think they underestimate our wines, however they have got it spot on with the Uni’s. I’m glad they didn’t look at our state primary schools as their opinion wouldn’t be so high. (Remember primary schools can’t supplement their dwindling funding with high fee paying foreign students to bump up their teaching quality)

        We are capable, we just have an apathetic population who are being kept that way by self centred politicians who are are doing their best to pander to the ever powerful lobbies that blight our political landscape. Until a leader emerges from the mess that is our political selection process we will continue good but never great.

      • Explorer says:

        Is it more important from a philosophical point of view for an Australian resident to have a job than for a resident of China to have a job?

        Global corporations are providing global socialistic outcomes by distributing jobs to societies that want them most as evidenced by the price they are prepared to offer to get them.

        Is it a bad thing for so many Chinese and Indians to be lifted out of poverty at the expense of realtively very wealthy UK, US and Australian residents?

      • SP says:

        That is a good point explorer. However I don’t think we are arguing that those in poorer nations deserve to stay that way. The discussion is more centred around the fact that the very global companies that benefit from government support use third world nations to increase their profits above all else. The way that they then treat the third world labour is for another discussion as it is a complex one. I have seen it throughout Latin America and I’m sure others have through Asia.

        One point that I do not agree with you is that companies provide a socialist service. By the very nature of capitalism and company structure they do not care for anything else but their jobs and keeping the shareholders happy. I believe that they should do this and continue to. As global socialists, I can’t really see how that can even be considered. The only capital that they would redistribute is to escape their tax liabilities.

      • Mav says:

        Is it a bad thing for so many Chinese and Indians to be lifted out of poverty at the expense of realtively very wealthy UK, US and Australian residents?

        Not at all. But pollies like Joe insist that we race to the bottom in terms of labour and welfare standards in order to ‘compete’ with China and India.

        Social cohesion will surely give way if we do that. Indian and Chinese political leaders are literally hanging on to the tiger’s tail in order to minimize social unrests. Can Joe Hockey and co handle 10 x Cronulla riots year in, year out?

      • drsmithy says:

        Is it a bad thing for so many Chinese and Indians to be lifted out of poverty at the expense of realtively very wealthy UK, US and Australian residents?

        It is when it’s not necessary that it comes at the _expense_ of “relatively very wealthy UK, US and Australian residents”.

      • Lucius says:

        I suppose the irony is also that you are precisely the kind of self-proclaimed intellectual that imbues the very antipathy you abhor in the Everyman. Witness the petulant, sneering dismissals and emotive vilifications of opposing views smattered throughout your hysterical rants- rants aroused by the mere site of differing opinions. (How in Hayek’s name The Prince wants more of that kind of thing is beyond me).

        The accusation that Australia is a land of anti-intellecutal philistines is an almost timeless refrain; yet today Australia is a more prosperous society, a more pleasant place to live, and commands more attention on the global stage than at any other time in its history. Indeed, as haughty observers from the mother country mocked our provincial ways, the Empire was crumbling and the antipodes were rising. Similar censure was routinely levelled at the uncultured inhabitants of the New World; then those boorish yankees came to dominant the globe. (And of course anti-intellectualism does have a long and venerable history in the US; the epithet ‘egghead’ is itself an Americanism.) As much as you yearn for righteous retribution upon all those who’ve denigrated you and cerebral ways, a nation’s success is about much more than the eggheadedness of its populace.

        Right on queue, we see the usual bland denunciation of mining- naturally some of the world’s most incredible feats of geological surveying, engineering, risk-taking, and sheer grit in some of the most inhospitable places on earth are reduced to “digging up rocks”. This is by the far the most dynamic sector of Australia’s economy, one that underwrites the prosperity required to pay for- amongst so much else- our society’s absolutely vital academic institutions. As is so often the case with your ilk Aristophrenia, a modicum of humility would do you the world of good.

        Now, don’t get me wrong, I quite like philosophy; particularly that of the classical liberals and leading 20th century thinkers such as Ayn Rand. But a nation run by philosophers and linguistics professors encounters the awkward dilemma of how to actually generate the wealth required to support the theorizing of its most sapient members. Without the dumb luck of stumbling over vast hydrocarbon reserves, all the philosophers on the planet wouldn’t have made Norway wealthy like it is today.

        All that being said, I do agree with a lot of your points. It is simplistic to put all problems down to an ‘entitlement’ way of thinking. A lot of America’s fiscal woes do stem from tax cuts and military blunders. Corporate welfare is an outrage. But it is also true that the developed world’s socio-economic structures are facing a number of headwinds in terms of government obligations and demographics. You congratulate Japan for its reverence of education and intellect, yet ignore the inexorable decline and/or collapse that awaits it without truly radical reforms. Japan currently borrows more than it raises in tax revenues each year; by 2060, the Japanese government is forecasting its population to decline by a third, with the proportion of those above 65 sitting at 40%. Its current model simply cannot function at that point (and obviously is likely to break down much earlier).

        Japan is just the most extreme case; this is the scenario that awaits much of the developed world unless we recognize that current entitlement regimes built on high population growth rates and high ratios of workers-to-dependents cannot continue to function as societies age.

      • Aristophrenia says:

        If you read or adhere to Hayek then you are a lost cause – a truly funky thinker in the truest meaning of funky – he stinks.

        American is historically the antithesis of your view – it is easily the world leader in science and almost always has been – till now. Now that it values religious fundamentalism over NASA.

        Lang Hancock famously discovered his wealth flying in a small plane and “lucked” on it. The fact you equate geological surveying as one of the great scientific areas of humanity speaks for itself – I personally am much more enamored with carbon graphite electronics which will revolutionise life as we know it.

        Even then – my point is that it is knowledge and science which better us – not mining itself. If we had the choice of doing anything with science – mining should be the last thing. If we could have all the wealth of Silicon valley or the pilbara, because it absolutely IS an either or decision, then Silicon Valley is the obvious choice – you have shot yourself in the foot.

        It is thinkers and philosophers who brought us out of the darkness – who drive every single great step forward – then it is greed of dimly let greedy who leech upon this for their personal benefit – and claim it somehow benefits the rest of us. This argument is the backbone of Imperial Britania – we brought the colonies out of the darkness – we did good. A perverse sense of reality.

        Much of the rest of your post claims Australia is not anti itellectual – and you then lambast intellectuals ??

        Japan borrowed from itself. It is only now starting to borrow externally. You might want to understand that.

    • Crux says:

      Great post Aristophrenia… hear hear!!

    • General Disarray says:

      Aristophrenia,

      Thanks for posting that comment. It would be great if you did a guest spot here at MB and went over the speech in detail – it would be an interesting read.

    • JoeBlow says:

      Shades of South Park in that one, time to put on my Reign in Blood CD…

      “There are plenty of Western Nations with significantly better social security nets that are vastly better than Australia’s which also happen to be significantly wealthier AS A RESULT and have the highest standard of living on earth.”

      Only if one considers having a GDP/head equivalent to a middle class african-american from Alabama to be ‘the highest’ in the case of Sweden

      http://super-economy.blogspot.com.au/2010/01/dynamic-america-poor-europe.html

      Or having one’s disposable income reduced by confiscation to a level where bringing a packed lunch to work is not a lifestyle choice in the case of Norway.

      http://www.nytimes.com/2005/04/17/weekinreview/17bawer.html?_r=1

      The Nordics are a prime example of two foxes and a turkey deciding democratically what’s for dinner.

      Fantastic if you’re a public sector worker or the single rent seeking source of monopoly butter (Tine) at several times the price elsewhere.

      Fantastic if you’re a member of the self selecting political-cultural elite running these states.

      Fantastic if you’re a mature industrialist because the tax system will quite happily destroy any upstart competition.

      http://www.arcticstartup.com/2012/04/05/entrepreneur-tax-denmark

      Less so when the state in it’s wisdom confiscates over half your private sector wages at quite staggeringly low levels of income combined with 15% VAT on food and 25% VAT on everything else.

      That is not equality by any shape or form.

      • drsmithy says:

        Fantastic if you’re a public sector worker or the single rent seeking source of monopoly butter (Tine) at several times the price elsewhere.
        Fantastic if you’re a member of the self selecting political-cultural elite running these states.
        Fantastic if you’re a mature industrialist because the tax system will quite happily destroy any upstart competition.

        So just like America, then ?

        But this means Europe delivers an overall win, because it’s also:

        Fantastic if you’re an average Joe thanks to easy access to an excellent education, regardless of his personal wealth.

        Fantastic if you’re an average Joe who’s worker’s rights will be protected, rather than held in contempt.

        Fantastic if you’re an average Joe who doesn’t have to worry about being bankrupted by medical costs, nor having his healthcare options dictated by his employer, nor not being able to get health insurance if he’s poor or working part-time.

        Fantastic if you’re an average Joe who doesn’t have to worry about starving in the streets if he can’t find a job.

        Fantastic if you’re worried about corporations selling your private data without your consent, or using it to discriminate against you.

        Etc.

        However, I will concede that if you’re wealthy and want to live a selfish, consumerist, wasteful lifestyle, then America is better aligned with your desires.

      • Seekvalue says:

        Good one mate

    • Jon says:

      Too true. To anyone interested in how draconian are the intents of the Trickle-down crowd, read Naomi Klein, in particular her book ‘Shock Doctrine’.

      Feudalism never left the planet, it just morphed into Crony Capitalism

      • Aristophrenia says:

        I mocked Naomi for years – until I actually read the book – her clarity on Poland, Russia and Asia is inspiring. I already knew about Russia via other writers, but Poland and Asia was enlightening.

        I refrain from mentioning Klein as proponents of creatures like Anne Coulter, Hayak, Friedman, Greenspan, Reagan denigrate her with the same enthusiasm they do most other genuine intellectuals and you are dismissed as a left wing loon.

        But yes – her book is essential reading – although her analogy to electric shock therapy is entirely unwarranted and detracts from the entire premise, which could have been written in 200 pages.

    • flawse says:

      I don’t agree with everything there Aristo but thanks for the good contribution. I’d have to say I stopped reading myself…it was same ole sameo to me…and I’m a Libertarian sort of conservative!!!

      If we are going to open up this discussion let’s get past welfare!

  14. Mav says:

    Good speech, though he ignores the reality of how the various sovereign crisis came about – Housing bubble, privatisation of profits and socialisation of losses via sovereign guarantee of banks.

    I hope he disowns his Svengali-prompted suggestion of extending sovereign guarantees to private entities and private markets.

    • spleenblatt says:

      A hypocritical, self-serving, mish-mash of half-truths, historical distortions and omissions, pandering to a roomful of hard-nosed conservative, libertarian zealots, makes for a good speech? This is Thatcherite/Raeganite drivel writ large, just a little folksier.

      Hockey has now amply proved by this speech that he is just about dumb enough for the role of Liberal Party Treasurer.

      • Mav says:

        Hello! I am supposed to be the resident pinko-commie-socialist greenie Union terrorist here.

        I meant “Good speech, if you ignore the reality of what coalition has delivered during their days in government”.

        Also, since Hockey has not defined what he means by “entitlements”, it provides a suitable wedge or an opening for US to define what the entitlements really are – FTB, Baby bonus, FHOG, NG etc etc.

      • spleenblatt says:

        I did think it was odd, and while I don’t think I’m any of those things (greenie-pinko, etc), it does concern me sometimes on this site to witness the zeal for generalised systematic pain and destruction, that some might come to see this kind of neo-liberal self-flagellation (though only ever selectively administered in reality) as a desirable outcome for all of those naughty households guilty of commiting the sin of indebtedness.

      • flawse says:

        spleenblatt…I gues I’m one of those towards whom your comment is directed. Some of us are actually really trying to seek a REAL answer knowing full well that all the easy solutions are long since gone.

      • spleenblatt says:

        If there were such things as easy solutions flawse, they would be taken. There is only the benefit of hindsight.

  15. Jason says:

    Well, it just goes to show that Swan isn’t the only aspiring hypocrite Treasurer in the House of Reps.

    • Jason says:

      In fact this article is the perfect follow-up to Swan’s billionaire-bashing rant posted a few weeks ago.

  16. Jack says:

    “I will give you a classic example. In Canberra, there’s a current shadow treasurer who has just receved a substanstial payrise which had bi partisan support. He is a member of a defined benefit scheme that was closed to new politicians in 2004 after a backlash led by Mark Latham. The scheme allows the politician to recieve $20 dollars from the public purse for every dollar that he has contributed and will provided a pension for life. He is happy because the pension is calculated on exit salary which as a result of getting rid of their electoral allowances has been rolled into their salary (with bi partisan support)

    Either taxpayers pay the bill or the government has to borrow to pay for the entitlement.

    “Hypocrite”

    • Jason says:

      What defined benefit scheme is that Jack, can you please elaborate on this?

    • Mav says:

      Either taxpayers pay the bill or the government has to borrow to pay for the entitlement.

      Taxpayers does not have a choice on the matter. It has already been taken out of the budget and put into the Future Fund.

      $45 billion arduously built up by the previous conservative government were set aside into a Future Fund. The funds cannot be touched by the government for everyday expenditure. Rather, the fund can only be accessed to pay for the previously unfunded entitlements of federal public servants so as to reduce the burden on taxpayers.

      I nearly lost my lunch when I read the last line.

      • Jack says:

        The Future fund wasn’t for the pollies scheme but rather PSS and CSS both of which had pension entitlements. In NSW the SSS and SASS schemes were closed in 1985 and 1992 whilst CSS was closed in 1990 and PSS in 2005.

      • Mav says:

        Thanks for the info. I didn’t know there were so many different schemes for pollies and PS.

      • flawse says:

        I dunno….if Joe was a private business the ACCC would have a filed day. He’d never get out of gaol!
        $45 B arduously built…you mean you sold off Telstra and pretended that was part of a budget

        ‘Future Fund’ the damned thing was set up with everyone pretending it was some sort of Sovereign Wealth fund for all Australians. Costello was looking after our future…what a crock that was! As we know it was set up to cover the asses of politicians who had never set aside anything! Call in ASIC!

    • Jack says:

      And just in case I lose my seat as your local member and I was not a pre 2004 super scheme member. I have this

      http://www.heraldsun.com.au/news/more-news/double-deal-for-federal-politicians-payouts/comments-fn7x8me2-1226169128976

  17. Charles Ponzi says:

    Let Joe end the Age of Entitlement by pushing to get rid of negative gearing.

  18. Jack says:

    The polly pays 11.5% of salary and the employer ie us pays 69%. This is a transcript. Gillard, Hockey, all of the pre 2004 are on the old scheme and it works on exit salary.

    I am not sure about State pollies as I belive some states have moved in line or modified. There a number of pollies like Tony Windsor that receive a state gov parlimentry pension and will have a Fed gov pension on top. Bob Katter is the same. Anthony Albanese is another one that springs to mind.

    http://www.abc.net.au/7.30/content/2004/s1043983.htm

  19. Robbie_Reid says:

    You’ve got to admire Hockey’s chutzpah!

    If any government was serious about equality of opportunity they would be implementing an estate tax. An inheritance is the ultimate in unearned wealth and taxing it would in no way reduce incentives to build wealth. A modest tax on estates over a reasonable threshold could fund a lot of early childhood education and opportunity for those who are disadvantaged.

    • flawse says:

      Yep it’s a really great tax…how much you pay is inversely proportional to how long you live. If a beneficiary dies quickly the Govt gets two chops at your estate within a couple of years. Very equitable.

      If something was to be done in this arena perhaps CGT should be levied and the transfer to beneficiaries treated as a virtual sale.

    • poid says:

      Cant agree with that, a lot of people accumulate wealth to pass it on to their next generation. Levying an estate tax would act as a disincentive for wealth accumulation for those people.

      In fact it may act as an incentive to ensure that any wealth is spent away, and result in a greater reliance on social safety nets by the elderly.

      The last thing we need to encourage is greater consumption to the detriment of wealth accumulation.

      • flawse says:

        Ah poid….re the estate tax…I was being sarcastic!
        Sorry…and apologies to Robbie for being so. Sarcasm is a pretty ordinary sort of reply!

  20. General Disarray says:

    When can we expect Joe to announce he won’t be taking his pension?

    • Waynes Black Swan says:

      I also find it abit rich for Joe to slam the welfare state yet still happily ride the political perk gravy train. Explains why people have such low opinions of politicians.

  21. Jack says:

    Re estate taxes, in the US this is done at a state level. In one state I thinks its Idaho, if your estate is larger than 90k you lose 50% of the amount in excess of the 90k unless the 50% goes toward a state approved Philanthropic trust, ie helping the disadvantaged. I

  22. rob barratt says:

    Hmmm
    With regard to entitlement, one of my favorite occupations is watching a crowd of people at the airport when they come to pick up their luggage from the carousel. Instead of standing 2-3 meters from it, when they would be able to:
    a) See their luggage more easily
    b) Be able to pick it up without pushing it through someone else

    They instead crowd closer & closer to it, in a bizarre feedback which eventually results in the worst possible outcome.

    That’s the human race folks. And their politicians faithfully reflect them. We will have to face everything that’s coming to us as a result of the debt binge, and what will we learn for next time? – What those folks surrounding the luggage carousel have learned.

    • Seekvalue says:

      +1 Classic!

    • Dan says:

      Seems what is missing at the baggage carousel is a strong leader, a real leader, a humble steward of the surrounding masses?

    • flawse says:

      :) that one always gets to me as well RB!

    • Deenominator says:

      +1 a truly great example.

    • SteveB says:

      “They instead crowd closer & closer to it, in a bizarre feedback which eventually results in the worst possible outcome.”

      My favourite is when the exit to a carpark is upstream of the entry. Bone heads will block the “Keep clear” of the exit and then become agitated when the car park appears to have spaces but the que doesn’t advance. (Queen st @ Victoria Market, Melbourne)

    • Hewell says:

      Go to China, you will find much better examples.

  23. Explorer says:

    “Perhaps the real problem is the exuberant excesses of politicians who do not seem to understand or care about the fact that like a household, a nation needs to balance its budget over time and needs to make sure it can cover its future commitments.”

    Hockey clearly doesn’t accept modern monetary theory, doesn’t understand the problems caused by fixed currency regimes like Gold, Bretton Woods or Euro and has not looked at the history of budget deficits, and probably doesn’t understand the basic economic identity of GDP.

    Prag Cap would give him a big FAIL!

    • Lucius says:

      Presumably you’re referring to the economic parlour trick of MMT where it points out that governments in control of their own currencies won’t ever default?

      We’re all Zimbabwean now.

  24. concerned45 says:

    I for one wish we could just get on and clean up this awful mess we’ve created.How is it that a man 63 and his wife 60, receive unemployment benefits when they have a million plus sitting in super, an expensive home with everything that opens and shuts,up market cars and cash under the mattress. I’m not saying they probably haven’t worked hard to achieve these assets, but surely the tax payer shouldn’t have to carry people who are able to carry themselves?

    • boyracer says:

      Or to put the question another way, why do said people even put their hand out for taxpayer support?

      Can we blame the government for responding to the pleas of voters?

    • Karan says:

      As far as I’m aware there’s an asset & savings test at $5k – what makes you think your scenario allows someone to claim unemployment? Certainly didn’t occur for my dad.

    • drsmithy says:

      I for one wish we could just get on and clean up this awful mess we’ve created.How is it that a man 63 and his wife 60, receive unemployment benefits when they have a million plus sitting in super, an expensive home with everything that opens and shuts,up market cars and cash under the mattress.

      They don’t unless they’re rorting the system somehow. My parents retired (self-funded) with substantially less and were unable to access any benefits (other than, IIRC, a seniors card) whatsoever until a) the GFC smashed their retirement fund by about half and b) they passed 63 and 65 to qualify for the pension.

  25. Jon says:

    So Libs are going to cut entitlements. Excellent.
    From an article ‘The tax-free middle class’ (The Australian 20/08/08):
    “HERE’S a tax trivia question . . how many families receive more in handouts from the federal Government than they pay in income tax?
    The answer – 42.2 per cent – should shock because it covers every family on the bottom four rungs of the nation’s income ladder and a fair portion of those on the fifth.”
    http://www.theaustralian.com.au/news/features/the-tax-free-middle-class/story-e6frg6z6-1111117533336

    • flawse says:

      Or the Public Service; or the powerful Unions; or the Law Society; etc etc etc or

      However I reckon we ought start with the one thing we can surely change…oursleves.

      • [email protected] says:

        Thats the only way

  26. 3d1k says:

    HnH, I should have asked you to elaborate on your in principle agreement far earlier in the day. Probably too late now.

    Then again, faced with the oppositional tenor of many of the comments above, would you dare!

    FWIW, this is one I think I may be in your camp on. Don’t let that change your mind.

  27. 3d1k says:

    Well I didn’t expect that!

  28. SteveB says:

    “It is the first time I’ve seen an Australian political leader acknowledge that the world has changed after the GFC”

    A point missed by many in the stampede to use Howard era policy as a rebuttle to Hockeys “good intentions”.

    “His comparison of Western nations with Asian discipline is also kind of ludicrous given so much of that outcome is based upon government control of the economy via currency controls and other mechanisms.”

    We are unable to talk about racial stereotypes since we all went into the politicaly correct hippie melting pot. (Positives like music, food and tribal dancing are allowed exceptions.) He would be on troubled ground comparing us with Sth Asia on education, work ethic and ambition as the comparison might not be flattering. So, yea, it’s the Govt regulation creating the increase in living standards……..

  29. Magpie says:

    A few years ago, if someone had asked me, I’d have said that I like Joe Hockey. He might not be particularly bright, but he does not appear to be a liberal blood sucker.

    If you ask me today, I said that one thing hasn’t changed: I still think he isn’t too bright.

  30. Frankc says:

    “Perhaps the real problem is the exuberant excesses of politicians who do not seem to understand or care about the fact that like a household, a nation needs to balance its budget over time and needs to make sure it can cover its future commitments.”

    It’s quite clear that good ol’ Hockey hasn’t heard of the principle in the Fallacy of Composiiton, where it is completely wrong to make inferences from the individual, or parts of the whole, to the whole itself, ie. society. This is Economics 101.

    For crying out loud, the government is NOT there to balance books but to counteract the imbalances brought on by largely unchecked and higly volatile forces in the marketplace. It follows that the larger the economy, then potentially the greater the imbalances, and hence the larger the finances required to correct the initial disequilibrium.

    At the end of the day, H&H, I disagree strongly that “…henceforth nations will be judged upon the relative performance of their current accounts.” Current Accounts?? Really?!? What nations will be judged by ultimately is in the overall *standards of living* afforded to it’s populace, and which is increasingly under threat from this back-of-the-cornflakes-packet type simplistic analysis found in sentence after sentence in this useless speech.

    If this is your idea of a good speech, H&H, then I’d hate to see a bad one…;-)

  31. Fickyou says:

    Joe Hockey simply needs to shut up and grow up. He has had an easy life and doesn’t know how hard it is for people living on the DSP. I’ve had a hard life and no-one cares. The DSP is all I’ve got. So please, don’t take away all I’ve got. If the Liberals win the next election, just do something to get the cost of living down and give the mentally ill a chance at life. I know you will all agree with me. I didn’t bother to read the whole speech because it was too long.