Writing for The Saturday Paper in April 2017,
Mike Seccombe gave us a hint of the disappointment Bill Shorten and Labor would suffer two years later. “[N]ever tell voters they’ve got it good. Speak NOT to their economic reality but to their economic illusions”. This is a lesson Shorten might’ve learned in an interview with Melbourne’s Neil Mitchell on 3AW around the same time in which the interviewer tried to tie Shorten down on just what defined rich.
After some sparring, Mitchell proposed the number $180,000 which Shorten refused to acknowledge as rich. As only 3% of the population were pulling this in 2017, it seems a fair number. Yet, Shorten would not be drawn in and Seccombe described the media ridicule of the loser of the unloseable election (Mark II) that occurred at the time. How could a Labor leader not view $180,000 as rich? Perhaps, you can see where we are heading.
Seccombe goes on to describe an MLC survey of Australians that found nearly 60% of Australians don’t think $1million in assets make you rich. Half of this surveyed group believed that you needed $150,000 to live comfortably. Further, “Thirty-three per cent of people earning $40-$69,000 per year aspire to greater wealth [and] 45 per cent of people earning $70-$99,000, 55 per cent earning $100-$149,000, and 71 per cent of people earning $150,000 admit to wanting more.”
This points to wealthier people being less content than the poor. People in the $40-$80k income range find the variation of income in their social circle to be comparatively small. However, if you move to the top 10%, which is $94,000 and above by 2017 figures, those in your decile cover a huge range of income that includes Gina Rinehart. Even if you’re at the bottom of that top 10%, your social circle is likely to include some very wealthy people.
Which brings us to the Capuchin monkey. See the clip below. As one of those at the bottom of the 10%, you are likely to be in a cage next to the grape eaters. What does all this mean? It suggests that aspiration is now such an integral part of our makeup that anyone who challenges it is likely to be flayed.
Income Distribution and Monkeys
We had a preview of the Scott Morrison vs Bill Shorten battle on this issue in Parliament during Turnbull reign. The Government had placed a “budget repair levy” of 2% on people earning over $180,000 which was due to come off in June 2017. Labor’s Assistant Finance Minister and deputy leadership aspirant, Jim Chalmers, attacked the Liberal Party in Parliament over its failure to extend the levy. Turnbull invited his Treasurer Scott Morrison to respond. Scomo gave us a cameo performance foreshadowing his later attacks on Shorten by reminding the Parliament of the Neil Mitchell interview and the fact that the top 10% of earners are not rich.
That is where we are. We have a Morrison Government and our aspirations are undisturbed. Yet, there is a broader context and it is very reason for this website. Just what are we repairing about the budget? Why is it so hard to address the needs of the disadvantaged and poor in our society? Here is the lesson. When Shorten was in Gladstone in Queensland in April he was confronted by workers on $250,000 a year wanting a tax cut. What Labor was offering was a reintroduction of the 2% debt levy. This was all framed within Chris Bowen’s “we will have bigger surpluses’,
What Went Wrong?
Labor’s plan was to shift money from the rich to the poor and middle class. They were going to remove tax credits for franked dividends affecting 3% of the population, grandfather negative gearing out of existence, increase capital gains tax on shares and investment properties, reintroduce a “debt repair levy” on people with incomes over $180,000. Can you hear the Capuchin’s stirring in the adjacent cage?
There are good reasons to tax the rich. One of the best is that people shouldn’t have excessive control over resources. As billionaire Nick Hanauer explains, give him a billion dollars and most of it will go into bidding up shares and the property market. Share it among 100,000 people and it will create jobs and income. Inequality is also bad for social cohesion. If you don’t address it, the wealthy have to build stronger cages.
And there is the aspirational argument. If you link assisting the poor with taking from the rich, you create three groups of enemies; those who are rich and know it, those who are rich and don’t know it and those who identify with the rich through aspiration. Randall Wray explains the problem from a USA perspective but it fits here just as well. In short, if you want the Capuchin’s at each other’s throats, link taking from the rich to give to the poor..
On the other side, there was NO need to link addressing the needs of the poor and middle class with challenging the wealthy. By all means go after the wealthy if that is you plan but keep these issues separated. Each of the three groups above resent money given to the poor. This is amplified by the taxpayers’ money fallacy. Each of these groups think the money is coming out of their pocket. Government propaganda supports this spurious notion.
Don’t Link Tax with Inequality
Which brings us us to the final point. We have this false notion that budget responsibility demands we balance. Just like a household, the Federal Government has to balance the books. This is simply nonsense. For example, Australia has run close to 80% deficits since 1901.
Finally, let’s be clear about what a surplus is. A surplus is when the Federal Government takes more money OUT of the economy than it puts in. Why would we want that when we have public hospitals and schools that need additional facilities and services? This is despite the resources we need to address these problems and many others being available. Why wouldn’t we want to put them to use. Why would we leave poor people without a job or a home? Is mental illness a desired policy outcome. If it is, keep going.
So, if you have come to this point and are still concerned about the need to repair the budget then you probably haven’t figured out where money comes from. For the country’s sake, it is of vital importance that you do so soon. Certainly before the next election. Government has failed us. Addressing the interests of aspirational Australians are now the key goal of government over the needs of the disadvantaged Australians or the concerns of the decent Australians. “We share a dream and sing with one voice…I want to to be rich”.