First signs that familism has limits?

The previous government was extraordinarily generous to families.  According to calculations I did from Treasury’s Intergenerational Reports, the FTBs alone increased, in per person terms, 29% per person between the 2002 and 2007 reports. And that’s not counting the baby bonus or childcare handouts.

Yet according to the 2007 Australian Election Survey, only 41% of respondents thought that the Howard government had become more generous over the last 10 years to ‘working couples with children’. 23% of Australians, who must have been holidaying on another planet during the Howard era, even thought that they had become ‘tougher’ on these working families.

But in this familist time, is there any end to the demands of ‘working families’? According to the AES, 49.5% of respondents agree that ‘working couples with children’ deserve more or much more from the social welfare system. My answer, that they deserve ‘much less’, is supported by a miserable 0.8% of respondents. Even the answer that they deserve ‘less’ support has only 4.5% support. And I thought I had a tough task selling higher education reform.

But some hope comes from this morning’s Newspoll reported in The Australian. About two-thirds majorities support means testing the baby bonus and FTB B, and 57% support means testing childcare tax rebates. And there is majority support for the testing to begin at $70,000 a year, which if based on household income would start to make some serious savings.

Of course I think these savings should be directed to tax cuts, which would in part benefit those same families. Yet this Newspoll, like other recent polling on the subject, finds that support for tax cuts drops (in this case from 66% to 36%) if respondents are told that tax cuts might cause interest rates to increase. But tax cuts financed from reduced family spending ought to be neutral for interest rates, since the total amount ending up in consumers’ pockets will be the same.

13 thoughts on “First signs that familism has limits?

  1. The government is today reported as wanting to address high EMTRs through its “comprehensive review” of the tax system. I wonder how they will simultaneously do this while extending means-testing. Even if the savings from means-testing are handed back through lower MTRs, I can’t see how the most egregious EMTRs would fall without a substantial handing back of the surplus. Which would not be a bad thing, of course.

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  2. But tax cuts financed from reduced family spending ought to be neutral for interest rates, since the total amount ending up in consumers’ pockets will be the same.

    It could even be less — isn’t there a psychological temptation, upon recieving a “bonus”, to spend the money, rather than save or invest it?

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  3. Leon – I’m the reverse. If I receive a lump sum (eg tax refund) I tend to put it in my ‘capital’ account for major purchases at some future time, whereas if I received the money more regularly in smaller amounts I would be more likely to spend it now.

    On the other hand, families have more spending pressures than some of the people who would receive the tax cut.

    I don’t think we can answer this question without empirical evidence, but I doubt the differences betweent the options would be significant.

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  4. From ABC online

    ” Speaking on radio the Opposition’s treasury spokesman Malcolm Turnbull questioned Labor’s promise to cut public spending with one hand and give tax cuts with the other.

    “This is my concern, with the Treasurer I really wonder whether he knows what he is doing,” he said. ”

    The Liberal Party shadow treasurer, and soon to be leader, objects, apparently, to smaller government.

    As Margaret Thatcher once said, “it’s a funny old world”.

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  5. Andrew, in answering that couples with children deserve “much less”, is this from the starting point that you believe almost everyone deserves “less”, and couples with children deserve “much less” because they already get more than everyone else? In other words, if you had your way, couples with children wouldn’t necessarily be getting “much less” than couples without, just “much less” than they get now?

    Can I ask, do you believe that the children themselves deserve “much less”? I.e., if we treated family benefits as payments to children rather than to their parents, does it change the issue of whether such payments are “deserved”?

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  6. I don’t think having unconditional handouts of thousands and thousands of dollars given to a group of people based on the fact that they’ve chosen to do something that others havn’t is in anyones long term interest.

    In the short term, the government is sending a message to these people that they can afford to have more children than they can afford. That the government will cover the difference. It’s already well known that the current level of spending cannot be sustained once the current boom we’re going through ends.

    Targeted welfare (on top of the general welfare system) spending like the Family Tax Benefits will be among the most obvious, if not popular, major spending policies to cut or do away with. The only alternative will be to run deficits, and then Labor will be labeled as irresponsible economic managers yet again, and rightly so.

    Whatever they cut, and they will have to cut quite a lot, if they can’t do it now they never will.

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  7. Spiros
    You sounded surprised when you noted ‘the Liberal Party shadow treasurer, and soon to be leader, objects, apparently, to smaller government’

    Why are you be surprised when the Liberal Party’s Leader and Treasurer for the past 12 years did nothing to achieve smaller government. Taxation revenue per person (adjusted for inflation) increased by over 40 percent from 1996 to 2006. Malcolm Turnbull is following the party line. The Liberal Party has plenty of small government rhetoric, but no commitment to delivering it.

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  8. Mirch, I am apparently the only one with this understanding of the baby bonus: to do exactly what you say – to encourage people to have more children. ie one for dad, one for mum, and one for the country?

    If that is the goal, leaving aside the merits or not of having more children, don’t you think means testing would tend to skew things to those that can least afford children in any case, and treat it as a welfare payment, rather than the intended incentive payment?

    PS. Disclosure to demonstrate lack of pecuniary interest: I’ve had the big V.

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  9. I am apparently the only one with this understanding of the baby bonus: to do exactly what you say – to encourage people to have more children. ie one for dad, one for mum, and one for the country?

    I think one needs to differentiate between a government’s stated rationale and the actual rationale of a policy. The stated rationale was as you say; the actual rationale was to transfer income to families and thereby garner votes from the familiast crowd. Were the government really interested increasing population levels, it would have used the money in a much more targetted way.

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  10. Some thing that might be worthwhile calculating is the actual purchasing power of disposable goods of families over that time — some things to do with children or at least indirectly to do with children may have gone up more than inflation in that time (e.g., high school fees, food). In addition, it may be that people’s expectations have also gone up (e.g., perhaps people expect bigger houses, better private schools and so on). If this is happening, the actual purchasing power of families may have been declining over time, in which case the government jackpot they have received may not be obvious in terms of overall lifestyle, which may explain some of the effect.

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