Polity by Rob Salmond

In the wake of Hurricanes Trump and Brexit, Andrea Vance penned a thoughtful column the other day about “post-truth politics.” Vernon Small had voiced similar musings earlier. Vance says:

The polls don’t punish National for straying from the truth. And Labour are desperate, throwing mud in the hope something gets traction.

Whatever the motivation, the truth has gone out of fashion.

She catalogues the imaginary MSD flying squads and the memory-hole treatment National gives to unwelcome reports on inequality, 90 day trials, MFAT leaks, and foreign trusts. I’d add repeated mendacity about tax and offensive murmurings about Maori and housing to National’s list of recent post-truth excursions.

Both Vance and Small do also argue the foreign trusts issue reflected poorly on both National and Labour, as Key argued black was white over the merits of our tax law and Little danced on pins over who he had and had not apologized to.

I agree with them, both broadly and in the specific example. I expect both National’s and Labour will look at their interactions with John Shewan and his report with considerable chagrin. The difference, of course, is that when the government of the day stuffs around on this, it prolongs a blight on our economy, affecting everyone. When Andrew Little does the same, it only affects him and John Shewan.

So, what is to be done?

I think Vance answered her own question in the quote above. The movitation for the truth going out of fashion is obvious: there’s no downside to lying. As she says, political liars are generally not punished for their lies.

And why is that?

Politicians aren’t punished for lying partly because too often the media chooses not to punish them. The media is the closest credible witness to the statements our leaders make. They’re the ones who are paid not only to pass on who said things about stuff, but to analyze and critique as well. That’s what the public expects from its media.

Every time a news report is framed as “he said / she said,” it fails to do it’s whole job. Put simply, the media cannot be a passive bystander while speaking truth to power.

The more power they have, the more you have to speak truth to them.

A very well respected ex-journalist once put it to me this way: “I saw my job as being biased against whoever was in charge.”

Yes, I know this means arguing the media should be biased against Labour when it wins. I agree with that idea. Having an editorial stance biased against the most powerful, whoever they are, is good for democracy.

In the modern media environment, I don’t think media can afford to run a politician’s lies as a news story, wait for opponents to criticize them, then run the criticism as a second cycle story, either as news or elsewhere. With the public increasingly having twitter-level attention spans, waiting for that second cycle is too late.

Once you’ve uncritically repeated a lie, the ship has sailed because increasingly, mildly interested, undecided voters don’t watch The Nation or Q+A or read opinion columns about “post-truth politics.” (For those doubtful, have a look John Zaller’s The Nature and Origins of Mass Opinion or Markus Prior’s Post-Broadcast Democracy.)

In practical terms, that means refusing to run a news story – even a whispered exclusive – without thoroughly verifying the politician’s claims first. When you find something amiss, it means leading with “Politician X lied again about thing Y” on day one, rather than burying it on day two or in par 12.

It also means not waiting for a counter source before plucking up the courage to call someone out. Nobody should have to wait for a partisan person like me to expose the lie about net tax before writing that it’s a lie. That’s important because if the journalist’s criticism is buried under a wall of “the opposition says that’s a lie because…”, that only helps the liar because it infuses criticism of their lies with the stench of partisanship, inviting people to see the episode as “politics as usual” rather than “a lie from on high.”

In summary, I agree with both Andrea Vance and Vernon Small. They’ve diagnosed as important problem. But, as media, they are also a big part of the cure. 

No, this post isn’t about either Brexit or the soccer. It’s about Finance Minister Bill English, who’s continuing his decade-long quest to spread lies about tax to trick New Zealand’s well-off into feeling overly sorry for themselves.

Here’s a Stuff article from the weekend, fed by English:

More than one in four households are contributing nothing to New Zealand's tax take.

A table from Finance Minister Bill English's office shows 663,000 households - or 40 per cent - receive more in tax credits and other benefits than they pay in tax….

By comparison, the top 3 per cent of individual income earners, earning more than $150,000 a year, pay 24 per cent of all tax received.

Those figures are pure bullshit, and English has form peddling them on unsuspecting journalists. Here’s why it’s nonsense:

 

GST is excluded completely

The most obvious screw up in English’s “net tax” figures is they completely exclude GST.

That’s $19 billion of tax payments he’s ignoring, and those tax payments are distributed very differently from the income tax he has included. That’s, you know, important.

Once you correct this error*, the net tax payments by the highest earning 10% of households drops to from 56% to 41%.

 

The idea of “per cent” is misused

If families earning over $175,000 a year (the top 10%, apprxoimately) pay 41% of the net tax, how much net tax do the families earning between $40,000 and $175,000 pay? Couldn’t be more than 59%, right? Because you can’t contribute more than 100% of net tax, right?

Wrong.

According to English’s own table, families earning $40,000 - $175,000 pay 70% of net tax. That means all families earning over $40,000 together pay 111% of the net tax. 111%!

Confused? It’s deliberate.

Bill English wants you to hear “top earners pay 56% of net tax” and interpret it as “top earners pay $5.60 of every $10 that goes into the tax system.”

In fact, that isn’t true. It’s complicated not only by GST as I mentioned above, which turns the 56% into 41%. It’s also complicated by the fact that more than 100% of the next tax has to go into the system, to allow the total to come down to 100% after net transfers go out the other way.

In fact, top earners pay net $4.10 of every net $11.10 that goes into the tax system from New Zealand families, from income tax and GST combined. From that $11.10, about $1.10 goes to cover the net tax shortfall of the lowest income families, and $10 goes on other stuff.

That $4.10 out of each incoming $11.10 is 37% of the total incoming net tax. That's how much the top decile actually pays. Not the 56% English claimed.

 

How much is 37%?

That 37% of the incoming net tax is paid by a group of people who earn 30% of the income in New Zealand (from English’s table) and hold 60% of the wealth (according to Statistics New Zealand).

That’s not all that progressive, really.

Which is no great surprise, given New Zealand’s tax policy. New Zealand has one of the lowest income tax wedges on high earners in the OECD (see my 2011 book on this topic). And we are one of the countries most heavily reliant on one of the least progressive types of taxes around – a comprehensive, flat, consumption tax.

Add those elements together, and you get a lower burden on high income folk here, compared to just about every other developed country. And no amount of Randian chicanery from Bill English’s office can mask that fact.

 

* I used the GST exposure figures from the Tax Working Group’s (2010) report, applied by household decile, to estimate GST payments. 

 As readers know, there’s all manner of turmoil sloshing around the UK this week following the Brexit vote. The PM’s gone, the campaign to replace him is on already, Labour’s blown up, and Scotland could either scupper the Brexit or Scexit itself. Many of the promises from Team Leave have either been quickly disavowed as “mistakes” (aka lies) emblazoned across the Leave bus, or laughably big-upped by Boris Johnson, who now reckons he can negotiate to keep all the good bits of the European common market without paying a cent for the privilege. 

As I’ve argued here on another trade negotiation topic, Johnson’s position is non-credible because it fails the “or you’ll do what” test. Once the UK triggers Article 50 of the Treaty of Lisbon, it loses basically all leverage with the EU, because within feasible bounds Brussels **knows** the UK has to take whatever deal is on offer. If the UK ever says: “well if that’s your bottom line, there’s no deal,” it is left with pre-1973 nothing. That won’t play well in Blighty, meaning Britain's leaders have painted themselves into a very tight corner.

There’s plenty of food for thought in New Zealand, too. Our currency took a hit along with the pound, and some of Europe’s economic uncertainty will undoubtedly rebound on us, as the EU (outside the UK) and the UK are in our top six trading partners. How much of that is short term panic, and how much is structural change remains to be seen.

One thing I think we should be concerned about is trade access, especially for Fonterra. I had initially thought Brexit could have a silver lining for New Zealand in terms of preferential access for Fonterra to the UK. There is some prospect of that, although it will be a few years off, because the UK has quite a trade policy mess to clean up before it turns its attention to us.

But there’s a big flipside to this, which a very smart trade professional talked me through the other day. A good proportion of Fonterra’s current access to EU markets was granted as a continental concession in the 1973 negotiations for the UK’s EEC membership. And this 1973 agreement is one of the most important things Brexit will pick apart.

Absent the pro-New Zealand voice of the UK, will France, Denmark, Italy, and the other dairy-heavy European countries be looking to preserve Fonterra’s access even though its current vehicle is being scrapped? I could easily see a strong domestic lobby in these places looking opportunistically to rid themselves of some competition. And while the UK and EU are negotiating their divorce, will anyone really have the time to placate one of the UK’s faraway younger cousins?

I think there’s a real chance that Fonterra, and potentially other major agricultural exporters, will find themselves losing some of their EU access well before they gain any countervailing access to the UK. That could cause big problems for us, and we should be hedging ourselves against that possibility with haste.

There also may, or may not, also be political lessons to be learned from Brexit.

For example, some in New Zealand think the no confidence motion in UK Labour’s Jeremy Corbyn shows how out of touch [the Labour caucus OR Jeremy Corbyn] is with the real needs of [UK Labour AND/OR the UK public]. They believe this regrettable trait is shared by New Zealand Labour’s [MPs OR activists], and that the relevant New Zealand folk should follow Corbyn’s lead by [standing tough OR sodding off] in advance of the next election.

Without passing overall judgement on either argument, I think it is far too early to come to these kinds of conclusions. That's partly because it’s a bit tough to see all the ins and outs of supporting cast in the Brexit campaign from here, and partly because the situation facing UK parties in this historically unusual circumstance isn’t directly analogous to the comparatively run-of-the-mill politics going on here. Yes, that's boring punditry, but sometimes boring is the right thing to do.

These last few weeks have been dire for the government, across housing, crime, employment, and caring for kids. Yes, I’m biased, but I haven’t seen National have this bad of a stretch for a long while.

We had a Budget that failed to fire anyone’s imagination – with even David Farrar calling it “very bland” on Budget day. And after that we’ve had a long, long string of Wayne-braves by multiple Ministers, ranging from regular dunces like Smith and Collins through to usually sure-handed people like English and Bennett. Let’s count them off.

First, and most obviously, there’s housing. After doing very little for housing in the Budget, Nick Smith and Paula Bennett seem to have been having a private competition over who can screw up their responsibilities the worst. Bennett’s command performance of “don’t upset the government or I’ll put your shit in the street” competes with Nick Smith’s “brown people don’t own homes cos they’re dumb.”

I honestly don’t know which is worse, although they are both awful, ignorant positions to take. Bennett managed to compound her error further by spreading complete fictions about government action to help the homeless.

Even Key’s been getting into the act on housing, claiming the falling home ownership rate is because people of “changing societal norms.” That’s going to be news to all those people showing up at auctions and getting outbid – if only the norms changed, their bids would apparently be enough!

I guess the tens of thousands locked out of home ownership should all bid on the 65 homes under $500,000 that John Key told them to google.

Second, Judith Collins continues her record or overseeing disappointing levels of cuts to, you know, crime, but not lots of cuts to corners, budgets, and ankle bracelets.

(Pro-tip for Judith: don’t call something “uncuttable” without getting someone strong to try cutting it first.)

On TV3’s The Nation, she conceded she’s not going to meet the target she set herself on reducing reoffending, and it’s plainly obvious she’ll miss her self-imposed target on reducing violent crime, too.

Reoffending is going up over the last couple of years, not down; and sexual assaults are up dramatically since 2008. Collins tries to pass all that off as the result of more reporting of crime, but it just doesn’t wash; and nor did her weasel words at the weekend touting a reduction in re-offenders but not re-offending.

Second pro-tip for Judith: Nobody really cares who in particular nicked their TV, what matters is they don’t have a TV!

In social policy, National is well out of step with the public, and with what the public thinks “democracy” means, with its veto of the new law to extend Paid Parental Leave. Most of the people’s representatives want to pass this law, and most of the people want it passed, so National is taking a big risk in the name of a few bucks. Not smart.

And finally on the economy and jobs, there’s a colossal blunder from John Key, just today. Treasury has released study showing his 90 Day Trial policy is a complete flop, not leading to any additional jobs, and instead:

We conclude the main benefit of the policy was a decrease in dismissal costs for firms, while many employees faced increased uncertainty about their job security for three months after being hired.

Not good news for workers, nor for National. Key’s glib response to his own Treasury, via the media:

Key on 90 days: "you can have a piece of academic research but it's quite different from a small cafe owner whose money is on the line"

— Katie Bradford (@katieabradford) June 17, 2016

Pro-tip for John: Your Treasury’s report was precisely a study of what small café owners, with their money on the line, have been doing with the 90 day law. Which is nothing.

Another National talking point down the drain.

And, to top it all off, today the Beehive’s sewerage failed, meaning it is quite literally full of shit.

This whole period has been very messy, possibly worse than they’ve had. And at the moment it’s not easy to see where the next big win for National is coming from, unless they massively reverse course on a house building programme, something 75% of the public wants but the government has spent years saying is insane.

There’s an old idea in politics that people aren’t willing to consider switching teams until they get sick of the incumbent, in just the same way most people don’t buy a new car until the old one starts giving them problems.

The last three weeks show a government car that’s starting to cough and splutter, spewing out noxious gas but not going anywhere fast.

The next fifteen months are going to be fascinating.

This afternoon I watched Labour and the Greens announce their signed Memorandum of Understanding to cooperate in changing the government.

Good for the leaderships of both parties for putting this together. I’ve always been a Labour person, but if I couldn’t vote Labour I’d vote Green. I think Labour and the Greens are the core of New Zealand’s next government. 

I’m sure there’ll be a lot of commentary about this. I just want to add two points.

The first is about timing – this is the right time for two genuinely progressive forces to cooperate more deeply. As the chart below shows, the combined left* is now rising off its historic lows, while the combined right** is falling from its historic highs.

At present, the right is polling around 48%, the left around 40%, and New Zealand First has around 10%. Since the last election the left is rising while the right is falling. We’re right at the bottom of the range where the right can be re-elected on its own. With any further poll movement over the next 15 months, it will be not be clear on election night 2017 who the Prime Minister will be. 

The progressive left is now back in the game.

That makes it the right time for the left to cooperate, with the aim of consolidating the current positive trend and making the opinion change faster.

It’s no surprise that after eight years the National government is being increasingly blamed for the serious problems we’re facing as a country. Whether it’s the many parts of the housing omnishambles, growing problems in health and education, and an economy that’s delivering big gains for just a few and not much for most of us, the public appetite for more of the same is diminishing.

Today’s Labour / Greens announcement helps grow the other side of that equation, which is about hope and optimism about an alternative government. Which leads me to my second point: What is the value of this kind of agreement?

Even though it is not a Coalition Agreement, the Labour / Green MOU is a clear, formal signal to voters about the progressive left working together to deliver an alternative vision. There’s a stream of academic research about this, most prominent in Sona Golder’s (2006) book The Logic of Pre-Electoral Coalition Formation. That research provides evidence that parties who cooperate before an election, rather than campaign completely independently, ultimately are more likely to win government. That’s a pretty good reason to formalize things.

This MOU is not a full on pre-electoral coalition, of course, and speaking personally I’d be surprised if these particular parties went there this term. Ultimately the voters deal the cards when they vote, and it’s tricky for a party to play its hand when there’s so much uncertainty over who’ll get which cards.

But the academic research suggests moves to provide voters with more certainty and more unity in a potential governing coalition tends to get rewarded at the polls. Sometimes, and most strongly, that’s a pre-electoral coalition. But an MOU achieves at least some of the same goals  as a coalition agreement, and so we’d expect at least some of the same electoral rewards.

And that’s a second reason why the leaderships have done so well to put this MOU together now.

* Combined Left is Labour / Alliance when around / Greens

** Combined right is National / ACT / UF when not polling zero / Christian movement de jour