October 17, 2005


The case for lower taxes and increased self-reliance (Louise McBride, October 17, 2005, The Australian)

OUR tax system is in decay, our culture one of entitlement and ourpoliticians have their heads in thesand.

People figure they have paid, or are going to pay, so much tax all their lives that they are entitled to any benefit they can get their hands on: student assistance, child welfare payments, single-mother pensions, the dole, Medicare or the aged pension. The benefits are seen as a right, bought by taxes.

Whatever you think about polling, Richard Grant's 2004 Australian Parliament House Library research paper, "Less tax or more social spending: 20 years of opinion polling", is a fascinating read.

Yes, there has been a significant shift in public opinion. In the 1980s, the public strongly preferred less tax over more spending on social services. From the late '90s, polls on the tax/spend trade-off recorded higher support for more social services - well, certain type of services - and lower support for less tax.

But, consistent with several international findings, the social services the public wants more spent on are health and education. The public does not want increased spending on unemployment benefits, single-parent payments or assistance to minority groups.

Thus the genius of the Third Way, which mainly sequesters your taxes in accounts that benefit you, making individuals dependent on themselves rather than government.

The polls show a keenly self-interested electorate that believes lower taxes to be of greater immediate personal benefit than any item of expenditure. Polls asking directly about the level of existing tax (relative to previous levels) where health and education were not specifically mentioned found consistently higher preference for less tax than more social service.

Sixty one per cent of respondents believe Australians are paying more tax than they used to; 75 per cent of respondents believe taxes increased over the two years to 2003; and a substantial number believe present levels of income tax are unfairly high. Even when asked to consider the tax levied on a single person earning $120,000 a year, 45 per cent said it was too high, 45 per cent said it was fair and less than 10 per cent said it was too low. In January 2004 the majority believed the current tax rate of 47c in the dollar on income earned over $62,500 was too high.

The poll findings are inconsistent with Treasury analysis reported in this paper showing nearly 40 per cent of families receive more in welfare payments than they pay in tax. The point at which families pay tax has risen $12,000 since John Howard took power in 1996. Families receiving more in benefits than they pay in tax receive an average subsidy of $14,870 a year, an 11 per cent real increase over the past decade. In the past decade, the money in the pocket of low-income families has increased up to 30 per cent.

But try telling voters that. Public opinion seems to be a mix of self-interest and altruism. The polls scream that voters wantless tax but more spending on health and education.

This more-for-less paradox is not a good omen for a federal Government trying to deliver on these demands.

Posted by Orrin Judd at October 17, 2005 9:09 AM

Your 'third way genius' stuff assumes an awful lot while ignoring the basic premise that the state is by nature necessary yet the most abusive, even evil, force when not contained and defined along specific lines of responsibilty posessing powers strictly limited by law.

In the investing world one of the risks to be kept in mind in regulatory or legislative risk. Depending on the those in power, what are 'personal accounts' today (dubious ownership qualities since their creation is mandated by the state) might easily be described as creatures of the state at a future time and be subject to state control or even confiscation through taxation or regulation in order to fulfill some 'compelling governmentel interest'. The 'third way' sidesteps any realistic, historically based view regarding the nature of the state and it's just powers as well as it's potentially abusive nature.

Posted by: Tom C., Stamford,Ct. at October 17, 2005 1:32 PM


Yes, if we govern ourselves badly in the future we'll be badly governed. Your alternative, that we do away with the state, is pie in the sky but would also do nothing to stop our being badly governed in the future. indeed, had a Third Way system prevailed prior to the Depression we might have avoided the New Deal. Your way made the system you loathe inevitable.

Posted by: oj at October 17, 2005 1:41 PM


My feelings toward the 'state' are realistic, as realistic as those who created our constitution. Government, at the federal level, is a necessity. It's powers must be definite and strictly limited. I have never believed that human beings can govern themselves without a properly structured state apparatus. Third wayers seem to be unapolagetic second way statists who recomended all of the failed policies of recent history and look to 'third wayism' as a kind of face saving mechanism. The abuse of the power of the state is the problem, not the state itself. Those in power will eventually abuse that power unless restricted by law and the counter-balancing institutions of organic society. Third wayism seems like a fashionable rationalization which will end just like second way social statism.

Posted by: Tom C., Stamford,Ct. at October 17, 2005 1:54 PM

Yet it was in fact the First Way that ended in Second Way socialism.

Posted by: oj at October 17, 2005 2:00 PM

You don't think the passing (in retrospect) itellectual fashions of 19th century sciebtific rationalism had anything to do with your second wayism? Hey, we made some wrong turns along the way, why compound the problems with further rationalizations?

Posted by: Tom C., Stamford,Ct. at October 17, 2005 2:05 PM

Yes, scientific rationalism led to the notion that we could design a perfect state, which the 20th Century experiment with socialism in its various forms proved false. That's why the Third Way depends on market mechanisms and individual choices rather than central planning.

Posted by: oj at October 17, 2005 2:12 PM

In order to accomplish what? Without being realistic regarding the limitations of the state and it potential for abuse, third wayism is a dead end, just another ism bound to create more problems than it solves.

Posted by: Tom C., Stamford,Ct. at October 17, 2005 2:28 PM

Provide the minimal economic security that voters will otherwise require from a social welfare state.

Posted by: oj at October 17, 2005 2:32 PM

Amazing. If you rescinded the taxes on wages as well as interest income, the magic of compounding would already have become widely understood among the 'working classes'. The only groups not benefit would be the IRS, armies of bureacratic social tinkerers and others on the state payroll. We can't have that.

Posted by: Tom C., Stamford,Ct. at October 17, 2005 2:40 PM

If it rained money we'd all be rich. Instead, we live in the real world...

Posted by: oj at October 17, 2005 2:48 PM

The "working class" didn't pay income taxes in high numbers until WW II, and they never seemed to grasp that compounding interest could make them rich - IF they started early in their lives.

Today's working class pays a much higher percentage of their income to the various levels of government, but they still have so much left over that it's hard to know where to spend it all.
They don't seem any more prone to make investments with a forty-year horizon.

If tax rates are cut any more, it won't result in increased savings for retirement.

"Too soon old, too late wise".

Posted by: Michael Herdegen [TypeKey Profile Page] at October 17, 2005 7:33 PM

"...minimal economic security which voters require". Some voters require economic democracy, absolute equality of outcome, socialized medicine, state sponsored abortion on demand, radical gender equality, homosexual marriage, etc.,etc. Terrific. They are, however, all issues once properly thought to be beyond the jurisdiction of the federal government. Oj seems to believe that the American people are children who must be coerced into saving through taxation, mandated retirement accounts (which, of course, can be 'mandated' away at any time). After years of empty slogans, faulty promises, attempts at social engineering and 'redistribution' policies aimed at creating greater 'equality', it should be clear to most fair minded folks that institutional over-reach is problematic. The US government is not constituted for 'third wayism' nor was it constituted for new deal social statism. The state is not a competetive enterprise that needs to function within practical, efficient or economical boundries.

Posted by: Tom C., Stamford,Ct. at October 18, 2005 1:27 PM


That's right, it's constituted for the Second Way.

Posted by: oj at October 18, 2005 2:18 PM

Second way was a reaction to American federalism. Third way is a reaction to it's failure.

Posted by: Tom C., Stamford,Ct. at October 18, 2005 3:04 PM


The government is a creature of the Constitution, a 'first way' document.

Posted by: Tom C., Stamford,Ct. at October 18, 2005 3:43 PM

The Constitution is a creature of the voters, the Second Way reality.

Posted by: oj at October 18, 2005 4:55 PM

No the Second Way was a reaction to the failure of the First Way to provide a safety net for times of economic downturn. The Third Way is a way to satisfy that objection via First Way mechanisms and Second Way mandates.

Posted by: oj at October 18, 2005 4:59 PM

"The Constitution is a creature of the voters."


The 'third way' was originally seen as a path between free market economies and central planning, capitalism and communism, if you will.

With the demise of the Soviet Union, the 'second way' was no more. How could social statists, labour, and left wing movements continue to justify their existence? Revisionism.

The leviathan needed a new, more politically viable rationalization. It is surprising how many sensible, well-meaning folks are falling for it.

Posted by: Tom C., Stamford,Ct. at October 19, 2005 11:02 AM

The Second Way thrives in the form of the social welfare state in every nation in the West. we can either just keep it, as contoinental Europe, Canada, and Japan will, or we can Reform it along Third Way lines as Chile and NZ have and W, Howard, and Blair are.

Posted by: oj at October 19, 2005 11:30 AM

So, yesterday's 'third way' is today's 'second way'? If you keep moving in the right direction maybe you'll finally figure out that there is a right way and a wrong way.

Posted by: Tom C., Stamford,Ct. at October 19, 2005 12:14 PM

No, the Third Way brings First Way means to Second Way ends.

Posted by: oj at October 19, 2005 12:25 PM

Second Way? Do you mean Communism or social-statism? By "Third Way" do you mean fascism or state capitalism? I'm leery of such fluid definitions. "First Way', at one time, emphasised a minimum of collectivism and coercion now it seems to mean whatever. You're getting into a kind of liguistic tragedy of the commons here.Very dangerous when discussing political philosophy/ideology.

Posted by: Tom C., Stamford,Ct. at October 19, 2005 1:16 PM

Yes, the Second Way covers the range of essentially socialist alternatives adopted by Western nations once women were given the vote and Social Darwinism proved unsatisfactory to voters in the wake of Depression--from the New Deal at the least socialist end to actual Communism at the most.

The Third Way merely recognizes that so long as there's a wide franchise the voters insist on a government guaranteed safety net but that it is best provided by individuals themselves to the greatest extent possible with government only a last resort.

Posted by: oj at October 19, 2005 1:26 PM

The voters don't insist, they are led to believe that the state is capable of delivering. The state has it's own interests and if not restrained by law, will do everything in it's power to advance those interests at the expense of everyone else.

Posted by: Tom C., Stamford,Ct. at October 19, 2005 2:02 PM

When every democracy in existence adopts the same scheme and then maintains it, it seems safe to say that voters insist. You're talking about a world that exists only in your head, not in reality, which is why the GOP was out of power for the fifty years it talked about undoing the safety net and only elected presidents who were New Dealers until W.

Posted by: oj at October 19, 2005 2:09 PM

Man, you just make stuff up as you go along, I mean, the New Deal ended the Depression? You really think so? Your attachment and acceptance the basic premise of this latest rationalization for the state even has the uniquely Marxist tenet regarding it's withering away in the future. You really misunderstand how politics and government work and why it's powers were thought to need a fairly strict definition by the wisest generation of practical political minds in history. This 'Third Way' stuff has been around for 50 years. It was wrong then and it is wrong now because it's premise is wrong. A compromise between totalitarianism and freedom is impossible.

Posted by: Tom C., Stamford,Ct. at October 19, 2005 3:24 PM

No, it did nothing to end the Depression.

The modern Third Way begins with Augusto Pinochet, Margaret Thatcher and New Zealand.

Posted by: oj at October 19, 2005 3:33 PM