Gareth Morgan, In His Own Words

Is the TOP leader a reliable prophet?
by Gordon Campbell

morganSome people are thinking of voting for Gareth Morgan on Saturday, and some already have. In a tight election and during a week when we’re celebrating the suffrage, that – arguably – doesn’t make a lot of sense, at least to anyone on the centre-left. That’s not merely because on current polling his Opportunities Party (TOP) won’t reach the 5% threshold. The bigger problem is that Morgan ‘solutions’ would deliver their benefits only over the course of decades at best, with a good deal of pain for the vulnerable, mid flight.

As he says, people like himself would be taxed in future on their assets, including their housing and investment income but evidently, it would take quite a while before some of the gains became apparent. As he explained in March, he doesn’t want house prices to come down too much, too soon.

“ We want to keep house prices where they are, and give incomes a chance to catch up….but we have to make sure we don’t get there too fast.”

Fine. Obviously, no-one wants to trigger a house price crash overnight. Yet given the existing level of house prices and the current flat-lining of wage increases, this vision of a radical change where the key benefits trickle down very slowly is a unusual one – with the gains arriving at glacial pace, while the downsides appear virtually overnight. To date, the Vision Thing has kept on being plagued by these irritating details of whether it would work in practice sufficiently well to justify the pain of the transition.

To voters blessed with a sufficient comfort zone, that’s obviously not a pressing concern. They like Morgan because he’s a bloke with big ideas, many of which are worthy. He’s for good stuff like reforming the tax and welfare systems, for green jobs, for eliminating poverty traps and the unfairness of untaxed wealth.

Surely then, it can be only the negativists and nitpickers who point to the hardship that (a) Morgan’s version of the Universal Basic Income and (b) his revision of National Superannuation would inflict for the 20 or 30 years required for the Vision to work its way through its process of transition, to fruition. That’s just not his prime concern. He’s here to shakes things up, and the boring details of the implementation is something that he plans on leaving to others. Literally. Morgan is the Moses leading his TOP followers out of their bondage to old ideas, but he doesn’t aim on joining them in the Promised Land. As he also explained earlier this year, he won’t be directly involved unless TOP gets 10-15% of the popular vote – although he would continue to bankroll it, should TOP make it into Parliament.

To return to the more important point: his early (and subsequent) versions of UBI and pension reform are likely to be brutal during the decades of transition before “income catches up.” For example: the UBI of $11,000 and $4,000 per child envisioned by Morgan and co-author Susan Guthrie in their book The Big Kahuna would, as AUT economist Michael Fletcher has pointed out in this critique here leave a solo parent say, with one child, significantly worse off. Here’s the basic problem, as Fletcher pointed out:

The most generous version of Morgan and Guthrie’s scheme (a UBI of $11,000 per adult and $4,000 per child) would have resulted in a sole parent beneficiary with one child and no other income receiving $15,000pa. Even now, that family, if living in one of the main urban areas and getting full Accommodation Supplement, would receive $26,900 (and up to $1,820 more if paying higher rent in inner-city Auckland or the North Shore). Morgan and Guthrie put up a proposal that would have seen many of sole parent beneficiaries – as well as a considerable number of superannuitants and people with disabilities – worse off. Their suggested solutions to the problems their proposal creates for sole parents families (buried in Chapter 9) amounted to either privatising or undermining social security. These included making their ‘unconditional’ basic income conditional on parents taking out private life insurance; compulsorily docking the basic minimum for a non-custodial parent even though it was set as the minimum one person should have to live on; and suggesting that sole parents and others who cannot afford the rent should simply find cheaper accommodation.

Fletcher has updated his reservations about Morgan’s version of the UBI in this more recent article here. Essentially, the concerns about the “transition” period have not been put to bed by the subsequent three part iterations of the UBI and its related pension reform, which now have an array of top-ups and add-ons ( alongside means testing for pensioners) in an effort at softening the likely repercussions.

The new means tested pension would still be particularly difficult for those elderly who are asset rich and income poor ie, if they had lived in and subsequently bought their state house in a suddenly fashionable neighbourhood, they’d be facing a huge tax bill on their home based on its market value, with little or no ability to pay it. That’s a common situation, and its bound to trigger an exodus say, from the likes of Seatoun to Cannon’s Creek. Unfortunately, TOP’s proposed tax on the family home would almost certainly result in rich white suburbs becoming even more so, as diversity got priced out of the neighbourhood.

Meanwhile, the wealthy who can save readily and buy homes would be still reasonably well placed (a) to pay the capital gains tax on their houses and (b) to pay their accountants to devalue (on paper) the wealth that they’ve accrued. Yes, the poor and middle class would receive a boost from the UBI and cuts to income tax and abatement rates, but – to make the UBI affordable to government – they’ll also lose virtually every other aspect of the welfare safety net, from paid parental leave to student allowances. Age poverty in particular, would increase as many (a majority?) of pensioners would be presented with grisly options e.g. moving in with family or others, downsizing, or perhaps selling the house to family, and renting it back from them. Further down the income ladder, those who managed to scrape together some savings – or buy a house – would be taxed heavily for doing so. Which seems ironic, from a party that calls itself the “Opportunities” Party.

So far, the response from the Morgan Foundation to such misgivings has largely been one of ad hominem abuse (Fletcher was called “weak minded” and “fainthearted”) and the cheery assurance that hey, while it’s going to take a while to deliver the gains, it’s going to be worth it in the end:

We don’t expect people in 20 to 30 years time to be any closer to a wonderfully rational, bullet-proof human exemplar than today’s lot. Of course there will still be lives going astray in the future. But we should be open to imagining how those lives might be supported differently but equally well or better in the future – through family and community, through the economy, and through the tax and welfare system.

The following gives a hint of the vision – and the intrusive, ‘please sir can I have some more’ detail it would entail. If you think WINZ today is bad, consider the prospect of always applying for top-ups, all of them liable to being hedged at any time with politically imposed conditions :

All adults would receive the UBI and have the option of applying for a top-up. Rather than have a child UBI, a top-up related to the number of children being cared for would be available. No hours-in-work conditions would apply. Those aged 65 and over could apply for top-ups (just as people who receive NZ Super can now apply to WiNZ) and the maximum top-up for those folk would deliver an income equivalent to NZ Super today. The first call on a non-custodial parent’s UBI would be his or her children but those parents too could apply for a top-up in the event they have no taxable income.

Importantly, the basis for the means-testing would be taxable income assessed under a new tax regime which incorporates net worth in the taxable income analysis.

Well, this country has been down this kind of road before, in the company of another radical right wing economist. Roger Douglas too, used New Zealand as a laboratory for Big Ideas that he assured us would deliver social benefits, eventually. The wonder is that anyone on the centre left would fall for the same assurances, twice.

To his credit, you can’t say Morgan didn’t warn us. At page 227 of The Big Kahuna, the authors concede that “it’s hard to be satisfied that $11,000 will cut it” before forging on regardless a few pages later:

Unless you tax the population blind, it’s highly likely that whatever level of UBI you choose, you’ll be committing some people who currently rely on transfers to some fairly major changes and generally not for the better. But, of course, this probably says far more about the status quo than about the UBI, and it doesn’t mean a UBI of $11,000 is “inadequate” for most purposes….

As Fletcher freely acknowledged, the Morgan-Guthrie proposal had three main strengths – as he said, it included wealth into redistributive policies far better than we do at present, it individualised entitlement to assistance and it avoided the high marginal tax rates that currently affect many families and low-income individuals. “However, it simply fails to provide adequate income support for many people, in particular children, and would almost certainly result in a significant increase in poverty rates.”

As mentioned, subsequent iterations of the UBI and related pension reform have scrambled to soften those outcomes – while still trying to deliver a UBI capable of providing a subsistence level of existence, without hiking the taxes required to pay for it to levels that would be politically unsustainable. Yet as with Brexit, a hard landing would be inevitable for many, at least under TOP’s formulation of a UBI.

Journey Into The Past

Gareth Morgan’s ideas, money and energy continue to be TOP’s raison d’etre and driving force. But beyond his ideas about cats, little attention has been paid to Morgan’s views down the years. Given the long term delivery cycle of TOP’s policy prescriptions, it would seem to be highly relevant to test drive Morgan’s reliability as a prophet, since voters are being asked to rely heavily on his Big Ideas to bear fruit, over time. For that reason, I’ve taken a 20 year trip through the past to gather a sampling of the Morgan worldview, in his own words:

Bi-culturalism? Not So Much

“The affinity Maori have for societal organisation that subjugates the rights of the individual for the benefit of the collective is a flawed formula for economic development.” New Zealand Herald 16, June 1998)

“Where Labour is taking us is to legislate – on the foreshore, local body or employment – that Maori have special entitlements. The danger is that this path leads to an expectation by some that their usage rights over property exclude those of anyone else. From this perspective comes the.. all day hakas and other assorted war dances, threats, intimidation and biffo that signal a breakdown at the boundary between democratic capitalism and tribal collectivism.” (21 April 1998)

Democracy? It Should Be Privatised

“One person, one vote is a very clumsy system – it lets the ignorant have a say. As with the All Blacks system, we could delegate this [to those] who are interested enough to find out and care about a subject, the sole say: they do the research, they weigh up the options, they decide the policy. We could all get 20 votes each one tied to a specific policy plank. Then we could swap around amongst ourselves those rights. Then politics might achieve an efficiency of decision making that leaves less [to] populist policy [and] subsidies…. (Dominion Post, July 19, 2002 )

Nix to rail

“Unless the government is planning to make rail as ubiquitous as it was when the West was won…its hankering for rail as the cure for our transport infrastructure is misplaced. Dr Cullen blithely asserts that rail is an essential part of our transport infrastructure.”(Dominion -Post April 26, 2003)

Saddam has weapons of mass destruction

“Ditching the nuclear-propelled ships policy is an obvious way to appease the hostility the US and Australia have towards us. Oh, and how does the US know Saddam has weapons of mass destruction? Because they still have the invoices. Welcome to the real world.”(Dominion-Post, March 22, 2003)

Yes to nuclear power

“The contribution a nuclear plant or two could make in New Zealand is enormous….” (“ Nuclear the clean answer” The Press, 12 April, 2003)

“ In this post September 11 world of with us or against us, we would be foolish to think that ongoing antipathy to the interests of Great Britain, the United States, and Australia will deliver us any favours at the trade table. Convenient it may have been for us to exploit the separation of trade and foreign policy, but that era’s over…{Nuclear]isn’t such a bad alternative. And post September 11, being an insider on politics will also mean being an insider on trade.” (The Press, 12 April, 2003)

Pensioners ? Greedy

“Today’s elderly should not be excused from playing their fair part in the necessary reform of state pensions…Rather than an entitlement, {the pension] should be a handout targeted to those in real need…rather than the taxpayer being the first port of call for retirement income, the government should adapt its policy on inheritance, to give people incentives to care for elderly parents. ..the state for instance [could] grant children who care for their parents 50% more than their siblings.” (15 September 1998.)

“Almost all of [Morgan’s respondents to a previous column critical of retirees] are claiming some alienable right to impose a tax on others as compensation for just being old. The justifications are mainly the hoary ones of a lifetime of paying taxes. Or some social contract they struck with Muldoon. Even the RSA chipped in with a list of the war dead being grounds for universal entitlement to an age-based subsidy…For retirees, the transition to targeted welfare is best achieved by continuing slowly to raise the age of eligibility to s state pension beyond 65 – eventually to 105. The message from the politicians needs to be clear : taxpayers are not in the business of running insurance schemes for age, for unemployment, for tertiary education, for sole parenthood, for sickness, or for accidents.” (NZ Herald, 25 November 1997)

Cultural diversity? Be Careful Of It

“[In] France, the values of the majority are being held hostage by the tolerance being shown to actual differences. There is a point at which tolerance for difference becomes unacceptable – the point being when to do so makes the host country subservient to the migrant one, [with] the locals discriminated against…It should be the migrant making the compromise, not the other way around. Migrant policy then has a responsibility not to meet its targets by importing people whose cultural gulf from the New Zealand way of life is so wide. Having minorities rendered miserable aliens in their new land does no good, despite the obvious hand-wringing, do goody intentions of the infinitely tolerant.” (Dominion-Post September 18, 2004)

No too, to the evil Cullen Fund

“The Cullen Fund should be dismantled” ( Dominion-Post July 31,2004) The same year, Morgan derided the Cullen Fund as an attempt to “collectivise all New Zealanders’ savings, and get rid of self reliance once and for all… and in the process create a save here and invest there’ dictatorship.” As in:

“The other side of the equation is the government’s undermining of the private sector’s propensity to save, and fund its self-reliance. Proliferation of state welfare and universal entitlement has traditionally been blamed for undermining private savings rates. But to this, the modern social democrats ( aka socialists) have added all manner of workplace super schemes and the Cullen Fund…(Dominion-Post, February 19, 2005)

“Much has been made of the idea that employees who sacrifice income and divert that amount into a superannuation scheme ….the government’s public relation machine is telling us we will all benefit. The truth is that virtually all who fall for this sleight of hand will be worse off….Political crusades are not always founded on reason, and there is every indication that the government’s intention in forcing savings into channels where the toxicity twins of fees and taxes end up raping and pillaging the fruits of peoples labour is based on little more than arrogant paternalism – a chronic condition of the Left.” Dominion-Post September 4, 2004)

No to public education

Two entire columns ( July 3, “Let market forces into our schools”) and July 17, 2004) were devoted to the need to bring more market forces, vouchers, the abolition of zoning and user pays incentives into the public education system.

Monopolies, OK

When the state-owned phone company was privatised the fear was that a private monopoly [Telecom[would be far more avaricious than the state one, exploiting customers unmercifully. Free local phone calls had a socialist rationale then. It hasn’t any longer.” (December 20, 2004)

Health problems, over-hyped

In a November 12, 2005 column in the Press, Morgan wrote dismissively that the “bleeding heart stories from lengthening queues at hospitals are the bread and butter from which media headlines are made, and public opinion swayed.” He preferred an incentive model:

“Governments could publish a range of tolerance for body mass index and those who fall within that over the year (certified say six monthly, bit like a WOF for a car) would qualify for a lower rate of personal tax. Those who failed would incur the full tax rate. Think of the nation’s obesity chart like a Plunket chart – if you’re at the upper extreme it will cost you.””

Ageing society? Many health problems are self -induced.

“The OECD has released yet another report highlighting the consequences of the ageing global population. It repeats its warnings as hordes of pensioners queue for their age-entitlement cheques at welfare bureaucracies….If a patient doesn’t undergo the rehabilitation that those operations require in order for their recovery to be complete then they should be blamed. The best way to affect that is to hit their hip pocket if they don’t play their part. Lets say a [hip or knee] operation costs $40,000, then if the person undertakes the rehab and a full recovery is effected, they qualify for part or total wiping of the debt… Imagine a farm of exercycles connected to the national grid, which would deliver a double whammy of benefit to taxpayers.” (Press, October 29, 2005)

State radio? Arts funding? Leave them to market forces

“The case for whether national radio satisfies the grounds for being a public good has long been dubious…the reality of course is state sector broadcasting is a relic – and a needless drain on the public purse.. Meritocracy as decided by normal market process – wherein people reveal their preferences through the pricing mechanism- is the only means of identifying which artistic and cultural creativity is worth protecting… For too long a feather-bedded life (sic) has rendered protected sections of our broadcasting and artistic community ignorant of the rewards of meritocracy.” (NBR June 25, 1999) See also : “State Funded Radio: The Post Office of Broadcasting” ( New Zealand Herald, 10 February, 1998)

Given that Morgan’s brand relies so heavily on his alleged powers as a visionary, it seems worth keeping in mind that there’s this wealth of evidence that indicates his vision has nothing in common with the centre-left. To anyone’s best knowledge, there hasn’t been a subsequent, secret Pauline conversion to socialism.