Alex's politico-economic blogroll: Why are Ministers different?; Quake insurance claim backlog; Why the Westpac hooha is off the mark; Bob Clarkson cartoons

Here's my blogroll for the week. Got the politicians coming back next week (they've been in recess for a couple of weeks) so should be some excitement coming out of this place again.

From the left

1. Treasury got 28 of their last 30 quarterly growth forecasts wrong. Labour MP Brendan Burns asked the Parliamentary library to dig into Treasury's forecasts. He thought outgoing Treasury Secretary John Whitehead gave a revealing interview on Q&A last Sunday.

First, challenged by Guyon Espiner on the 170,000 jobs/4 percent p.a growth forecasts, he claimed Treasury had a second to none record for such predictions. The Parliamentary Library confirmed for me this week that Treasury has got its growth forecasts wrong for 28 of the last 30 quarters. (Sure some differences are minor but some are .5% or even 1%+ out).

Secondly, he confirmed that Treasury had supported Michael Cullen in building surpluses rather than giving tax cuts and that these stood us in good stead for the current downturn. (So much for National’s continuing rhetoric about Labour’s economic mismanagement.)

 Then he talked about Treasury’s concerns about growing inequality in New Zealand (we are now lag at 26th in the OECD on this measure). What has this Government done to address inequality – tax cuts skewed to those on high incomes? Increased GST? Assets sales?

 And Dr Whitehead talked about how the way to address inequality is lifting skills. We’ve just had a budget that cuts such funding by $90m.

 Finally, he defended state asset sales as a way to boost wealth. For whom?

2. Bob Clarkson's back...and the left are happier for it. LPRENT at The Standard is welcoming news ex National Tauranga MP Bob 'the builder' Clarkson will stand for ACT at the election on November 26.

His departing speech to National party delegates thanked the Exclusive Brethren for their help – which was one of those political foot in the mouth occasions that always left his audience reeling.

If I was in the Act Party, I’d be very happy about how such an astute political operator adds to their appeal. Fortunately they really don’t appear to have any, especially to the women.

3. Working in the Pacific with Cuba. Green Party MP Keith Locke has been visiting Cuba as the Greens' foreign affairs programme. He thinks there are areas where New Zealand and Cuba can work together.

I visited the Latin American School of Medicine just west of Havana and talked to Marcia and Mark from the Solomons and Asil from Fiji, who were pleased with what they had learnt, after a bit of a trial coming to grips with Spanish. The Pacific students had just had their turn putting on a cultural night, and said their version of a haka went over a treat.

Cuba wants to coodinate its Pacific medical programme with the New Zealand, Australia and the Pacific Island Forum and I said it was something the Greens could help with.

Another area we might be able to help with is cancer research. I talked to Dr Iznaga Escobar at the Centre for Molecular Immunology. Cuba has a huge programme to develop vaccines to stabilise breast and other cancers. Being a small country they need bigger populations for their tests.  Canada, India and Brazil are among the countries that help but not yet, it appears, New Zealand. Cuba has 382 medical patents, and the export of vaccines, etc. is their second biggest export, next to nickel.

4. Why are Ministers different from public service executives? Idiot Savant at No Right Turn asks why Ministers impose such stringent rules on their departmental executives in terms of corporate hospitality, but don't seem to abide by the rules themselves. Remember the Greens released a list of Parliamentary written questions where they asked Ministers what corporate hospitality they had received from Westpac over the last 12 months. The government is currently looking at re-tendering its master banking contract held by Westpac for 21 years. 

Public servants are not allowed to accept such hospitality, precisely because it looks bad and creates a perception of corruption and conflict. Attendance at corporate events must be strictly for business reasons, and departments should meet attendance costs. MPs and Ministers impose these rules on public servants for good reasons. But it is absolutely hypocritical if they do not also apply the same thinking to themselves.

Update: More comments from the Dim-Post here, pointing out how this can add up to serious amounts of money over a three-year term.

And here's the bit from the State Services Commission website on how departmental executives should handle themselves in the corporate hospitality sphere. Doesn't look quite the same as what Ministers are held to...

Hospitality offered to chief executives may provide opportunities to develop relationships, but a chief executive's presence at such occasions is potentially open to criticism. The context must be taken into account: for instance, how relevant is the event or function to the department's role; will the department's interests genuinely be advanced by having a senior-level presence; should the department or the individual chief executive be meeting the costs to attend?

From the right

5. Insurance claim jam. Homepaddock has a little piece on jammed insurance claims.

An insurance company has 1,000 claims all ticked off but has paid out only eight.

That’s what someone in the construction industry in Christchurch told us.

It must be bad enough coping with the February earthquake and its aftermath without having living in limbo because your claim is caught up in an insurance log jam.

6. Give DHB's the role of paying out sickness beneficiaries, cap the amount they can spend, and then see if the health sector works harder to get these people back to better health. Lindsay Mitchell looks at one way to incentivise the health sector to work at getting people off sickness benefits. At the moment it's up to MSD to deal with them.

As it stands well people are lumped together with unwell people and are all seen under the same roof by the same people. People with no expertise in matters physical or psychological. If the money for sickness and invalid benefits was coming out of DHB funding you can bet that the focus on why more and more people are going on them would sharpen up pretty fast.

Which leads me to a further thought. Money is very tight in Health. It is also capped, whereas MSD funding is not. Does Health tacitly sign people over to the responsibility and cost of MSD because there isn't money available for whatever it would take to get them functioning?

Suggestion: The existing funding pool for sickness and invalid benefits could be transferred over to the relevant DHB and thereafter managed but capped. Money saved by reducing the caseload (the current levels are artificial) and used elsewhere in the health system or invested in resources to further assist beneficiaries back to good health. Mental health exponents will tell you how badly under-funded their area is. This would give them a chance to up their funding and treat people to the best of their capacity which is surely what health professionals want to do.

7. Is Key moving to marginalise Brash? Adolf at No Minister thinks John Key's announcement of welfare reforms may mean people stick with National instead of going over to ACT.

Today's announcement of welfare reform by PM Key has put paid to any chance Dr Brash might have had of convincing the electorate that he and he alone could ring the changes which are needed to bring NZ back to a fiscally responsible state of being.

The majority of New Zealanders will say to themselves:-

Why do we need Dr Slash when Mr Key is doing the job which needs to be done?

They are right. They don't need him and they won't vote for him.

Although here's the first comment on Adolf's post:

A typical cheerleading post from Adolf. How predictable. Key will not go the full hog on welfare, as is needed, he is a pure populist, talk is cheap.

I am voting for Don, so don't speak for me, thanks. New Zealanders and 'they. Arrogant to speak for the masses.

Let's see when the bubbble bursts, really.

8. Steve's a nice guy. Let's give Westpac the contract so Steve can get invited back to the rugby again. Here's David Farrar's take on the Westpac corporate hospitality story:

First of all people should realise that the Green Party do not want a fair competitive tender for the Government’s banking contract. They hate Westpac and have been campaigning against it for many years.

It is nice to get to watch a rugby game or concert from a corporate box. I’ve been a guest at a few, including Westpac’s. You get a standard meal, some beer or wine and a sheltered seat. It’s a nice evening out. But trust me no one is going to be trying to influence a tender based on that. Maybe the Greens really think that politicians can be bought so easily – but if so that is more a reflection on themselves.

Let’s look at how Green world thinking goes. We invited (for example) the Press Secretary to the Minister of Police to the rugby. And because he is in our eternal debt for getting to go go to the rugby, he will then lobby his fraternal press secretaries at their weekly coven meetings. This will then get the Press Secretary to the Minister of Finance on side. He will then lobby the Minister of Finance and say “Hey boss, fuck all this tender notice. Westpac gave Steve a nice ticket to the rugby, so lets give them the Government contract”. And Bill will then say “Yeah. I’m going to instruct Treasuey to tilt the tender towards Westpac, so only they can win. This will involve around 30 public servants having to join the conspiracy, but fuck it Steve is a great guy, and they might nit invite him again. So to make sure the Press Secretary to the Minister of Police gets invited back again to the rugby, we’ll do it.”

Economics blogs

9. The problem with the anti-privatisation debate. Paul Walker at Anti-Dismal has some points on why some of the don't-sell-the-SOEs arguments may need some fine tuning.

Firms tend not to be around for that length of time. So we can't get the $700 million [in dividends] forever.

Secondly the $7 billion is not all that we get if an SOE is sold as taxes on the private firm’s profits will be taken by the government. Thirdly there seems to be confusion as to the relationship between the dividends of $700 million per year and profit maximisation. The writer of the Dominion posting says “If we sell it for 7 billion, that is ALL we ever get and it will end up like kiwi rail, run down by the owners to maximise profit” which seems to indicate that the writer thinks maximising profits is a bad thing. But if the firm doesn’t maximise profits where does the writer think the dividends are going to come from? We only get the $700 million each year because the SOE sets out to maximise profits.

So even if we have public ownership we still have to have profit maximisation to get the $700 million in dividends. So if it is bad for the private firm to maximise profits it must also be bad for the SOE to maximise profits, so we can have either profit maximisation by the SOE and the $700 million in dividends or non-profit maximisation by the SOE and miss out on the dividends. The actions of a profit maximising SOE will be the same as the actions of a profit maximising private firm. Both will do whatever they need to to maximise profits.

There are good reasons for not liking partial privatisation but those given in the comment on the Dominion Post website are not some of them.

10. Overestimating the youth minimum wage effect. Economist Eric Crampton agrees the abolition of the youth minimum wage has led to more youth being unemployed. He responds to David Chaston's post that was on interest.co.nz.

Interest.co.nz editor [Ed. publisher] David Chaston blames raising the youth minimum wage for the loss of 30K jobs. 

I think that's overstated: we can't just look at how much more the youth unemployment rate rose than the adult unemployment rate; we have to look at how much more it rose than we would have expected it to rise given the increase in the adult unemployment rate. We expect youth unemployment to be worse hit in a recession than adult unemployment; this time, it's been rather worse than in prior recessions. I've pegged it at around 10-12k more kids unemployed than we'd expect given the prior worst performance of youth unemployment. The method's described here; results here. It remains possible that something else happened that threw a great big wedge between the adult and youth unemployment rates, but you'd need something that happened about the same time as the change in minimum wage legislation and that has persisted from 2008 to present and that has a plausible theoretical reason for causing the effect and is big enough to have done the job.

Video

Here's George Bush. Have a good weekend.