Ideas@TheCentre brings you ammunition for conversations around the table. 3 short articles from CIS researchers emailed every Friday on the issues of the week.
The US has a problem with stagnating income. Real median income for US men has barely moved in 40 years. For white men in particular, this represents a new and confronting reality. Conventional wisdom suggests the response of rejecting free trade and immigration, and voting for Brexit, Trump and Hanson, is the revenge of these losers of globalisation.
While some still question whether that is actually true, there are suggestions that the answer to Trumpism is more redistribution to compensate those worse off.
Have we really considered what they are being compensated for? If we put aside politics for a moment, the devil’s advocate suggests there might be little economic or social justification for these transfers.
The striking thing about the US election is the rejection of the Democrats’ welfare compensation model. Part of Trump’s appeal is that he is effectively promising a return of a path to the middle class for the uneducated and unskilled (arguably this is the American dream).
Is it axiomatic that the return of this American dream would be positive? Is it even possible?
Left unsaid is that historically the path to middle class was largely open only to white men; primarily because their wages were held artificially high by a system of protection from external competition and the exclusion of women and minorities from many workplace opportunities.
Trump voters may lament that the country has gone off track since the 1950s, yet this effectively argues that the displacement of this system by three different factors — globalisation, mechanisation and increased participation from women and minorities — is a mistake.
It is impossible to separate their respective effects but it’s worth noting that while male income in the US has stagnated, both participation and median female incomes have increased over that same period. Asian men and women, and to a lesser extent Hispanic men and women, have all seen real median income gains over the last 16 years. Poverty has fallen substantially.
Even if globalisation is part of the problem, it’s highly doubtful reversing it would see the return of high demand for low-skilled, white male workers.
Advancement for women and minorities has long been fobbed off on the basis of ‘merit’, but the question not being considered is whether the absence of a path to middle class for unskilled white men is actually the end point of a meritorious system working as intended. If so, compensation will not fix the problem — only delay the reckoning.
The complacency about Australia’s tax burden is getting a shake-up with the election of Donald Trump as the next US President, particularly with his proposal to cut the US company tax rate from 35% to 15%.
The average OECD company tax rate is currently 27.3%, when weighted by country size (as CIS has previously argued the weighted average is a better way to analyse country averages). The Trump tax cut will slash this average to 20.3%, well below Australia’s current rate of 30%.
This will hit Australia, and hit us hard, because the US is the largest investor into Australia. US businesses will repatriate their vast offshore funds (reportedly worth $3.1 trillion) back to the US, or move them into lower taxed countries. And the proposed cut in our company tax rate to 25% may prove to be too little, not too much.
If Trump’s plan is implemented, Australia’s company tax revenue as a share of the economy (currently 4.9%) will be more than double the developed world average (of 2.2%), and will still be well above this average even if imputation and Australia’s proposed company tax cut are deducted. Similarly, Australia’s personal tax revenue will be 2.6 percentage points above the developed world average after Trump’s personal tax cuts.
Australia’s overall tax burden is already above the developed world average if IMF figures are used, but will be much more so if Trump’s tax package is implemented in full. However, the Left prefers OECD figures which have Australia’s tax burden below the developed world average.
But this data will no longer provide comfort to the Left: with the growing Australian tax burden, plus the Trump tax cuts, I estimate the Left’s preferred measure will have Australia going above the OECD average in 2020.
Australia will become a high taxing country. I wonder if the Left will welcome the growing tax burden, or will mourn the loss of their (dubious) debating point.
But debating points shouldn’t be the focus: what instead should concern all Australians is the potential for a further, major decline in Australia’s competitive position — a decline that will harm us all.
In an ABC interview this week, Prime Minister Malcolm Turnbull persisted with his argument that pressure for reform of section 18C of the Racial Discrimination Act 1975 is little more than a pre-occupation of the elite media.
Groups such as News Limited have certainly been ardent advocates for reform, but that is because of a concern that basic freedoms enjoyed by Australians are under threat.
Turnbull’s oft-repeated mantra of ‘jobs and growth’, while important in itself, will not succeed in knocking the issue of freedom of speech into the long grass. Nor can the issue of equality eclipse liberty.
So the government’s decision to establish a parliamentary enquiry into the operation of the RDA is welcome. It will examine the reasonableness of the legal limits and assess the need for reform.
In particular, the enquiry will assess 18C and, it is to be hoped, make a specific proposal that the words ‘insult’ and ‘offend’ be removed from the section.
Reform of 18C provokes fears — often stoked by Race Discrimination Commissioner Tim Soutphommasane — that it will unleash the hounds of hatred. This is unlikely to happen.
Even AHRC President Gillian Triggs has finally given her support to reforming 18C, saying that she would see it as a “strengthening”. “It could be a very useful thing to do,” Triggs told the ABC.
And, as UTS academic Andrew Jakubowicz has argued, revisions to 18C could be accompanied by changes to the Commonwealth Criminal Code to allay any fears that hate speech might proliferate.
Basic freedoms such as freedom of speech are under threat from cultural progressives, Liberal MP Tim Wilson warned in his CIS 2016 Acton Lecture this week.
“A cultural expectation of political correctness that goes beyond respectfulness has seeped into our society,” Wilson said. Identity politics is promoting a form of tribalism.
Our politicians’ self-enforcing points views are not the ones that count. This parliamentary enquiry needs to succeed so that the heavy burden of 18C and its restraints can be lifted from our shoulders.