Welfare is consumption not investment

Christian Porter has an op-ed this morning passing off welfare policy as industry policy.

The free-trade agreements also provide a new way to link the social services system to the economy as we develop service skills and new technology in the disability sector.

We not only care for Australians with disabilities, but our ongoing commitment will open the opportunity to expand skills and technology for economic growth. In this sense our commitment to the National Disability Insurance Scheme intersects with our innovation agenda.

That is good propaganda but I’m not convinced it is good economics.

The notion that welfare spending intersects with innovation policy is predicated on the notion that any government spending is good spending. It also assumes that any innovation spending is associated with large positive externalities. Both those assumptions are highly contested. Government spending, for example, diverts private consumption and private investment away from private choices and positive net present values to negative net present value activity. The mechanism whereby the government believes that nexus will broken is in a voucher system.

The scheme empowers people with disabilities to make their own decisions about how they are supported. Funding for disability support is allocated to each eligible person, not to a service provider. What this does is change the landscape of the disability sector and market, opening up new opportunities. This includes stimulating a vibrant assistive technology market. It is in this area Australia has the potential to become a world beater.

Indeed – yet the government is assuming that voucher recipients will choose to spent their vouchers on assistive technology and not something else. They also assuming enough expenditure on assistive technology to sustain a global industry. The fact that such an industry has not already emerged in Australia with a medical monopsony providing disability services is telling.

To be clear – increased disability spending will no doubt improve the lives of the individuals who receive that additional income. But it will not improve the overall economy. This is what the government is claiming:

Fortunately, the NDIS is not just smart social policy; it provides the potential for economic advancement. The Productivity Commission concluded that over time the economic benefits of the scheme will outweigh its costs and will add close to 1 per cent to GDP.

Okay – so if we estimate the size of the Australian economy at about $1.6 trillion we’re looking at an industry that will generate about $16 billion per year. That is less than estimates of how much the NDIS is going to cost.

Bottom line: Nice try. There may be good arguments for spending (more) money on disability. There are good arguments for a voucher driven system over a provider driven system (perhaps not as good as education vouchers). Disability driven economic growth is not one of those good arguments.

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35 Responses to Welfare is consumption not investment

  1. Denise says:

    Thank you Sinclair for this clear exposition and
    for your ongoing generosity in conceptualising
    the real issues at stake economically.

  2. Rabz says:

    The biggest problem with the NDIS (apart from the fact that it is going to break the budget) is that the vast bulk of the (initial) estimated $23 billion pa is going to go into the pockets of the vast army of bureaucrats who will be charged with maladministering it.

    People with disability will miss out again and taxpayers will be right royally screwed. Remember, this scheme was designed by the likes of Shorten, Macklin, Gillard and Rudd.

  3. Sydney Boy says:

    Increased disability spending will no doubt improve the lives of the individuals who receive that additional income. But it will not improve the overall economy.

    Agreed.

  4. john constantine says:

    The swampfilth designed the disability rort with the intention of using the disabled as cannon fodder raw resources to feed wealth and power into their welfare industry, with the full crony socialist agreement that the welfare industry would pay a river of golden tribute money into swampy politics.

    Any accidental benefit to an actual disabled person as a side effect of creating a massive power base for their left is a good photo opportunity, but not the point of the legislated flow of resources left.

    [what is the outcome of a ndis system operating in a borderless society?.]

  5. JohnA says:

    Christian Porter has an op-ed this morning passing off welfare policy as industry policy.

    The free-trade agreements also provide a new way to link the social services system to the economy as we develop service skills and new technology in the disability sector.

    We not only care for Australians with disabilities, but our ongoing commitment will open the opportunity to expand skills and technology for economic growth. In this sense our commitment to the National Disability Insurance Scheme intersects with our innovation agenda.

    That is good propaganda but I’m not convinced it is good economics.

    The notion that welfare spending intersects with innovation policy is predicated on the notion that any government spending is good spending.

    This is not even good propaganda.

    It is simply trying too hard to make something useful out of a decision to stop bloated and wasteful spending. It may even be another example of standard Marxist praxis – redefine everything in terms of your own paradigm.

    The new government has been excused (on the Bolt Report yesterday by former Labor advisor Nicholas Reece) for “taking tiny steps towards the Left” of the political spectrum. Reece went on to advocate taking even larger steps.

    I note today that AB has blogged extensively (not read yet) on the Libs shift leftwards.

    It is undeniable that the Liberal Party is in the control of the wets (Liberal Left aka Keynseians), and is henceforth headed for either their own irrelevancy, or the ruin of this country.

  6. Rabz says:

    The other wonderful thing about the NDIS is that it can never be wound back, much less ever removed (barring of course, total societal collapse).

    The banshee like screeching about “bashing the disabled” could be heard from space.

  7. Snoopy says:

    ‘Bashing the disabled’ will also be the sadly effective response to anyone disagreeing with future proposals to extend the conditions which qualify for NDIS.

  8. What John Constantine said – this is just another bowl of sugar being put on the table.
    The swampherds will flood the system from all over, and the media will have a field day painting the government as heartless bastards who want to throw little Jacques/Ivan/Mohammed onto the scrap heap ‘just because he/she/it has AIDS/Hep C/galloping halitosis and can’t get treatment in their own country’.
    The NDIS is just another cudgel to smack white, middle class Australia around the head with.

  9. john constantine says:

    Does the trauma of going through Nauru cause anxiousness that qualifies you for their NDIS ?.

  10. Baldrick says:

    Fortunately, the NDIS is not just smart social policy; it provides the potential for economic advancement.

    You just know that Turnbullshit can’t wait to get his teeth into the NDIS with big spending, grandiose statements and a myriad of photo opportunities with kids in wheelchairs.

  11. Simon says:

    Innovation via government.. what about this rings true?

    Firstly, Government is (or should be) the stable status quo that the ‘innovator outsider’ disrupts.
    Secondly, Government is a seemingly endless set of committees manned by perfuntionaries. Long since drained of all thoughts of inspiration, if they ever had them, long ago. these ppl will pick our winners.. Ha!
    Lastly, Governments job is to wisely invest our tax dollar, “Innovation” is a high risk investment.. so much loss as the best grant applications win over the ideas born of struggle and natural selection.

  12. Ros says:

    Is he saying we will export skills in assisting the disabled to China. From what we saw China is not at all interested in assisting the disabled. A terribly burnt man we saw in Beijing busking, to feed himself, and our guide shared with us that he would have to keep moving because it was illegal for the disabled to put themselves on display. Or in a village on the Yangtze where a very badly crippled probably paraplegic man was put at the exit from the boat. A daily thing for him we were told. Again because he had no other means of surviving.

    I didn’t get how spending more and more on health and related areas was a wealth building industry, if it wasn’t an export. It seems Mr Porter has found a way.

  13. Shy Ted says:

    Of the many, many disabled people I have met during the course of my work more than 99% will never become productive workers because they have genuine disabilities. Any technological advances will soon be made cheaper in Asia and any income lost. Disability services need to be local so they can be delivered to the handicapped lad who mows my lawn. He is a long way from doing a professional job and he takes forever but he loves the work and the contact. And he declares his income and has an adjustment in his DSP accordingly. A Canberra bureaucracy of 6-7000 will never replace that. Actually I’d prefer he didn’t have to declare what I pay him because the costs of compliance would have to outweigh what I pay him. But he does go to work.

  14. James says:

    NDIS is not just smart social policy; it provides the potential for economic advancement.

    Advancement for who?

  15. Sinc, I think you are being very kind here.

  16. Mr Rusty says:

    The scheme empowers people with disabilities to make their own decisions about how they are supported. Funding for disability support is allocated to each eligible person, not to a service provider. What this does is change the landscape of the disability sector and market, opening up new opportunities.

    Judging by the folk on DSP I encounter the “new opportunities” will be heading the way of pokies, Big Booze, Big Cigs and local yoof who sell a different kind of coke and ice to the one you can order at the bar.

  17. notafan says:

    What it will do is encourage more people to both seek access to the DSP and to exaggerate their disability to access the additional cash.

    And it will be $2 out of the pocket of the taxpayer for every 50c in the pocket of the disabled.

    I’m sick of the welfare sector . Gone are the days when people were too proud to accept charity.

  18. Sinclair Davidson says:

    Sinc, I think you are being very kind here.

    That’s just me. I am a kind person, despite what they say.

  19. ar says:

    increased disability spending will no doubt improve the lives of the individuals who receive that additional income.

    Maybe. Govt spending skews people’s decisions one way or the other.

  20. . says:

    James
    #1837185, posted on October 26, 2015 at 10:16 am
    NDIS is not just smart social policy; it provides the potential for economic advancement.

    Advancement for who?

    Out of the $1100 per week or so allocated to each recipient of the NDIS, most of this will go into APS salaries.

  21. hzhousewife says:

    The NDIS is just another cudgel to smack white, middle class Australia around the head with.

    When there are no white, middle class Australians left, what will the disabled do?

  22. H B Bear says:

    Welfare is consumption not investment – I’ve been saying that for years.

    Publicly funded health and education spending needs to be backed out of the national accounts to give any meaningful information. Look at a basket case economy like Tasmania – the biggest employers are the public hospitals and universities. Ask yourself what that investment achieves year-on-year.

    Like all the rest of them Porter will need to go on the watch-list if he keeps coming up with stuff like this. Moro the Man of Steel seems to have gone missing as he undertakes his crash course in public finance. Not looking too promising you’d have to say.

  23. Pedro says:

    Hmmm, if the NDIS is more efficient than the current mixture of systems then we could get the good consumed, disabled people cared for, at a saving to the current cost, or more people cared for at the existing cost. Either way, that would make the NDIS an investment.

    I’m not claiming the NDIS will be a good investment, just that the premise of the post is clearly wrong.

  24. Justin says:

    This is the exact meaningless drivel Steve Kate’s wrote about.

    Seems like all new BS expenditure will be reassigned as innovation investment.

    The only thing it will intersect with is rent seeking spivs on the way to deficit.

  25. JC says:

    Justin

    Do you even understand what you wrote?

  26. . says:

    I think Justin is some tribal idiot trying too hard.

    You muppet, Kates and Davidson agree with each other most of the time.

  27. Andrew says:

    Like all the rest of them Porter will need to go on the watch-list if he keeps coming up with stuff like this. Moro the Man of Steel seems to have gone missing as he undertakes his crash course in public finance. Not looking too promising you’d have to say.

    Like Frydenberg, Porter was another regarded as a rising start of conservative politics. Once they hit the big time, they start taxing & spending your money like every other drunken sailor in their party.

  28. Pedro says:

    “Like all the rest of them Porter will need to go on the watch-list if he keeps coming up with stuff like this”
    Not for the first time, I’m reminded of the People’s Front of Judea.

    “I think Justin is some tribal idiot trying too hard”
    Exactly. In the long run, it is better to use your own brain than piggy-backing off somebody else’s dumb work.

  29. JohnA says:

    Sinclair Davidson #1837264, posted on October 26, 2015 at 11:15 am

    Sinc, I think you are being very kind here.

    That’s just me. I am a kind person, despite what they say.

    And despite your choice of ghoulish avatar. 🙂

    PS: typo alert in my early post (rushing off to a funeral is my excuse):

    The first sentence after the quote should read:
    “It is simply trying too hard to make something useful out of a decision to NOT stop bloated and wasteful spending. “

  30. candy says:

    I’m pretty sure the original motive for NDIS was to bring services and better quality life to those with disabilities, and not for them to intersection with innovation and be one of the drivers of the economy.

    In the real world that Christian Porter doesn’t know about perhaps, I doubt anyone believes those with disabilities will be great contributors to the workforce. If they were, they wouldn’t be disabled would they.

  31. Sinclair Davidson says:

    I thought Justin was suggesting that Steve and I were in agreement.

  32. Yohan says:

    Fortunately, the NDIS is not just smart social policy; it provides the potential for economic advancement. The Productivity Commission concluded that over time the economic benefits of the scheme will outweigh its costs and will add close to 1 per cent to GDP.

    Amazing !! Who knew that gigantic welfare spending programs end up being a net benefit to the economy?
    We just need to put everyone on a program and we will see huge growth. Go Liberals !

  33. Yohan says:

    The NDIS is a policy that nobody, not even politicians, knows what it will contain. This is bad, because right it’s a policy looking for spending ideas, and every leftist and quango under the sun has a million such ideas.

  34. . says:

    Yohan – see my post at 11:53 am yesterday. The NDIS will cost $1100 per week per client and most of that goes to public servants.

    Anyone who isn’t a layperson and understands public finance ought to be appalled.

    Forget policy, it is simply extremely bad governance.

    From a long term, political or sociological perspective, it will entrench a professional class of unproductive people with over credentialed, low content/skills/knowledge degrees as a permanently publicly financed political bloc.

  35. Yohan says:

    The NDIS will cost $1100 per week per client and most of that goes to public servants.
    Anyone who isn’t a layperson and understands public finance ought to be appalled.

    Amazing waste. 1k a week for each disabled person, most lost on administration.

    The part I hate about all this is the insinuation that pre-NDIS people are not getting any care. Its not true. We know life is much more difficult for disabled but there are a plethora of organizations that help the blind, people with MS, e.t.c but now with more government interference everything will become more centralised and wasteful.

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