Fundamental Differences in Thinking Between the Singapore Government and Singaporeans

I had previously dug out some statistics and had written an article here which showed how the government has systematically profited from Singaporeans. This invited a counterargument from someone on Facebook, who countered with his arguments of the statistics.

I am sharing the discussion in this article. The discussion exposes the fundamental differences in thinking between the two groups of Singaporeans – one which aligns themselves to the economic principles of the PAP government and one which does not. Please read on.

Please also share your viewpoints in the comment section below. I will start off the article with his viewpoints, followed by my point-by-point counter-viewpoints.

Just to give you some background, this guy is a lecturer in one of Singapore’s university. I will call him Jonathan (not his real name) in this article.

*****

Jonathan: Your problem basically, is that you lack the ability to make logical inferences and you have too vivid an imagination and spout crap before checking your facts:

1. First claim, real wages are falling. That’s true. Also true that Govt revenues having been rising. Obviously, the increase in tax revenues didn’t come from income tax, so the Govt has been able to raise additional revenue not by taxing income but through corporate taxes and probably GST. Isn’t that a good thing?

2. And you question why incomes have not grown at the bottom and why the Govt hasn’t done anything about that? Have you been reading? Do you know what are the global economic trends? For how many countries in the world has the income of the poor been rising? You expect Singapore to be different? On what basis do you base that expectation?

3. And you claim that the Govt should have done more to keep the incomes of the poor from drop? Great. Do WHAT exactly? Do you know how the economy works? Do you run a business?

4. To be fair, I had also highlighted the problem of the low wage cleaners to the Govt a couple years ago and the Govt didn’t seem to have to done a whole lot until recently, but you think the problem is trivial? How exactly would you raise the salaries of local cleaners who make up only a fraction of the cleaner workforce? You do realize that raising salaries across the board will cause more inflation?

5. You are right to say that the Govt has mismanaged housing and public transportation, but do you know what’s happening in China and HK? Do you know why the current housing market is screwed up? Basically, your PM is trying to satisfy your people’s demands for private housing and had cut back on HDB supply and releases a lot of land to the private development. What he obviously didn’t anticipate is that it’s much harder to regulate the private housing market when the housing supply is put in private hands. You can see what happens to the private housing supply over the next 3 years. Your people wanted to live in private property hor.

6. Do you know why the COE prices are all screwed up? Again, because the PM released too many COEs 5 years ago so that people can own cars, thinking that the ERP will control car usage. Well it doesn’t. Do you know that there are currently too many cars on the roads? We die die need to take cars off the streets which is why the COE has to spike. There’s no solution. If we don’t take cars off the streets, public transportation like buses and taxis will get choked.

7. And you claim that housing and transport feed into inflation? People die die need to own cars meh? You dun buy car, how does it affect you? People need to buy house meh? The people who are adversely affected and I do have some sympathies for them are the newly weds. That said, do you know that there is a surplus of 3-room flats, so it’s not that there are not enough flats, but these young ones want big flats and also in choice areas. Flats in the outlying areas are still affordable with the Govt grants. I do agree however that BTO and having these kids wait 3 years before they can get married is a stupid idea. I told MND this in 2008. Nobody listens, but that’s another story.

8. What kind of a claim is this: “As I had said, the government doesn’t want to increase taxes because it would be too obvious – you want to take money from the people in as discreetly a manner as you can”? Harlo?

9. End of the day, get this straight, CPF money and Medisave is YOUR money. Govt cannot eat one. Why does Govt increase Medisave contribution because as you had rightly said, healthcare costs are going up and people are living longer. If costs go up and we don’t increase the Medisave contributions, you run out of money, how pays huh? Govt? Who is Govt?? Do you know what it means by sheep hair grows on the sheep?

10. I have to admit that my grasp of healthcare economics is not as strong as it ought to be, but what’s clear is that increased expenditure DOES NOT always lead to better outcomes. Go and read more. Please lah.

Boarding call. Gtg. 🙂

*****

Hi Jonathan (not his real name), thanks for the reply. This is what I think. Feel free to comment.

1) It’s true that the increase in tax revenues come from taxing income through corporate taxes and GST, but the proportionate increases for both these and personal income have remained constant. As I’ve said, the government might not have increase taxes but the amount of monies we are putting in from other sources is increasing – CPF, Medisave, COE etc – this is where it increases the government’s coffers. People might say that they are separate financial instruments and we shouldn’t compare them but the truth is this – the government uses our CPF to invest in Temasek and GIC, where they gain high interests which aren’t returned (back to our CPF, where the money for investment is taken from). At the same time, the overall withdrawal from CPF have actually decreased. As much as there are separate instruments, from a holistic perspective, the government has found a way to make more money through CPF, and they do not need to rely on the taxes.

2) For incomes, my question is this – just because in other countries, the incomes of the poor have been decreasing, we should accept this? Because in other countries, they’ve let the poor suffer and this should be ok? I come from a humanitarian basis – the thing is this: the government employs more than 100,000 people in the civil service. At the same time, the Singapore companies which Temasek owns, which is owned by the government, employs another thousands and thousands of workers. The government might have used the rhetoric that wages are determined by market demand and supply forces. They are obviously not. The government gets to adjust that. For example, in the late 1970s, the government was willing to inflate the wages by 20% for a few years. Presently, the government could have tweaked their policies to prevent the wages from those at the bottom to be suppressed. Why didn’t they? The Nordic countries are able to maintain a more equitable wage distribution. How does a country do that then – it means those who are richer are willing to perhaps take a slightly lower pay, to adjust for that – the question then is, are people like you willing to do so?

3) I don’t think we can look at this just from an economist perspective, because as a government, you do just that, that shows how you value and prioritise your people – as monetised beings. Sure, as governments which pander to the capitalistic system, we become economists. But as governments which need to answer to people’s rights and social needs, where do we become responsible? As mentioned before, the government could also have tweaked the policies to prevent the incomes of the poor from being suppressed – how? For example, how did they determine the wages of foreigners? Where did they peg it? Because of how low they had pegged it, they gave incentives for companies to reduce the wages of the locals as the wages of the locals become less competitive. Why did they take 7 years to change the minimum amounts that the foreigners should earn, while the wages of locals were depressed for these few years. In some other countries, the locals and foreigners are paid the same rate, because they are paid according to their capabilities and not their nationality – I’m not saying we should go for this but the question is – how can we make this more equitable?

4) Again, raising salaries would mean having to raise salaries for the other payscales, somewhat. This isn’t something Singapore hasn’t done before, as mentioned. It was done in the late 1970s. Also, the other question that I had put forth is this – how willing are the rich to have to rebalance their incomes to help those at the bottom be able to have a more equitable standard of living? The question I ask again is this – are we willing to earn less than $1,000 a month? If so, should we let another human person live with the dignity on a $1,000 income? We can look at this from a plainly economist perspective, but as a government, as I’ve said, there’s a need to be socially responsible as well. The Nordic countries pay their cleaners $2,000 or $3,000. Why? Well, firstly their standard of living is higher but don’t forget, Singapore is equally as rich as they are – then why are we paying low wage workers such a low amount? The fundamental issue is this – they’ve learnt not to only value the people who work as workers who are deemed as performing mundane jobs that are seen as unimportant, but they’ve learnt to value the people as human beings, basically, and to confer on them a wage that can accord them a basic and healthy standard of living – and this is where government intervention comes in to moderate the effects of low wages and high profits which the corporations make off with. But in Singapore – the government is the corporation. Herein lies the advantage as well as the problem – how?

5) I don’t know if I think that’s a fair statement to make – that everyone in Singapore wants to live in private property. Is it? On the other hand, I could, as many commenters have said as well, that the reason why the government had wanted to release more land for private development – because that’s where the money lies. For a government which has perfected their solutions and policies, do you think that they would not have calculated and foreseen the impact of their policies and where this will lead to? This is the government which claims to be able to foresee and anticipate challenges and problems – so you are telling me that they didn’t anticipate the problems that would arise with setting aside land for private development – which they would know precisely would lead to an increase in housing prices, and thus more money for their coffers. I think they would have highly very likely calculated for this long before, and they knew what the impact would be. What they didn’t calculate though is this – they didn’t calculate that the people’s anger would actually boil over. They didn’t count on a people who are docile and dormant to actually have anger which will boil over and impact on the last elections – and that’s why they had no choice but to act and replace Mah Bow Tan. Don’t forget, before 2001, Capitaland Mall did not do very well and made losses on some years. But from 2001, their profits increased incrementally. A stroke of luck? More likely, very shrewd planning behind the scenes to ensure rising profits for whose coffers?

6) For the increase in prices in COE, thanks for sharing on the information on the ERP. Let me take a look at the statistics before I can come back to you on this with more information – though I’m not sure if its a clear fact that the ERP is not working – there are other countries which have adopted our model and something the government champions. I’m more of the thinking that both these instruments are money-churning instruments and on a psychological level, there’s a limit as to how much you can increase the price of ERP, and thus a more sensible solution is to peg any rises to COE, because when people make a purchase on a high-budget item, it’s easier to peg higher taxation to something that is already costing so much – they are psychological more ready to pay more than it was on ERP. But let me take a look before I have more answers.

7) Thanks for also furnishing on the information about the housing. Agreed with your points. Though again, this ties back to why housing prices are increasing – how would you manage this problem of rising housing prices, and decreasing real wages?

8) I had dared to make the claim that the government doesn’t want to increase taxes but has increased other sources of income precisely because they’ve increase the monies they are collecting from the other sources of income – increase in Medisave Required Amount, Medishield premiums, COE, housing prices. The Singapore companies are earning higher profits. So what if our taxation rate didn’t increase? The other sources of revenue for the government, and Temasek Holdings are increasing anyway. And then this question – why is it that Temasek and GIC are earning 17% and 6.8% annualized returns since their inception, and the government bonds (which is our CPF monies) is invested in them, yet it only gets back an interest of 1.55%. Something is sorely missing here – might you be able to enlighten me here?

9) End of the day, yes – the CPF money and Medisave is our money. But since 2001, the amount of CPF withdrawals have actually decreased – dropped! – even as the number of people who should rightfully be able to draw them out should have increased! How many new policies have the government put out over the past few years which changed the way people could withdraw on their money and which have thus led to this decrease? Yes, the CPF money is our money but why are we withdrawing lesser? At the same time, if the CPF monies is our money, why are the overall CPF balances increasing by such a high rate, even as the amount we can withdraw have dropped? Sure, the interest rates (for the bonds that CPF is invested in) might account for the increase in the balance. But the interest rate is only 1.55% and have remained at around this level over the past few years. What would more likely account for the increase in the overall CPF balance, rather than the fact that people aren’t able to withdraw their CPF out?

10) No, increased expenditure does not always lead to better health outcomes, obviously. But as I’ve said, not all decisions should be made on an economist point of view – the proportion of government spending on healthcare for the individual has dropped year on year since Singapore’s independence. The basic question is this – can the government do more for the lower incomes, and perhaps the lower middle income groups, who have to continue to pay a higher and higher proportion out of their own pockets for healthcare? This, at the same time, when the healthcare costs have increased at a high rate over the past few years. Furthermore, our real wages have decreased over the past few years. What I’m asking for isn’t new. Many people have been asking for it. You had said previously that there’s no impetus for the government to increase the wages of the low income because no where else in the world are governments bothered to do so, so you might say. Then, the argument I put back to you is this – if the other developed Asian countries – the Asian tigers – are actually able to pay a higher proportion from the government on healthcare expenditure, why isn’t the government doing so? It obviously exposes a flaw in logic here, doesn’t it? Or rather, the government makes decisions on what is financially sound, but for who now? Herein lies the very obvious question, and I think you know it.

I would like to hear from of your thoughts on this, as it has helped me think through the issue a bit further.

Thanks for this!

Roy

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