Ex-GIC chief economist Yeoh Lam Keong issues badass reply to DPM Tharman’s now-viral speech
He's probably the only person who can answer to DPM Tharman.
The other day, we wrote about a pretty epic 27-minute speech that Deputy Prime and Finance Minister Tharman Shanmugaratnam gave at an unsuspectingly poorly-attended PAP rally in Bukit Panjang.
It was viewed by quite a few people, we think:
It also happened to be seen by his old classmate from the London School of Economics, Yeoh Lam Keong. Who also happens to be an adjunct prof at the Lee Kuan Yew School of Public Policy.
Oh, and did we forget to mention that he’s the former chief economist at the Government of Singapore Investment Corporation?
So yes, Yeoh saw the clip, and being the awesome person that he is (see number 18), decided to issue an equally intelligent, and pretty badass response:
Once again, we know your limitations on time and crunch the super intelligent things he said into these hopefully more understandable points:
1. He praised Workfare, but says at the same time it is “sadly inadequate”, and we can afford to up it. By about three times.
Concretely, for example, the Workfare Income Supplement or WIS is a great scheme; it helps low income workers without disincentivising work, is very progressive, yet at an average payout of $150-200 per month ( largely in CPF) it is still sadly inadequate.
How much is adequate? Most social workers will tell you that given current living costs $500 to 600 per month, and largely in cash, is needed in monthly WIS payouts to help adequately cover even basic needs like food, housing, medical and transport expenses. How much more would it cost us? Roughly $1 billion or 0.3% of GDP per annum.
2. He said the Silver Support Scheme also needs to be tripled to be effective. And he says it’s easy for us to as well.
Similarly, the Silver Support Scheme (SSS) is another great new scheme directed at the poor struggling with retirement adequacy that needs to be trebled from a measly current $200 average payout per month to really make a difference. The additional cost? About $700-800 million per annum, or 0.2% of GDP.
Between these 2 reforms in the WIS and SSS, we would largely and quickly eliminate much of the absolute poverty and hardship experienced by both the working and elderly poor that we currently still see in spite of a decade of insufficient policy action to ameliorate it in a way that we can well afford. Is the government taking poverty “very seriously” or seriously enough? Then what are we waiting for? I leave you to make that judgement yourself.
3. He argues that the middle class in Singapore might well be willing to pay a little bit more in taxes to help look after the less privileged, as well as to enjoy higher social protection and mobility.
What is perceived as fair here by the middle classes is more a matter of adequacy and effectiveness, combined with social equity norms rather than just subsidy benefits received per tax dollar paid. Many middle class members in developed countries don’t mind paying higher taxes to have the security of a higher level of social protection and mobility as well as to look after the less privileged.
In the better systems, they regard it as part of their social responsibility and their contribution towards national cohesion and well being. Here again, Singapore has one of the lowest public spending rates on healthcare, education and social security in the OECD, and I would argue (this amount of spending is) still pretty inadequate for a rapidly-ageing economy highly exposed to the volatility and wage stagnation that globalisation and technological change tends to generate in developed economies today.
4. EVEN THEN, Yeoh strongly feels we can avoid raising taxes for the middle-income, given the following:
– We’ve had, he argues, extremely conservative budget accounting — even the IMF (no less!) thinks we have 7 per cent of our GDP in structural budget surplus (that translates to some $20 billion) over many years.
– Taxes on the rich are currently extremely low and can be raised moderately further to globally still competitive levels.
– Environmental and sin taxes can be raised substantially further yielding significant revenue, looking at the experience of other competitive countries.
5. He also responds to DPM Tharman, who pointed out in his speech that our returns of investment on our reserves has been maxed out in increased social spending measures. We’re plenty impressed.
Our current spending rule on reserve investment income is also very conservative requiring that half of expected real investment income be kept for future generations. This is a very conservative time preference given that future generations are likely to be much richer and less in need of basic social spending infrastructure (eg long term healthcare, education or public transport), which we so far have yet to provide adequately for current generations.
6. Yeoh also calls for greater public transparency in terms of details about Singapore’s fiscal resources so that financial market analysts, think tanks and economists can analyse and play a more informed role in debating the best use of our money.
In the US for example, the Congressional Budget Office (CBO) regularly reports to Congress on long-term budget and fiscal projections in a variety of major scenarios, which is subject to scrutiny and debate by think tanks, academia, financial markets and the public. Financial market analysts have, in fact, come to trust CBO projections more than US Treasury projections.
In Singapore, by contrast, there is a sad lack of basic budget knowledge, even within parliament or government about our true fiscal position, as much of the data is secret or confidential and hence not sufficiently rigorously discussed.
And we thought the rest of what he said is worth reproducing in full:
Finally I commend DPM Tharman for keeping public finances in Singapore progressive in an exemplary way and for the significant gains in social protection — MediShield Life, the Silver Support Scheme, more affordable BTO flats that the government in its leftward shift has implemented and fought for both within cabinet and in public policy by Ministers who care like him and Gan Kim Yong. I am heartened he recognises there is still much work to do. Fiscal sustainability is also of paramount importance, no question.
Let’s retain these orientations and directions as much as possible without losing sight that we are still way behind on basic adequacy measures in several key areas — poverty alleviation, unemployment protection, long term and chronic healthcare, egalitarian education geared towards a creative, knowledge-based economy, and truly efficient public transport.
Can we find a uniquely Singaporean way forward that combines adequate social protection, fairness to our middle class and future generations as well as ensure fiscal sustainability? I believe we can. But we first need to have much clearer, better-informed public debate before we can do so. The key strategic shape of social spending will have a tremendous impact on the well being of Singapore and on the character of Singapore society in the long term. As with the debate on population, this is too important a matter to be left just to the economists!
Now we know — DPM Tharman is still probably one of the best finance ministers Singapore will ever have, but we’re really glad we have his ex-classmates like Yeoh Lam Keong to show us it is possible to provide an equally epic answer to him.
In case you haven’t seen DPM Tharman’s speech, you can read about it here.
Top image: Screengrab from video