Key questions for a liberal democracy

It seems to me there are several key questions that policy makers face in a modern liberal democracy. In no particular order these seem to me to be:

• At what point on does welfare become a net detractor to society?
• At what point does taxation become a net detractor to society?
• Who benefits from encumbering business with regulation?

Welfare

It is clear that excessively generous welfare is pernicious to society. Why work for say $500/wk when you can get $300/wk for 'job search'. If you're currently working for $500/wks how long will you keep doing so before you go on welfare? What is the long term impact of successive family generations on welfare? What policy do you adopt when welfare is considered an entitlement, and viewed as 'pay'? Should welfare be unconditional?

This seems to me to be a question of support and incentives. A modern society needs support systems for it's citizens, however it should not undermine the incentive for able bodied adults to provide for themselves.

Taxation

Progressing leaning politicians alway lament unequal wealth distributions and advocate redistributing wealth from the rich to the poor. The common analogy is unfairness associated with unequal sizes of the 'pie'. The underlying assumption here is that the size of the pie is fixed over time, so that transfers from the rich to the poor don't affect the pie.

This is obviously flawed. If you were rich and you knew government would expropriate pieces of the pie (legally obtained) and give them to the poor what would you do? You would like consume the pie before the government took it, and stop working to sustain or increase the size of the pie. In aggregate across the nation this amounts to a reduction in overall wealth.

So the policy question seems to be one of deciding how much you can expropriate the wealth of the rich (for the benefit of the poor) before the rich stop providing the nation's wealth. It is important to realise that it is only the wealth that have the required excess wealth to invest to sustain and grow businesses and the economy.

Regulation (and taxes)

Regulation costs money. Be it employment, OHS, environmental, compliance or other it all costs firms money. But what is the firm but the conduit to assemble the 'factors of production' into products and services for fickle consumers? Sure we can compel Australian firms to comply with all manner of regulation, but we can't compel consumers to buy G&S from these now more expensive firms. Where did you buy your last electronic good, clothes, toy, book etc from? China perhaps?

As technology permits more and more services will be outsourced to lower cost (i.e. regulation) nations. Legal, accounting, financial planning, some healthcare, IT support you name it; it will all go to lower cost countries destroying jobs in Australia.

The problem to me is that policy makers direct regulation at Australian firms, not Australian consumers. This is creates a non-level playing field in which importers have an immediate cost advantage that local firms can't compete with. If we wan't a level playing field for Australian firms, we need to shift the cost of regulation of them and acknowledge the fact that we can't compel them to regulation expense until we can compel customers to buy their G&S.