Key argued cogently that the abatement regime for Working for Families would level net incomes so radically that a two-child family would end up with pretty much the same in the hand whether their gross income was $38,000 or $60,000 a year.
Infamously, Key then entrenched Working for Families as Prime Minister, and Ardern and Robertson have further locked in middle-class dependency with their December 2017 Families Package.
In fact in 2004, the left-wing critique of Working for Families was stronger than Key's, that it would operate as a subsidy of low-paying employers.
That is, using Key's original numbers, if there was a job to do worth $60,000 a year, an employer could hire someone with two kids, pay them just $38,000 a year, and they'd end up with almost the same pay in the hand.
Union bosses rightly feared it would be difficult to get workers with children to sign up for a pay campaign if it made little difference whether they earned $38,000 or $60,0000 a year.
Worse, if Government subsidises something, there will be more of it, in this case low-paid jobs. To an employer, Working for Families screams out: "Don't buy more plant and machinery or invest in on-job training, just hire a few more low-skilled labour units and get the government to pick up a big hunk of the tab."
There is very little doubt Working for Families has led to lower productivity and wages across the economy than had Clark not launched it as her big 2004 Budget bribe to fend off Don Brash's Orewa-speech challenge.
That is bad for everyone but the most pernicious effects of Clark's bribe are on those without children trying to save for a first home, such as young nurses, teachers, doctors, and police officers.
They suffer from the economy-wide lower wages caused by Working for Families but without the top ups.
Thanks to Clark, Key and Ardern, the best way for a childless nurse, teacher, doctor or police officer to get an after-tax pay rise is not to work harder, get promoted or even join the union and go on strike, but to get themselves or their partner pregnant.
When trying to buy a house, childless people also have to compete with those with children, whose after-tax incomes have been artificially inflated by the state.
Working for Families then creates a vicious economic and political cycle. As it holds back productivity and keeps wages low, the best electoral response is to expand it further, as Ardern and Robertson did in December.
And what better way to stop nurses, teachers, doctors, and police officers from striking than to ensure the ones with children will get nothing out of doing so?
Working for Families already costs taxpayers $3.2 billion a year. Expect that to rise before the next election as a tactic to split unions between those with or without children, buy some industrial peace and secure Ardern's re-election.
And don't expect National to be able to do anything about it. With the financial status of so many working families now as locked in to welfare as any other beneficiary, abolishing Working for Families is becoming ever-more politically impossible.
It has transferred the primary economic relationship that determines family income from being that with the employer to that with the state. It is indeed communism by stealth. Clark and Cullen knew exactly what they doing when they set it up.
- Matthew Hooton is managing director of PR and corporate affairs firm Exceltium.
