What about the T60 minus T1 (T60-1) of the population?

Hardly a week goes by without someone or some media report lamenting the plight of the B40 — whether it be low wages, abysmal savings, unaffordable housing or schooling or transport, high cost of living, of eating out or indeed eating at home.

The idea is that they need help, targeted assistance and subsidies — from petrol to rice to sugar and cooking oil — cash handouts, grants for education and loans to buy homes. These grow louder during election times — a sizeable voter bank where cash is king.

No one begrudges the help extended to those in need. Society benefits from improving the well-being of all.

The question is what about the T601? They are comparatively better off. They are never mentioned by politicians and the media. They do not have special access, handouts, grants and so forth. In fact, they are almost always left to their own devices — independent, to do what they must for survival, for advancement. They save what they can, provide liquidity to the banking system so that loans can be extended to large corporates and poor households. They are the biggest group of individual taxpayers.

So, what do they get in return — as good hardworking citizens, paying taxes and contributing to economic prosperity for all? They only want ease of doing business, less corruption, less bullying, less discrimination in their business and licensing as well as in their children’s education, lower cost of living, less depreciation of the ringgit, a better stock market performance and less inflation.

The T1 are already “over-entitled”. They own the licences, they are rent seekers, they extract the nation’s natural resources and control the levers of power — hence the T60-1.

Should what little benefits that currently accrue to the T60-1 also be taken away so that more of the national coffers can be directed to the B40? A popular and almost nationally accepted consensus is targeted subsidy — especially for petrol. The danger of “crowd thinking or herding” is that it leads to dependency and inability to think critically.

Petroleum (oil and gas) is a national resource belonging to all Malaysians. Because we are a net producer, the decision in the past was that all Malaysians should benefit from it — by paying less. Now, we are told that the T60-1 should not be entitled. That this is “wasted resources” on them. Instead, cut this off so that money can be saved in the government budget. For what? To give more to the B40 (who will be entitled to this targeted subsidy) — they need even more help? (Of course, they do. Who will ever have enough?) — or to let the government spend on other projects?

The fact is that higher oil prices will lead to higher revenue for the government. But the headline story is, repeatedly, that higher oil prices lead to larger subsidies that is bad for the country. This is simply NOT true. It is a narrative to divert away what little benefits currently enjoyed by the T60-1.

The accompanying chart shows the clear positive correlation between global oil prices (grey line) and the government’s petroleum-related income less subsidies (yellow line). Higher oil prices translate into higher net government income, after deducting the higher subsidies.

Furthermore, targeted petrol subsidies — resulting in higher retail prices for petrol — will, without a doubt, lead to yet another round of inflationary effect across the board. That is, even higher prices for food, goods and services. And higher inflation will lead to either higher nominal interest rates or a weaker ringgit. In other words, this will hurt all, but the T60-1 will be hurt the most.

We understand that the nation has limited fiscal space and there is the need to provide assistance to the B40, whether subsidies, handouts, wage subsidy and so on. But why is it that the T60-1 always has to pay? Taking away their petrol subsidy is an indirect tax on them — and more money for the government. The key to improving the well-being of all Malaysians is to grow the pie — not in “robbing Peter to pay Paul”.

Do not keep weakening the middle class. Economic prosperity (with capitalism) and political stability (under democratic regimes) are possible only with a deep and wide middle class.