Mal’s Coalition cascades into chaos

When we posted How are the ‘adults’ managing our economy? on The Political Sword in April it seemed as if Turnbull’s administration of his Coalition couldn’t get any worse. We were wide of the mark! Now he sits apprehensively and indecisively on his house of cards, on tenterhooks lest he lose his balance, praying it doesn't collapse.

That piece was written as the 2017 Budget was being prepared. Scott Morrison was warning us about what we might be in for. Knowing that debt would increase, he tried to butter us up with talk of ‘good debt’ (spending on infrastructure) and ‘bad debt’ (recurrent spending on, for example, welfare). With his credibility in the doldrums, it is doubtful if anyone listened, let alone believed him.

The April piece on TPS began:
Who will ever forget the insults, the slurs, and the slander that the Coalition heaped upon Kevin Rudd, Julia Gillard and Wayne Swan as they managed the economy through the Global Financial Crisis and beyond? They were depicted as children playing games in their political sandpit with no idea of what they were doing, making one catastrophic mistake after another.

Remember how the Coalition boasted that the children should get out of the way and let the adults take over, insisting as they did that they were the experts at economic management. So convincing was the rhetoric that the electorate believed them and has consistently rated them as superior to Labor in economic management in opinion polls.

Recall the ‘debt and deficit disaster’, a mantra with which they assailed Labor for years. Remember the ‘intergenerational debt’ they accused Labor of accumulating.

Since their election in 2013 they have had their chance to show their much-vaunted expertise under the skilled management of Tony Abbott and Joe Hockey, and then Malcolm Turnbull and Scott Morrison, with Mathias Cormann a consistent shadowy presence. How have they done?
We know how they have done – appallingly. The Coalition’s incompetence and mal-administration is now legend.

Here are some contemporary facts:

Wages growth is the weakest on record, dating back to the late 1990s. Underemployment remains high with an increasing trend towards part-time work, creating the “gig” economy.

Reserve Bank governor Philip Lowe warns that record high household debt and record low wage rises are constraining consumer spending and hurting the economy.

The economy is under performing and will continue to do so through 2017 and beyond.

Stephen Koukoulas summarized the situation in The Guardian as follows: 
Based on the performance of the economy since the last fiscal update in December 2016, the budget is likely to confirm that this is a big-spending, big-taxing government with a strategy for continuing budget deficits and rising debt as it funds some of its pet projects.

It is all but certain that government debt will remain above 25% of GDP in 2017-18 and the forward estimates, meaning the government will be the first in the last 50 years to have spending at more than a quarter of GDP for eight straight years.

At the same time as spending is entrenched at high levels, the tax to GDP ratio is set to exceed 23% of GDP for only the eleventh time in 50 years. Tax revenue is growing solidly, in part in line with the expansion in the economy.

It is also close to certain that the level of net government debt will be projected to reach 20% of GDP, up from 10% when the Coalition won the 2013 election and the highest since the 1940s when the war effort boosted borrowing to record highs.
At as 30 June 2016, gross Australian government debt was $420 billion. In June 2017 the Turnbull government breached the $500 billion mark, (expressed alarmingly by some economists as half a trillion dollars) thereby doubling the deficit it inherited from Labor. Gross debt is projected to exceed $550 billion this year. Morrison is hoping to recoup some of this in this year’s budget with his $6 billion tax on the banks, but still intends to give a $65 billion of tax cuts to business!

We all know that housing affordability is worsening, locking out of the market young folk who do not have wealthy parents. The Coalition refuses to do anything about this as it sticks to negative gearing and the generous tax concessions around capital gains, thereby perpetuating the advantage moneyed investors enjoy over the young.

And as for the NBN, it continues to be a hybrid, copper-dependent mess that is not delivering what business needs, is rolling out far too slowly, and eventually will cost more than Labor’s superior FTTP design. It has been an Abbott/Turnbull debacle from the moment Abbott instructed Turnbull, then communications spokesman, to ‘Demolish the NBN’. Will it ever recover from that?

Need I give you any more evidence that our nation is steadily going backwards under the mal-administration of our economy by the Turnbull government?

On top of all this financial ineptitude, we have witnessed chaos writ large as Turnbull and the fractious conservative right squabble about how to handle the issue of same-sex marriage.

The chaos intensified when a postal ballot that will cost $122 million, was chosen. Astonishingly, the ballot won’t be carried by the Electoral Commission, but by the Bureau of Statistics, which has shown that it can’t carry out even a routine census proficiently. The High Court will decide if such an arrangement is constitutional. How the ABS will conduct the ballot is a mystery, as it’s a statistics-gathering organization. Long delays are likely before we will know the outcome of yet another Turnbull government stuff-up.

Then, as if that shemozzle wasn’t enough, Turnbull and his ministers have become entangled in the dual citizenship fiasco. They have been quite unsure how to handle it, and woefully inconsistent in their approach. Turnbull was only too ready in his characteristically sarcastic style to lampoon the Greens after Scott Ludlum and Clarissa Waters discovered their dual citizenship and resigned. “It shows incredible sloppiness on their part” bellowed our PM in parliament. Now, with several of his own ministers, no less the Deputy PM, the Deputy Leader of the Nationals, and his Minister for Industry, Innovation and Science all caught up in the saga, Turnbull’s barefaced inconsistency has been exposed. Canavan has been excluded from ministerial duties, while Joyce and Nash are permitted to continue as if nothing had happened!

All the time Turnbull is fighting a guerrilla war with the hard-right agitators in his party room, who threaten him with retribution unless he follows their dictates. He is so shackled, hog tied, clapped in irons – use whatever metaphor you like – that he is rendered impotent strategically, administratively, politically, and as a leader.

The voters continue to be unimpressed. We have now had the eighteenth Newspoll in a row where the Coalition trails Labor, this time by eight points: 54/46. If this trend continues, by February of next year Turnbull will have passed Abbott’s infamous record of thirty bad polls in a row, Turnbull’s raison d'etre for upending him.

Essential poll shows the same result. Turnbull’s satisfaction score continues on its poor trajectory, now minus 20. The Guardian features images from the Essential Report that illustrate Turnbull’s dilemma graphically.

Now that the Coalition sees defeat coming at election time, worried that Shorten’s “inequality” meme is biting, Mathias Cormann was sent out to launch a panicky attack on him in a speech at the Sydney Institute.

Writing in The Age in an article titled: 'Socialist revisionism': Mathias Cormann's doomsday warning of 'success exodus' under Bill Shorten, James Massola says: ‘Finance Minister Mathias Cormann has painted a doomsday scenario of Australia under a Shorten government, claiming a "cocky" Labor leader is relying on the politics of envy to propel him to the Lodge as people forget the failures of socialism. In an extraordinary speech …Cormann charged Shorten with making a "deliberate and cynical political judgement that enough Australians have forgotten the historical failure of socialism" and exploiting the politics of envy’, even describing Labor’s policies as akin to communist East Germany.  

Need I go on further to convince you of the widespread paralysis that is afflicting Mal's Coalition? You may care to remind yourself of what we published in April, just four months ago, in How are the ‘adults’ managing our economy? To do so click here.

The piece concluded:

The unavoidable conclusion is that this ‘adult’ government is economically incompetent, driven by its conservative rump, quite unable to see its way through the nation’s economic difficulties, incapable of analyzing the economic situation, inept at deriving solutions, bereft of planning ability, and hog-tied by ideological constraints. Moreover, it is so unutterably arrogant that it cannot see its ineptitude. And even if it could, would it be capable of doing anything about it?

As a substitute for informed opinions, all we get is self aggrandizement and platitudes from Turnbull, and a torrent of meaningless drivel from the Coalition's two motor-mouthed financial Daleks: Morrison and Cormann.

How has it come to this with the adults in charge?
Has the situation improved? You be the judge. Click here.

What is your opinion?
How do you assess the Coalition's performance?

Can it regain traction before the next election?

Let us know in comments below.

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Inequality amblyopia



Inequality amblyopia is a condition affecting some conservatives, who simply cannot see inequality when looking directly at it. The facts and figures that convince objective observers that there is increasing inequality in our nation, are simply not visible to them.

As in childhood amblyopia, or ‘lazy eye’ as it is called colloquially, there is nothing wrong with the eye. Amblyopia results from a developmental problem in the brain, not the eye. The part of the brain that receives images from the amblyotic eye is not stimulated properly.

In conservatives that part of the brain is where political concepts, ideology and entrenched beliefs live. So ingrained are these beliefs that no contradictory facts or figures can erase them. The beliefs are unshakable. Evidence has no impact; it is invisible.

This is why Scott Morrison was able to argue that rather than increasing in Australia, inequality was decreasing! He said: “The latest census showed on the global measure of inequality, which is the Gini coefficient, that is the accepted global measure of income inequality around the world, and that figure shows it hasn’t got worse, it has actually got better,”

Even if Morrison actually understood how the Gini coefficient was computed, what it measured, and the nuances that surround it, he is pushing his luck to base his refutation of Shorten’s inequality claim using only the Gini to 'prove' that inequality is decreasing, not increasing. More of this later.

For those not familiar with this measure of inequality, the following explanation extracted from Investopedia may be of value.
The Gini index or Gini coefficient is a statistical measure of distribution developed by the Italian statistician Corrado Gini in 1912. It is often used as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population. The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. A country in which every resident has the same income would have an income Gini coefficient of 0. A country in which one resident earned all the income, while everyone else earned nothing, would have an income Gini coefficient of 1.

The same analysis can be applied to wealth distribution (the "wealth Gini coefficient"), but because wealth is more difficult to measure than income, Gini coefficients usually refer to income and appear simply as "Gini coefficient" or "Gini index," without specifying that they refer to income. Wealth Gini coefficients tend to be much higher than those for income.
Morrison has likely made his assertion after reading the 12th iteration of The University of Melbourne Melbourne Institute’s annual study of The Household, Income and Labour Dynamics in Australia Survey (HILDA). The preface to the HILDA Survey explains that it ‘…seeks to provide longitudinal data on the lives of Australian residents. It collects information annually on a wide range of aspects of life in Australia, including household and family relationships, child care, employment, education, income, expenditure, health and wellbeing, attitudes and values on a variety of subjects, and various life events and experiences. Information is also collected at less frequent intervals on various topics, including household wealth, fertility-related behaviour and plans, relationships with non-resident family members and non-resident partners, health care utilisation, eating habits, cognitive functioning and retirement.’

The important distinguishing feature of the HILDA Survey is that the same households and individuals, 17,000 persons in all, are interviewed every year, allowing the study to see how their lives are changing over time.

Of relevance to this piece is one of the findings of this year’s HILDA: ‘The Gini coefficient, a common measure of overall inequality, has remained at approximately 0.3 over the entire 15 years of the HILDA Survey.’

The flakiness of using this measure to support a political point of view about the level of inequality in Australia is illustrated by Figure 4.2 on page 48 of the 2017 HILDA Survey, which details the Gini coefficient up to 2015 for males and females based on the weekly earnings of full-time employees. The graphs show a tiny downward flick for males (indicating less inequality), but there is a larger upward flick for females (indicating more inequality). The movements are so small that to claim inequality is decreasing is patently dishonest, particularly as the Gini for males and females go in opposite directions, females more than males.

Do take a look at Figure 4.2 below to convince yourself of Morrison’s deception.


The OECD Economic Survey Australia 2017 also comments on the Gini. It states: ‘The Gini coefficient has been drifting up [towards inequality] and households in upper income brackets have benefited disproportionally from Australia’s long period of economic growth. Real incomes for the top quintile of households grew by more than 40% between 2004 and 2014 while those for the lowest quintile only grew by about 25%.

You may care to look at Figure 3 on page 8 of this report that compares the Gini coefficient of Australia, Canada and the US. It shows how much the income of the top 1% has grown, as it benefitted most from the economic boom.

So let’s dismiss any serious claim that Gini ‘proves’ that inequality is decreasing in Australia. There is so much other evidence to the contrary that inequality amplyopia must be affecting the brains of those who argue so.

Conservative commentators too, such as Adam Creighton, economics correspondent for The Australian, and Paul Kelly, editor-at-large, were quick to attack Shorten’s call of inequality. Creighton wrote a headline in The Weekend Australian of July 22-23 that read: ALP’s ‘false’ pitch on inequality. He goes on to assert that Shorten’s claim that inequality is at a 75-year high is ‘patently false’. Creighton supports his argument by quoting Professor Roger Wilkins, author of HILDA, who told an Economic and Social Policy conference that “Inequality is still relatively high by modern standards but the narrative that says inequality is ever rising is patently false…”, and that the proportion of Australians over 15 with incomes less than half the median level of income had fallen to about 10%, adding “That if anything inequality has been declining”.

So the game, as always, is to quote the data, or the person that supports the argument being made. This is what Morrison, Creighton and Kelly have done, shamelessly, although it flies in the face of the facts and figures.

Yet, ask the average person in the street whether they believe that they, or Australians in general, are becoming better off or worse, and the predominant answer will be ‘WORSE’.

Writing in Crikey, political editor Bernard Keane says: ‘We're missing the point on inequality. Arcane debates about measures of inequality don't deal with the day to day perceptions of voters of an economic system that has stopped delivering for them.’

He goes on: ‘Is inequality in Australia getting worse? Is the Gini coefficient going up or down? Who’s right, Bill Shorten or Scott Morrison and the conservative newspapers beating the bushes for academics who’ll back them up? It doesn’t matter, and the longer the government and its media allies debate it, the more they’ll play into Shorten’s hands on what will become a key issue for the next election.

'Inequality is a central outcome of the kind of market-based economic reforms we’ve pursued since the 1980s. That’s how neoliberalism works. It has made us all wealthier – even the poorest Australians are wealthier than they were 30 years ago, in real terms. But the wealthiest have benefited more than the rest of us. This is indisputable.'

Writing in the same issue of Crikey Helen Razer says Inequality IS the point’. She continues: ‘Inequality has reached a crisis point in Australia, no matter your definition. The poor can't afford homes or electricity, and something has to be done. Rising inequality, says the Leader of the Opposition, is a terrible fact of Australian life. Rising inequality, says the Treasurer, is a non-fact that opposition leaders evoke when what they really want to do is stunt economic growth.

'The Herald Sun says that everyone should just shut up about rising inequality, because causing people to worry about what they don’t have and can’t get is a destructive “politics of envy”. There’s no point in scrutinising the odd claims of the Herald Sun – it’d be a bit like arguing with my Aunty Dot about global warming three sherries in. But there must be a point in scrutinising what is meant by “inequality” and how much of it we have, or don’t have, in this nation.’


Also in Crikey Alan Austin writes: ‘ Company reporting season begins this week with confidence sky high that record annual profits will be achieved. With these will come exciting news of higher executive salaries, well-earned performance bonuses and, of course, increased shareholder dividends. These are already being hailed by the corporate media as proof that all is well with the world. Meanwhile, data on Australia’s economy published in July confirms two things. First, that much of the increased income and wealth accruing to rich corporations and individuals is taken from the poor and the middle. And second, that this rate of transfer is accelerating.

Peter Martin, economics editor at The Age frontally addresses the disparity between Shorten’s claims and Morrison’s in his article: HILDA. Why we're suddenly concerned about inequality. Things have stopped getting better.

Martin begins: 'Bill Shorten's on to something. Not the pointless debate over inequality – whether it's rising or not depends on what you measure – but the truth that lies beneath the debate. It's that, unusually, life is getting harder.'

He goes on: 'In all but four of the past 15 years, things were getting better. Two of those four years followed the global financial crisis. The other two were the two most recent years for which we have data: the first two full years of the Abbott-Turnbull government. It means that whereas before the election of Tony Abbott, a typical Australian family took home about what it did in 2009, it now takes home less, after adjusting for inflation.'

He quotes Shorten: ‘As Shorten put it in a speech that purported to be about inequality but was actually about declining real incomes, "It feeds that sense, that resentment, that the deck is stacked against ordinary people, that the fix is in and the deal is done." We didn't get that sense when ordinary incomes were rising, even though inequality was widening. Only now, when real incomes are slipping, do we feel resentful. And it's mainly men who are resentful. Female earnings are trending up, especially those of women employed full-time. Male earnings are trending down.’

Can Morrison or Creighton or Kelly counter these feelings? Especially when the average Joe sees corporate high fliers sitting on salaries and bonuses that often run into millions. No, not with their amblyotic vision! The visual centre in their brains can’t process the facts and figures that we all can see.

Let’s look at some of the facts that Martin extracted from HILDA:

Education:
University graduates earn much less than their predecessors used to ($1023 a week, down from $1468) and they are much less likely to be in full-time jobs four years later (73 per cent, down from 91 per cent). Australians with only a high school qualification are even worse off. When the survey started, 81 per cent of them were employed full-time within four years. Now it's 62 per cent.’

Work:
As more and more of us work in part-time rather than full-time jobs, an increasing proportion are combining part-time jobs in order to work full-time. This means that part-time jobs are more common than the Bureau of Statistics survey suggests and that full-time jobs are harder to get.

Australians are working longer without waiting for the pension age to rise. The typical retirement age has climbed from 62 to 66 for men, and for 61 to 64 for women. And retirement is less likely to be a one-off event. Thirteen per cent of men who retired between the ages of 60 and 64 find themselves back at work within a year, up from 9 per cent. Seven per cent of the women who retired between 60 and 64 find themselves back at work in a year, up from 4 per cent.’


Superannuation:
‘Even now, a quarter of a century after the introduction of compulsory superannuation and 15 years after compulsory contributions of around 9 per cent, the balances of retirees are surprisingly low.

‘Thirty per cent of men retire without super, and 29 per cent of women. The men who do have super retire with a typical balance of $325,200; the women with $110,952. That typical balance is the median, meaning half of the retirees will have more, and half less. The mean (average) is much higher, pushed up by very big retirement balances at the top.

‘Retirees with low balances are highly likely to use them to pay off debts, obliterating 58 per cent of their super (men) or 70 per cent (women) in one go.’


Home ownership:
’Home ownership rates for the under-40s have collapsed. In 2002 when the survey began, 32.5 per cent of 18- to 39-year-olds owned a home. It's now 24.9 per cent.

‘The proportion of men in their early-20s living with their parents has jumped from 43 per cent to 60 per cent. The proportion of early-20s women staying at home has jumped from 27 per cent to 48 per cent.

‘Those who can buy houses find it hard to pay them off. The average mortgage taken out by a young homebuyer has almost trebled – jumping from $120,813 to $330,687. Going back to the same homeowners year after the year the survey finds that in most years the amount owed climbs as a substantial minority of young homeowners refinance or redraw or fall behind on their loans. HILDA author Wilkins says if they continue like this – using their mortgages to fund day to day expenses – there will be "real implications for future aged pension liabilities".’


Martin concludes: 'Australia remains a wealthy country. But it isn't absolute wealth (or even relative inequality) that matters most when it comes to our feelings. It's whether or not things are getting better. HILDA suggests they are getting worse.'

The following McCrindle image of Australian Income and Wealth Distribution 2016 summarizes inequality in this country graphically:



Morrison, his Coalition colleagues, and their conservative cheerleaders in the media are petrified about the impact of Shorten’s inequality message. No matter what counter messages they shout over the airwaves or through the Murdoch media, they know that the people out there, most of whom have never heard of the Gini coefficient, let alone its variations over time, realize that they are worse off than before, know that life is getting harder for them as their wages stagnate while the costs of living continue to rise. They know that as they struggle to pay off their mortgage and their rising power bills they have less and less for food and other essentials. No amount of tough talk from Morrison and Co., no amount of quoting Gini, no amount of slick political blather will convince them otherwise.

The sad fact is that despite these verifiable facts, Morrison and his Coalition colleagues are incapable of processing what everyone else can see, now reinforced by HILDA data. They can see the facts just as anyone else can, but because of their inequality amblyopia their brains cannot process these facts, distorted as their thinking is by inbuilt ideological biases and deeply entrenched beliefs. Their eyes see the facts; their brains cannot, and never will.

Only by recognizing this form of amblyopia will ordinary citizens ever be able to understand how conservatives can deny that life is getting more difficult for so many, how they can deny that inequality is increasing.

Shorten is on a winner.




Postscript: If any of you doubt the soundness of the 'inequality amblyopia' allegory, you might be interested to read a pertinent article in Friday's issue of The Conversation: How do you know that what you know is true? That’s epistemology by Peter Ellerton, Lecturer in Critical Thinking at The University of Queensland.

Do you believe inequality is increasing in this nation?

Let us know what you think in ‘Comments’ below.

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Economic geniuses perform epic back flip



The sheer effrontery of our politicians never ceases to astonish me. To them black can be white, and in an instant white can be black. It is not just the monumental back flip that such a change of language involves that astonishes me, it is the bald-faced nerve they exhibit when they change course to the opposite direction, as if nothing had happened! The 2017 Budget starkly exemplifies this.

So burned into our neural networks are the slogans, the mantras, and the catchphrases of past eras that no change of heart, no change of language, no denial of history can ever erase them. Check your memory of the Abbott epoch to see if I’m right.

You will remember the Coalition’s sarcastic description of Labor’s economic team as being quite unsuited for the complex task of managing the economy during the Global Financial Crisis. It insisted they should stand aside and let the adults, the superior economic brains in the Coalition, the geniuses at economic management, take over. Labor’s team was depicted as kids playing games in a sandpit.

Let’s go back then to the time of the GFC, an emergency that threatened economies the world over.

You will remember that at that time the advice of Treasury Secretary Ken Henry to PM Kevin Rudd and Treasurer Wayne Swan was to provide economic stimulus, (which was plainly Keynesian) and to “go hard, go early, go households”.

They did, with cash handouts and infrastructure projects. The Rudd/Swan response was a spectacular policy success, tarnished only by poor implementation of the so-called ‘Pink Batts’ program by the Department of the Environment, during which the lives of four workers were tragically lost.

You will recall that while the Coalition supported the initial stimulus, although castigating the government for sending cheques overseas and to some deceased people, it reneged on supporting the second tranche – the bulk of the infrastructure stimulus. Prominent in that tranche was Julia Gillard’s ‘Building the Education Revolution’ that involved the construction of new and refurbished school halls, libraries and classrooms, science laboratories and language learning centres, covered outdoor learning areas, shade structures, sporting facilities and other environmental programs.

Infrastructure
You will remember the sarcasm that the Coalition heaped on these infrastructure projects, not only criticising elements of them, their suitability and their cost, but pouring contempt on the concept of infrastructure spending, which Tony Abbott and his Shadow Treasurer Joe Hockey deemed a waste of money. Malcolm Turnbull too chipped in with his two-penneth. Yet that infrastructure endeavour not only gifted thousands of schools with much-needed amenities and facilities, which now enhance them splendidly, but it also gave local builders work and hardware suppliers business. It kept many a small town going at a time when many businesses were threatened with closure, and many workers were facing unemployment.

Now, in 2017, suddenly Treasurer Scott Morrison tells us that spending on infrastructure is fine as it accumulates ‘Good Debt’. To confirm his newfound belief in the value of infrastructure spending, his Budget features a plethora of such projects: road, rail, airport, hydro, and energy infrastructure, many with timelines stretching into the distant future. While there will be debate about the merits of some and their timing, Labor is not condemning them as a waste of money, as it has always appreciated what Morrison has just awoken to, that infrastructure spending, especially when interest rates are low, is good for the economy.

Here then is the first example of how the Coalition’s economic geniuses, after all their previous scathing condemnation of infrastructure spending, have finally had the scales fall from their eyes, have seen its value, and have endorsed it extravagantly. But have they acknowledged their epiphany? Of course not!

Debt and deficit
Next, let’s reflect on the ‘debt and deficit disaster’. Remember how almost daily newspaper headlines trumpeted: ‘Labor’s financial mismanagement’, ‘Debt spiralling out of control’, ‘Budget in freefall’ and ‘Labor's debt time bomb’. There was even a truck doing the rounds with ‘Labor’s Debt’ festooned on placards.

Joe Hockey was sarcastically indignant about budget ‘blowouts’ and revenue shortfalls. He revelled in lampooning a mining tax that raised no revenue. He insisted that a Labor government would never achieve a budget surplus. “It was not in their DNA”, he asserted. But of course it was in the Coalition’s DNA. It knew what to do. But as we know it didn’t. Year after year it showed it had no idea how to achieve a surplus! Now Morrison thinks he’s found the magic formula.



Scared of a downgrade by the rating agencies, Morrison’s magic formula for a surplus in the 2017 Budget curiously still includes a corporate tax cut for big businesses and multinationals, no longer costing $50 billion, but now $65 billion, still predicated on a mythical trickle down benefit for those at the bottom of the heap. Surprisingly, while he gives with one hand he takes away with the other by imposing a new tax on the five big banks, levied on various types of borrowing that banks use to fund their lending, including corporate bonds and large deposits. Good luck with that one!

Here is Alan Austin’s assessment of Rudd/Swan period in his October 2016 article in Independent Australia: Australia’s debt mismanagement under Turnbull: It’s worse than you think. 
Over the entire period of the first Kevin Rudd Government, debt was added at the rate of $2.85 billion per month. This was required to deal with the early onset of the global meltdown. This rate of borrowing increased slightly through Julia Gillard’s term until the GFC was over in early 2013. Through her last eight months, the gross debt added each month averaged just $1.02 billion. For Labor’s entire duration, the monthly increase averaged $3.06 billion.

Then came the appalling maladministration of Tony Abbott, during which $4.75 billion was added each month, without any justification related to global conditions. This resulted from wasteful spending on a colossal scale and refusal to collect taxes from the rich.
Further on, Austin writes:
Malcolm Turnbull then successfully challenged Tony Abbott for the prime ministership primarily because Abbott had “... not been capable of providing the economic leadership our nation needs.”

So what happened thereafter? Did the new regime start to repay the debt, as it had been promising to do for years? Not at all! Further fresh debt was added in Turnbull’s early months at a rate just below Abbott’s figure. That has since blown out disastrously, with more than $8.5 billion borrowed per month over the first four months of this financial year. Turnbull’s total rate has been $4.78 billion per month.

Gross debt is now $450.79 billion. This is $173.4 billion higher than the $277.4 billion Labor left in September 2013, up 62.5%. Net debt has also risen alarmingly. We only have the figures until the end of August, but these reveal a rise of $15.9 billion just since June, up 5.35% in two months to $312.3 billion. This is $137.7 billion above Labor’s $174.6 billion legacy, up 78.9%.
This was written six months ago. The situation is even worse now. The adults, the economic geniuses, have produced the situation reflected in their latest Budget.

“We don’t have a revenue problem; only a spending one”: Morrison
For as good an analysis of the Budget as you could wish for, and a scathing assessment of Morrison’s mantra, do read Greg Jericho’s article in The Guardian: Federal budget 2017: the 10 graphs you need to see: 
There was a revenue problem after all!
After nearly a decade of saying the problem was all on the spending side, the 2017-18 budget is where the Liberal party has finally admitted that there is a revenue problem.

The 2017-18 budget estimates that by 2020-21 the budget will be firmly back in surplus, and it does it mostly off the back of government revenue returning to the level it was during the surplus years of the Howard government.

In the 11 years prior to the GFC, when the budget was either in surplus or balance, government revenue averaged 25.1% of GDP. In the nine years since the GFC, the highest it has been is 23.4%, and this year it was just 23.1%.

To give some context, 2% of GDP is around $34bn, so it’s a fair gap. But that gap is about to be reduced.

The budget predicts that by 2019-20 government revenue will reach 25.1% of GDP and in the following year a very healthy 25.4%. The last time we saw revenue at that level was in 2005-06.

To get there the budget anticipates revenue growing over the next 4 years by around 4.4% in real terms. That growth was not uncommon during the mining boom years, but has been reached only once in the past nine years.

And what is the revenue that is growing? Income tax.
In other words – revenue was a problem after all! The economic geniuses were wrong, again.

Morrison has now predicted that the long-wished-for surplus will first appear in 2019/20, four years from now! Let’s see if this prediction, based on very optimistic assumptions, is any better than his other predictions.

There it is. For years, the Coalition boasted about its prowess in economic management and denigrated Labor’s. For years, the Coalition decried infrastructure spending. For years the Coalition trumpeted the ‘debt and deficit disaster’, which it insisted that Labor created and turned into a ‘budget emergency’. For years the Coalition was adamant that it did not have a revenue problem, only a spending one.

Only now, with the 2017 Budget, has the Coalition and its financial geniuses tacitly admitted that infrastructure spending is ‘good debt’, that it has been even less effective at reducing debt and deficit than Labor, that it will not produce a surplus until 2019/20, and then only if its heroic assumptions come true, and that indeed it does have a spending problem, which it intends to solve with higher taxes on everyone.

It’s taken only four years to awaken to the bleeding obvious and back flip spectacularly. That’s real genius!

How much longer will it take these geniuses to wake up to the error of giving large tax cuts to the big end of town? How long will it be before they cotton onto what has been known for decades, namely that such largesse does not and never has trickled down to the masses?

How much longer though will it take for Morrison, Cormann, Turnbull, Abbott, Hockey and Co. to say: “We were wrong, very wrong”?

Don’t hold your breath!




What is your opinion?
Let us know in comments below.

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How are the ‘adults’ managing our economy?



Who will ever forget the insults, the slurs, and the slander that the Coalition heaped upon Kevin Rudd, Julia Gillard and Wayne Swan as they managed the economy through the Global Financial Crisis and beyond? They were depicted as children playing games in their political sandpit with no idea of what they were doing, making one catastrophic mistake after another.

Remember how the Coalition boasted that the children should get out of the way and let the adults take over, insisting as they did that they were the experts at economic management. So convincing was the rhetoric that the electorate believed them and has consistently rated them as superior to Labor in economic management in opinion polls.

Recall the ‘debt and deficit disaster’, a mantra with which they assailed Labor for years. Remember the ‘intergenerational debt’ they accused Labor of accumulating.



Since their election in 2013 they have had their chance to show their much-vaunted expertise under the skilled management of Tony Abbott and Joe Hockey, and then Malcolm Turnbull and Scott Morrison, with Mathias Cormann a consistent shadowy presence. How have they done?

I am indebted to one of our most astute political commentators, Bernard Keane, Crikey politics editor, for the best analysis I have read of the Coalition’s economic performance over the last four years. You can read it in its entirety in his article in the April 3 edition of Crikey: How the deficit was blown: The Coalition’s $100 billion bill.

I have drawn heavily on Keane’s analysis and have quoted from it substantially. Here is an abbreviated version of it. Sit down before you read it, and have a tranquillizer handy.

Keane begins:
”Since its election in 2013, the Coalition has given away $46 billion in political decisions, and signed the Commonwealth up to $50-60 billion in long-term spending that will hammer the federal budget for decades to come. (My emphasis.)

“The 2013 Pre-Election Fiscal Outlook, produced independently by Treasury and Finance, forecast a return to surplus this financial year and net debt peaking last year at $219 billion.

“The Coalition’s first budget forecast a return to surplus in 2018-19 and net debt peaking at $264 billion.

In MYEFO at the end of 2016, the budget was forecast to be still $10 billion in deficit in 2019-20, when net debt would be $364 billion.
Can you believe that after their promise to return the budget to surplus this year, and their assurance that net debt would be confined to $219 billion last year, the ‘adults’ subsequently told us that the budget would not return to surplus until 2018/19, and later that in 2019/20 we would still have a $10 billion deficit and that net debt would balloon to $364 billion, twice as high as Labor’s deficit ever was! No wonder the ratings agencies are breathing down their necks! And they still claim that the situation would have been much worse had Labor still been in government!

While Keane acknowledges that much of the spectacular deterioration of the budget under the Coalition is due to revenue write-downs, he asserts that “the government has worsened its own position through a series of political and ideological decisions that give the lie to its claims to be the victim of an irresponsible Senate”. He details the substance of those decisions as follows:
  • an $8.8 billion gift to the Reserve Bank to make the 2013-14 budget deficit look worse, and earn future dividends for the government.
  • Repeal of the carbon price cost the Commonwealth around $12.5 billion in lost revenue over the forward estimates and at least $1.8 billion per annum beyond that (based on a conservative estimate by the Climate Institute, lower than the government’s own estimate)
  • The government’s company tax cuts agreed last week will cost $5.2 billion over the forward estimates.
  • Repeal of the mining tax – despite the government’s claims that it raised no money – cost it $3.5 billion over the forward estimates, according to budget papers.
  • The reversal of Labor’s changes to Fringe Benefits Tax reporting requirements to end the rorting of novated leases cost, by its own admission, $1.8 billion over the forward estimates.
  • Income tax cuts for middle- and high-income earners cost $3.8 billion.
  • The ineffective Emissions Reduction Fund so far is costing $2.55 billion, although the government has decided no further funding will be wasted on it.
  • A Northern Australia Infrastructure Fund, established with no effective oversight, assessment or evaluation mechanisms and flagged as a funding source for unviable coal mining projects, will cost $5 billion.
  • A National Water Infrastructure Development Fund established as a funding source for Barnaby Joyce’s obsession with building more dams, is costing $0.5 billion.
  • A scheme to prop up dairy farmers threatening to desert the National Party, via the discredited means of concessional loans, is costing $0.55 billion.
  • Australia’s continuing participation in Middle East military ventures has so far cost $0.72 billion since Tony Abbott sent Australian forces back to Iraq in the name of fighting the “existential threat” of ISIS.
  • The government is spending $0.24 billion on a school chaplains program, although further funding has been halted for now.
  • Nick Xenophon extracted an additional $0.37 billion worth of conditions as price for his support for company tax cuts last week.
Keane lists several significant costs beyond the forward estimates from a number of other government measures:
  • The disastrous F-35 joint strike fighter program will cost taxpayers at least $17 billion over the period to 2023. There are new problems with the aircraft that are not being addressed or are worsening, and with no guarantees the cost will not escalate further.
  • The government’s decision to reverse the Abbott government’s approach and construct the new generation of Royal Australian Navy submarines in Australia is expected to add up to 30% to the $50 billion cost of the program in order to provide less than 3000 jobs in South Australia.
  • The company tax cuts agreed last week will cost $25 billion over ten years, although the government remains hopeful it can increase that cost to $50 billion! although there remains no evidence from anywhere in the world of any economic benefit from company tax cuts. (My emphasis)
  • The continuing fiscal impact of some of the above measures beyond the forward estimates will cost the budget, on a conservative estimate, $6 billion per annum (unindexed)
  • .
Although some of the decisions were backed by Labor such as the submarines decision, which will cost the taxpayers many billions of dollars, the F-35 purchase, and the income tax cuts, “these decisions are in defiance of evidence, represent the triumph of ideology over reason, and in many cases were rankly political." (My emphasis)

Worse, some of them are likely to generate new waves of spending: the removal of an effective, cheap carbon price in 2014 created an energy policy vacuum that led directly to the current energy crisis and proposals from the government to spend billions of dollars re-entering the power generation industry.

Our military involvement in the Middle East looks set to increase, not decrease, in coming years.

The cost of poor decision-making will be borne by taxpayers for years, even decades, to come.” (My emphasis)
It would be hard to imagine a more condemnatory account of the Coalition’s ‘adult’ management of the nation’s economy in the four years since 2013. Its predictions have all been wrong. The ‘adults’ have steadily worsened the nation’s fiscal situation. The 2019-20 budget is projected to still be $10 billion in deficit, the promised surplus is nowhere in sight, and the nation’s net debt is projected to be $364 billion, twice as high as it ever was under Labor!

In an update in Crikey Weekender: Seven new terrible economic records ScoMo set in March - Scott Morrison has some new records to add to his quest to be known as Australia's worst treasurer reads: "The Office of Financial Management released figures last week showing gross borrowings at $484.6 billion. Of this, $58 billion is residue from the Howard government or its predecessors. Labor increased it by $212 billion. Another $214.6 billion has been added since the 2013 election. Hence the Coalition has now more than doubled Labor’s gross debt, in three years and six months. It doubled Labor’s net debt in January."



The unavoidable conclusion is that this ‘adult’ government is economically incompetent, driven by its conservative rump, quite unable to see its way through the nation’s economic difficulties, incapable of analyzing the economic situation, inept at deriving solutions, bereft of planning ability, and hog-tied by ideological constraints. Moreover, it is so unutterably arrogant that it cannot see its ineptitude. And even if it could, would it be capable of doing anything about it?

As a substitute for informed opinions, all we get is self aggrandizement and platitudes from Turnbull, and a torrent of meaningless drivel from the Coalition's two motor-mouthed financial Daleks: Morrison and Cormann.

How has it come to this with the adults in charge?


What do you think?
What is your assessment of Scott Morrison as Treasurer?

Should he be replaced?

If he needs to be replaced because of incompetence, who should replace him?

Let us know in comments below.

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Toxic talk



Are you as offended, as disgusted as I am with the language used by our politicians day after day? Have you noted how mean-spirited, antagonistic and adversarial their words so often are?

They use words like poison arrows aimed at the heart of their political opponents and those in our society whom they despise.

They have no concern for the damage their arrows might inflict, or how injured or offended their targets might feel. Wounding, disabling, hurting, demeaning is their purpose. The more damage they can inflict, the more satisfied they are.

It’s akin to schoolyard bullying, but much worse. Can you recall language as ranting, as poisonous, as hurtful, as damaging, during your school days? I can’t.

Listen to them – try to pick their targets, and watch their reaction.

There is a group that conservatives loathe passionately – those at the bottom of the social scale who rely on welfare support: the unemployed, the job seekers, the homeless, the disabled, and the mentally ill. They are Joe Hockey’s ‘leaners’.

This derogatory language goes back a long while. Do you remember when Tony Abbott, as a minister in the Howard government coined the tag ‘job snobs’ to denote those who were too lazy to look for a job, or too fussy about what work they would do and where, or too demanding about terms and conditions? Those who eventually did get a job might then oversleep, or not turn up because the travel was too arduous or inconvenient or they had no transport, or they would leave work early or slack on the job – thus the tag ‘job snobs’. When job seekers moved onto Newstart, the term morphed into a peculiarly Aussie term: ‘dole bludgers’.

Joe Hockey upped the ante when he pushed his ‘end of entitlement’ message, first at a conference in Britain. Far from trying to conceal his theme, he proudly shouted it from an international pulpit. His point was that there were some, indeed too many, who felt entitled to welfare, entitled to support from the government, and of course the taxpayer, if they had no job. Not long after we heard his now-infamous descriptor – ‘leaners’ – to designate this despicable mob, who depended on Hockey’s ‘lifters’, the good guys who had a job or a business, who pay their taxes and support the idle leaners.

Hockey’s message did not go down well, especially when those castigatory tags were given effect in his punitive 2014 budget, in which he punished the leaners and the less well off. Even his own supporters recognized that his budget was unfair. Rudiments of it still languish in the Senate wistfully awaiting endorsement.

Then along came Scott Morrison, keen to transmit the same message but unwilling to use Hockey’s tags. So he coined some of his own, not as elegant as Joe’s, but replete with the same pejorative meaning. So now we have the ‘taxed’ and the ‘taxed-nots’. As keen as Hockey, and Abbott before him, to divide our nation into ‘them and us’, into ‘the deserving and the undeserving’, Morrison launched his unique tags at the Bloomberg Summit on the economy last week.



Here’s what he said:
“A generation has grown up not ever having known a recession, of seeing unemployment rates at more than 10% … On current settings, more Australians today are likely to go through their entire lives without ever paying tax than for generations. More Australians are also likely today to be net beneficiaries of the government than contributors – never paying more tax than they receive in government payments. There is a new divide – the taxed and the taxed-nots.”
Remember though that in his mind the ‘taxed-not’ cohort are the dole bludgers, the leaners, those who suck the welfare system dry because they don’t, won’t, or can’t work and therefore pay no taxes. Somehow, the almost 600 companies, major ones such as Qantas, Virgin Australia, General Motors, Vodafone, ExxonMobil, Warner Bros Entertainment, Lend Lease and Ten Network Holdings, who paid no tax last financial year, were not mentioned. Nor were international giants Apple, Microsoft and Google, who paid very little tax here on the large profits they earned in this country. Presumably Morrison does not categorize them as ‘taxed-not’. Why?

The reason behind Morrison’s apparent inconsistency is ingrained conservative ideology. Conservatives believe that we get what we deserve. Those who work hard, or are entrepreneurial enough to own a business, deserve the monetary reward they get, and what’s more deserve to keep that reward and not have governments take it away as taxes and give it to others, to those who do not work and earn. Thus we hear endlessly that Liberals want to reduce tax, and have seen them propose to do that, even for the wealthiest. The promised $48 billion tax cut to businesses awaits the verdict of the Senate.

Moreover, conservatives believe that those who have little deserve their impecunious state. They have not worked, or have not worked hard enough, or have not saved enough, and therefore deserve to be poor. These people ought not expect to get handouts from others, or from their government. They deserve their poverty-stricken situation, and should not expect the milk of human kindness to be offered to them. This view is consistent with George Lakoff’s model of politics. Using the metaphor of nation as family and government as parent, he argues that conservative politics corresponds to the strict father model that posits that people should not look to the government for assistance lest they become dependent. Conservatives regard the inequality that is a sequel to such an ideology as part of the natural order. There have always been lords and ladies, and serfs to bow to them and serve them. They see no need for egalitarianism in what they see as an inherently unequal world.

We ought therefore to not be surprised when we hear Scott Morrison or Mathias Cormann or Kelly O’Dwyer perpetuate ’the workers versus the bludgers’ way of thinking. Remember the fury Eric Abetz generated while he was Minister for Employment when he sought to introduce a rule that the unemployed must complete forty job applications a month. As far as he was concerned, they had nothing better to do. The impracticability of this soon mugged him, particularly when it became apparent that it was unlikely that forty jobs would be available in Tasmania close to where the job seeker lived. His object was not really to find a job for these people; it was to punish them with ‘homework’ for being unemployed.

Abetz reasoned:
"We undertook what we believed would be a fair consideration of an application of a job every morning and every afternoon should not be too onerous."

"There doesn't seem to be a community complaint with the cut-off of 20 job applications per month, so one assumes one might be able to increase that without too much extra community concern.”
Eventually, the idea was scrapped out of concern that employers would be ‘swamped with fake job applications’, rather than the imposition on job seekers of forty applications a month was unreasonable and stupid.

So long as conservatives are in power, we can expect this toxic talk to continue, directed as it is at what they see as a lesser grade of citizens, a poorer class of people. It is a reflection of their entrenched ideology, which they will not, indeed cannot change. It is in their DNA.

There is another variety of toxic talk, one that we witness, in fact suffer every day, many times a day. We see it whenever politicians are confronted with uncomfortable facts. Rarely prepared to say: ‘We messed up’, ‘We made a mistake’, or more benignly ‘We could have tried a different approach’, they barrage us with a deluge of disingenuous words to justify their actions, and just as deceitfully, to blame others for the situation.

All politicians are adept at this stratagem. Blame shifting, and aiming their poison arrows at their opponents, comes easy. But few do it as spitefully as our odious Minister for Immigration, the Honourable Peter Dutton.

Confronted recently with the shocking report by Save the Children about the impact prolonged detention was having on children held on Nauru, he quickly dismissed reports of sexual assault and abuse as ‘hype’ and ‘false allegations’. He went on to roundly condemn The Guardian and the ABC for promulgating the report and the ugly accusations it contained.

He accused those seeking to expose the awful occurrences on Nauru as maliciously denigrating the government’s effort. Never was there a concession that things were bad on Nauru, and needed urgent attention. To Dutton, this report was a storm in a teacup, exaggerated out of proportion. He maintained that protective systems were in place and operating effectively. He accused asylum seekers of setting themselves on fire, deliberately self-harming, or making false allegations of sexual assault in order to come to Australia. He airily dismissed the reports of sexual assault, child abuse and self-harm written by detention centre staff, insisting: “Most of that’s been reported on before.”

To Dutton, whistleblowers are simply troublemakers hell bent on embarrassing him and the government.

He was quick to add that the genesis of this situation was Labor’s relaxation of ‘border control’, and the resultant arrival of thousands of boat people, with hundreds drowning on the way (he has always got his figures off pat). His argument is that if only Labor had continued the Howard border protection policies, this situation would not have arisen. Now poor Peter has to cope with Labor’s legacy of neglect and incompetence!

So he delivered the double whammy: nothing much was wrong on Nauru, and what was wrong was Labor’s fault anyway.

Perhaps more than most, it is those ministers who are tasked with managing the nation’s finances who most regularly engage in toxic talk. Never prepared to concede that they haven’t got all the answers, or that they might have achieved a better result with another approach, they continue to blame the previous Labor government for their fiscal woes. We are regularly reminded about Labor’s legacy of profligate spending, ‘debt and deficit’, and Labor’s determination always to raise taxes, and never to cut spending. It matters not that under the Coalition spending has increased, taxes have risen, and the deficit has ballooned; it is still all Labor’s fault. Labor continues to be condemned with this toxic talk, this disingenuous language, extravagantly embellished with straight-out lies.

I could go on for pages recounting this type of toxic talk that so infuriates us all day, every day. I wrote about it extensively on The Political Sword almost eight years ago in The curse of adversarial politics. It is still worth reading. The penultimate paragraph reads:
“Those who despise adversarial politics find it to be contemptible, a damaging affliction on our political system. They resent the stifling impediments it places on governing, on governments carrying out what they promised the electorate they would do. They see it as focused on ‘winning’, on gaining a political advantage, rather than telling or establishing the truth, or contributing usefully to the discourse.

“It sets the teeth of the electorate on edge, which ‘turns off’ in despair. Voters would prefer politicians to be open and upfront, more focussed on the good of the nation, less willing to corrupt the usually-worthy principles that brought them into politics in the first place. Adversarial politics may be an important reason the public has turned away from politics and has become cynical about the motivation and behaviour of politicians. The more adversarial politics becomes, the greater the erosion of voter engagement and threat to the democratic process.”
That was written eight years ago. What’s changed? Nothing!

The public loathes toxic talk as much as ever. Will politicians ever learn?




What do you think?
Let us know in comments below.

How do you feel about the way politicians use pejorative words to describe citizens they despise?

How do you feel about the adversarial language our politicians use against each other?

What do you feel about the way they use toxic talk to attack and berate each other?

How would you prefer them to behave?



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The tale of two Daleks



Good Daleks are hard to find. They’re expensive. But for the Treasury and the Department of Finance, no cost is too high. So they spared no expense in their search for reliable Daleks that could repeat their messages tirelessly. They had hoped to find some with a rudimentary knowledge of economics and some understanding of finance, but had to settle for ones that at least could recite mind-numbing messages repeatedly and consistently.

After a long search, and after discarding some defective ones that seemed incapable of learning their lines, they settled on DM and DC as their primary Daleks, and KO’D as a trainee.

DC had had previous experience in finance, and had been programmed so often to repeat the same words and phrases that he needed no further programming. He was brilliant. No matter what the question, he would repeat the same mantras and catchphrases with his inimitable accent, which had an insistent Germanic tone to it. Indeed, he was so good that he became a tutor for DM who previously had been used in Immigration. DC tried to tutor KO’D, but gave up – she was too inclined to go off-message.

When DM was in Immigration, he had been programmed to repeat ‘Stop the boats’; ‘We’ll turn the boats around when safe to do so’; ‘We don’t discuss on-water operational matters’; ‘This government is not running a shipping news service for people smugglers’; ‘We are running a military-led border security operation which is stopping the boats’; and ‘We’ve taken the sugar off the table’.

When he was used in Social Services he would repeat: ‘The age of entitlement is over’, a mantra used by another Dalek, discarded because he was past his expiry date and had been exported second-hand to the US. It must have been an oversight, but DM was not programmed to label people as either ‘lifters’ or ‘leaners’.

The programmer of these Daleks was so skilful that they always repeated the same phrases, word perfect, again and again and again, so much so that anyone remotely interested in politics could recite them by heart. Some voters, too wedded to political discourse on TV for their own good, slowly became obsessive-compulsive, and sat in their corner of the psychiatric ward muttering the lines they had heard so often. “Jobs and Growth’ was so imprinted that it was impossible to erase this mindless utterance. Every time the TV was turned on, there were the Daleks regurgitating their lines, over and over, monotonously, word perfect.

What’s more, they were carefully programmed:
  • to talk quickly, as if firing verbal bullets’;
  • to talk loudly;
  • to talk incessantly;
  • to repeat their words over and again;
  • to talk over their interviewers, and ’never take a breath’;
  • to avoid answering questions they didn’t like’; and
  • to answer such questions with “I don’t accept your characterisation".
The programmer guaranteed that with such tactics it would be impossible to ignore them, impossible to escape them.


Joseph Goebbels knew that if you told a lie often enough, the people would eventually believe it. What’s more, he knew that the bigger the lie, the more the people would be drawn to it. The Dalek programmer knew this too, so it was of no consequence if the words he programmed into the Daleks were wrong, were untrue, were senseless, or had no meaning, so long as they served a political purpose.

Any new device needs testing, so the programmer got DM and DC together to try them out with some talented ABC interviewers, Leigh Sales and Michael Brissenden, who took it in turns to see if they could trip them up.

Leigh Sales began by trying to catch DC off guard:

LEIGH SALES: Against the backdrop of the campaign, Australia has just posted the slowest wage growth in decades. Between that, low inflation, low productivity and a stubborn deficit, do politicians need to level with Australians and say to them that they're unlikely to continue enjoying rising standards of living?

DC: Well our economy's an economy in transition. We're dealing with global economic headwinds, we're dealing with lower global economic growth and we're dealing with much lower global prices for our key commodity exports and that is of course why it is so important that we continue to implement our plan for jobs and growth. And, I mean, if you look at the results that we've achieved so far, the economy is growing at three per cent - higher than any of the G7 economies, double the rate of Canada, employment growth is strong, the unemployment rate at 5.7 per cent is not as low as we would want it to be, but it is much lower than what had been anticipated when we came into government in 2013. So we've got to keep heading in the same direction, we've got to keep implementing our plan for jobs and growth, including a more competitive enterprise tax rate.

Head spinning, she turned to DM:

LEIGH SALES: You talk a lot about your ‘plan’; the electorate still doesn’t understand what it is:

DM: The budget is an economic plan to ensure that we provide for growth and jobs to drive this transition that is occurring in our economy.

Australians know that our economy is transitioning and they know there are great risks and threats to it. This budget is the economic plan, which will support that growth that supports those jobs by backing in the investment that is needed to make it happen.

Michael Brissenden jumped in to chance his arm with DC:










MICHAEL BRISSENDEN: Alright. On the broader economic policy issues, what exactly did Treasurer Scott Morrison mean when he said the government may have to ‘recalibrate’ its policy mix after the election?

DC: Well you know, obviously we have a very clear national economic plan for jobs and growth but as you know, we have always - as we have done in the past and as we continue to do moving forward, we'll always make judgements based on the circumstances as they evolve to ensure Australia's…

MICHAEL BRISSENDEN: So everything could be back on the table?

DC: No, that is not right. I don’t accept that characterization. I think that everybody knows that we are focused on implementing our plan for innovation to support start up businesses everywhere.

Everybody knows we're focused on implementing our defence industry plan to support local high-end manufacturing.

Everybody knows we're focused on rolling out our export trade deals, which help our exporting businesses.

And everybody knows that we're focused on making our tax system more growth friendly, delivering business tax cuts paid for by crack downs on tax avoidance and by better targeting relevant tax concessions.

Now, obviously as economic circumstances evolve and as we continue to face economic headwinds, we pursue opportunities and we will continue to do everything we can to ensure that Australia is as strong as possible.

An economic foundation to take advantage of the opportunities but also to be resilient in the face of any challenges. We must live within our means!

MICHAEL BRISSENDEN: And the political realities may mug you as well after the election, you may be forced to change things because you can't get stuff through the Senate for instance.

Nick Xenophon tells us that he has some pretty serious reservations about the company tax cut, extending beyond businesses earning over the turnover of 10 million.

So you may have to compromise on some things including some of the centrepiece of your election budget strategy.

DC: Well our message to the Australian people is that if you want us to implement our plan for jobs and growth, if you want us to implement a plan that would help secure our successful transition from resource investment driven growth to broader drivers of growth, then support our candidates, yes in the House of Representatives but also give us your vote in the Senate because it is in our judgement in the national interest for us to have the capacity to get our plan for jobs and growth through the Senate as well as through the House of Representatives on the other side of the election.

MICHAEL BRISSENDEN: And if that doesn't happen, you may have to compromise, might you?

DC: Well our message to the Australian people is that if you want us to implement our plan for jobs and growth, if you want us to implement a plan that would help secure our successful transition from resource investment driven growth to broader drivers of growth, then support our candidates.

MICHAEL BRISSENDEN (exasperated): Okay. DC, we'll leave it there!

He decided to try his hand with DM and tackle him about priorities (Sales sat quietly head in hands):

MICHAEL BRISSENDEN: You talk about a $50 billion tax cut for businesses, but you say you can't afford $37 billion for schools.

I mean it is about where you're putting your priorities.

DM: And you know what our priority is – growth, economic growth – because if you don't have economic growth, you don't have jobs.

If you don't have economic growth, you don't have the growth in revenue that pays for schools and for hospitals and for all of these things. And we must live within our means.

Now what Labor is doing in this election is running around committing money that it doesn't have.

MICHAEL BRISSENDEN: And we still have a spending problem under you, your own budget papers show that tax...

DM: I don’t accept that characterization. We're getting it down to 25.2 and what we've learnt this week is Labor's big defence yesterday was to say oh well, it's not as much as $67 billion. It's only $37 billion.

Now what it also admitted to yesterday is that all of the revenue they say they save by, or gain again by not going ahead with our small and medium sized tax cuts for businesses, all of that is already spent because they have to make up 18 billion in measures that they're already blocking.

So when Bill Shorten says 'I'm paying for this on schools or hospitals because we're not going ahead with the company tax cuts', well that's a lie.

It's not true because he's already spent them. He's spent every single cent of that going ahead with those company tax cuts, not on paying for schools or hospitals but for paying for the things he already opposes. We intend to live within our means!

DC chipped in:

DC: Well our message to the Australian people is that if you want us to implement our plan for jobs and growth, if you want us to implement a plan that would help secure our successful transition from resource investment driven growth to broader drivers of growth, then support our candidates.

Irritated by DC’s repetition, Brissenden jumped in to see if he could give a more plausible response to his question to DM. Could he trip him up?

MICHAEL BRISSENDEN: How come you can afford a $50 billion tax cut for businesses, but you can't afford $37 billion for schools?

DC: Well, I don’t accept your characterization. You know what our priority is – growth, economic growth - because if you don't have economic growth, you don't have jobs.

If you don't have economic growth, you don't have the growth in revenue that pays for schools and for hospitals and for all of these things. And we have to live within our means!

DM could not resist having his say:

DM: The budget is an economic plan to ensure that we provide for growth and jobs to drive the transition that is occurring in our economy.

Australians know that and they know there are great risks and threats to it. This budget is the economic plan, which will support that growth that supports those jobs by backing in the investment that is needed to make it happen.

It’s all about jobs and growth, jobs and growth, jobs and growth, jobs and growth, jobs and growth…

Brissenden’s eyes glazed over. He turned to Sales. Leigh, how on earth do you turn these things off?

Don’t know Michael. I guess they will stop when their batteries run out. But I suspect someone recharges them every night. We may never escape them!

As Sales and Brissenden retreat defeated, DM and DC chatter on:



Jobs and Growth, Jobs and Growth, Jobs and Growth; Our economy is transitioning, Our economy is transitioning, Our economy is transitioning; The budget is the economic plan, The budget is the economic plan, The budget is the economic plan; If you don't have economic growth, you don't have jobs, If you don't have economic growth, you don't have jobs, If you don't have economic growth, you don't have jobs. It’s all about Jobs and Growth, Jobs and Growth, Jobs and Growth, Jobs and Growth…….

As Sales and Brissenden disappear, DC and DM smile knowingly at each other: Together they babble:
We won. We won. We won! Again!!!

What do you think?
What do feel about our Daleks?

Do they irritate you?

Do you listen to them any more, except for amusement?

Let us know in comments below.

Turnbull is selling us a pup



You all know what that idiomatic expression means – being tricked into buying something that is worthless. It arose from the old swindle of selling a bag that purportedly contained a piglet, but instead there was a puppy inside.

PM Turnbull wants you to believe that his bag contains a piglet, but all you will find is a pup. The piglet is called ‘Jobs and Growth’. Every day, many times every day, he is out there on the streets crying ‘Jobs and Growth’, ‘Jobs and Growth’, ‘Jobs and Growth’, like a door-to-door snake oil salesman.

The piglet that Turnbull says he has in his bag sounds attractive. Who would deny the benefit of more jobs? And only a nihilist would eschew the notion of growing the economy.

Trouble is that he won’t let you peep inside to check out the piglet. And he won’t tell you where he got it. He doesn’t want you to know its bloodline, whether or not it’s diseased, and whether it's able to do what piglets do best.

He wants you to buy his ‘Jobs and Growth’ piglet sight unseen; he does not want you to question its soundness.

How does he intend to feed his Jobs and Growth piglet? He says he will feed it with tax cuts for businesses, not just small businesses that we are told are the life blood of our economy and the leading employer of our workers, but also large businesses right up to multinational corporations, owned mainly by overseas investors.

How does he know that feeding the Jobs and Growth piglet with tax breaks will make it develop into a fat and succulent pig? Well, he has a theory.

It goes like this: cut taxes to businesses and they will use the extra money in their pockets to expand their business, produce more, and employ more. That’s it! Turnbull didn’t invent it, nor did his daleks Treasurer Morrison or Finance Minister Cormann. It’s been around a long while. It goes by the name ‘Supply-side economics’. If you want to learn more about its origins and modus operandi read this detailed account in Wikipedia, which begins:
“Supply-side economics is a macroeconomic theory which argues that economic growth can be most effectively created by investing in capital, and by lowering barriers on the production of goods and services.

“According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices; furthermore, the investment and expansion of businesses will increase the demand for employees and therefore create jobs. Typical policy recommendations of supply-side economists are lower marginal tax rates and less government regulation.”
You’ve heard about lower marginal tax rates and less government regulation before, and how the benefits of these measures will trickle down to those at the bottom of the pile. We’ve written about: ‘Trickle down economics’ on The Political Sword’. Its original name, coined by economist John Kenneth Galbraith, was: ‘Horse and sparrow economics’ – “If you feed enough oats to the horse, some will pass through to the road for the sparrows.” Read The trickle down effect by 2353NM, How the economic rationalists tried to steal our hearts and minds by Ken Wolff, and Trickle down economics breeds inequality by Ad astra.

Turnbull’s propositions might sound plausible to the casual observer, but does supply-side economics do what its proponents insist it does? Does it work? Is Turnbull’s Jobs and Growth piglet capable of developing into a large edible pig?

This question is not one that conservatives intend to address, although there is plenty of evidence that might provide an answer. They have an extraordinary capacity to ignore evidence. In an article in Alternet, Noam Chomsky quotes political scientist Norman Ornstein’s description of the fervently conservative US Republican Party: “…a radical insurgency that doesn’t care about fact, doesn’t care about argument, doesn’t want to participate in politics, and is simply off the spectrum.” Here we have the Liberal Party – same mind-set.

So does supply-side economics work? We have written often about the fallacy of trickle down economics, (see above) but there is much more. Sometimes you hear this economic theory described as ‘Reaganomics’ or ‘Thatcher economics’.

Let’s start with a blistering critique of Reaganomics, or ‘Riganomics’ as she prefers to call it, by Rachel Maddow, an American television host, political commentator and author who hosts a nightly television show, The Rachel Maddow Show, on MSNBC. The critique is titled: How Reaganomics Destroyed The Middle Class...And Maybe America. It’s worth watching the whole 8 minutes 26 seconds of this YouTube clip:



If that hasn’t convinced you of the fallacy of supply-side or trickle down economics, read this appraisal in Wikipedia. Part of the theory, which some describe as ‘voodoo economics’, posits that rather than federal revenue falling when tax cuts are made, it would rise, as portrayed by the mythical Laffer curve, debunked long ago. The theory is refuted here:
”Economist Gregory Mankiw used the term "fad economics" to describe the notion of tax rate cuts increasing revenue in the third edition of his Principles of Macroeconomics textbook in a section entitled "Charlatans and Cranks":

“An example of fad economics occurred in 1980, when a small group of economists advised Presidential candidate, Ronald Reagan, that an across-the-board cut in income tax rates would raise tax revenue. They argued that if people could keep a higher fraction of their income, people would work harder to earn more income. Even though tax rates would be lower, income would rise by so much, they claimed, that tax revenues would rise.

“Almost all professional economists, including most of those who supported Reagan's proposal to cut taxes, viewed this outcome as far too optimistic. Lower tax rates might encourage people to work harder and this extra effort would offset the direct effects of lower tax rates to some extent, but there was no credible evidence that work effort would rise by enough to cause tax revenues to rise in the face of lower tax rates…

“People on fad diets put their health at risk but rarely achieve the permanent weight loss they desire. Similarly, when politicians rely on the advice of charlatans and cranks, they rarely get the desirable results they anticipate. After Reagan's election, Congress passed the cut in tax rates that Reagan advocated, but the tax cut did not cause tax revenues to rise.”
Writing in Business Insider Australia, about the US economy in an article titled BOMBSHELL: New Study Destroys Theory That Tax Cuts Spur Growth, Henry Blodget says:
“One economic theory has been repeated so often for so long in this country that it has become an accepted fact: Tax cuts spur growth. Most Americans have gotten so used to hearing this theory that they don’t even question it anymore.

“One of our two Presidential candidates is so convinced of the theory that he has built his entire economic plan around it, despite the huge negative impact additional tax cuts would likely have on our debt and deficit.

“But is the theory true? Do tax cuts really spur growth?

“The answer appears to be “No.”

“According to a new study by the Congressional Research Service (non-partisan), there’s no evidence that tax cuts spur growth.

“In fact, although correlation is not causation, when you compare economic growth in periods with declining tax rates versus periods with high tax rates, there seems to be evidence that tax cuts might hurt growth…

“One thing that tax cuts do unequivocally – at least tax cuts for the highest earners – is increase economic inequality. Given that economic inequality is one of the biggest problems we face in this country right now, this conclusion is very important…

“…this topic has become highly politicized, so it’s impossible to discuss it without people howling that you’re just rooting for a particular political team. Second, no one likes paying taxes. Third, everyone would like a tax cut, including me.

“So I think we can all agree that everyone would prefer that tax cuts actually did spur economic growth.

“Alas…”
Blodget goes on to prove his point with a number of charts.

He asks: “So, have these declining tax rates for the rich – the ‘job creators’ who are being given a bigger incentive to invest by the reduced tax rates led to faster economic growth?

“Nope.”


Later he says: “Although tax cuts do not appear to spur economic growth, they DO appear to lead to greater economic inequality. Inequality in the United States recently hit a level that has not been seen since the 1920s: The country’s top earners are taking home more of the national income than at any time in 70 years.”

Referring to his charts, he says:
“And now let’s look at the correlation between this rise in inequality and tax rates – the lower the top marginal rates go, the bigger the share of national income that goes to the top 0.1% of wage earners. And it’s the same for capital gains rates.

“Meanwhile, the share of national income that goes to “labour”– a.k.a., most Americans – goes up as the top tax rates increase.

“Why is the rise in inequality so troubling? Well, beyond the issues of fairness and stability, increasing inequality is hurting the economy. Unlike middle class and upper middle class folks the country’s highest earners don’t spend all the money they earn. So this money doesn’t get circulated back into the economy, where it can become revenue for other companies and salaries for other workers. (If there were a dearth of investment capital, the money might get invested, but we’ve got plenty of investment capital right now. Our problem is a lack of demand).

“So, what’s the bottom line?

“Well, the bottom line appears to be that low taxes do not spur economic growth and DO cause greater economic inequality.

“So, although it sounds like heresy, presidents and Congress-people who actually want to fix the economy might want to consider raising taxes rather than cutting them. Or, at the very least, keeping them the same.”
You can read the whole article here.

Along with tax cuts for businesses, Dalek Morrison keeps repeating that we don’t have a revenue problem, only a spending problem! He and Dalek Cormann are programmed to say this mindlessly and endlessly. The unavoidable consequence is spending cuts, which also go by the name ‘austerity’. Austerity has been tried in many places with little success.

An article in the Australian edition of The Guardian by Larry Elliott, Austerity policies do more harm than good, IMF study concludes, subtitled: Economists give strong critique of neoliberal doctrine ushered in by Ronald Reagan and Margaret Thatcher in the 1980s begins: “A strong warning that austerity policies can do more harm than good has been delivered by economists from the International Monetary Fund, in a critique of the neoliberal doctrine that has dominated economics for the past three decades.”

In response to the UK Chancellor of the Exchequer George Osborne’s wish to introduce austerity measures “…to give the government more flexibility in the event of a future crisis”, IMF economists:
“…rejected the notion that austerity could be good for growth by boosting the confidence of the private sector to invest. They said that in practice, ‘episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1% of GDP increases the long-term unemployment rate by 0.6 percentage points.’

“The IMF economists summarised what a growing consensus among economists across the globe now think, that Osborne-style austerity economics increases inequality and instability, and undermines growth.”
They concluded:
“…that the increase in inequality threatened to be self-defeating.

“The increase in inequality engendered by financial openness and austerity might itself undercut growth, the very thing that the neoliberal agenda is intent on boosting. There is now strong evidence that inequality can significantly lower both the level and the durability of growth.”
In yet another article in The Guardian: You’re witnessing the death of neoliberalism – from within, Aditya Chakrabortty quotes IMF research: “The results, the IMF researchers concede, have been terrible. Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off.”

It seems that if neoliberalism is not yet dead, it is moribund.

How much more evidence do we need to be convinced that Turnbull is selling us a pup? There is no Jobs and Growth piglet in his swag. What’s more, even if there were, it could not grow into the jobs and growth he promises every day. His much-vaunted ‘plan’ has no substance. Ken Wolff goes into this in his TPS Extra piece: What economic plan?

Turnbull’s Jobs and Growth promise will not, indeed cannot be achieved. The food he says he will feed his Jobs and Growth piglet: lower taxes for businesses and spending cuts, will not make it grow. Indeed all the evidence, gathered over fifty years, indicate that his food will not even keep his Jobs and Growth piglet going.

Instead, the opposite will occur – it will starve. There will be no more jobs, and growth will not occur. Inequality will increase.

The rich will get richer and the poor will languish waiting for the promised benefits that will never trickle down.

In fact, the piglet Turnbull is trying to sell us is a pup.

Why do Turnbull, Morrison, Cormann and fellow ministers fly in the face of the facts? Why do they persistently cling to supply-side economics, which has been discredited over and over again? Ornstein’s answer rings true: Neoliberals are 'a radical insurgency that doesn’t care about fact, doesn’t care about argument, doesn’t want to participate in politics, and is simply off the spectrum.’ They adhere to their preferred economic theory because it suits them and their top-end-of-town supporters, replete with top hats.  

How can we argue with such people? We can’t. The only way to destroy their dangerously flawed economics, which threatens not just our economy, but also the social fabric of this egalitarian nation of the ‘fair go’, is via the ballot box.

July 2 is our best chance to tell Turnbull that he is selling us a pup.


What do you think?
Do you feel you are being sold a pup?

If not, what is Turnbull selling us?

Let us know in comments below.

Trickle down thinking breeds inequality



In a piece published on 13 April, I predicted that inequality would be a hot button issue in the upcoming election. Now that we have had both Scott Morrison’s budget speech and Bill Shorten’s speech in reply, we can see how this issue will play out in the election. Although the word ‘inequality’ has not assumed the repetitive status of the ‘jobs and growth’ mantra, it is subtly pervading the political discourse.

Every time the term ‘fairness’ is used, notions of equality are being canvassed. In his reply speech, Shorten made a point of emphasising equality for women: “championing the march of women to equality, closing the gender pay gap and properly funding childcare”. He spoke of fairness and integrity in superannuation, and asserted that “Australia should never accept the false choice between growth and fairness - each is essential to each other.”

By now most readers of political blogs will be familiar with the term: ‘trickle down economics’, but for those who are not, let me give a short history of this concept. It is not a formal economic theory so much as a catchphrase that captures a concept that permeates the thinking of many politicians, namely that benefits given to those at the top will trickle down to those at the bottom.

The concept goes back a long way. Economist John Kenneth Galbraith noted that ‘trickle-down economics’ had been tried in the United States in the 1890s under the name ‘horse and sparrow theory’: “If you feed the horse enough oats, some will pass through to the road for the sparrows.” Reaganomics was an example, and likewise Margaret Thatcher’s approach to economics.

In his book: Zombie Economics: How dead ideas still walk among us (Princeton University Press, 2010), John Quiggin, Australian Laureate Fellow in Economics at the University of Queensland, described several discredited economic theories that refuse to die, living on as zombies that politicians still use to suit their political purposes. Among the zombies he listed was ‘trickle-down economics’. Although discredited, Quiggin warned that as a zombie that will not die, the concept would still be used: “As long as there have been rich and poor people, or powerful and powerless people, there have been advocates to explain that it’s better for everyone if things stay that way.” This was elaborated upon in an April 2011 piece on The Political Sword: Joe Hockey should read John Quiggin’s Zombie Economics.

While great economists such as Adam Smith, John Stuart Mills and John Maynard Keynes have supported income re-distribution through progressive taxation, and most economists still do today, there are still some who argue that we should let the rich get richer and wait for the benefits to trickle down to the poor. One could be forgiven for thinking that is what Joe Hockey, Scott Morrison, Malcolm Turnbull, and today’s Coalition members believe, as they insist on giving tax relief to the wealthy, but not to the less well off. This trend was starkly portrayed in the 2014 budget, and continues in 2016.

Quiggin gives example after example to demonstrate that the trickle down hypothesis is false, and caps this with a telling graph of household income distribution in the US from 1965 to 2005 that shows that those on the 95th percentile for income steadily improved their position by over fifty percent, while those on the 20th percentile and below were static.

He pointed out that the biggest challenge of the failure of the ‘trickle-down hypothesis’ is to understand why and how inequality increased so much under market liberalism, and how it can be reversed. To Quiggin, restoring progressivity to the tax system is seen as an obvious move.

For the academically inclined, several varieties of inequality are recognized: Wikipedia says:
”Economic inequality is the difference found in various measures of economic well being among individuals in a group, among groups in a population, or among countries. Economic inequality is sometimes called income inequality, wealth inequality, or the wealth gap. Economists generally focus on economic disparity in three metrics: wealth, income, and consumption. The issue of economic inequality is relevant to notions of equity, equality of outcome, and equality of opportunity…There are various numerical indices for measuring economic inequality. A widely used index is the Gini coefficient, but there are also many other methods.

“Some studies show that economic inequality is a social problem; too much inequality can be destructive because it might hinder long-term growth. Others argue that too much income equality is also destructive since it decreases the incentive for productivity and the desire to take-on risks and create wealth”.
The latter is what conservatives believe.

A more familiar way of talking about inequality is to talk about ‘fairness’, a concept every Australian understands. The ‘fair go’ is valued by most of us. Who would argue against the idea that everyone should have a ‘fair go’?

Joseph Stiglitz is another who has been writing for years about the damaging effect of inequality. His book: The Price of Inequality is a classic. More recently, Thomas Piketty entered the arena with his Capital in the Twenty-First Century and hypothesized about the genesis of inequality. He asserted that the main driver of inequality, namely the tendency of returns on capital to exceed the rate of economic growth, today threatens to generate extreme inequalities that stir discontent and undermine democratic values. He reminded us that political action has curbed dangerous inequalities in the past and could do so again. But is the Coalition listening?

No matter who writes about inequality, the conclusion is the same: the gap between those at the top and those languishing at the bottom of the pile is widening in many countries, ours among them.

If you need any more evidence to convince you of the fallacy of the ‘trickle down’ concept, read: The embarrassing truth about trickle-down on the New Economics website, NEF, the outlet of a UK think tank promoting social, economic and environmental justice.

The 2014 article by Faiza Shaheen concludes:
”The trickle-down approach has been bad economics. Not only has it failed to deliver on its own terms but also it has actively damaged the health of our economy, society and political system. It has supported growing inequality which, rather than boosting economic performance, has deflated it. The UK grew more when we were a more equal country during the post-war, pre-Thatcher era than after. Its damaging social effects are also mounting. High levels of inequality are increasingly seen as harmful to individual well-being and health, social cohesion and social mobility.

“Obama’s attack on trickle-down economics, echoed by Labour Leader Ed Miliband offered hope that our leaders are finally engaging in the possibility of dethroning this damaging philosophy, but the recent response to a potential increase in income tax shows that the theory still festers. We must continue to counter an approach that has created a tide of inequality that lifts up the yachts while leaving the rest of us paddling harder. By pulling the rug out from under trickle-down economics other damaging myths can be exposed, such as the argument for high executive pay.”
Read too Elizabeth Warren demolishes the myth of “trickle-down”. “That is going to destroy our country, unless we take our country back” in Salon. She is an academic and Democrat senator.

For Liberal skeptics here is the coup de grace in United Fair Economics in an article Trickle-down economics: Four reasons why it just doesn’t work, written in 2003 during the Bush era:
  • Cutting the top tax rate does not lead to economic growth
  • Cutting the top tax rate does not lead to income growth
  • Cutting the top tax rate does not lead to wage growth
  • Cutting the top tax rate does not lead to job creation.
The article supports these assertions with graphic evidence, and concludes:
”Overall, data from the past 50 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middle classes or the nation as a whole. To be sure, the economic indicators examined in this report are dependent on a variety of factors, not just tax policy.

“However, what this study does show is that any attempt to stimulate economic growth by cutting taxes for the rich will do nothing – it hasn't worked over the past 50 years, so why would it work in the future? To put it simply and bluntly, Bush's top-bracket tax cut is an ineffective attempt at stimulus that will not cause any growth - unless, of course, if you're talking about the size of the deficit.
If we now look at the Coalition’s 2016 budget, much of it is based on the trickle down concept that tax breaks or other economic benefits provided to businesses and upper income levels will inevitably benefit poorer members of society by improving the economy as a whole.

That is what is behind the monotonously repeated ‘jobs and growth’ mantra. Superficially appealing, the Coalition posits that to increase jobs those who employ people must be given tax breaks and other incentives. This is most flagrantly demonstrated by the Coalition’s plan, beginning on 1 July, to reduce company tax progressively from 28.5% now to 25% over the next decade, not just for small and medium businesses with a turnover of less than $2 million, but to extend eligibility to businesses with turnovers of up to $10m, and the lower rate will be gradually phased in for larger businesses until it covers all companies in 2023.

The Liberal manifesto Lowering company tax, boldly asserts:…if you are against cutting company tax, you are against economic growth. If you are against economic growth, then you are against jobs.” In other words, the benefits of cutting company tax will trickle down to the workers at the bottom. Arthur Sinodinos was the first confidently to expound this a few weeks back.

PM Turnbull and Treasurer Morrison were reluctant to admit the cost to revenue of this measure, but Treasurer Secretary John Fraser let the cat out of the bag during a Senate Estimates hearing with the figure of $48.2 billion over ten years. Clearly, the Coalition has such fervent belief in the stimulatory effects to ‘jobs and growth’ of giving a large tax break to businesses, even to multinationals, that it is prepared to forego over $48 billion in revenue!

Another manifestation of preferentially feeding the horses is the Coalition’s push for lower penalty rates on Sundays. Their belief is that if this were to occur, more businesses would open on Sundays, and employ more people. Trickle down again. That those depending on Sunday rates would suffer seems immaterial to them.

There are other instances in the 2016 budget of giving to the rich but not to the poor, such as a tax cut to those earning over $80,000 by raising the marginal tax threshold for this second top bracket from $80,000 to $87,000. But there is no tax break for those earning below this magic figure; indeed they will suffer cuts in entitlements. The horses will get the oats; the sparrows will need to fossick in the manure to get their share.

Progressives: Labor and the Greens, know the trickle down concept is a charade. They believe that to stimulate an economy that is slowing, and thereby drive jobs and growth, stimulatory measures are needed. Time and again, better wages have been shown to increase economic activity because people have more money in their pockets to buy the things other people make or do. Using government funds to support infrastructure development also has been shown to stimulate economic activity and increase jobs. This Keynesian approach has a long track record of success when applied where private economic activity is lagging, but the Coalition doesn’t want to know.

I need go on no further.

Almost every slogan, almost every utterance of the Coalition is premised on an entrenched, unshakeable belief in trickle down economics, despite this concept having been debunked for a century. Zombie-like though it is, the Coalition embraces it with fervour. Why? Because it suits their political purpose: to shore up the top end of town, to please those who fund and support it.

Don’t expect them to ever believe that trickle down thinking breeds inequality, because with all PM Turnbull’s talk of ‘fairness’, ‘equality’ is unimportant to them. They believe that inequality is simply part of the natural order of things, and should remain that way.


What do you think?
We are looking for your comments.

What do you think of the Turnbull/Morrison budget?

Do you see how trickle down thinking has permeated the budget, and how it will lead to more inequality?

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More about Puff the Magic Malcolm



In the first of this short series, I described how after the disaster of Tony Abbott, the promise that Malcolm Turnbull brought to prime ministership was already fracturing as he fails, day after day, to live up to his own values, and reneges on his strongly held views. Abbott flagrantly and unashamedly broke his promises. With Turnbull it is subtler; he is saying and doing things that we all know are contrary to his position. This is perhaps most obvious with the issue of climate change, a matter that was covered exhaustively in the first in the series.

This the second, deals with Turnbull’s position on marriage equality, the Gonski reforms, the NBN, Australia becoming a Republic, his immigration policy, his cities policy, and his economic policy.

Marriage Equality. Everyone who has been listening to Turnbull knows that he is strongly in favour of marriage equality. He has said so many times in parliament and out. Moreover, he advocated a vote in parliament to determine the matter. But once he became PM he reverted to Abbott’s delaying tactic of a plebiscite after the next election. Although he would regard the result as binding on the parliament, his old guard of conservatives, Eric Abetz, Cori Bernardi et al vow to vote as they wish, irrespective of the views of the electorate. It seems as if this conservative clique is calling the shots, and Turnbull does not feel secure enough in his hold on leadership to stand up to them. What a disappointment from the one who challenged Abbott on the grounds of poor leadership!

The hope that Turnbull would reverse the Abbott tactic, and either have a vote in the parliament or at least hold the plebiscite at the time of the election, thereby saving an estimated 160 million dollars, has so far been dashed. If he is hoping to run either of these lines, he is leaving it pretty late,

Disappointingly, the promise of a Turnbull different from Abbott on this important social matter has been tarnished.

The Gonski school reform is another area where Turnbull’s promise is fading. He talks about the need for innovation, agility and entrepreneurship, but doesn’t add that these attributes are built on a foundation of sound education that starts in preschool and extends to university and beyond. And it must be available to all who can benefit from it. The Gonski school reforms were designed to bring this about. After telling us all pre-election that he was on the same Gonski page as Labor, Abbott reneged post-election on the vital last two years of funding. Any hope that Turnbull would see the fallacy of curtailing spending on education was dashed after he and his education minister repeated the same weary line that ‘you can’t solve the schooling problem by throwing money at it’. Apart from being a stupid thing to say, suggestions about how the government would solve the problem, with or without money, were never forthcoming. So Gonski is in limbo.

The creation of a smart, innovative, agile nation will have to wait until Turnbull works out what to do about school education. His attitude to education accelerates disillusionment about him.

The NBN project has been a great disappointment for those who expected him to handle the NBN project with skill and flair. We all know he is a tech-head, a nerd when it comes to communications gadgets, the founder of OzEmail, one of our earliest email services. We remember that he was instructed by Abbott to ‘demolish the NBN’ which Labor had initiated, but hoped he would find a way of maintaining its initial design, which was to provide a super-fast broadband service to 97% of Australians with ‘fibre-to-the premises’ (FTTP) technology. He salvaged the NBN from Abbott’s onslaught by adopting a multi-technology approach, and substituting the inferior ‘fibre-to-the-node’ (FTTN) option, where fibre extends only to boxes on street corners, with Telstra’s old copper wire finishing the connection to the premises. In doing so, he lumbered this nation with a second rate facility just when we needed to be world leaders in an increasingly competitive global environment.

In a comprehensive assessment of the Coalition’s FTTN NBN in September 2105, Richard Chirgwin, telco analyst and journalist writing in The Register, gave credit for some aspects of the government’s rollout, but was scathing about many, for example, in the critical areas of technology, the rollout timeline, speed, and the cost, He wrote:

The Liberal Party's pre-election policy document stated ”Our aim is that everyone in the nation should have access to broadband with download data rates of between 25 and 100 megabits per second by 2016”.

“That timeline was quickly exposed as optimistic and the "aim" unrealistic. The universal 25 Mbps service promise has now been pushed out to 2020.

“Fibre-to-the-node (FTTN), however, has to be regarded as the greatest disappointment of the policy: the government has failed to deliver either the rapid rollout or the amount of savings promised in the policy.

“Approximately 65 per cent of the FTTN portion of the rollout is expected to be completed by 2016-17. The remaining 35 per cent will be deployed in 2017-18 and 2018-19 and will in most cases be in areas served by HFC [Hybrid Fibre Co-Axial technology] networks”, the policy stated.

“At the most recent NBN presentation, the company hopes to activate 1.8 million premises on FTTN by 2018. That's a little late. Also, absent a full footprint plan detailing which premises will receive which technology, it's impossible to say if the promise of 65 per cent FTTN completion is on track.

Verdict: Promises not kept.
Turnbull was scornful when he spoke of the cost of Labor’s NBN, which he deemed prohibitively wasteful. He ought now to be eating his words. Chirgwin had this to say:

Cost: By far the worst performance is in the matter of the cost of the NBN.

“The pre-election assertion that [Labor’s] FTTP network would cost $90 billion was quickly revised down to $73 billion, which is still a lot of money, but at the same time, Turnbull's statements about the cost of his multi-technology model have repeatedly been revised upwards.

“The $20.4 billion capex [capital expenditure], and peak funding of $29.5 billion, were obsolete within a year, and after several revisions, the most recent estimates for the NBN build are peak funding of between $46 billion and $53 billion.

“The government protected its own books by the simple expedient of capping its investment. To meet the balance, NBN will have to raise its own debt.

Verdict: The government has performed no better than its predecessor in making cost forecasts.”
You can read the sorry story in full here.

The use of the image below to head Chirgwin’s piece tells the story.



In summary, Turnbull’s demonized Labor’s FTTP NBN, and made wild promises about how much cheaper the Coalition’s FTTN NBN would be, and how much faster it would roll out to more homes. Once again he brought disillusionment to many – another Turnbull promise remains unmet.

Australia becoming a Republic has been a Turnbull dream for years. He was a member of the Australian Republican Movement since its formation in 1991 and later chairman. He headed the ARM team at the 1998 Australian Constitutional Convention, but John Howard’s manipulations thwarted his endeavours and the referendum in 1999 was lost, a stinging defeat that still lingers in Turnbull’s memory. Yet his advent to prime ministership kindled hopes that at last this nation might move away from being a constitutional monarchy to becoming a republic. Writing in The Age, Tim Mayfield expressed this hope in Australian republicans take hope from Malcolm Turnbull's ascent.

Expect yet another disappointment on this front. Perhaps understandably after his bitter 1999 defeat, he seems in no hurry to address the republic issue. He seems to be unwilling to spend any of his considerable personal political capital on this venture, especially in the face of resistance from his monarchist colleagues.

Political survival is more important to him than pursuing the cherished principle of Australia becoming a Republic.

Immigration policy has been dealt with here recently in Australia’s diabolical dilemma. We are still waiting to see if Turnbull returns the 267 adults and 72 children now in Australia on ‘humanitarian’ grounds. NZ Prime Minister John Key has shown his compassionate face by offering to take them. Will Turnbull persist with the harsh Abbott policy, or show that he has a more benevolent attitude?

Cities policy was hailed as one of Turnbull’s most enlightened moves. Writing in the Sydney Morning Herald in September of last year, in an article titled: Turnbull government's cities portfolio: What does it mean and will it work?, Nicole Hasham reported the reaction of Committee for Sydney chief executive Tim Williams: “…the decision to appoint a Minister for Cities is simply an idea "whose time has come". Hasham continued: “Infrastructure chiefs across the nation have been buoyed by Prime Minister Malcolm Turnbull's enthusiasm for urban planning, including Jamie Briggs' appointment as the first Minister for Cities and the Built Environment and the government's new willingness to consider public transport investment."

That was then. What has happened since? We know what happened to Jamie Briggs, so how will his successor, rural MP Angus Taylor, fare? Turnbull has rejected suggestions he has downgraded cities policy in his ministry reshuffle.

At the very least,we expect Turnbull to discard Abbott’s environmentally destructive pro-roads, anti-public transport attitude.

Anthony Albanese, who carries the splendid tag: ‘Shadow Minister for Infrastructure and Transport, Shadow Minister for Tourism, and Shadow Minister for Cities’, is sceptical about progress so far. Here’s what he said a few days ago about Turnbull’s disappointing performance so far:



This piece could go on and on cataloguing Turnbull’s disappointing performance, so let’s finish with his economic policy.

Nobody disagrees with his view that this nation needed to be ‘agile’, ready to grasp the abundance of opportunities here and overseas. We all agree that in the wake of the downturn in mining the economy needs to reshape itself. The renewables industry was just one such opportunity for readjustment in our economy.

Underpinning these needed adjustments is the acute need for fiscal reform. Nobody questions the need for tax reform, industrial relations reform, or welfare reform. The Turnbull government’s progress on these fronts has been slow, erratic, minimal, and flawed. It could hardly have been much worse.

The GST was the first target. Labor made its position plain from the beginning. But the Coalition procrastinated, bumbling along insisting it was still ‘on the table’, until finally a few days ago its abandonment was announced by Turnbull, followed by his treasurer. Even after that, Minister for Employment, Michaelia Cash, was insisting the GST was still on the table! The disorganization and indecision was awful. No reasonable person would deny Turnbull and Morrison the right to have the effect of changing the GST modeled by Treasury, but with all the punch that Treasury has, why did it take so long for Turnbull and Co. to reach the same conclusion Labor reached months ago?

Reasonably, Turnbull rejected any change on the grounds that the net benefit would be too low, and the political cost too high. He has always emphasized that ‘fairness’ must characterize any change to the tax mix, but the lack of fairness inherent in this regressive tax was not his stated reason for rejection. Lack of fairness was Labor’s prime reason for rejection. It knew that increasing the level and scope of the GST would increase the already-high level of inequality in this country. Inequality does not feature in Turnbull’s arguments.

The removal or reduction of concessions that favour the wealthy in superannuation, negative gearing and capital gains tax has always been a fertile field for increasing revenue. But the top-end-of-town oriented Turnbull government has shied away from these obvious opportunities. Turnbull challenged Abbott on the grounds of his poor economic leadership; we are still waiting to see if Turnbull’s is any better.

Labor has outlined its policies, as have the Greens, but the Turnbull government flounders, adding indecision to uncertainty. I believe this is principally because of treasurer Morrison’s ideological obsession with reducing taxes. He sees removing concessions as tantamount to increasing taxes.



At his National Press Club address last week we saw the fiscal dithering of the Turnbull government writ large as Morrison waffled for 46 minutes telling what we already knew about the tough financial situation this country is in, that repairing it would be a long haul, taking on Test Match dimensions rather than those of a 20/20 Big Bash (no doubt he thought this was clever framing), and that any tax relief would be ‘modest’, and a long time coming. While using his copious words to berate Labor’s proposal, we did not hear one word from him about the Turnbull government’s policy on negative gearing, superannuation and capital gains, or for that matter on any other fiscal policy. The speech was vacuous and insulting to the NPC audience that gathered expecting to get at a least a morsel of information on these crucial matters.

Morrison was attacked repeatedly the next day on talk back radio over his arrogant disrespect for those seeking information about important government policy, but fobbed off his assailants with his usual torrent of words unstoppably tumbling from his loquacious mouth. Bernard Keane of Crikey in his brilliant piece: Waiting for ScoMo - in which no policy happens, twice, aptly described Morrison’s NPC speech as “…more a one-hander version of Waiting for Godot, the play in which, famously, nothing happens, twice.

But at least in his post-address talkback appearances he did introduce us to the ‘unicorn’ frame. Morrison is not much better at picking apt metaphors than he is at picking apt fiscal policies. Let me take you down a side road for a bit.

We all know what this mythical creature looks like, but why did Morrison use the unicorn as a metaphorical frame?

I looked through Renton’s Metaphors but found no reference to the unicorn. Wikipedia did not help either. In fact it said: “In the Middle Ages and Renaissance, it was commonly described as an extremely wild woodland creature, a symbol of purity and grace, which could only be captured by a virgin…its horn was said to have the power to render poisoned water potable and to heal sickness.” Not what Morrison intended!

Another source asserts that chasing unicorns is looking for the right job. Surely not what Morrison was thinking!

In the Hebrew Bible it was often used as a metaphor representing strength…a wild, un-tamable animal of great strength and agility. Agility is what Malcolm desires; perhaps Scott does too!

I suspect though that his metaphorical meaning is that ‘chasing unicorns’ is the pursuit of something that, for all intents and purposes, is unobtainable, as unicorns don't exist.

He might have been wiser to tone down his rhetoric by choosing a more understandable metaphorical frame – perhaps ‘chasing rainbows’ would have resonated better.
That’s enough about the cascade of disappointments that have come flooding from our new PM, his treasurer and much of his ministry. To many, Malcolm is a likeable fellow. Well-educated, well-spoken, dignified, prime ministerly, he held out such promise to an electorate tired of the combative, aggressive Abbott. Turnbull heralded a new era for voters tired of the embarrassment of having Abbott as our leader, relieved that at last we had one who could make us feel secure, if not proud.

Then the disillusionment began. Day after day, as the Coalition vacuum cleaner sucked up policy opportunity after policy opportunity into the dust receptacle of abandoned prospects, disappointment grew.

Disappointment is contagious. Initial goodwill towards Turnbull is fading day after day as he and his government dither, ply us with platitudes, make faraway promises, dishonours them, does nothing, goes nowhere, marches on the spot, yet talks as if they have grand plans, sadly for a distant and receding future. Reflect on what Morrison said in his NPC address and you will see what I mean.

Some Labor supporters might want to see the Turnbull government fail, but even those must be demoralized by the reality that the awful Abbott government that did so much damage has been replaced by a torpid do-nothing outfit that seems lost in the political wilderness without a compass.

The Magic Malcolm that so many welcomed seems to have gone up in a Puff of Liberal Blue smoke.




What do you think?
This second pieces concludes this short series on Turnbull’s shortcomings and his backsliding as he fidgets under the repressive thumb of the reactionaries in his own party. If he cannot cast off the conservative curse, clamber out from under the repressive influence of the Abbott-led opponents, he may never show us the Real Malcolm Turnbull, whose values and genuine beliefs have made him so popular with the voters.

Will he be crushed into humiliating submission, crippled by forced conformity, curtailed in every move his better self tells him to make, incarcerated by those who gave him power? Even Laborites hope not. We know the Malcolm of old; we were hoping for something better this time around. But so far we have experienced only disappointment and disillusionment.

Do tell us what you think in the comments section.