The Henry Review is out and the economics commentators, along with journalists, some of whom have not shown much aptitude for economics, are out there going hell for leather giving us their learned opinions. How much credence do we give them, even when they seem to be singing in harmony?
This piece was inspired by Grog’s pieces on Grog’s Gamut on Sunday evening: Oh Henry! The Tax Review that's a bit chewy and The Henry Review and Liberal Party Logic in which he summarized the comments that had been made at that time. Both are good reads.
But let’s first set the background. These are the same economists and columnists that ‘guided’ us, the great unwashed, through the GFC from its earliest convulsions. These are the same economists who, for reasons best known to themselves, always predict the next movement in interest rates, only to get it wrong half the time and sometimes not get it right at all. Tossing a coin would be just as predictive. These are the same economists who contradicted each other about the usefulness of the economic stimulus measures the Government instituted in response to the GFC, opinions ranging from ‘a profligate waste of money’ to a minority asserting it was ‘a necessary response to a looming economic disaster’. While most have come round to acknowledging that the stimulus did its intended job, some still argue the toss and want to attribute Australia’s avoidance of recession to other factors. Even those who have accepted the value of the stimulus have trained their guns on the unintended effects of stimulus in the insulation and BER programs as a way of saying, sotto voce – well, we might have been wrong about the value of stimulus but look at the awful problems stimulus programmes have created.
Last September, exasperated with their outpourings I penned What value are economists to our society?, and as far back as February 2009 I wrote The problem with economists. Both are as true today as they were then.
To use a favourite Tony Abbott phrase: ‘how can we trust’ these same economists and columnists to give us valid and reliable opinions on the Government’s response to the Henry Tax Review? My answer is ‘we can’t’, but that won’t stop them pontificating, despite the deficiencies they are exposed to have had over the last two years, despite their political leanings, despite their lamentable ignorance of the process of governing and the political process which affects everything governments do, despite the fact that they can say what they like and not be held to account, as are politicians. They seem shameless about their past errors, and only too ready to dish up another dose of ill-informed opinion about this and every new economic issue that arises. Voltaire put his finger on it when he said: “Opinion has caused more trouble on this little earth than plagues or earthquakes”.
Let’s add another dimension to the background. The nation is still emerging from the GFC downturn. Unemployment is still too high, small business is still recovering, and in some industries still struggling, but the mining boom continues to accelerate and is predicted by Treasury to continue for three decades. Although the debt resulting from the stimulus that shielded us from recession will be much lower than the $315 billion Labor Debt Bomb touted on the back of a truck by Malcolm Turnbull, it is nonetheless substantial and has to be repaid. The Government has committed itself to restraining growth in its expenditure as a proportion of GDP to 2% when growth returns to trend as it will soon do, a very stringent constraint that influences every decision it makes, tax or otherwise.
There is another meme running – that Kevin Rudd is a ‘coward’, ‘gutless’, ‘lacking the courage of his convictions’. This has arisen out of his deferment of the ETS until the end of 1012, and exacerbated by the cancellation of the insulation programme and the pre-school centres building programme, announcements that critics say Rudd should have made himself. The Coalition is running very hard on this ‘coward’ story as it’s just about all it’s got, so ‘demolish the man Rudd and his Government tumbles with him’. Possum puts paid to the ETS ‘coward’ story in his piece in Pollytics on Crikey: I’ll see you a coward and raise you an idiot, although Peter Bowe asks on Mumble: Is Kevin Rudd a coward? You bet he is says Brent. Read them both and make up your own mind.
Given the background described above and the running meme, as one would expect, Dennis Shanahan was out early on video from the lock-up setting a theme that has been taken up by others, that Kevin Rudd had taken a cautious, limited, election-oriented approached, and to make his point, he waved the thick Henry Report and the thin Government response in each hand to emphasize how limited Rudd and Wayne Swan’s response was. Tom Dusevic gave a much more balanced account, as did Paul Kelly who called it a cautious election year tax package with two long term structural reforms. Jennifer Hewett emphasized the long period of implementation gave time for adjustment, but predicted great angst from the miners.
In Grog’s account on Grog’s Gamut in Oh Henry! The Tax Review that's a bit chewy you can read the early reactions. I won’t repeat them here, except that David Koch, Sunrise Breakfast host, says “How wimpy was that.” Grog wisely advised him not to give up his day job, and on that page there is a video of the typically flamboyant Terry McCrann who described it extravagantly as ‘a total damp squib’, warned about ‘killing the goose’ that’s laying golden eggs, and ended by saying – ‘tax reform it ain’t’. That McCrann is often wrong does not deter him from pontificating on anything economic, and giving the impression that only an idiot could disagree with him.
Breakfast Politics gives you a spread of the comment this morning. You can see from the headings how the journalists regard the Government actions. Michelle Grattan took a balanced view: “The government has made a pragmatic pitch to attract voters, bolster revenue and modestly burnish its economic reform credentials in its targeted response to the massively ambitious Henry tax review.” Associated with Grattan’s article is a video of an interview of Ross Gittins by Tim Lester. Gittins’ view is that ‘it’s not a very brave Government’, and shows ‘very little courage’. I could go on with many more examples, but there is a consistent theme – Rudd and his Government are not courageous – terms range from ‘cowardly’ to ‘cautious yet pragmatic’. This is the line the anti-Rudd camp has taken up strongly, and even the more neutral ones like Gittins believe Rudd and Swan could, should have done more.
So let’s ask ourselves as ordinary citizens, not burdened by pseudo-knowledge of economics as so many commentators are, mindful of the fact that an election is just months away, and accepting that to do anything at all a political party must be in power, how would we have acted if in the Government’s shoes?
Would we do what so many of our expert commentators hint, go much further, immediately tackle the contentious reforms suggested in Henry, reforms that will disadvantage large sectors of the community? Why not implement the lot? After all the Government commissioned the review and is now implementing only part of it. What wimps! Alan Kohler, who has a calculator, told us that meant the Government has picked up only 1.75 of Henry’s 138 recommendations, or a bit over 1 per cent. That’s his smart-aleck way of saying the Government has wimped out, as if all recommendations are of equal importance and that you can simply divide the total recommendations by the number adopted to gauge the operational uptake. He should know better than to pull this trick – he’s supposed to be a serious commentator on economics.
What would these commentators do if their opinions about what to do, if their decisions on tax reform would determine whether or not they kept their job? How ready would they be to wear flak from large chunks of the population if they endorsed the tricky, the controversial and the dangerous? How brave, how courageous, would they be? How willing would they be to introduce all or nearly all the recommendations right away? You know as well as I do they would be as cautious as Rudd, Swan and the Government is, and would introduce changes at a time and at a pace that the people affected most could easily assimilate. They would not risk their jobs, their very survival by being ‘brave’ in the way they insist Rudd and Swan should be. It’s so easy for them to talk the talk, but ask them to walk the walk and see how many are still around.
The Government should be commended for initiating the widely-applauded Henry Review. It now has a comprehensive set of recommendations, of which the Government considers some are doable now, together with a blueprint for reforms in the years ahead. Some it considers as not doable anytime. That should not surprise anyone who looks carefully at them. It has decided to introduce change gradually, giving plenty of time for adjustment, and to phase other changes in when conditions, including budget circumstances, allow. That seems to me to eminently sensible and politically rational.
This piece contends that economics commentators and columnists live in a sheltered world where they can opine as the wish about what the Government should do without consequence, without jeopardizing their job and their economic survival. In fact all they jeopardize is their reputation, but that seems of little concern to them as no matter how often they are wrong they bat on as if they have said and done nothing amiss.
They seem to live in a fantasy land where their musings have no consequences, where they have to make no decisions, where they do not have to live with the upshot of any opinion they offer, where any advice they give has no repercussions for them personally. So they can just blast away at any target that takes their fancy or the fancy of their groupthink-afflicted colleagues. It’s great sport, and without risk, yet so destructive to rational public discourse about matters of great importance to this nation.
You may conclude that I’m shooting the messengers; let’s put it this way – take what these messengers say with the large grain of salt their past performance warrants.
What do you think?