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Weekend reflections

February 28th, 2009
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It’s time once again for weekend reflections, which makes space for longer than usual comments on any topic. As always, civilised discussion and no coarse language.Slipstream divx

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  1. Hermit
    February 28th, 2009 at 07:31 | #1

    The Australian Industry Group’s opposition to the ETS and MRET is unsurprising. Conservatives always want business-as-usual even when you’d think it is no longer in their interests. The timeline if I have it right was that the ETS was conceived in late 2007, discussed at length in 2008 (Garnaut et al), watered down to near irrelevance and renamed the CPRS in late 2008, discussed even more (like now) in 2009 and is scheduled to start mid 2010. That’s indecent haste according to the AIG and they need more time to get the paperwork sorted out or something. Meanwhile Melbourne suburbs get to 48C while swathes of Queensland are underwater. I suggest the issues no longer represent business-as-usual nor can they be postponed.

  2. Socrates
    February 28th, 2009 at 09:06 | #2

    The opposition to an ETS, and the parallel reluctance of the US to admit its banks are dead and nationalise them, illustrates to me how much debate about political economy has degenerated in recent decades and how slavishly bound to market solutions we have become. Markets are usually the best solution, but not always. So when we have a serious problem the market can’t fix, shouldn’t we have a government solution instead?

    I was struck by this link from Tim Lambert’s blog recently:
    http://www.thebigmoney.com/articles/hey-wait-minute/2009/02/11/surprise-economists-agree
    So most economists agree global warming is a problem, the fix is affordable, and inaction costs more. Plus we know a majority of voters want action too. We also know its an example of market failure. So why do we have to find a market solution?

    If we can solve global warming with that level of spending, government should regulate to prohibit the harmful causes, spend to replace them with new infrastructure etc, and tax us to pay for it. If other countries don’t do the same we tax their imports to reflect the cost of their emissions to us. Some of our exports will be less competitive, but only by a few %, except for industries we too must restructure anyway if we are serious about solving this. If this sounds crazy, it seems from my reading that the cost is no more than the world is currently spending to (barely) fix the GFC. The spending to fix global warming would probaby restart our economy anyway.

    So I think the problem with global warming is not scientific (we know the problem), not technical (we know the solution), not economic (we can afford it), nor social (there are game theoretic solutions) but ideological (we are obsessed with finding a market solution).

    Please note this is not a criticism of those working on an ETS. If an ETS could be politically accepted that would be fine. But if it can’t (seems to be the case) then we need a Plan B. I say that is direct government action.

    Off to do the shopping.

  3. carbonsink
    February 28th, 2009 at 09:42 | #3

    More evidence that China is in recesssion:
    China Tax Receipts Show Marked Fall in Incomes

    “Tax data show much sharper deceleration in income and consumption in the past few months than suggested by official retail sales or income growth figures,” Goldman Sachs analysts Joshua Lu, Caroline Li and Fiona Lau wrote in a note today.

    Also, Setser on China’s falling exports:

    China’s 17.5% y/y fall in its January exports is far smaller than the falls in the exports of other major Asian trading powers. Japan is down 46%. Korea, 33%. Taiwan, 44%.

    That strikes me as one of the key puzzle’s of today’s global economy. One potential explanation is that China is taking market share. One potential explanation is that the big fall in China’s exports is in the pipeline, as China is the last stop in Asia’s assembly chain. And one potential explanation is that a significant domestic downturn in China is adding to the downturn in the exports of other Asian economies.

    Which prompted this amusing comment:

    Another potential explanation: the Chinese government figures are lies.

  4. carbonsink
    February 28th, 2009 at 09:47 | #4

    Oh yeah, Q4 US GDP revised to -6.2% (from -3.8 from memory). Anyone notice that little tidbit?

  5. P
    February 28th, 2009 at 09:54 | #5

    Regarding the idea of a boycott of Pacific brands, last year I remember reading about legislation in the Australian Parliament that would make the advocacy of such a boycott illegal. Is this the case?

    A related but separate question, would the TWU fall afoul of the law by blockading the transport of Pacific Brands machinery out of Australia.

  6. boconnor
    February 28th, 2009 at 11:16 | #6

    All this hand wringing about executive salaries is just silly. Companies should be able to pay whatever they like for their executives. All the government needs to do is add a marginal rate to the tax scales of 90 cents in the dollar for any compensation package (including share options etc.) over $500K.

    You can live a very good life in Australia on $490K per annum. But if a company wants to spend more than that on its executives then that’s fine – the government can always use the extra tax revenue for the good of the common wealth.

  7. Ikonoclast
    February 28th, 2009 at 11:33 | #7

    Socrates says, “So most economists agree global warming is a problem, the fix is affordable, and inaction costs more. Plus we know a majority of voters want action too.”

    This is the case and yet we cannot get any meaningful action. This tells us much about the current ineffectiveness of our democracy and the stranglehold that undemocratic corporate influence has over public policy.

    Rudd’s “do-almost-nothing” policy gives free kick after free kick to the big corporate polluters and shafts the public twice over. One, we pay for the current (in)action in dollar terms and then we pay again as climate change decimates our economy, our environment and finally us.

    The key struggle of our time is to wrest power democratically away from the corporations and back to the people. Corporate power must be severely restricted and effective democratic power re-established.

  8. Socrates
    February 28th, 2009 at 12:26 | #8

    Ikonoclast

    I agree. Hayek only got it half right. There are two road to serfdom; one is a too big government trampling over individuals. The other is a too small government not stopping powerful private interests trampling over individuals. Ironically, serfdom was largely created in Russia by the Boyars, because the central state was too weak.

  9. Alanna
    February 28th, 2009 at 13:01 | #9

    #8 Socrates, I agree with your comment.

    “There are two road to serfdom; one is a too big government trampling over individuals. The other is a too small government not stopping powerful private interests trampling over individuals.”

    Economists amongst us should recognise that to ignore a broader concept of equilibrium is a danger. The holy grail economists seek is not so small as to be restricted to mere equilibrium in the market for goods and services.

  10. TerjeP
    February 28th, 2009 at 13:03 | #10

    Speaking of market solutions here is an idea for reforming immigration.

    http://blog.libertarian.org.au/2009/02/26/an-immigration-market/

  11. TerjeP
    February 28th, 2009 at 13:07 | #11

    This tells us much about the current ineffectiveness of our democracy and the stranglehold that undemocratic corporate influence has over public policy.

    I doubt it is corporate influence that gives pause to the Rudd government after all they rolled back Work Choices. I suspect it is the likely corporate response to an aggressive ETS and the subsequent knock on effect to voters that gives them pause.

  12. Donald Oats
    February 28th, 2009 at 13:43 | #12

    Rudd has been snookered by the same people who caused trouble in the late 80′s early 90′s on dealing with AGW – the Fergusons and Grays in the Labor party. And Heather Ridout simply played the usual waiting game – make soothing noises until the deadline is near, and only then start to say that there is a problem with the legislation/conditions/implementation blah blah blah. The Waiting Game is well known among experienced politicians but Rudd seems to have been blind-sided and has panicked. Furthermore, in setting such a low initial target Rudd and Wong have played into the psychology of people going “Why make an effort if that is all we are aiming for?”

    I have taken Kevin Rudd at face value on this election promise. If he is unable to deliver a meaningful cut by a meaningful deadline, then there isn’t going to be another chance at this. With the way the current targets are going, I’m beginning to wonder if Rudd wanted to back out of ETS all along since winning the election. I suspect that the government is effectively counting on AGW being totally incorrect, meaning that the government hopes there is no anthropogenic component to any warming, and also that there is no warming (via CO2, methane, etc) anyway.

    Am I being too harsh on Labor here, or are others feeling discouraged too?

    [PS: Personally I reckon AGW is quite correct to the degree of understanding that we can have at the present time: meaning that there is a warming trend that is statistically significant, that CO2, methane, etc provide the forcing via the greenhouse effect, that the human contribution to GHG is statistically significant YoY, that we have adequate models for quantifying the response of the atmosphere, ocean and land, and water in all of its phases, to have qualitatively correct results from simulations and boundary value problem formulations. As measurement technology improves so too will the models.]

  13. Michael of Summer Hill
    February 28th, 2009 at 14:27 | #13

    John, the Pacific Brands saga is in its infancy but until the government’s audit of the company’s finances become public, Australians will be in the dark as to whether any fraud was involved. However I do believe the whole of Australia is behind the unions collective action in trying to stop the company from moving its machinery overseas unless as TWU national secretary Tony Sheldon says ‘the company repays $17 million in Federal Government assistance’ back.

  14. Bruce Littleboy
    February 28th, 2009 at 15:11 | #14

    A lot has been said about the corrupt or unethical practices of bankers, ratings agencies, regulators and deregulators. Bonuses paid by directors to themselves is another case in the news. The Coalition says that the problem would be solved if legislation made shareholder approval necessary. As institutions are major shareholders, and these institutions are run by peple who vote eachother bonuses, isn’t this another market failure?

  15. boconnor
    February 28th, 2009 at 15:51 | #15

    Bruce @14

    I believe there have been a few celebrated instances where shareholders have rejected the remuneration report presented at the annual general meeting (Telstra?). If the vote was binding directors may think twice about their recommendations for bonuses. But your right, major institutions are probably going to side with the directors. There is nothing so sanguine as a chairman with a pocketful of proxies from a compliant institutional investor.

    If we were really going to be radical we would change the corporations law to give each individual shareholder one vote independent of their actual share holding. Now that would turn the shareholder/director power arrangement upside down!

  16. Socrates
    February 28th, 2009 at 16:07 | #16

    Pacific Brands behaviour compares poorly to Mitsubishi. When they closed their Adelaide plant I recall they paid back some of the government funding they had received, and paid workers full entitlements too. So much for our patriotic Aussie companies.

  17. Socrates
    February 28th, 2009 at 16:12 | #17

    Bruce

    Exactly. The directors have much to answer for in corproate excess. The problem si the way they are appointed. Most shareholding is tied up in funds. How can fund members complain about the behavior of their fund managers? Retail funds still only have a vountary code of conduct. It doesn’t matter what we do with corproate regulation as long as this loophole is left open.

    Interestingly, after the collapse of Enron, only one investor sued the directors (successfully) for breach of fiduciary duty, recovering some millions. It was the trustees of the California Schools Board Pension Fund. None of the retail fund investors pursued it. Some of the directors were their appointees of course.

  18. paul walter
    February 28th, 2009 at 16:22 | #18

    Re Pac Brands,
    buried in the corner of a newspaper last night , was a Gillard statement on about secondary boycotts being illegal, blah, blah.
    A sort of IR equivalent to Garrett’s pro Gunns environmental nonsenses or Wong’s “conservation” measures and rhetoric re Darling/Murray. And we never learn, when it comes to Labor.
    “…new boss, same as the old boss;
    won’t get fooled again”.

  19. Bruce Littleboy
    February 28th, 2009 at 16:53 | #19

    re carbonsink #4
    US GDP shrinks 6.2%
    Age website

    February 28, 2009 – 9:03AM

    Do note that this figure, like the 3.8% figure, is one quarter’s figure times 4 (‘annualised’). So in 6 months the US economy has contracted by 2.5%, which is still severe, but not as scary as figures quoted by journalists (who generally forget about the “annualised” bit).

  20. El mono
    February 28th, 2009 at 17:42 | #20

    Socrates i am coonfused as to why the political barriers which stop an ets would dissolve for direct government action. I think that the correct goernment actions are no more likely than the correct market mechanisms.

  21. El mono
    February 28th, 2009 at 17:44 | #21

    What i mean to say if the lobbies are gonna lock us in to 5% reduction then it will not matter if we use an ETS, Carbon tax or direct government actions we are still gonna fall well short of what needs to be done.

  22. Socrates
    February 28th, 2009 at 17:59 | #22

    El Mono

    True but I suppose it depends on whether the obstacles are internal or external. If internal what you say is true. If external then perhaps we need to resort to a unilateral approach, rather than trying to get multi-lateral agreement. It seems to me that the task of getting an ETS to work makes it harder because its too easy to defect at every stage. Whereas with direct action, once the commitment is made, it will proceed. Either way though, I agree with previous comentors that the whole ideology of free markets for everything needs to change.

  23. Alanna
    February 28th, 2009 at 18:43 | #23

    Hi all – Im chaning my nom de plume to Alice (and thats because at times I think Im living in wonderland) eg Bruce #14 says (referring to excessive executive remunerations..)

    “The Coalition says that the problem
    would be solved if legislation made shareholder approval necessary.”

    Then why didnt they do it when they were obscenely excessive and when they had the chance when they were in government? Lets not kid ourselves.

    This is politicking only.

  24. Alice
    February 28th, 2009 at 18:44 | #24

    Does it work? Yes. I am in wonderland. Please note name change.

  25. Socrates
    February 28th, 2009 at 18:54 | #25

    I’m still trying to be Socrates. It is an aspirational target :)

  26. February 28th, 2009 at 19:04 | #26

    I put a submission into the Henry Tax Review for the Retirement Income System and they acknowledged receipt, so eventually it will probably appear here. Later, I will make a submission for the other part, but meanwhile here is the body of this one with my contact details removed:-

    Submission to the Henry Tax Review – Retirement Income System

    P.M.Lawrence

    A phased approach to increasing age pension adequacy and improving personal saving for retirement

    Background

    In Australia as in many developed countries, demographic changes indicate the possibility of stress on pure age pension systems in future. This would arise from the combination of a higher ratio of retired to working age people, and/or an insufficient increase in productivity and production to make up the shortfall. Heading this off would involve more investment to increase productivity and production, and/or changes to migration and family policies to address the demographics directly (but these would also involve more investment for the needs of those demographic cohorts). These issues apply whether the needs of the retired are met through the age pension system or through superannuation, private savings and investments, or in any other way.

    From the narrow perspective of age pensions alone, there is an obvious remedy: simply raise the age pension entitlement age, so that recipients form a smaller group and workers a larger one, so restoring a ratio that provides adequacy. However, this moves many problems to other policy areas and to the other pillars of the system. In particular, it does not address the investment issue or the need to maintain employment levels, both for the older workers and for the wider population. At the individual level, people coming up to retirement would face a major hurdle in planning and providing for retirement and/or continuing to work if they faced a large or abrupt increase in the entitlement age.

    In the following material I outline recommendations to address these other problems, apart from employment levels, which I shall cover in another submission to the main part of the tax review.

    Recommendations

    For present purposes, I am assuming that there will be an increase in the entitlement age for age pensions. This is no great assumption, as it covers a wide range of possible increases and phasing in, including making no change. Exploring this range permitted comparison with present arrangements and led me to definite recommendations:-

    (1.) Commencing as soon as practical, phase in an increase of the entitlement age, by 1 year for every 2 (say) calendar years that pass until the entitlement age reaches 70 (say). The precise numbers may vary, and the upper age need not be determined straight away. Age pensions for this smaller group should be increased to maintain adequacy for them as needed, based on CPI rather than wage levels but not means tested so as not to create adverse incentives for the other pillars. This strengthens the adequacy of the age pension pillar fast enough to head off problems in that pillar while providing time for the other recommendations to strengthen the other pillars, flowing through further saving in those to investment. This measure targets the age pension pillar.

    (2.) Cut personal income tax in step with reductions in outgoings on the age pension system to allow individuals to save more through the other pillars, superannuation and voluntary saving. To encourage this, and to target the savings so that they flow through to investment of the sort that will support the lifestyles of people becoming more dependent on these pillars, implement much of these cuts by increasing superannuation income tax concessions, indexed to a proportion of the average wage. Ideally this could be as high as (say) 16% or approximately one sixth, but this is likely to be too high to be realistic in the near future because of the need for the tax base to fund other policy objectives outside the retirement area and because funding needs for age pensions will only fall gradually. Therefore this proportion should be increased from time to time as circumstances warrant, rather than determined and set up from the beginning of these reforms. This measure targets the superannuation pillar.

    (3a.) Target personal income tax cuts further, to people approaching retirement, by setting up a tax cut age matched actuarially to the entitlement age. This age would fall in step with increases in the entitlement age, in such a way that younger people would be largely unaffected while older people would have a window allowing them to save for retirement more effectively. This is more equitable as so much of their financial planning for retirement has already taken place without being able to anticipate these reforms, yet it does not come at the expense of younger groups as these will also benefit from this window in their turn. As this window corresponds to a shorter time horizon until retirement, the older group falling within the window has a greater incentive for saving over current consumption. This measure targets the voluntary savings pillar.

    (3b.) Alternatively, rather than target tax cuts by age, set up a distinct SAYE (Save As You Earn) fund somewhat like those found in Singapore and other countries and make compensating income tax cuts across the board. This reduces the complexity of the tax system itself by separating various things off – modularisation. This fund should have three main features: a progressive contribution structure (say, 10% of income above a threshold); a cap, savings above which could be drawn down (say, of the order of the $289,000 cited in note 2 of page 8 of the Retirement Incomes Consultation Paper, suitably indexed); and, a cap reset age actuarially matched to the age pension entitlement age as described above, when the cap would be reset to zero allowing people to draw down their savings (if they predeceased this age, their savings would be freed up for their estates at the date at which they would have reached that age). Additionally, it may be convenient to do any or all of the following: shift superannuation income tax concessions to this scheme, crediting these superannuation savings towards the cap, to assist the modularisation; rather than credit interest to individual accounts, waive fees and apply interest/usufruct to the age pension pillar or even to consolidated revenue generally (reducing the degree of hypothecation); and, integrate it with other funds like the Future Fund to the extent that this gives true synergies rather than a reduction in modularisation. This allows more flexibility, both in regard to existing political commitments to personal tax cuts which would not apply to the SAYE scheme, and in regard to how people could direct their income (as they would not be constrained once they reached the target set by the cap). This measure also targets the voluntary savings pillar.

    Effects on the areas of equity, risk, myopia and institutional failure

    Clearly recommendations (3a.) and (3b.) above address intergenerational equity that would otherwise be adversely affected by recommendation (1.), and all the recommendations address equity broadly.

    The Retirement Incomes Consultation Paper describes the risks as political risk, investment risk, inflation risk and longevity risk (page 31 and elsewhere). Recommendation (3b.) addresses political risk by increasing transparency so that “raiding” would be visible, and by reducing incentives for raiding by making usufruct available to governments. Recommendation (1.) addresses investment risk at the upper end, by minimising longevity risk so that individuals do not face adverse incentives to over-invest. Recommendations (2.), (3a.) and (3b.) address the rest of investment risk, also providing suitable incentives and opportunities to avoid institutional failure. Inflation risk is addressed partly by the indexing explicitly present in the recommendations or implicit in their increases of individual discretion to allocate funds and in the shorter time horizons needing to be covered because of recommendation (1.), and partly by increasing the scope of governments to increase the adequacy of age pensions because recommendation (1.) reduces the size of the group needing them over time.

    Between them, all the recommendations address myopia. However, a rational response to investment risk may be misunderstood as myopia; the value of savings and investments depends on future revenue streams, which may be uncertain. There is a little known feature of this variation, that it may well grow exponentially even faster than the exponential growth of the savings and investments (I have confirmed this for simple cases, using the repeated composition of Probability Generating Functions). This means that, no matter how much an investment portfolio is diversified, eventually any investment strategy collapses. In many cases, what appears to be myopia is in fact a sound approach to exponentially increasing uncertainty over longer time horizons, particularly for superannuation with fees and charges (we may be seeing some of the consequences of this now). The combination of recommendations above mitigates this difficulty as much as is practical, by providing a mixed approach. The very longest time horizons are covered by the age pension pillar, using the greatest possible diversification through the resources of the whole politico-economic system. Medium time horizons are covered by the superannuation pillar, with some diversification, and shorter time horizons are covered by the voluntary saving pillar.

  27. Alice
    February 28th, 2009 at 19:42 | #27

    Socrates – from now on Im Alice. You never know who sits in your classes – I could get the baby rottweillers……as unrounded as young undergrads can be, I have a job to do and that is to teach them not what to think, but how to think and I dont want tribal troublemakers for the sake of the rest of the class (not that I cant deal with it….Im long practised at dealing with troublemakers).

  28. Alice
    February 28th, 2009 at 19:57 | #28

    Im sorry PM Lawrence

    but

    “Cut personal income tax in step with reductions in outgoings on the age pension system to allow individuals to save more through the other pillars, superannuation and voluntary saving.

    and you write

    implement much of these cuts by increasing superannuation income tax concessions,

    I rather think super and super concessions to the already very rich in many cases has increased inequality, created an overblown financial sector and contributed to the GFC.

    I really dont think wee need anymore superannuation income tax concessions. Costello did that before we melted down. I think what a lot of people need is their super in their hand, thankyou and to have real choice where they want to put it, not where the employer wants to put it and where the government wants you to put it (really why should people listen now?). If they want to pay off the family home with it – good. It will reduce private sector debt levels.

    Im not sure I would support your recommendations.

  29. February 28th, 2009 at 20:56 | #29

    Alice, “what a lot of people need is their super in their hand, thankyou and to have real choice where they want to put it” is what recommendations (3a.) and (3b.) are about. To the extent those get implemented, recommendation (2.) won’t be. Notice also, recommendation (2.) only provides tax concessions that people don’t have to take up, unlike the approach other people are pushing of forcing people to contribute, and I’m also suggesting that those tax incentives be small to start with (I’m hoping they will end up having a smaller effect than the present approach, but I want to sell this).

    “I rather think super and super concessions to the already very rich in many cases has increased inequality, created an overblown financial sector and contributed to the GFC”.

    Inequality, in itself, is harmless, although it can be a symptom of other problems. I will address those in my later submission. I referred obliquely to the rest in my remarks about myopia actually being a sound response that shouldn’t be overridden by forcing people to save on the wrong time horizons.

  30. Dave
    February 28th, 2009 at 23:14 | #30

    Socrates/Bruce, just on the topic:

    I wrote to my super fund last year, and after a lot of wrangling, found out that they have never once voted against executive payrises. Unless ordinary super holders put pressure on their trustees, executive pay will go up and up.

  31. Ikonoclast
    March 1st, 2009 at 06:03 | #31

    PM Lawrence, I am going to be brutally frank. Have you sat down with a bunch of 70 year olds recently? Do you really want 70 year olds in the work force?

    Point 1. I doubt that 1 in 20 seventy year olds could do a labouring job, machinery operators job or a job that involved standing most of the day.

    Point 2. I doubt that 1 in 10 seventy year olds could absorb and learn the new technologies and the endless managerial changes (90% of the latter being pointless) in the modern office.

    Point 3. Health problems and sick leave in the 65 to 70 cohort would be a cost no employer would want on their books.

    The formal productivity from this cohort (if forced to remain in the workforce) would be very poor. Traditional family and grandparenting roles, volunteeing work and some part-time paid work for the spryest ones form the best options for this cohort and for society.

    Don’t force them all into one box and say they all have to work till they are 70. It won’t do the individuals or the workplaces any good.

  32. Ikonoclast
    March 1st, 2009 at 06:21 | #32

    I’ll add another brutally frank point. If people are not working, they are economic parasites no matter how they get their income.

    It makes no difference whether non-personal effort income comes from shares, superannuation or a government pension that person is a non-productive parasite so far as the formal economy goes.

    I can say this because I am now one of these non-productive parasites in the formal economic sense. I live off a combination of my superannuation and my wife’s income from her full time job.

    Now, I happen to do all the cooking, cleaning, washing, shopping, house maintenance, lunch making, teenage taxi servicing and 2 half-days a week of tasks for my ageing parents. In my spare time I am trying to research and write a novel and a short philosophical work both of which are mediocre and will never be published but they keep me mentally occupied.

    BUT in formal economic terms I am an unproductive parasite. And proud of it! The late stage capitalist workforce today is so full of bulls**t and pointless and even negative activity why would one want to be part of it? Not this little black duck I can tell you.

    People who have lived on shares and rents and the work of others for most of their lives (capitalists and rentiers) are the biggest parasites of all. I despise them.

  33. Kevin Cox
    March 1st, 2009 at 07:37 | #33

    #7, #8, #9 I agree with your sentiments. However, I think there is a solution that satisfies both the free market people and those that want more regulation.

    The solution is in the way we regulate. What we now do is to build markets then try to regulate them. What we can do is to build the regulations into market places (and other systems) so that the market places will do our “will”. That is, let us build market places that through their operation enforce compliance and the achievement of other objectives.

    Senator Faulkner in a speech http://www.smos.gov.au/speeches/2008/sp_20081002.html said “If we want other values – such as privacy – to be ‘programmed on the bare metal’ of technological development, we will need new and innovative ways of doing so, ways other than legislative fiat or paternalistic scolding.”

    This is the idea I have been trying to express in my discussions on Energy Rewards etc.

    We have achieved Senator Faulkner’s objectives in the area of personal identification. We have built and are selling a system that has privacy principles built into the id system. If a company uses our system to identify people they will obey privacy principles.

    If a person uses the Energy Rewards market place I propose they will reduce ghg emissions.

    That is, we build the regulations and objectives into the system.

  34. Kevin Cox
    March 1st, 2009 at 07:50 | #34

    #31 Ikonclast have you sat down with a group of 18 to 25 year olds, or any other age cohort.

    I would go further than you and I would not require anyone to work if they did not want to. That is I believe our society will be much better off if we condone and support people who do not want to work.

    That is, give everyone a living wage, but give them extra if they work.

    People if they do not work will either do things of benefit to themselves and others or they will do nothing. They rarely do “bad things”.

    People if they have to work will do things but many of those things are very bad for society. Think of all those poor souls enforcing government regulations in places like the Department of ….. (fill in the blank yourself)

  35. Chris Warren
    March 1st, 2009 at 08:13 | #35

    Thanks PM Lawrence for your recommendations.

    However a lot of people will suffer if the CPI is used instead of Average Wages (Howards Audit Commission also wanted to destroy this benchmarking).

    More will suffer if they are forced to work to 70. A few will relish the opportunity.

    Great difficulties will arise if taxes are cut as you suggest.

    The problem is that workers have been promised prosperity through the capitalist welfare state. This was introduced by the Beveridge Report. As we now know, this welfare program was in part based on exploitation of the Third World and in part on exponential growth in debt and population.

    Under Keating, with the ACTU clapping, Australian wages were cut with promises that workers would be better off because superannuation contributions were increased in lieu of wage rises. This money has now been lost. Stupid ACTU.

    If workers spend 30 to 40 years building bridges, roads, ports and developing and delivering new goods and services, then the society they built needs to guarantee them a comfortable retirement before spending ridiculous amounts on FA18′s, frigates, and submarines.

    If the economy is being globalised (for some benefit) then this benefit needs to be Tobin-taxed to fund comfortable retirements.

    It is undesirable to subtract superannuation from workers wages as they then do not have the appropriate purchasing power of the ocean of goods and services presented to them in shops. So they are tempted to use debt – which then grows exponentially.

    I fully expect that taxes on profits and foreign financial flows will easily fund moderate retirement incomes – without deduction from workers wages. Increasing workers final consumption expenditures assists the economy generally.

  36. Alice
    March 1st, 2009 at 08:38 | #36

    PM Lawrence – You write

    “Inequality, in itself, is harmless, although it can be a symptom of other problems”.

    Then even given you think inequality is harmless I must ask you. Is that always the case? To what degree? When I look about since even as short time ago as 1990 there now is study after study showing how the rich have got richer and PM, that is, very much richer.

    I understand the balancing act, in terms of economic policy responses, implicit in
    inequality. Too much kills entrepreneurial initiative and too little creates social disharmony. To ignore rises or falls in this measure once again ignores trends that may become dangerous to the econonmy. Therefore inequality, and measuring it, does matter.

    I would argue that just such views as yours have awarded policy makers with the freedom to not even consider the level if inequality and thus tacit approval to ignore the widening gap between the rich and the poor since the mid 1980s. In Australia and in the US and in other countries that gap has permitted the already rich to extract excess surplus in excessive remunerations from the firms that they are engaged with.

    Super tax concessions granted by Costello no doubt continued this view and allowed the already rich to get richer. The wealthy have higher income, earn more super and thus get better tax treatment than the poor PM.(neoliberalism taken to an extreme?)

    At all stages of the superannuation game, the rich have done much much better, whilst the super flowing to the middle and the poor have accrued at a lesser rate. Super flows have maintained employment levels in the financial sector, and that may be a good thing but super has also allowed some (? many) of those employed in the financial markets to rort the financial system and bring it down in a heap through types of unethical behaviour that runs the full continuum.

    Trapped money is what I call super, PM and I always thought a situation would happen one day, where people woke up after many years of work to find it gone. That pool has been just way too tempting for private sector managers and governments alike.

    Im against the whole notion of super that is enforced and locked away. I know the argument, ageining population, who is going to pay for them. Most people are responsible, fear of poverty is enough for them and they do not need to be treated like children (come hither little children….we will hold your hand and make you save and then we will help to rob you of your savings).

    It may have been the case that instead of super flowing on auto pilot to the sharemarket, their super investment in their house would have put many more people in a more secure position now, added to economic activity and thus returned more tax to the government even permitting us all to enjoy a less run down infrastructure now.

    Those poorer and middle income earners should have been given the opportunity to pay off their house with their superannuation, if they choose to do so, without it being transferred to an employee in the financial markets first, for his cut for fees and charges.

    That is real freedom of choice, PM.

    In some ways super has been a nice little game, for some. Tax concession treatment has made it even nicer. The government also suffers loss of resources when tax concessions or cuts are granted. Resources that provide schools, roads, health or education initiatives etc.

  37. March 1st, 2009 at 09:18 | #37

    Ikonoklast, yes, I have sat down with 70 year olds recently, and I shall probably do so again on Monday when I have lunch at my club.

    You have partly misread what I suggested, and partly haven’t followed through what the recommendations deliver. The age pension entitlement age will eventually reach 70, but that’s a generation or so off. People will still be retiring earlier, but on the back of superannuation and personal savings which they will be set up to have. What you fear is what would happen if the government simply raised the entitlement age.

    I’ll reply to Alice later, when I have time.

  38. nanks
    March 1st, 2009 at 09:25 | #38

    Like Alice it never occured to me that I’d get my super. I always assumed it would be too tempting for government. But wasn’t super always set up to increase inequality by being based on % income rather than scaled contributions biased toward lower incomes.(Much fairer as it assumes low incomes can save less for retirement)
    And weren’t the ACTU powerbrokers excited by the prospect of sitting on boards that controlled billions of dollars? I don’t think they were being stupid (@Chris Warren)

    Overall the super idea was not a good one for ensuring retirement incomes. Much better would have been public housing, health care and pensions funded by a fair tax system.

  39. Oceanic
    March 1st, 2009 at 09:29 | #39

    Hermit#1 -

    Relevance of CPRS.

    From the recent devastation in Victoria, greatly exacerbated by a lengthy drought, to the deluge in Queensland – is there any hope of a locally [read national] concocted CPRS, with all of its encumbering financial penalties, achieving a reduction in these climatic catastrophes?

    Evidence would record a loud NO, as the events causing our suffering are happening far from our shores.

  40. Oceanic
    March 1st, 2009 at 09:47 | #40

    Hermit#1

    further to my entry #38 – which managed to get away before completion. I would draw your attention to a 2006 report

    http://www.csiro.au/news/ps2l5.html – 30k -

    from which I have extracted the following –

    “What we have seen in our latest climate simulations is that the ‘Asian haze’ is having an effect on the Australian hydrological cycle and generated increasing rainfall and cloudiness since 1950, especially over northwest and central Australia. The effect occurs because the haze cools the Asian continent and nearby oceans, and thereby alters the delicate balance of temperature and winds between Asia and Australia. It has nothing to do with Asian pollution being transported directly over Australia.”

    I believe this weather imbalance ties in with the state of the Indian Ocean Dipole and accounts for the sustained drought of the southern half of OZ.

    Therefore, it appears to me unless the Asian Haze can be removed any steps we take with a CPRS will not amount to much.

  41. Hermit
    March 1st, 2009 at 10:32 | #41

    Oceanic assuming this theory holds up to scrutiny I still think there are several reasons why Australia is in the box seat to influence Asian emissions. Firstly it appears that Asian coal exporters Indonesia and Vietnam now wish to conserve coal for domestic use rather than assist China. An extrapolation made a year ago suggested China would be a major coal importer by 2010 or so. The recent downturn may only shift out that timeline. There is talk in Europe (eg by Sarkozy) of putting carbon tariffs on imports from China. Australia could decline to approve Chinese acquisition of Rio Tinto coal and iron ore offshoots. We could also make uranium exports conditional on coal use reductions by China and India.

    Generally I think there are ways around such issues. While Asia is crapping on us climatically we remain the lolly shop of resources and we should call the shots.

  42. Oceanic
    March 1st, 2009 at 11:20 | #42

    Hermit#40

    We may be the candy store but it’s not enjoyable selling the produce if we are continually flooded or drought ravaged.

    I believe the 2006 CSIRO report quoted is fairly good authority and if read in conjunction with the June 1999 discovery of the Massive Haze over the Indian Ocean, an acceptable conclusion can be reached that their contention of changes to weather patterns was a reality and expected to intensify.
    The problem with this area of science is a coupling of complexity and considerable time lag before a positive conclusion can be reached.

    Extrapolating, [don't you just love the breadth that word gives] the proof of intensification is consistent with the torrential rains moving eastward from the 2006 reported position of
    northwest and central Australia.

    Although aerosols within the haze undoubtedly comprise particulate matter from coal-fired burning, which should and could be eliminated, others are from large scale forest fires in Indonesia; age old practices in India burning dung etc and wildfires generally, to mention a few. Those countries contributing to the haze need to be encouraged to change their ways before the air will clear.

  43. Alice
    March 1st, 2009 at 11:35 | #43

    Nanks#37 – says

    But wasn’t super always set up to increase inequality by being based on % income”..?

    Nanks, I agree.

  44. March 1st, 2009 at 11:36 | #44

    The solution proposed by Malcolm Turnbull, Joe Hockey and Tony Abbott for action against excessive executive salaries would be as ineffective as their use of the outrage over salaries paid to Pacific Brands chief executives reeks of political opportunism.
    Former Pacific Brands chief executive Paul Moore was reportedly paid $1.2 million a year in 2007 which went up to $1.5 million in 2008, even thr0ugh he left halfway through the financial year, according to The Australian. That paper reported he collected $5.8 million when he retired in January 2008.
    In the scale of executive salaries in Australia, this is relatively small beer. Think Sol Trujillo, who is on more than $10 million a year and, according to Ian Verrender in The Sydney Morning Herald persuaded the board to pay him a $3 million “termination bonus”, even though he was not being terminated.
    Verrender points out that if Trujillo stayed more than four years in the Telstra job, he would have to pay tax in Australia.
    Where is the outrage of Turnbull, Hockey and Abbott about this, not to mention the abuse of stock options to chief executives in many of Australia’s largest companies?
    To suggest that executive salaries be subject to shareholder approval has a major flaw. With large companies, institutional shareholders mostly have the numbers to decide the result.
    These institutional shareholders nearly always support the board.
    If the proposal ever came into being, all it would do would be to legitimise obscene salaries. The quid pro quo mentality from captains of industry would be at work. Then Turnbull, Hockey and Abbott would wash their hands and say the shareholders have spoken.

  45. Alice
    March 1st, 2009 at 11:57 | #45

    Ikonoclast#31 and PM Lawrence#36

    I doubt whether most 70 year old would want to be in the workforce full time and if they are spry enough would only want part time work at most.

    Raising the entitlement age, now or in the future in some sort of phase in period doesnt hide its effect. It will only cause greater hardship on the neediest. The wealthier will have retired.

    I see little merit in your suggestions PM all round and wonder who they really benefit? Employers and governments who are simply not looking at the bigger picture of why a growing number of people have insufficient savings for retirement as a factor of their income levels, loss of workforce protections, the inequity in tax scales, and their outgoings like housing costs such as mortgages and interest payments over their life.

    If your strategy requires people to work longer into their infirm years and within a work environment that realistically will not want to employ them anyway, its not much of a strategy to me.

    Ageism in employment starts to creep in even after 40 years of age – I know a few people who have lied about their date of birth seeking employment effectively and my stepson was briefly a recruiter. He told me that ageism exists because employers want young people. They get electronic applications and they just pile them as too old, too old, too old not after 60 but after 40! That is the real world and what jobs would be left for 70 year olds? The hard (perhaps physically demanding even) low wage jobs no one else wants.

    Picking and packing in warehouses?

    Its fine to have a plan that suits employers and governments but if that plan is going to make the poor worse off and require the wealthy to pay less income tax given where we are already at now with inequality, then its going to make things, frankly, worse.

  46. Oldskeptic
    March 1st, 2009 at 12:22 | #46

    Yes, but this is all a part of the ‘neo-liberal’, largely incoherent in my view, belief structure.

    Note: neo-liberal was never a part of mainstream conservative thinking. Rather it was extremely radical and determined to change, overthrow or even junk whole institutions that had steadily developed since (roughly) the 1890′s.

    More a rejection of modernity and a wish to return to some imagined late 1800′s England, that never actually existed. Aided by its handmaiden, also incoherent, neo-classical economic ‘theory’, and later followed by its much more aggressive neo-conservative offspring.

    The nonsense peddled over the last 30 years was appalling to behold, only matched by the credulity of the middle classes, the chattering classes and the media.

    “Dual deficits”, remember that howler. The other, more sinister, was the explicit acceptance of 2 classes of people. Those who need to be incentivised to do their best, ie the elite who were only being held back because they couldn’t get richer, Gillivers held down by the threads of the ‘little people’. The rest, needed ‘labour market flexibility’, their code for longer hours, lower pay, less benefits and job insecurity. They get the carrot, we get the stick.

    Contrary to their propaganda, they were never against large Govt. What they wanted was a realignment of Govt to towards their vested interests, which in the Anglo-Saxon countries they largely achieved.

    Unfortunately, for us that is, the ‘internal contradictions’ have caught up.

    One such example was that untrammelled elite power = untrammelled corruption, just as in any 3rd World nation with a ‘strong man’ in charge. I knew the gig was up for the UK when the Govt sold off the Inland Revenue (tax dept) buildings to a property magnate who operated out of a tax haven. This simply meant that the whole system was totally and rottenly corrupt, but that the arrogance of the ‘elite’ was so great by then they simply didn’t care. No society or economy can last long like that.

  47. rog
    March 1st, 2009 at 12:49 | #47

    Those calling for increased financial regulation need to consider the facts; the costs of regulation may far exceed any benefits.

    Look at Operation Wickenby, $300m spent to get back $3m with one aging rocker spending some time in gaol – hardly a good use of taxpayers money. Reforming taxation could obviate the need or the opportunity for these complex tax avoidance schemes to exist.

  48. Salient Green
    March 1st, 2009 at 13:07 | #48

    I regularly employ over 65′s for seasonal work and they require shorter days and longer, more frequent rest breaks. We have a flexible agreement on wages.

    Over 65′s, generally, have a work ethic, initiative, are resourceful, punctual, reliable, patient and good team workers. For these reasons I prefer them over the under 25′s any day even for the extra trouble of accomodating their shortcomings.

    None of these older people have super.

    It makes me angry that these and so many others have and are missing out on super. Women, part time workers, the unemployed and small businesses struggling along since Economic Rationalization are missing out through no real fault of their own.

    Successive Governments have failed to treat the disadvantaged fairly while creating and furthering a system which allows corporate pigs to determine their own diets and then to gorge themselves on what could be other people’s livelihood and retirement income.

    This debate on corporate greed is most welcome but it must be realized that it is only one symptom of a sick economic system which, while it is still hooked on debt, growth and consumption, provides the perfect culture for these corporate parasites.

  49. Bruce Littleboy
    March 1st, 2009 at 13:57 | #49

    re executive remuneration # 15-17, 23-24, 30, 43 etc.

    Kevin missed an Alice in Wonderland possibility when the Libs suggested a change in the law so that shareholders would need to expressly approve the Board’s remuneration:
    “So I’ll take that as bipartisan support!”

    We would then have had the pleasure of watching the Libs howl and backpeddle. (Or Kevin squirm and backpeddle if the Libs were brazen enough to keep a straight face.) Political analysts are really just theatre critics.

  50. Alice
    March 1st, 2009 at 14:41 | #50

    Rog at 46

    Here is a release by the ATO. Your quote

    “Look at Operation Wickenby, $300m spent to get back $3m with one aging rocker spending some time in gaol”

    is blatantly incorrect. Firstly, the 300 mill for Operation Wickenby to fight tax haven abuse is over 7 years and I suggest you read the correct results. This is a very positive initiative with very positive outcomes.

    http://www.ato.gov.au/corporate/content.asp?doc=/content/00169431.htm&mnu=43278&mfp=001

    Wickenby

    As at the end of November 2008, Wickenby has raised $265 million in liabilities, collected more than $84 million and restrained over $75 million from the proceeds of criminal activity. An additional $74 million has been achieved through increased tax collections in subsequent years by those who have been subject to action by the Wickenby taskforce.

    So far, 28 people have been charged, and 23 criminal investigations involving multiple parties are underway. Several defendants have indicated that they intend to plead guilty to charges.

    Three people have been convicted, and two more are to face sentencing in the New Year. We expect other prosecution results as Wickenby’s investigations continue.

  51. Alice
    March 1st, 2009 at 14:45 | #51

    re 45# Alice has become like Oldskeptic too.

  52. March 1st, 2009 at 15:34 | #52

    A lot has built up, so I’ll try to address them with comments in chronological order for each poster, starting with Kevin Cox.

    “I would not require anyone to work if they did not want to. That is I believe our society will be much better off if we condone and support people who do not want to work. That is, give everyone a living wage, but give them extra if they work.”

    I have looked into this, and it’s going to be behind part of my next submission. But it turns out that the optimum amount is less than enough to live on, so that everyone can price themselves into work at a good enough top up wage. There are also huge transitional problems for many implementations.

  53. rog
    March 1st, 2009 at 15:45 | #53

    OK, I was out by a few dollars but still, PW will run at a considerable loss whilst tax reform is still needed as a matter of urgency.

  54. March 1st, 2009 at 15:47 | #54

    Chris Warren wrote “a lot of people will suffer if the CPI is used instead of Average Wages”.

    No, I only suggested this for the age pension side of things. I also recommended that there be no means testing so that people could achieve better results through the other “pillars” of the system, superannuation and voluntary saving, if they wanted to. The other recommendations give them a chance to, so it is not a “let them eat cake” thing.

    “More will suffer if they are forced to work to 70″ – no, this is the same misreading Ikonoklast made that I replied to above.

    “Great difficulties will arise if taxes are cut as you suggest. The problem is that workers have been promised prosperity through the capitalist welfare state… If workers spend 30 to 40 years building bridges, roads, ports and developing and delivering new goods and services, then the society they built needs to guarantee them a comfortable retirement… If the economy is being globalised (for some benefit) then this benefit needs to be Tobin-taxed to fund comfortable retirements…”

    Nobody who made the promises is around now, and nothing can be delivered anyway without doing something to raise the production and productivity to deliver it. So taxes are not the way to go.

  55. carbonsink
    March 1st, 2009 at 16:02 | #55

    Bruce Littleboy @ 19:

    US quarterly GDP numbers are always “annualized”. Dunno why, that’s just the way they do it over there.

    BTW, Chinese electricity consumption is down again. Amazing that an economy can be growing at ~7%, but use less power every month. Those Chinese sure are efficient :)

  56. rog
    March 1st, 2009 at 16:04 | #56

    Given the huge amount of Australian investment held offshore you could well ask how many more Wickenbys are there?

    With cost blowouts on IT, rumours of mass sackings and government directions as to ‘efficiency’ dividend the ATO is fast running out of resources – tax

  57. Alice
    March 1st, 2009 at 16:18 | #57

    Rog, operation Wickenby IS tax reform.

  58. Alice
    March 1st, 2009 at 16:20 | #58

    Wickenby is badly needed tax reform as a matter of fact. There are huge overseas tax haven black holes where greedy people and criminals are are avoiding tax.

  59. March 1st, 2009 at 16:21 | #59

    Finally for Alice.

    “Then even given you think inequality is harmless I must ask you. Is that always the case? To what degree? When I look about since even as short time ago as 1990 there now is study after study showing how the rich have got richer and PM, that is, very much richer.”

    Yes, and it is a symptom of some things that should be attended to. It is not, in itself, a harm. As I mentioned, my later submission will cover those things.

    “I would argue that just such views as yours have awarded policy makers with the freedom to not even consider the level if inequality and thus tacit approval to ignore the widening gap between the rich and the poor since the mid 1980s”.

    No, because they have further chosen to ignore the symptoms and not attend to the real problems. They have not been following views like mine.

    “Trapped money is what I call super, PM and I always thought a situation would happen one day, where people woke up after many years of work to find it gone. That pool has been just way too tempting for private sector managers and governments alike.”

    I agree, and I mentioned that in an article I wrote on this same topic over ten years ago now: “People could of course invest in private superannuation schemes in the old way, but this is actually an absurd choice for many of us, because the benefits of their management decisions are marginal and the fees are imposed at the beginning – with any real career mobility nobody gets their money’s worth” (the article may resolve some of your other doubts). But the thing is, we do have a superannuation pillar locked in now, and the only way I can see to sell the recommendations is to have one about that covers superannuation but does not force people to use it, while having other recommendations that provide what you are after.

    “I doubt whether most 70 year old would want to be in the workforce full time and if they are spry enough would only want part time work at most”.

    For some reason, you stop dead before looking at the effect of all the recommendations working together. I already answered this, and you even cited where I did, but you haven’t taken it on board.

    “Raising the entitlement age, now or in the future in some sort of phase in period doesnt hide its effect. It will only cause greater hardship on the neediest. The wealthier will have retired.”

    The whole point of the other recommendations, which you are tuning out, is to raise the condition of those “neediest” into the other category. On its own, doing something like recommendation (1.) would be terrible (see where I wrote “However, this moves many problems to other policy areas and to the other pillars of the system… people coming up to retirement would face a major hurdle in planning and providing for retirement and/or continuing to work if they faced a large or abrupt increase in the entitlement age”?). However, ideas like that are already being canvassed, so I put together a package to sort things out.

    “Ageism in employment starts to creep in even after 40 years of age – I know a few people who have lied about their date of birth seeking employment effectively and my stepson was briefly a recruiter. He told me that ageism exists because employers want young people. They get electronic applications and they just pile them as too old, too old, too old not after 60 but after 40! That is the real world and what jobs would be left for 70 year olds? The hard (perhaps physically demanding even) low wage jobs no one else wants.”

    I know this, even from my own direct personal experience. These are part of the other problems I told you I would deal with in my later submission (see where I put “In the following material I outline recommendations to address these other problems, apart from employment levels, which I shall cover in another submission to the main part of the tax review” in this submission?). You can see some of the thinking behind that in my reply to Kevin Cox above. If you want more, read some of my other articles and material on the same page as the one I linked to further up.

  60. paul walter
    March 1st, 2009 at 16:49 | #60

    Relax, Alice#35. It’s ok to recycle obsolete neolib quack nostrums and remedies from the ‘nineties, in the teeth of a consequent global recession, if you are a libertarian.
    It’s called the “Slum dog millionaire” defence.

  61. March 1st, 2009 at 17:29 | #61

    Paul Walter, if you can identify anything like that in what I put forward, please do so. Otherwise you may just be making an unfortunate association of ideas that merely sound the same to you. In particular, I am not aware of any of this being ’90s neo-anything stuff – and I doubt if you came across it in aources like that either.

  62. rog
    March 1st, 2009 at 17:48 | #62

    How so Alice? I believe that they are only using existing legislation.

  63. Kevin Cox
    March 1st, 2009 at 18:04 | #63

    #51 PM Lawrence I would be interest to know how you determine the optimum amount and how you then determine it is “not enough”. What are the transition problems?

    I’ve had a look at it myself and the savings in the way we run our tax and social security and other transfer payments are very large.

    You can also structure it so it is an “optin” system. That eases some of the transition problems.

  64. March 1st, 2009 at 19:37 | #64

    Kevin Cox, it is practically impossible to determine the optimum amount in advance, although we can determine some things:-

    - A full subsistence amount would leave a sizeable segment opting out of work, so there would be a GDP shortfall compared with what is obtainable. That tells us it is above optimum.

    - A zero amount is similarly sub-optimal, since not everybody would be able to price themselves into work and, indeed, some would resort to counter-productive, predatory behaviour to survive.

    - An amount set to match unemployment benefits would work out the same as the cost of those, once transitional effects have been sorted out, so it is a good starting parameter for an approach that tries to get nearer the optimum.

    - Because the shapes of possible curves that describe things have a broad plateau rather than a narrow spike, there isn’t much to be gained by trying for a precise optimum (the shortfall is a second order function of the discrepancy). Near enough is good enough.

    The transitional problems come partly from the “stickiness of wages”, meaning the earned part of income ought to fall for people already in work before the rest can bid themselves into work, and partly from the funding problems of having to pay out until people priced themselves into work (some approaches also have continuing transaction costs from churning funds and running the system). These show up even in relatively “clean” approaches like Negative Income Tax, and spoiled a trial of that which only used a sample test group in a region where everybody else was driving wage levels.

    But there are ways around these problems, ones I have mentioned around here before, which I shall work up as part of another submission. As well as Professor Kim Swales’s work on the area, I have recently been informed that Nobel winner Edmund Phelps has also been thinking on similar lines, ending up writing a book on it, “Rewarding Work”.

  65. Ernestine Gross
    March 1st, 2009 at 20:54 | #65

    Question: The USA literature often talks about ‘capitalism’ and the aim of saving capitalism while solving some social problems (eg Phelps, referenced by PML. In the continental EU literature, the term capitalism is hardly ever mentioned. Instead one reads about ‘social market economy’ or ‘social and ecological market economy’. These EU terms make sense to me (eg they suggest that the market economy is to serve the society and, since the environment cannot be separated from the economy, it may be useful to include the word ecological to make it obvious to everybody).

    What exactly is it that is to be saved in the USA?

  66. Ikonoclast
    March 1st, 2009 at 20:57 | #66

    It’s very simple. We need a national super scheme for every worker guaranteed by the government. Call it Commonwealth Super.

    We need a national bank guaranteed by the government. Call it the Commonwealth Bank.

    We need nationalised communications. Call it Telecom. nationalised mail service. Call it Commonwealth Post.

    We need nationalised roads, power and energy infrastructure. Nationalise, nationalise, nationalise all strategic infrastructure.

    Give all corporate capitalists a big crew cut, yank them out of their cushy office jobs put them on the roads and pay them the basic wage.

  67. Alice
    March 1st, 2009 at 21:00 | #67

    Rog#61 and so should the ATO use existing legislation and have the resources to do so. With so many waves of efficiency reforms some government departments have been stripped to the point of innefficiency. There is absolutely nothing anyone could object to in operation Wickenby and its more than existing legislation. This been long overdue since the renee, rodney, rich and skase band played at places like the balmoral pavilion in the 80s.

    Further, the marginal tax rates for the wealthy were lowered substantially approx 30 or 40 years ago and still that wasnt enough. They still bay as like hungry wolves for lower taxes and lower regulation, get it, and then dont pay any tax at all.

  68. Alice
    March 1st, 2009 at 21:39 | #68

    PM Lawrence

    You comment on ageism and people being unwilling to hire 70 year olds.

    “I know this, even from my own direct personal experience. These are part of the other problems I told you I would deal with in my later submission (see where I put “In the following material I outline recommendations to address these other problems, apart from employment levels, which I shall cover in another submission to the main part of the tax review” in this submission?)”

    PM your model may look good as so many do in legoland, but there are too many “oughts” in it for me. Ageism is a big one. Despite iniatives aimed at getting people to work longer you cannot compel the large profit seeking private sector to hire what it doesnt want to hire no matter what you do (no glossy posters, no television ad campaigns…cant you just see it “older workers are gold” showing some 70 year ex pentathlete who looks 50?)

    It will be a waste of resources trying to fix that one and if the model on which your suggested improvements are aimed at is flawed, then I dont see the point in applying patches, ie the model of compulsory super based of a percentage of income earned is(as Nanks mentioned – funadmentally flawed and embeds inequality).

    We have a problem with inequality right now, because economic policy makers have been not only totally ignoring it, but also ignoring the problems that are causing it (if you happen to think inequality isnt a problem but the factors that cause it are).

    Super levied as a percentage of income combined with favourable tax concessions have contributed to some of these problems we now have in the financial markets and contributed to the speculative bubble that preceded it.

    I dont see anything in you plan that corrects for that or the rising inequality or the bloating of the financial markets since manadatory super was introduced. Markets generally can only have excessive remunerations when the firm earns abnormal profits…too much or too little (as in they are quite capable of paying themselves a lot just before going under and seeking a bailout as we have noted at Merryl Lynch, and the HIH fiasco).The pharmaceuticals are an example of too much. Yet the profits in financial nmarkets were made on the back of gambling with the monstrously huge pool of “trapped money”.

    I see in your plan a raised entitlement age, people working until they are 70, yet more tax concessions to co-erce people to keep putting in to super…ie keep forcefeeding the financial markets, even with the GFC we have just had. ?

    Its a patch PM but not an overhaul. We need a complete rethink here.

    Alanna

  69. Alice
    March 1st, 2009 at 21:44 | #69

    Can anyone find the Ci@lis in my post? I got moderated.

  70. paul walter
    March 1st, 2009 at 22:30 | #70

    OK, P.M.Lawrence. I know you are responding to issues of globalisation overall; the nationalism/ globalism and class divides, footloose computerised off shore banking and competive advantage re emerging nations against the sort of isolationism of the ‘thirties that could recur given the current crisis in faith. Easy mate, easy.
    I just can’t see, like so many others here, how capitalism can keep its credibility as to the legislation of “easier” measures like the one you are proposing, when public feeling is kept high by acts of bad faith typified by the US bail out, Sol Trujillo and PacBrands.
    We would get the sort of atmosphere you seek if we got even the slightest sense of “lead from the front”, shared adversity and even a skerrick less opportunism and bad faith from some. But its all take and no give with capitalism.
    And taxation seems one of the very few ways that the better off can be made to pay at least a fraction of their dues, for social infrastructure that they also benefit from, even if its only the form of defence, or the fact of their workers as educated and healed by civilisation, in the world outside their mansions.

  71. March 1st, 2009 at 23:41 | #71

    Alice/Alanna, what you are objecting to is the fact that this submission doesn’t do certain things. No more it does, but the Henry Tax Review was structured to ask for things separately, so I addressed this group of things with this submission in time for this area’s deadline and I shall cover the rest later.

    “I see in your plan a raised entitlement age, people working until they are 70, yet more tax concessions to co-erce people to keep putting in to super…ie keep forcefeeding the financial markets, even with the GFC we have just had. ?”

    Again I tell you, the 70 thing isn’t a work-until thing, it’s when the age pension would kick in and take up the load from private arrangements – private arrangements that become practical with this. And no, those aren’t just a way of pouring it all into superannuation, not unless they muck it up by not having those age related tax cuts. Even if they do muck it up, that just sets up the next step to make. Worst case, they just implement recommendation (1.), and second worst, they just implement recommendations (1.) and (2.) – but even recommendation (1.) buys time and stops them just hiking up the entitlement age a lot right away the way they are already discussing out of earshot. Anything they don’t implement increases the need for the rest, sure, but also the opportunity because of buying time. With recommendations (1.), (2.), and either of (3a.) or (3b.), we get something that holds together – provided we can get employment up and get the right institutional structures for people’s savings to flow through into constructive investment. I’ll be able to cover a lot of that in the other submission, but some of it is beyond the review’s remit. Even so it’s worth doing, and the more gets done the better placed we are for other reforms (and I mean real reforms, i.e. repairs and/or improvements, not just “changes politicians talk up”).

    What you see as a patch is in fact a first step in a transition – and, as such, it necessarily must be based on what is around now.

    Paul Walter, unfortunately, taxation is a “two wrongs” thing, so the right thing is to wind it back – only, prioritising other things than those the rent seekers have been thrusting upon us and replacing what it has been funding with other arrangements, ideally engineering out the needs rather than just providing alternative support arrangements. Kevin Carson’s mutualist blog is informative in the area (Ernestine Gross, that should show you that there are still strands of thought in the USA worth respecting, even though they are not of the USA).

  72. Ernestine Gross
    March 2nd, 2009 at 10:45 | #72

    (PML, point taken about lack of clarity.)

  73. Alice
    March 2nd, 2009 at 18:56 | #73

    PM

    Id like you to explain the following comment you made

    “Paul Walter, unfortunately, taxation is a “two wrongs” thing, so the right thing is to wind it back

    a) Id like that comment explained

    and

    b) “only, prioritising other things than those the rent seekers have been thrusting upon us and replacing what it has been funding with other arrangements”

    What other arrangements do you suggest funds shools, infrastructure, planning, health and those crucially important things that taxation has been traditionally funding ie social common capital etc ? What “other arrangements would you suggest”

    It is ridiculous to propose tax cuts without any plan to fund our vital infrastructure of government, but then Im starting to get the impression you would prefer less tax and less government? Yet more neolioberalism without a real plan PM. Just keep the status going by making sure super keeps feeding the financial markets. What I am suggesting is to let individuals decide what to do with their super – let them have the ability to use it for an attractive investment opportunity – not the Citibanks and Perpetuals and Lehman Brothers of the world. Gee does that make me the true liberal here?

  74. Alice
    March 2nd, 2009 at 19:42 | #74

    Rog,

    Tax reform in my view is being able to collect the tax that has been hidden in tax holes and offshore tax havens. Tax reform is reforming the individuals who have been finding all sorts of ways to hide taxable income so that they pay no tax. The department itself doesnt need reform. Its the wealthy tax evaders that need the kick up the backside. Thats reform. You dont strip resources from the ATO in the face of this gaping black hole.

    I really tear my hair out with some of the nonsense efficiency arguments that get put forward here in JQs blog…the economic policy direction over the past twenty years that has pretty well delivered efficiency drives here there and everywhere in the publioc sector…efficiency drives that stripped many departments of the basic resources to a point of inefficiency. What point an ATO that cant perform its main responsibility?

    Furthermore, it was all carried out under the notion that we dont need a decent government, and that the private sector is oh just so efficient. Well they are no more efficient than well run public sector departments. Futhermore benefits to the private sector have proven not to trickle down but to be hoarded by the few at the growing cost of the many.

    I bet the ATO gets pretty damn annoyed too with not having the resources to chase the criminals and wealthy who are pushing their tax burden down on to the poor and the middle class and even evading their tax responsibilities completely.

    It really is time to get back to normality. The breath of fresh air is here and the nonsense is being shown the door. Read today’s smh – one comment after another that people are isck and tired of obscene executive salaries and people who have been using off shore tax havens to render it free of tax.

    Almost every comment in SMH today.

    Are those still pushing the neoliberal agenda of feeding the horse most of the oats and telling the sparrows they should wait for some to pass through to the road, actually listening? They should be. Remind me again, what did happen to Marie Antionette? Its time to shut the free lunch box.

  75. March 2nd, 2009 at 20:00 | #75

    Alice, I don’t have time to reply in full right now, but may I suggest you keep reading and maybe even follow up the link I provided? I have been noticing a tendency of yours to read just up to the point where a problem would come up if you stopped, then stopping. In this case, you haven’t taken on board “ideally engineering out the needs rather than just providing alternative support arrangements” [emphasis added] or following the link to find concrete stuff that illustrates it.

    Get back to me if that material doesn’t help and I’ll try to flesh the area out in a day or two, but please don’t do that whole association of ideas/sounds like stuff. It will only substitute labelling for understanding, e.g. with that neoliberal label.

  76. Alice
    March 2nd, 2009 at 20:14 | #76

    PM – Ill read your link but could you just answer my questions at 73 ie very specifically with common sense? Without the jargon?

    First?

  77. March 2nd, 2009 at 20:40 | #77

    No, not first. I’m busy, and that link should be illuminating enough.

  78. Alice
    March 2nd, 2009 at 20:54 | #78

    Its not PM. They were simple questions and Im averse to non specific jargon as a response.

  79. Alice
    March 3rd, 2009 at 07:09 | #79

    Paul Walter #70 we have another one of them here…that thinks deregulating the world and removing all government by removing all taxes is a solution to the economy….right…is there a tablet they can take?.

  80. paul walter
    March 3rd, 2009 at 09:27 | #80

    Sounds like they’ve already taken it, perhaps more likely the whole bottle.

  81. March 3rd, 2009 at 10:46 | #81

    Alice, unless you followed up the material and found that there, you’re making things up on the back of labelling. By all means cite something that supports your assertion, preferebly showing you have read the material, and in particular supporting the direction of cause and effect you made up in “deregulating the world and removing all government by removing all taxes is a solution to the economy” (I wouldn’t dispute that if we had some marvellous pie in the sky result, there would be no governments and then no taxes – if).

    And you are quite wrong, I am too busy to give you a proper reply until at least this evening, possibly tomorrow, so it really would get you there faster if you did some of the homework I pointed you at. You should at least tell me what you call jargon, with examples, so I can avoid that when I get around to it.

  82. Alice
    March 3rd, 2009 at 10:58 | #82

    Pm for goodness sake. The link isnt worth citing and you sir, are a practical joker.

  83. Alice
    March 3rd, 2009 at 11:09 | #83

    Paul – they are, to use your famous words “bane of every blog atempting serious conversation, across the entire cyberverse”?

    The rambling much bold headed intro about super reform, with reams of unintelligible jargon, was in reality probably just an excuse to drop the silly extremist link in here in the hope than they could convert one dense fool to their mad way of thinking….yes, the whole bottle alright.
    Its a zoo out there.

  84. rog
    March 3rd, 2009 at 12:02 | #84

    Alice, the populist mood to cap exec salaries is a ridiculous sideline to the main issue of how banks operate and the leverage they are permitted to use.

    Reform is to existing tax laws, merely ensuring that laws are enforced is not “reform”

  85. paul walter
    March 3rd, 2009 at 14:31 | #85

    rog, I think she’s citing executive restraint and lack of, as symptom rather than cause.
    I think that the criteria for deserving v undeserving is arbitrary whichever side you are on- but I do know, I don’t want to be in the gutter while some executive responsible for some of the mess through an anti social mindset and misplaced loyalties, walks away with tens perhaps hundreds of millions of bucks (s)he doesn’t need, as part of the move to dominance of one small class over the rest on some very dubious justifications, indeed.
    Am sick of the Murdochs of the world trying to sell me the idea that I should rot in a dumbed down fools paradise ( am surely not so malevolent that I deserve that, compared to others ?) just so they can keep the goodies all to themselves, without even a questioning of their right to it against the rest.
    There are a lot of shonks being sold to pleb land at the moment under cover of a rights based debate, but for my part, remain stubbornly unconvinced that some of the really rich jerks out there are entitled to all that extra loot, just because they wear a suit (sh-t, am a poet, didn’t know it!!)

  86. Alice
    March 3rd, 2009 at 14:35 | #86

    confirmed 85#. I am. Willingness for risk leverage levels incentivised by excessive remunerations. Or did the chicken come before the egg? Doesnt matter, its a cracked egg now.

  87. rog
    March 3rd, 2009 at 14:52 | #87

    All the more important to focus on the cause not the symptom.

  88. March 3rd, 2009 at 16:52 | #88

    Alice, “The link isnt worth citing and you sir, are a practical joker” is a combination of “my mind is made up, do not confuse me with the facts” and resorting to abuse when argument fails.

    When I get the time, I shall catch up with a reply for Paul Walter at no. 70 above, but you appear indifferent to being told so unless you give me some reason to suppose otherwise, there doesn’t seem much point replying to your comments even when I do get the time. Not if you have decided that I am a practical joker or worse without even waiting for a reply or bothering to follow the link I gave to find out if there is any relevant background there or linked from there, just coming out and calling it worthless without anything to back that up.

  89. March 3rd, 2009 at 17:00 | #89

    Readers, Alice’s “The rambling much bold headed intro about super reform, with reams of unintelligible jargon, was in reality probably just an excuse to drop the silly extremist link in here in the hope than they could convert one dense fool to their mad way of thinking” is offensive. That “jargon” is lifted straight out of the material the Henry Tax Review put out, so I coukld talk to them in their language. Likewise the bolding came straight out of the format that made sense for the submission. I did not make that submission up just to play with people’s minds around here. Feel free to check what submissions they have on their site; sooner or later it will be there, which shows I only posted it here to get feedback – it’s not mucking around with people here. And feel free to show just what at that link is the sort of thing Alice objects to, or how my posting the submission leads to that – it came from a sincere attempt to give questioners here some relevant background, later on, when I tried to follow up what I thought were sincere requests and which I couldn’t foresee in advance.

    But my library session is coming to an end, so I must stop for a while.

  90. Alice
    March 3rd, 2009 at 20:30 | #90

    Pm I gave you feedback. The link you posted is extremist nonsense and the same nonsense expresses itself in your super plan. Reduce taxes, starve the government, keep people working to 70 before they get any entitlement, but keep their money longer in super with regulation. Most would despise that plan right now. Look what is happening as you draft this plan. Thats the last thing Ill say on it because the underlying philosophy leaves me completely cold.

  91. March 3rd, 2009 at 23:19 | #91

    Alice, judging by your remarks and lack of substantiation you didn’t read anything at that link. Did you even know that Kevin Carson is routinely called a Marxist for criticising what he calls “Vulgar Libertarianism”? That you can look more deeply than those people do just by seeing what he finds to criticise about them? If you can be bothered, that is.

    You are definitely grossly misdescribing what I put forward, thus:-

    - “Reduce taxes” is part of it, but comes in tandem with other stuff. Doing the other stuff is what lets the taxes go down.

    - “starve the government” – that’s pure invention on your part. Even though I want the government wound back in step with winding back/engineering out what it does I would never advocate doing anything as destructive as that which would cause all sorts of other harm too, and I didn’t advocate it in the submission I posted here.

    - “keep people working to 70 before they get any entitlement” – plain wrong since they would get their stuff in other ways before that.

    - “but keep their money longer in super with regulation” – more pure invention. Nowhere do I suggest more regulation on superannuation, and nowhere do I suggest locking that up longer.

    - And, as I expect of you by now, you completely omit the part that puts more of people’s money under their own control in the run up to retirement – the most important part. But you probably just didn’t read that far.

    You have no knowledge of the underlying philosophy, since you have shown a bad habit of simply not reading to the end. You gave no feedback, just asked questions some of which I answered and the rest of which I did not have time to answer before you revealed yourself for what you are, someone who simply won’t be told or follow things up. Simply calling things extremist without bringing up objections is just a manner of closing off discussion.

    Ask serious questions and show an openness to being told, and I’ll start telling you things.

  92. Alice
    March 4th, 2009 at 19:03 | #92

    As usual Pm you have these concrete plans (starve government, keep people working to 70, and lower taxes) and I have given you feedback. I dont like it. Its truly horrible in my opinion. Id like to stop seeing government holding peopl’e hands and forcing their money into super – especially those of middle or lower incomes who would be better off paying off their homes first…where is your plan for that? You say

    “Reduce taxes” is part of it, but comes in tandem with other stuff. Doing the other stuff is what lets the taxes go down.”

    Its the “other stuff” that is vague and non specific in your plan. What other stuff?

    and

    “I want the government wound back in step with winding back/engineering out”

    More meaningless jargon. “Engineering out”? How about “multi platform write down of government”? You havent used that one yet. Come now, PM, you are slipping.

  93. March 6th, 2009 at 20:32 | #93

    Alice, if I weren’t convinced you aren’t reading, I would be certain you are deliberately lying. You cite the following as “concrete plans” of mine:-

    - starve government;

    - keep people working to 70; and

    - lower taxes.

    Every single one of those is false, except that the last would be a consequence of some of my proposals if things worked through (i.e. it is not something I put forward as a “concrete plan”). Not one of them appears in my submission or my clarifications. If you knew what you were talking about you would know that, which would make those deliberate untruths and you a liar. Even though you don’t know what you are talking about, it’s still a straw man and you are working yourself up with “I dont like it. Its truly horrible in my opinion.” all by yourself. Pull yourself together, pay attention and come back with solid stuff, and you’ll be giving yourself a chance.

    I haven’t been following closely, but can we please cool this down – JQ

  94. March 6th, 2009 at 20:51 | #94

    Paul Walter, I promised you a reply. I’ve put it on the newer weekend reflections, here.

    JQ, I’ve been asking for some cool assessment and not getting it.

  95. March 10th, 2009 at 13:12 | #95

    This usual IMF suspect shows the kind of policy Australia is being pressed to adopt. Even if only recommendation (1.) above were adopted, it would cushion the effect on individuals more than that. The other recommendations aim at making up the losses in other ways. If it all comes right, of course, which is why this submission is not enough on its own and I am going to cover other stuff in a later submission.

  96. Alice
    March 10th, 2009 at 14:31 | #96

    P.M.
    The ususal IMF suspect is suggesting the usual IMF remedies that have been so unsuccessful in downturns elsewhere. Find savings, cut public spending, and take urgent moves to reduce deficits and raise the retirement age. So those more vulnerable are made to harshy carry the crisis on their backs whilst those of means and plenty of savings arent made to endure an inconvenient rise in their income taxes. These IMF recommendations are a contractionary policy in the midst of one of the biggest shocks to the economy on a global scale that we have had in a century. The advice is the same old IMF wheelbarrow used for all countries and all circumstances. In this respect (and I dont agree with everything he says Keating is right; the IMF should be beheaded).
    I dont agree with this article’s recommendations either P.M. to roll back public spening even when countries are already in recession. These policies fall harshly on the most vulnerable eg Argentina 2002, plunged into poverty and social disruption, by just such policies (there are other examples). However I note already the IMF is moving towards recommending fiscal deficits in the case of Ukraine under current conditions. This is a softening of their usual stance P.M. but I still notice the overwhelming support for intervention for banks.
    http://www.imf.org/external/np/tr/2009/tr022709.htm

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