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The Budget, the bottom billion and the 1 per cent

May 14th, 2014

My first Budget commentary is up at the Guardian. Teaser

No progress on tax avoidance, no sign that Australia will responsibly lead the G20, no reform of expensive concessions to the wealthy: this Budget is a massive moral failure

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  1. Ernestine Gross
    May 14th, 2014 at 11:48 | #1

    “The budget is a moral failure”

    “The fact that our structural problems can only be addressed if the 1% contribute more and receive less from the government has been ignored yet again.”

    Exactly. I say this against the background of theoretical models of ‘competitive private ownership economies’, using the methodology of Arrow-Debreu. These models contain implicit and explicit stringent moral conditions. Weasel word merchants are excluded, and the minimum wealth condition assures that ‘freedom of choice’ is not an empty term.

    I have not read Capital by Piketty as yet (it was out of print when I ordered it). But I have read some papers by Piketty et all. The historical content makes it very clear that the strong violation of any sensible interpretation of the minimum wealth condition is due to the institutional environment under the control of the rulers at the time.

    I take heart from the observation that the same conclusion regarding your points, reproduced above, can be reached via several research programs involving several methodologies.

    Getting off my pet topic, I heard last night the ALP has not as yet decided to reject the so-called ‘debt levy’ on the grounds that the hurdle income has been increased from $80,000 (to which they had objected strongly) to $180,000.

  2. Newtownian
    May 14th, 2014 at 12:36 | #2

    Ergo the coalition are morally, intellectually, philosophically, percerptually, ethically, visionarily, and imaginatively bankrupt?

    Doh!

  3. David Irving (no relation)
    May 14th, 2014 at 12:47 | #3

    @Newtownian
    In other news, water is wet, and the sun will set this evening.

  4. ChrisPer
    May 14th, 2014 at 12:57 | #4

    This is Wayne Swan’s budget, not Abbott666′s. All the cuts were his, and many of the suggested measures for achieving Labor’s committment to surplus are in there. All the sucker traps that locked Abbott into Labor’s spending – NBN, Gonski, NDIS – have worked. The ABC is essentially untouched.

    We on the right view this as a broken budget, a budget that defers cuts needed now out to the next election. We will re-test the leftist truth that Abbott is unelectable.

  5. Andrae
    May 14th, 2014 at 13:21 | #5

    “The most substantive objection is that the levy is only supposed to be temporary, but since it will outlive the current parliament, that is scarcely a major concern.”

    I’m afraid I cannot agree with you on this point. The levy is an act of political rhetoric first and an act of policy second. Were this not the case, the levy would have taken the form of a permanent income tax increase. As a result when deciding to support or oppose it, it is reasonable to consider the primary aspect of the proposal to be, the rhetoric with which the coalition claims to justify it. It is similarly reasonable to reject the reflexive austerity, and surplus fetishisation expressed in the Coalition’s rhetoric, and to reject the levy on that basis.

    This is what distinguishes it from the fuel excise indexation. The latter is permanent. While the and so the it is reasonable to evaluate the policy in terms of how it aligns with your goals and aspirations.

    For the Greens or Labor to accept a temporary levy is to validate the rhetoric and consequently trade a short-term tactical win in exchange for reinforcing a long-term political environment that will make achieving their strategic goals substantially harder.

    I’m not going to criticise preferring strategy over tactics.

  6. Ikonoclast
    May 14th, 2014 at 13:41 | #6

    JQ’s headline says it all: “This budget is a clear victory for Australia’s 1%.”

    The 1% is winning. How do 1% beat 99%? That is the question. The left and middle and even the upper middle have to ask themselves how each each 99 of them let just 1 at the top beat them. It must be the systems of ownership and control and the lines of command and control of the whole society. Ergo our entire society and economic system need profound and complete change to another system. Nothing else will suffice, indeed nothing else has ever sufficed. You cannot reform this system, it is beyond redemption functionally and morally. We must change it completely.

  7. kevin1
    May 14th, 2014 at 14:59 | #7

    It seems only 3% of taxpayers (on >$180K) will pay the levy; for that section of the top end of town a “sacrifice” without pain.

  8. Fran Barlow
    May 14th, 2014 at 15:31 | #8

    Interestingly Kevin, the so-called deficit levy will apparently raise $1.1bn over the forward estimates (four years) while defence purchasing is going to fast track $1.5bn in new hardware over the same period.

    Those 400,000 taxpayers are paying for 2/3 of some weapons of war.

  9. John Quiggin
    May 14th, 2014 at 15:44 | #9

    I’ve had my say on the Greens’ gesture politics in another post. And, everyone I’ve read who actually cares about income distribution agrees. If you want to keep defending them, take it to the relevant thread, or to the sandpits.

    Nothing more on this topic in this thread, please.

  10. Midrash
    May 14th, 2014 at 16:18 | #10

    I followed the link to the Guardian JQ and, after putting on a face mask to guard against the toxic fumes being emitted by your fellow pundit John Pilger (I haven’t heard that even Noam Chomsky thinks Mr Obama may try to lead us all into a war against that nice Mr Putin who has shown himsel so much in favour of ethnic self-determination in Chechnya), I found much expression of what appeared to be your emotional state.

    Oh dear! Australia has a new “image as a bad actor”. Are you one of the exponents of the new cultural cringe which makes our academics and actual or would be pundits tremble with anticipated shame as they contemplate the sneers that they imagine greeting them in the senior common rooms of Liverpool, Hull or Aberystwyth?

    I would like to know what your objective evidence for this humiliating cringe about our image and why you think whatever you can prove or demonstrate about it is more than a tenth rate issue for Australia. I would say that my sample of say 30 Ivy League plus Stanford, UCLA, Berkeley and Stanford graduates of mature years – all successful in their careers and mostly ex-Republicans now supporting Obama – can’t produce one whose image of Australia is unfavourable. And the same is almost as reliably true of a somewhat greater number of Oxbridge graduates in the BBC, law, the City of London and academe in the UK. Tbc

  11. Ikonoclast
    May 14th, 2014 at 18:20 | #11

    I cannot figure out what Midrash is on about nor what he is on.

  12. kevin1
    May 14th, 2014 at 18:33 | #12

    @David Irving (no relation)
    And the pope is a catholic. (One of the few eternal verities in our ever-changing world; I don’t think it’s gonna change.)

  13. Ernestine Gross
    May 14th, 2014 at 18:46 | #13

    @ChrisPer

    1. I am tired of the simplistic ‘the right’ vs ‘the left’ school yard macho fights.

    2. You say: “We on the right view this as a broken budget, a budget that defers cuts needed now out to the next election….”

    By 1 above, I say, yes, cuts are needed and they are in the area of weasel words, outright lies, deception and idiotic dogma. Your ‘right’ can’t even get elementary statistics right, have no coherent theoretical framework and are apparently totally annoyed that the last attempt by the self-appointed rulers of the universe, the so-called Wall Street bankers, have failed to impoverish the majority of Australians to the same extent as your ‘right’ have achieved in other places. Your ‘right’ want to get them hooked on debt at an early age to manipulate them into serfdom. No, my friend, it ain’t going to happen. Democracy, reason and a minimum of fairness and social cohesion will prevail. Full stop. Get used to it.

  14. kevin1
    May 14th, 2014 at 18:49 | #14

    Saw Laurie Oakes interviewing Shrek tonight. Gotta say, he’s a pretty hardnosed guy: recently I read the compilation of his columns over 2010-13 “Remarkable Times” which is really a daily diary, and good stuff. Insightful, predictive and scathing on the Abbott “character”.

  15. Ernestine Gross
    May 14th, 2014 at 19:02 | #15

    I have a question to all readers who whing about labour productivity.

    How do you define and measure labour productivity of the following members of society:

    1. corporate managers who earn more than $500,000.
    2. solicitors, who earn more than $250,000
    3. public servants who earn more than $250,000
    4. advisors to politicians who earn more than $200,000 annualised from their work.

    I have another question:

    How do you empirically distinguish between income earned and a wealth transfer within the corporation for labour category 1 above?

  16. May 14th, 2014 at 21:34 | #16

    @Ernestine Gross

    I don’t whing[e] about labour productivity. May I answer the questions anyway? (The answer is the same for both.)

    Do a Leontiev analysis, making slight changes to the parameters to assess the effects of changing each income slightly, under each of a range of assumptions about things for which there is some uncertainty (the way weather forecasting tries to bracket its forecasts). The most meaningful measure to read out may be a weighted basket of production, or it may be the highest eigenvalue of the matrix under test (as a proxy for growth rate over time). If, as I suspect it will be, the spread of results is large or the data for input is inaccessible or otherwise unavailable, or if there is simply too much computation to handle, the measurement problem is intractable even though the definitions are well defined; and if not, you will have your answers.

  17. May 14th, 2014 at 21:37 | #17

    At that Guardian article linked above:-

    First, there are the global poor, sometimes referred to as the “bottom billion”, people living on the unimaginable sum of one or two dollars a day.

    This is encouraging a common misunderstanding. Without in any way belittling the plight of people with that little cash income, in many cases they have some but inadequate non-cash subsistence resources and they are not living “on” their cash income but just using it as a very necessary, and usually inadequate, top up. By and large, their most pressing issue isn’t that their cash income is low but that they are being increasingly deprived of their non-cash subsistence resources. For instance, Haitians often used to manage reasonably well like that until the U.S.A. imposed the eradication of the “Creole pig” that was the mainstay support and wealth reserve of rural life in Haiti. Before western economic penetration, many societies were doing quite well with even less cash income because people had perfectly adequate non-cash subsistence resources!

  18. yuri
    May 14th, 2014 at 23:54 | #18

    @Ikonoclast
    Not for the first time I find myself not exactly defending Midrash who I suspect is a quite well known QC whom it would be presumptuous to defend but explaining to those whose ideological constraints confine them to limited tunnel vision that his points are perfectly clear.

    1. He has a go at JQ for expressing more attitude than argument and throws in a dig about the company he keeps on the Guardian.
    2. He asks what is JQ’s evidence about Australia’s image and why to matters to Australians not amongst particular limited elites.
    3. He proffers, perhaps to show a little of the limited demands for evidence or explanation that he is making of JQ, some anecdotal or small sample evidence of his own – to contrary effect.

    Now what’s so difficult about that? Did you have trouble with the prĂ©cis question on the old Matric/HSC/VCE English paper? I bet you didn’t accept the terms of the question but gave them an essay on the Revolution instead.

  19. yuri
    May 15th, 2014 at 00:08 | #19

    And now for myself, though I suspect Midrash would agree, what is the evidence that more than a small fraction of Australia’s foreign aid has been spent to good effect other than giving nice tax free income and travel perks to some white Australians. How much of it has been lost to African or other Third World corruption? Do we know? Have we even tried to find out? Is it even possible that our aid has done more harm than good as some have alleged? Compare African dictatorships with South Korea and Taiwan whose dictators weren’t feeding at the Western aid trough. (Toss in Singapore, Hong Kong and even Thailand and Malaysia too).

  20. yuri
    May 15th, 2014 at 00:19 | #20

    @P.M.Lawrence
    You may be the only other person whose words have appeared on this blog to have a clue about the Equatorial Tropics where people without cash often have abundant supplies of fish, fowl and fruit – and no heating bills. Not well supplied with hip replacements or pacemakers it is true, but that could be fjxed easily if we took our “closing the gap(s)” rhetoric seriously. We agree to forgo the right to pacemakers and prostheses after age 85 so we can generously support provision of them to people we don’t know and whose language and religions we don’t share just so long as they undertake not to make war on us in the next 10 years.

  21. J-D
    May 15th, 2014 at 08:40 | #21

    @yuri
    ‘You can figure out what it means if you try’, even if true, is not an adequate defence of Midrash’s gratuitous and habitual circumlocution.

  22. yuri
    May 15th, 2014 at 12:36 | #22

    @J-D
    Well I don’t think I could defend him against the sccusation of circumlocution if anyone wishes to allege that as his crime but some of the things said on this and other blogs need a bit of ornamental wrapping to make them half readable.

  23. Fran Barlow
    May 15th, 2014 at 13:49 | #23

    @Ernestine Gross

    Re Mr Oakes … I have no respect at all for the ‘sphere of influence’. He’s just another lazy right of centre hack.

  24. J-D
    May 15th, 2014 at 14:41 | #24

    @yuri
    I just did allege circumlocution as Midrash’s–well, I wouldn’t use your word ‘crime’, but I’d call it a failing.

    My best estimate of Midrash’s approximate meaning is this:
    ‘People in other countries care very little about what the Australian government does, and when they do it makes very little difference to people in Australia.’

    As it happens, I myself think that’s a good point, whether it’s also Midrash’s point or not. But if that is what Midrash meant, why was it wrapped up so elaborately in so many more words? You think it needs the ‘ornamental wrapping’ to make it readable? I suggest the reverse. A plain statement would have had a better chance of facilitating serious discussion. But perhaps that’s not Midrash’s object–or yours.

  25. J-D
    May 15th, 2014 at 14:43 | #25

    Blast! Messed up the tags. Sorry.

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