Like drunken sailors

Paul Krugman, observing Bush’s deficit policy made the observation that the traditional Republican critique of the Keynesian case for using deficits to stimulate the economy (that, once you started running deficits, you’d never find a suitable time to stop) was true, but only as regards Republicans.

Similarly, having been announced his conversion to the cause of social democracy a few days ago, Howard is behaving like an economic rationalist’s caricature of a social democrat, spraying billions of dollars around in a combination of interest-group pork-barrelling and half-baked ideas for micromanagement of everything from the TAFE sector to the taxi industry. Meanwhile, the decision to make the states pay for the National Water Initiative means that basic needs for schools and hospitals will be worse-funded than before. Again, more detail from Chris Sheil

Labor’s correct response here, I would say is not to engage in an item-by-item bidding war, but to announce one big intervention in Medicare, using part of the money already spent by Howard.

Update Monday AM The “drunken sailor” description is irresistibly apt. Crikey used it to, and here’s the Oz editorial

The irrationality of terror

A lot of discussion of terrorism is based on the assumption that, however morally deplorable it may be, it’s effective. I don’t think this is true – terrorism generally harms the causes it supposedly seeks to advance. Anne Applebaum points to the kinds of evidence that convince me of this, notably the counterproductive effects of Palestinian terrorism. (I’d also mention the IRA, which has achieved less in 30 years of terrorism than could have been obtained if peaceful civil rights agitation had been maintained for a few years in the 1970s).

Let’s hear it for the lawyers

It’s going to be a long campaign, and many people will be glad of the diversion provided by the football finals. And, for me at least, the news has all been good on this front. Alastair Lynch is making a good recovery from his hamstring injury, and Brisbane’s crack lawyers got Jonathan Brown off on a technicality last night. Nothing is certain in sport or politics, but, with a full-strength team, Brisbane are odds-on to win a fourth straight premiership (Centrebet is paying $1.63, and this time I think the markets have it right).

Ho hum

Labor’s long-awaited tax policy has been released, and a quick look suggests there’s not much to get excited about. Labor has taken on both stages of Howard’s budget tax cuts and added a bit more for nearly everyone, but not a lot for anyone.

The most interesting thing in the package is the reform to family tax benefit. I’m not an expert on the complexities, but Labor appears to have achieved a useful simplification and expansion without spending a heap of money.

The other point that may arouse some interest is that the funding calculations include offsets from assumed behavioral response – more spouses going back to work. As the package points out, the precedent for this kind of thing was set by ANTS. Still this will heighten the intensity of the dispute over whether the package should be submitted for costing by Finance under the (ludicrously misnamed) Charter of Budget Honesty. My advice would be to refuse.

Apart from this funding, relies on two more changes to superannuation to add to all the others we have experienced. First, temporary entrants to Australia will no longer get the benefit of the Superannuation Guarantee Charge – this will go to the government instead. Since other countries do the same and those affected are, by definition, not voters, this looks like a sharp political move. The other is to abolish the superannuation co-contribution recently introduced by Howard.

It’s disappointing to see no assault on avoidance through trusts and private companies, nothing on capital gains or fringe benefits, and nothing much on compliance. However, given that the approach seems to be to produce each policy item with an associated set of funding proposals, perhaps there is still something to come.

With luck, this will neutralise tax as an election issue, but Labor needs to come up with something more impressive than it has produced so far in its core policy areas of health and education.

Ingratitude and the Greens

We’ve heard a lot from the conservative side of politics lately about how the Greens are kooks, Communists, Nazis, anarcho-syndicalists and so on (I’m quoting senior politicians and prominent columnists here, not RWDB bloggers).

So how is that a Liberal minority government in Tasmania managed to last two years relying on Green support? It wasn’t comfortable – minority governments rarely are – and the Liberals cut a deal with Labor to make sure it wouldn’t happen again. But if even half of what has been said in the last couple of weeks was true, a government relying on Green support wouldn’t last two weeks before it fell to pieces over some demand for compulsory vegetarianism or the like.

There was also a Labor-Green Accord government a few years before. This also failed, but over the traditional Green issue of forests, rather than any of the nonsense we have heard about lately.

There’s a chronology here from Bob Brown focusing on forest issues. Obviously, it’s not an unbiased viewpoints, but the basic facts about the governments and their duration are there.

Welfare reform

Among the issues that won’t be addressed in detail in the current election campaign is the case for, and against, welfare reform along the lines adopted in the US. Although the Howard government has made various changes aimed at increasing ‘mutual obligation[1]’, there has been nothing approaching the reforms to the main pure welfare program in the US, then called Temporary Aid for Needy Families, and received primarily by single-parent families. Among those who still think substantial measures of microeconomic reform are needed, welfare reform along US lines is at the top of the list, and Wisconsin, where Governor Tommy Thompson slashed welfare rolls, is generally held out as the model.

Although there are various rationales for welfare reform, the only one I think worth considering is the claim that welfare perpetuates poverty. While relieving immediate distress, it is argued, welfare encourages a culture of dependence that perpetuates poverty. Against this, I’d put the argument that what matters most in preventing dependence is the availability of good jobs, and that a government commitment to full employment is what is needed for a genuinely mutual or reciprocal obligation to work.

There’s not likely to be a convincing and rigorously defensible empirical resolution of this debate any time soon. However, one telling piece of anecdotal evidence is worth a dozen regressions[2], so I thought I’d check out the Wisconsin example. What I found is a report with the headlines

Poverty rate hits 10-year high

State’s struggles also evident in growing number of uninsured: 11%

The rise in the poverty rate[3] is attributed mainly to the loss of manufacturing jobs, rather than to adverse effects of welfare reform. This is consistent with my general view that we need to look harder at employment and unemployment. But reform is clearly playing a significant role

We have gone since 1996, when Pay for Performance hit, from distributing 1.5 million pounds of food to 10 million on an emergency basis,” Tussler [executive director of Hunger Task Force of Milwaukee[ said, referring to the reform requiring work or job-seeking in exchange for welfare benefits.

I’m not claiming that this example proves that welfare reform increases poverty. But it’s hard to see how Wisconsin can be regarded as a successful exemplar of welfare reform when the poverty rate is higher than it was before the main phase of reform, and still rising.

fn1. As many have pointed out previously, the current government’s notion of mutual obligation involves drastically reducing its own obligations, while increasing those place on benefit recipients

fn2. Irony tags were clearly needed here, but Textile doesn’t support them

fn3. This is an absolute poverty measure, based on a poverty line set in 1965, and adjusted since then only for inflation. Of course, it’s not absolute by comparison with third world countries, and it’s about twice the income that was considered to constitute poverty 100 years ago.

Monday Message Board

It’s time for the Monday Message Board, where readers are invited to post their thoughts on any topic (civilised discussion and no coarse language, please). There will be plenty of posts from me on the election, and plenty of room for discussion, so I’d encourage Message Board comments on other issues.

Root causes

There is no excuse or justification for terrorism. But that doesn’t mean it is inexplicable, the product of purely irrational evil impulses. There will always be people willing, under certain circumstances, to resort to terrorism. If we want to fight terrorism effectively, we have to avoid creating those circumstances.

Successive Russian governments created the conditions in Chechnya that allow terrorists like those responsible for the Beslan atrocity to flourish. There was a long history of oppression, from Czarist times to mass deportation under Stalin. But the current outbreak can be traced most directly to the actions of Yeltsin and Putin. When Chechnya sought independence from Russia after the breakup of the Soviet Union, Yeltsin’s response was one of brutal and incompetent repression, eventually leading to an effective Russian withdrawal, and the creation of a failed state, in which warlords and militias flourished, and terrorism established itself.

After a series of Chechen terrorist attacks in Moscow and an attempted invasion of the neighbouring republic of Dagestan, Putin came to power with a policy of crushing Chechen resistance, which he implemented with high civilian casualties and the destruction of much of the capital city of Grozny[1].

Again, this history doesn’t justify, excuse or mitigate horrible crimes like the one we have just witnessed. But there is also no excuse for those who advocate policies that are bound to promote terrorism while rejecting any analysis of “root causes”.

fn1. Those interested in a more detailed history can find what seems to be a pretty good one at Global Issues. This is a leftwing site, but seems to give fairly objective coverage.