34 thoughts on “Monday message board”

  4. “Should this man lead Labor federally?”

    Beattie is not exactly ruling it out.

    But why would he want to give up the good life as Queensland Premier to lead the collection of talentless freaks, malcontents and egoists that is the federal parliamentary Labor Party?

    Only if he thinks he has a shot at winning next time oe the time other.

    Very unlikely.

    On the other hand, Fat Kim is headed nowhere. He’s as prolix and lazy as ever. The Labor party just might beg Beattie to come and save their sorry asses.

    Would the people buy it?

    Beattie’s not the Messiah, but, by the standards of Queensland politicians, he hasn’t been a naughty boy either.

    They might.

  5. Sounds like Joh for P.M. , to me.

    Sad that history departments get peanuts.
    Guess it is important to only remember what happened last year.
    Such is life!

  6. Me here again. Its been a while.

    The Laffer curve gets a bashing now and then as a failed concept. And yet the Bush tax cuts of 2003 (not the earlier ones which were mainly rebates) seem to be delivering a windfall in tax revenue.

    Lower “tax rates” delivering higher “tax revenues” sounds like the USA might have still been (and may still be) on the right hand side of the Laffer curve. This does not shock me because I think tax rates need to get a lot lower in both Australia and the USA before they hit the left hand side of the curve.

    The link below is to an article by a former presidential candidate Jack Kemp. He itemises the specifics of the moment better than I can.

    http://www.townhall.com/columnists/jackkemp/jk20050613.shtml

    So I bravely ask again “is there life left in the Laffer curve?”.

  7. It’s also been a while…

    I’ve just watched Australian Story on ABC, and I was shocked that they actually talked to someone that has been quite involved in the peace movement, and especially opposing the Iraq war, hence almost banned in all other maintream media:
    http://abc.net.au/austory

    I guess that’s why they had to have hoWARd and Downer… still spinning the same old crap. In light of Woods being taken hostage while trying to profit from war, and a peace activist taken hostage while working for humanitarian causes, the government’s and media comentators’ response is even more telling.

  8. Terje,

    I’m not in a position to look at Kemp’s claims in detail at the moment but I do have a question: if Laffer and Kemp’s claims are correct why did US tax revenue also rise when Bush Sr. and Clinton RAISED taxes?

  9. Terje, Kemp’s article is notable for the new distinction between ‘demand-side tax cuts’ (bad) and ‘supply-side tax cuts’ (good).

    But his history doesn’t seem too promising. The Kennedy tax cuts were explicitly Keynesian (demand-side) in motivation

  10. Carlos, that must be about the silliest statement I have ever read. The odiously self-serving Michael Moore and his fellow neo-reactionaries have been given more than enough space on the ABC to support their naive views. Go into any bookshop and see which views dominate or listen to ABC radio etc. The few second I caught mentioned something along the lines of this idiotic individual now going to Palestine to act as a human shield. I suspect (or am I wrong) that she won’t be standing in the way of a Palestinian terrorist intent on blowing up Israeli kids in a cinema etc.

  11. “going to Palestine”

    Palestine? Palestine? There is no such place. Surely, Michael, you mean Judea and Samaria.

  12. Please michael.buger.all et al, the point is not about media players and self promoters getting coverage, with is quite patchy and selective on all sides.

    The point is about an AUSTRALIAN CITIZEN taking a personal stance and following it with conviction and responsibility, to is full extent. Whether we like it or not, is irrelevant. What matters is the willingness to follow through, and put your money where your mouth is.

    The media reaction and our government’s support (or total lack of!) is the most telling part of this. If we are trully fighting for democracy and liberty, then surely all citizens should have the freedom and responsibility to take such positions, if they wish. I personally don’t, but I can understand why others might, even if I disagree.

    Most important of all was the way she described why she did such things (paraphrasing): “ultimately, you have to be able to look at yourself in the mirror”. That is why some exceptional people put themselves at risk and are willing to be jailed or worse for their beliefs and controversial stance, eg: Mandela, anti-Chinese human rights and other religious activists.

    Finally I get the meaning of that blog term “chicken hawk” to its full hyprocritical extent.

  13. For your info on public/private partnerships John, particularly my comments and the latest development with a local regulator. A job as the Regulator is one tough apprenticeship, but it does have its long run rewards it seems
    http://www.sauer-thompson.com/archives/opinion/003336.php#more

    I gather the consumers around the country are being softened up to expect peak demand blackouts next summer, as generating capacity will be stretched to the limit then. Ditto for water now it seems. Watch the political games within mutually accepted rules, being played out by big biz and big govt over these two areas in the near future.

  14. Just once, just once just once I ‘d like to see the people who whinge about bias on the ABC/Fairfax actually look at the bias in News Corporation, commercial TV and Commercial radio; which is far more extreme to the right than anything in the ABC/Fairfax to the left. Just once.

  15. Reggie, more than happy to oblige. I think the news coverage of the likes of News Corporation and Fox etc is shallow at best and often extremely biased in favour of right wing views at worst. This, though, does not excuse the ABC or the BBC their biases.

    Carlos, re your comment ‘The point is about an AUSTRALIAN CITIZEN taking a personal stance and following it with conviction and responsibility.’ This is not the point many people takes stances. What counts is taking the right stance and in the case of the anti-war brigade the vast majority are putting their dislike of America or, at least, conservative leaders ahead of supporting constructive change in the Middle East. In the case of the individual in question, why is she not there now instead acting as a human shield to protect aid workers and others trying to rebuild the country in the face of appalling atrocities being carried out by a motley collection of pro-Saddam loyalists and Islamic fanatics?

  16. I’d like to turn the discussion away from the Middle East, just this once.

    Can someone who actually knows how these things work explain how Steve Vizard did not commit insider trading?

    According to the media reports: Vizard was a director of Telstra who was informed in his board papers that Telstra was about to buy Sausage Software; the price offered by Telstra was (presumably) higher than the market price; with this information at hand, Vizard bought $500 000 worth of shares at the market price.

    If that’s not insider trading, what is?

  17. perzackerly Dave.
    It is a black and white case so why did ASIC go so cold on prosecution?

    Why is Vizard so stupid to think he could get away with this?

  18. Stephen Mayne was pointing out on ABC radio in Sydney this morning that Vizard’s Liberal Party and Melbourne (New) Establishment connections had people muttering darkly about the inconsistent application of the law in this area.

  19. You didn’t need insider information with Sausage. I remember driving in to work and hearing on AM (probably) that TLS were going to buy Sausage. I arrived at my desk and promptly bought – I dunno – a couple of hundred dollars of Sausage and by hometime the price had gone up by – I dunno – 40%.

    It was bubble time. Maybe Vizard could use this as a defence.

    (I meant, of course, to quickly sell them – I dunno – the next week – but found that required some sort of paper based transaction involving stamps and enveopes- a tech I’ve never mastered – so they sat in the drawer until inevitably they were worth basically zilch.)

  20. Liberal party conspiracy, or not, Rene Rivkin went to jail for what on the face of it was a far less serious case of insider trading.

  22. John,

    Kemp’s distinction between ‘demand-side tax cuts’ (bad) and ‘supply-side tax cuts’ (good) is not new. The distinction is at least as old as the term “supply-side economics” which has been on the landscape for 30 years.

    For an article refuting your claim that the Kennedy tax cuts were explicitly Keynesian (demand-side) in motivation try the following:-

    http://www.wanniski.com/showarticle.asp?articleid=3289

    AN EXTRACT:-

    ”
    The biggest reason, I think, is that since Jack Kemp began promoting Kennedy-type tax cuts in 1976, the Democratic Establishment has been rewriting history to show that the JFK tax cuts were demand-side, Keynesian stimulants to the economy. This in fact has been Teddy Kennedy’s pitch all these years, but it is of course not the case. I first learned something of the background of the Kennedy tax cuts from the late Herbert Stein, when he was a member of Richard Nixon’s Council of Economic Advisors. I’d met Dr. Stein in 1969 when I was political columnist for the old National Observer and he gave me a copy of his book, “The Fiscal Revolution in America,� which I still keep close at hand for reference. The book makes it clear that Kennedy was familiar with the classical arguments of Andrew Mellon, who was Treasury Secretary to Presidents Harding, Coolidge and Hoover, which justified tax cuts where they were unnecessarily high because of their incentive effects on labor and capital. In proposing the tax cuts in late May of 1962, Kennedy cited the incentive effects, not the income effects that a Keynesian would argue. And when the legislation was introduced by Rep. Wilbur Mills of Arkansas, then chairman of the Democratic House Ways & Means Committee, his floor speech was all “supply-side,� actually written by the late Norman Ture, an economic consultant to Mills. Ture in 1981 was chosen as Undersecretary for Tax Policy in the Reagan administration, the one economist to bridge both JFK tax cuts, the second being Jack Kemp’s.
    ”

    The extract says enough. But please do read the full article.

    http://www.wanniski.com/showarticle.asp?articleid=3289

  23. Terje, this is one of these topics that gets batted around the Internet endlessly. See this response to the third-hand sources cited above. Why would you cite Nixon’s economic advisers as evidence on the thinking behind Kennedy’s economic policy?

    On one crucial point, I can say for sure that Wanniski is wrong. The Kennedy tax cuts were cited as the first conscious application of Keynesian economics in the US when I studied economics in the early 1970s, well before the term “supply-side economics” had been heard of. The Kennedy economic team (Okun, Tobin, Heller) were all strong Keynesians. And no-one in the 1960s regarded Harding, Coolidge, Hoover and Mellon as anything other than discredited failures.

    So it’s the supply-siders who are engaging in historical revisionism here.

  24. http://www.usa-presidents.info/union/kennedy-3.html

    Read section II and III of Kennedys state of the union speech.

    Selected extracts:-

    ~~
    To achieve these greater gains, one step, above all, is essential–the enactment this year of a substantial reduction and revision in Federal income taxes.

    For it is increasingly clear–to those in Government, business, and labor who are responsible for our economy’s success–that our obsolete tax system exerts too heavy a drag on private purchasing power, profits, and employment. Designed to check inflation in earlier years, it now checks growth instead. It discourages extra effort and risk. It distorts the use of resources. It invites recurrent recessions, depresses our Federal revenues, and causes chronic budget deficits.
    ~~

    ie HIGH TAX RATES ARE DEPRESSING OUR FEDERAL REVENUES.

    And later on he says:-

    ~~
    This combined program, by increasing the amount of our national income, will in time result in still higher Federal revenues.
    ~~

    ie LOWER TAX RATES WILL RESULT IN HIGHER REVENUES.

    And here he plays both the demand-side and the supply-side argument:-

    ~~
    This net reduction in tax liabilities of $10 billion will increase the purchasing power of American families and business enterprises in every tax bracket, with greatest increase going to our low-income consumers. It will, in addition, encourage the initiative and risk-taking on which our free system depends–induce more investment, production, and capacity use–help provide the 2 million new jobs we need every year–and reinforce the American principle of additional reward for additional effort.
    ~~

  25. I agree that the political effort to sell the tax cuts involved a mixture of rhetoric. But as far as the economic policy debate went, noone paid much attention to the rhetoric. The cuts were regarded by both supporters and opponents at the time as demand-side stimulus, contrary to Wanniski’s claims.

  26. There are any sources written in the 1960s that will show, definitively, that the Kennedy taxs cuts were Keynesian in motivation.

    In a section of the 1966 Annual Report of the Council of Economic Advisors called The Employment Act: Twenty Years of Policy Experience, in a section called Inadequate Demand in Expansion, is the paragraph

    “The combination of fiscal stimuli to consumer demand and direct tax incentives to investment … promoted a vigorous and sustained expansion after 1963. The inherent strength of both consumption and investment appeared in a new light, once the Revenue Act of 1964 exerted its invigorating influence”.

    At a stretch, you could interpret the reference to “direct tax incentives to investment” as being supply side-oriented, but it is far more likely, given the context (“Inadequate Demand in Expansion”) that what was meant was that tax cuts to business stimulated the demand for capital goods (investment) by business. At the time, investment was thought by all economists, to be just one of the components of aggregate demand.

    What is unarguable is that the income tax cuts were aimed entirely at stimulating consumer demand. There is no mention at all of tax cuts leading people to work more hours, which was the foundation of supply side economics, as promoted by people like Wanniski when they were at their most influential in the early 1980s.

    Here is Arthur Okun, a leading economist of the day, in a 1967 author’s note to an article he wrote called Measuring the Impact of the 1964 Tax Reduction, published in Walter Heller (ed), Perspectives on Economic Growth, Random House

    “To be sure, the Revenue Act of 1964 was aimed at the demand, rather than the supply, side of the nation’s economy. Its objective and achievement was primarily to put productive capacity to work by raising demand. Effects on the productive capability of the nation were largely incidental but nonetheless important.

    By promoting fuller use of capacity, the tax cut created powerful incentives for growth-oriented acivity by business. This was most apparent in the subsequent investment boom with its important widening, deepening of our capital stock. Fuller employment of labor, meanwhile, encouraged private training of manpower and improved the mobility and upgrading of our human resources.”

    At best, on Okun’s interpretation, the tax cuts had secondary effects on the supply side. But the motivation was Keynesian.

    Even the conservative economists of the day thought they were demand-oriented. Milton Friedman argued that they wouldn’t work in raising demand, because they didn’t raise permanent income, and so wouldn’t raise consumption, but there was no question in his mind that they were aimed at demand stimulus.

  27. Uncle Milton,

    Thankyou for your response. Unfortunately I think it is based in part on a miss-characterisation of supply-side economics when you say:-

    ”
    There is no mention at all of tax cuts leading people to work more hours, which was the foundation of supply side economics, as promoted by people like Wanniski
    ”

    I have read a lot of Wanniski and over many years participated in electronic discussions with him (just as I can do here with Quiggin). In all my reading of Wanniski and discussions with him he has always been very clear that the tax cuts he advocated in the 1980s (and today) were never intended to generate more hours of work effort. In fact he goes to much length to make the point that tax cuts (like tariff cuts) produces a productivity dividen through improved resourse allocation.

    Wanniski really labours this point a lot. The following quote includes his emphasis:-

    SOURCE: http://www.wanniski.com/PrintPage.asp?TextID=2617

    ”
    3. THERE WAS NEVER ANY THOUGHT OF ‘MAKING PEOPLE WORK HARDER.’ ECONOMICS SHOULD BE ABOUT MAKING PEOPLE MORE PRODUCTIVE, I.E., PRODUCING MORE WITH LESS EFFORT.
    ”

    In fact he even concedes in the following article that higher taxation makes people work harder. Its just that harder work will be less productive.

    SOURCE: http://www.wanniski.com/PrintPage.asp?TextID=2980

    ”
    There is a prevailing maxim, among some reasoners, that every new tax creates a new ability in the subject to bear it, and that each increase of public burdens increases proportionably the industry of the people. This maxim is of such a nature as is most likely to be abused; and is so much the more dangerous as its truth cannot be altogether denied: But it must be owned, when kept within certain bounds, to have some foundation in reason and experience.
    ”

    Of course a simple thinking exercise lets us illustrate the point. If we put the tax rate up to 100% we would all have to survive via some form of subistence farming that avoided all trade. And indeed at that point we would all be working exceedingly hard to produce the most meagre of output because the division of labour and the efficience from specialisation that it entails would all but vanish.

    Regards,
    Terje.

  29. Terje, I think Wanniski is retrospectively rewriting his own doctrine when he says “THERE WAS NEVER ANY THOUGHT OF ‘MAKING PEOPLE WORK HARDER.’”.

    This could be shown, rather easily I suspect, by digging up op ed articles in the Wall Steet Journal circa 1980, and the other places where Wanniski, Laffer and the supply siders made their arguments.

    Not that it matters for the current debate, which is whether the Kennedy tax cuts were motivated by Keynesian concerns of inadequate aggregate demand, which they most assuredly were.

  30. Back to Vizard.

    wbb, whether or not Telsta was widely rumoured to be taking over Sausage is irrelevant. Vizard knew for sure that Telstra was going to take it over and he knew the price they were going to pay. This information was not available to investors like you.

    And the fact that Vizard ultimately lost money on these shares is also irrelevant. All that proves is that he hung on to them for too long. He still could have made a profit on the trades made with inside information, and probably did.

    So why didn’t ASIC prosecute? The best construction you can put on ASIC’s decision is that Vizard made the trades through his accountant (who he subsequently had a falling our with, and who dobbed him in) and it would have been difficult to prove that the accountant was acting on Vizard’s instructions. Vizard’s confession, with the facts as we know them spelled out, would have come only after the deal was done.

  32. Dave,

    I own a copy of Wanniskis 1978 book. He is not retrospectively rewritting supply-side economics.

    Here is a reproduction of the relevant chapter from the 1978 book.

    http://www.wanniski.com/showarticle.asp?articleid=2980

    This chapter specifically addresses the question of taxation and effort. And wanniski says that higher taxes likely lead to higher effort. Its just that higher taxes lower productivity. HE NEVER SAYS THAT TAX CUTS CAUSE PEOPLE TO WORK HARDER.

    There is no revision of supply-side economics. Just a failure by some opponents to deal with what the theory actually says rather than some easier to target straw man.

    Regards,
    Terje.

  33. “Milton Friedman is over rated.”

    The Royal Swedish Academy of Sciences would appear to disagree.

  34. When it comes to praising economists I prefer their more recent choice of “Robert Mundell”. I assume you know all about him.

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