Monday Message Board

It’s time once again for the Monday Message Board. Please post your thoughts on any topic. Civilised discussion and no coarse language, please.

50 thoughts on “Monday Message Board

  1. And while our fearless leaders busy themselves harvesting money,
    http://www.news.com.au/adelaidenow/story/0,22606,23066882-5006368,00.html
    the products of our education revolution are making themselves useful, helping turn productive land into McMansions
    http://www.news.com.au/adelaidenow/story/0,22606,23070421-2682,00.html
    I think I’ll have myself another stiff ethanol waiting for the Pol Pottyish solutions to emerge from the usual suspects. Hard to know who to pack off with hoes and scythes to the countryside first. The central bankers or the GW early adopters.

  2. I see George Bush is calling for an additional $145 billion in public debt (sorry “tax cuts”) to stimulate the US economy.

    Without doubt, the US budget deficit is going to blow out severely this year and next.

    I’d like to think that that would be end of claims about tax cuts raising government revenue (outside of very rare circumstances which don;t apply in the US or any other developed western economy currently but I know it won’t be.

    Obviously bush didn;t cut taxes ENOUGH.

  3. The last Governor General?

    Get your nominations in for the next and hopefully last GG a Labor View from Broome. Let’s have a republic by 2012. It shouldn’t be that hard to do now that the great blocker is gone.
    Please no military, clergy, judges, sportspeople or entertainers. And no drunks.

  4. And it wouldn’t be hard to drive out into the bush without enough fuel or water, either. What’s the modern way of dealing with problems? Stop the feedback about them. The problems haven’t gone away, and it’s still a damned fool idea for all that it’s become lot easier to make the mistake.

  5. Speaking of tax cuts, Kevin Rudd has announced today a plan to fight inflation, based on a target of a net government surplus of 1.5% of GDP. To me, if other election promises are to be kept, that means spending cuts or tax increases somewhere. But few details are given of where cuts might occur to achieve this. Question is, if you were Federal treasurer, where would you cut now? Or, where would you raise tax/plug tax leakage?

  6. Re 33: Socrates, setting aside questions about the wisdom of some election promises, lets try to take up your hypothetical. I would increase the tax free amount from the current approximately $7000 to a limit which would correspond approximately to the x% of aggregate tax cuts promised. (Data and models from the Treasury would be required to get a numerical value). Then I would work out how many social security (special assistants) programs would become redundant as a consequence of people on lower incomes having at least as much purchasing power as before. Potentially, some of these special assistance programs would become redundant. If so, cut the associated bureaucracies and record the ‘savings’. If there are no redundancies of programs, then one election promise is kept, and no damage is done to low and middle income earners and self-funding pensioners; the relatively rich may not notice the difference. If interest rates on consumer loans, including housing, do increase, then the impact on the purchasing power of ‘consumers’ (individuals) is mitigated.

    The idea of aiming for a government budget surplus of y% of GDP is a dubious one, IMHO. It amounts to an attempt to take ‘money’ out of the economy. But it only appears that way. The numbers have to be put somewhere. The Future Fund is one example of a repository for the numbers. The Future Fund ‘invests’ in the financial markets. These markets have serious problems which the Federal Government cannot solve alone (‘global economy’). It seems to me it would be much better to ‘invest’ a large portion of these numbers in the currently young population by means of financing their education with the promise that once they are making ‘good money’, in the future, marginal taxation rates will be higher than when they are making ‘little money’. (One cannot sensibly assign in advance a number to ‘little money’ because relative prices are relevant.) This measure would be consistent with the aim of reducing private debt; at least that component which is difficult to avoid for individuals under current circumstances. Going a little more into detail, it seems to me there is some prioritisation required regarding public vs private education. While I can’t see anything wrong with Rudd’s position that public and private schools are ‘socially desirable’ and hence deserve tax money, surely the public school system needs to be rehabilitated to the extent that ‘choice’ between one or the other becomes meaningful for individual families who are not in the very high income category. What constitutes ‘high incomes’ is another question to which the answer is not quite obvious. For example, $150,000 annual income may be considered ‘high’ for a single person without a $100,000 education debt but not for a person with a $100,000 education debt. It may not be considered ‘high’ for a single income family with 3 children in Sydney even if all children go to a public school. Furthermore, some of these (budget surplus) numbers could be ‘invested’ in health, public housing, infrastructure, pensions, and getting State Governments to stop ‘dividend stripping’ of their public utilities. (In this regard, the previous Environment Minister, Malcolm Turnbull, had a good proposal – IMHO).

    From here on my hypothetical becomes very speculative. I suspect that a lot of savings in the public and private sector could be made by getting rid of the enterprise agreement bureaucracies and the habit of hiring management consultants.

    Potential revenue sources are resource taxes, including environmental levies (program of selling time constrained pollution rights), tightening corporate tax laws and introducing a special tax on windfall gains (eg performance schemes of corporate managers that involve financial variables such as derivatives).

    I should hope the Rudd Government is not going to imitate the habit of some large corporations which plan ‘backward’, from ‘earnings per share’ to operations. That is, IMHO the preferred strategy is to budget for the election promises subject to a budget constraint rather than making the over-riding objective y% budget surplus. The latter has literally unknown consequences under changing conditions. This is difficult to get across to management consultants whose conceptual framework is the balance sheet (which assumes there is no uncertainty).

  7. 33. Some big cuts in JWH’s crazy defence procurements and senior ‘entitlements’ then a big hack at fringe benefits such as fleet purchasing.

  8. Ernestine

    Interesting your comment on the tax free threshold. When I first started working in 1985 I recollect it was around $4200pa. Many students or retirees with part time jobs paid no tax at all. I did some sums in 2004 and concluded that it needed to be about $11000pa in 2004 dollars to be equivalent. I agree this is a badly needed reform to encourage efficiency as well as equity.

  9. Socrates,

    I deliberately didn’t mention the defence budget as a possible source of expenditure cuts. The reason is that I would be totally out of my depth regarding geo-political, national interests, historical and technological factors. But, perhaps there are some people knowledgeable in these areas who feel competent to come up with an ‘in principle proposal’. As for economic principles I can only offer the general ‘trade-off’ idea of ‘butter vs guns’ – not much help here.

    What do you think of using the Future Fund for direct investment, as outlined above?

  10. Rudd will do well if he can simply keep a brake on real per capita spending (which went up massively under Howard). If inflation is the fear of the day then the “cost” of government should be kept in check. You don’t fight inflation by increasing costs.

    I would propose legislation that automatically increases the nominal tax free threshold by 30% each and every year with a pass on any given year in the unlikely event that real per capita revenue actual fell below the initial benchmark year. This would at once make the income tax system more progressive, work to abolish income tax and maintain a benchmark for spending which the government could budget to.

  11. We could cut the defence budget if we enabled greater use of civilian defence measures. Arming the population much as the Swedes and Swiss do would provide a significant defensive capability that could be turned against any potential aggressor. Such a civilian form of defence is also near impossible to use as a means of aggression against other nations (a plus or minus depending on perspective). However I would not go so far as to advocate ellimination of the standing professional army.

    Of course these days when people talk about defence forces they generally aren’t talking about defence. Their talking about foreign adventures with the UN or the USA. Frequently foreign aid by another name.

  12. “We could cut the defence budget if we enabled greater use of civilian defence measures. Arming the population much as the Swedes and Swiss do would provide a significant defensive capability that could be turned against any potential aggressor.”

    Yes and no doubt we could also afford about the same level of naval power as Switzerland possesses.

    Oh and let’s not forget that the overwhelming majority of our population lives several thousand miles away from the likely invasion points.

    But no doubt the can solve that by distributing petrol vouchers and roadmaps and telling our sturdy yeomanry to drive north.

    “Such a civilian form of defence is also near impossible to use as a means of aggression against other nations ”

    Nonsense. what you’re talking about is essentially the same as the conscript reservist armies used in World War I.

  13. Ernestine

    Regarding defence, I’m not expert but I understand that the $6 billion fighter purchase by Nelson is an obvious cut. Apparently on the Four Corners that investigated it last year show even the defence people thought it was not a good buy.

  14. Socrates, the question is though whether we should simply pocket the money or invest in a more appropriate fighter.

    I don;t think we can simply assume that the whole $6 billion is up for grabs.

  15. I wasn’t advocating conscription although it is true that both Sweden and Switzerland do also have conscription (as well as having a well armed civilian population). My point was that a well armed population makes a nation harder to invade and occupy.

  16. So we don’t have conscription, but instead we just hand out guns to everyone? I had no idea that libertarianism could be so much fun! 😀

    Meanwhile, back in reality, having the federal government run big surpluses in an effort to balance the rising public debt doesn’t really strike me as all that sensible. Isn’t this the reason why interest rates are supposed to go up? Tinkering with fiscal policy to avoid a rate rise seems like the economic equivalent of trying to fight a guy with both hands tied behind your back.

  17. So we don’t have conscription, but instead we just hand out guns to everyone? I had no idea that libertarianism could be so much fun!

    Well if it’s fun you want then bring back firecrackers.

  18. Ian 43
    If I understood the 4 Corners show, yes we can. We are committed to buying the “Joint Strike Fighters” in the long term for many billions more anyway, so there is no gain from the “Super Hornets”. They seem a crazy buy. The press recently said that the buy out cost of the contract was $300 million, but that still leaves $5.7B saved.

  19. IG, it is not necessary to have conscription in order to maintain a serious reserve. Consider what Haldane did to give Britain something like that by 1914.

    However, your implication that Libertarianism is inconsistent with conscription is mistaken. They are consistent when there is a realistic option of voting against it with one’s feet, which is precisely what the young Einstein did about German conscription by giving up German citizenship and becoming stateless, then moving to Switzerland. Technically and de facto, today, Swiss do not “have” to be conscripted; they get jailed and barred from certain civil rights if they don’t but still stay in Switzerland, but this squares with Libertarian ideas on the idea of “if you don’t want us then we don’t want you”.

    Oh, the Swiss do have serious marine defences on their two long lake frontiers, as well as on rivers and other bodies of water.

  20. Alpaca: “Meanwhile, back in reality, having the federal government run big surpluses in an effort to balance the rising public debt doesn’t really strike me as all that sensible. Isn’t this the reason why interest rates are supposed to go up?”

    Alpaca – we don’t have “rising public debt”, the Federal government has no net debt.

    We’re looking at the opposite situation – maintaining a large surplus is supposed to keep pressure off interest rates and stop the economy overheating.

    Of course the 0.75% rate cut in the US has taken away much of the rationale for higher official interest rates here.

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