Month: July 2008

Indigenous Territorians short-changed?

John Quiggin12 Comments

That’s the claim made in today’s Oz, quoting the NT Council of Social Service president Barry Hansen. The NT gets very high levels of Commonwealth Grant funding on the basis of a needs-based formula which is heavily influenced by the large proportion of indigenous people, living in remote areas that are costly to service. According to Hansen, the funding is largely spent on providing services to the wealthy (mostly white) suburbs of Darwin.

Mr Hansen pointed to the latest Commonwealth Grants Commission State Finance Inquiry working paper that showed the commission had assessed the Northern Territory Government’s expected per capita expenditure on indigenous services to be close to $218 million in 2006-07. The working paper’s assessment showed that the Northern Territory Government, whose grants from the commonwealth are not tied to the spending areas for which it is allocated, only spent $110 million.

I haven’t studied the NT accounts in detail, and I’ve only visited a few times, but I must say this is consistent with my understanding.

As an illustration, it’s worth comparing the Parliament building for the NT (pop 217 000) with the building in which the Legislative Assembly for the ACT (pop 339 000) which received self-government about the same time . The NT assembly is an imposing building. I don’t have a cost figure, but obviously it would not have been cheap. The ACT assembly meets in a low-rise office building, at least 40 years old and refurbished 15 years ago. (pics to come) It’s hard to see how the NT could have afforded its building on the basis of the local tax base, assuming that any compensation for the high cost of remote services was spent where it should have been. And what’s true of the buildings is true more generally of the capitals. While the ACT, and particularly its city centre, has got noticeably shabbier since the end of direct Commonwealth control and funding, Darwin looks like a place that is getting plenty of public expenditure.

Of course, impressions can be wrong and bloggers like Ken Parish at Club Troppo are much better-informed on the NT than I am. So I’ll follow this story with interest.

A quick request

John Quiggin18 Comments

Can anyone tell me where (in Brisbane, or delivered here) I can buy pate campagne? Feel free to provide recipes also, though most I’ve seen are look hard or too time-consuming for me.*

* Which reminds me of a variant on an old joke.
Q:What do economists make for dinner? A: Reservations.

Fortune magazine and the N-word

John Quiggin68 Comments

Nationalization, that is. In this piece on doomsday scenarios for Fannie Mae and Freddie Mac (H/T Calculated Risk) the cutely named and quasi-private mortgage packagers and guarantors, Katie Benner says

So what might it look like if the government had to lend a hand? Outright nationalization is an unlikely option given that neither the current administration nor the presidential candidates could afford to support such a move in an election year.

but goes on to imply that the likely alternatives could be far more costly, citing a Standard & Poors estimate of a trillion dollar cost to taxpayers, and possible loss of the US government’s AAA rating. Agency ratings aren’ t reliable indicators, but the US government has been in the category of issuers who are assumed to be exempt from scrutiny. A change in this status would be a huge problem for a big debtor like the US.

Either a bailout or a nationalization of Fannie and Freddie would make the Northern Rock fiasco in the UK pale into insignificance. The Northern Rock case shows that a policy towards financial enterprises in which both failure and nationalization are regarded as unthinkable cannot be sustained. The shareholders of these companies have been happy to accept the higher returns associated with an implicit government guarantee and they (the shareholders) should pay the price when the guarantee is needed.

Meetings, bloody meetings

John Quiggin14 Comments

There have been quite a few important meetings lately including COAG, G8 and the Major Economies Meeting on Energy Security and Climate Change (MEM) in Japan, attended by Kevin Rudd. Anyone expecting substantial progress to come out of these particular meetings was surely disappointed. But to look on the bright side, if any of these meetings had been held even a year ago, the results would have represented a substantial breakthrough.

Starting with COAG, the obvious disappointment was the lack of any immediate response to the drastic problems facing the Murray-Darling system. While most of the policies are now pointing in the right direction, nothing will really happen until 2009. The decision not to increase the amount of water that could be traded out of a region from 4 per cent to 6 per cent (still a tight restriction) was symbolic of the process as a whole. That said, there is currently so little water in the system that no amount of reform is going to do much good in the short run. We have to hope for the best.

The Major Emitters Meeting produced fairly predictable statements by China and India that the developed countries had to do more. With the US still to make any firm commitment, we’re unlikely to see much advance on that before the Copenhagen meeting, with a new Administration, next year. Still, that was accompanied by an acceptance in principle of targets for reduced emissions. And at least in one respect, these countries are walking the walk. Fuel subsidies in Asia are being cut in response to increased costs associated with higher oil prices. That’s a pretty sharp contrast with proposals for new concessions coming from (among others), Clinton and McCain in the US and Nelson and Turnbull here.

Finally, although the G8 proposal for a 50 per cent in global emissions by 2050 was carefully hedged, it’s still good news. Although this wasn’t spelt out a 50 per cent in global emissions requires a much bigger cut in developed country emissions, so even a weak commitment now will make backsliding harder in Copenhagen.

What I’ve been reading

John Quiggin51 Comments

Climate Code Red by David Spratt and Philip Sutton (more details here). This is a book that will doubtless be welcomed by those with a sceptical attitude towards the mainstream discussion represented by the IPCC, and makes many points that will be familiar from debates here – there’s more uncertainty in the IPCC models than is commonly recognised, important factors have been omitted, the intergovernmental process is subject to political constraints, emissions projections are problematic and so on. On a first reading, Spratt and Sutton make a pretty convincing case that the apparent scientific consensus position is well off the mark.

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Carbon taxes vs emissions trading

John Quiggin98 Comments

Now that nearly everyone is agreed on the need for a market-based policy instrument to reduce CO2 emissions, the biggest unresolved question is whether to implement carbon taxes, tradeable emissions permits or some hybrid of the two.

I support tradeable permits, but I’ve never really spelt out my reasons for doing so. It’s important before doing this to observe that the differences between the two approaches are more limited than most of the discussion suggests. Both ensure the existence of a price for CO2 emissions and both can be set up to distribute the costs of emissions in a lot of different ways.

That said, tradeable permits have some significant advantages in my view.
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