Year: 2008

Put a fork in him, he’s done

John Quiggin45 Comments

After the fiasco over alcopops, there’s only one reason Brendan Nelson can survive as Opposition leader. All the potential alternative leaders, with the apparent exception of Julie Bishop, have made just as big fools of themselves as Nelson has.

The decision to tax premixed spirit drinks on the same basis as spirits in general was announced weeks ago, without a peep from the Opposition. There are two justifications for the decision, either one of which is entirely sufficient.

First, it closes an obvious loophole in the revenue system. Since most spirits are consumed in mixed drinks of one kind or another, it makes no sense to exempt premixed drinks from the general tax on spirits. If the Opposition thinks spirits in general should be taxed at a lower rate, they haven’t said so, and of course they had 11 years to make the case from the government benches.

Second, the government has made the case that these drinks encourage excessive drinking among young people, particularly young women. AFAIK, no-one has refuted this, and certainly the Opposition has made no attempt to do so. (updatedin fact, tonight’s ABC news has footage of Nelson making precisely this claim in Parliament back in 1996)
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Republicans on the nose

John Quiggin27 Comments

While most attention has been focused on the never-ending story of the Democratic presidential primaries, the Republicans have just lost a seemingly safe seat in a Mississippi special election, following two earlier losses including that of former House Speaker Dennis Hastert. As this CNN story says, this raises the prospect of a wipeout in November. The result is consistent with steadily declining Republican affiliation and massive rejection of Bush (who’s reached all-time lows in several polls recently). McCain is still managing to avoid much of the stench associated with his party, but it seems to me this will be a lot harder for him in the context of a general election, where I imagine he will be expected to campaign on behalf of vulnerable Republicans.

I don’t know, though, whether there’s a common pattern of upsets in special elections. Incumbent governments often do badly in by-elections in Australia, since it provides the opportunity for a largely consequence-free protest vote, but this logic doesn’t seem to apply in the US context. I’d be interested in any thoughts from readers

Instant budget reaction

John Quiggin52 Comments

First up, I have to say that it was good to watch a budget without having to put up with Peter Costello. Unlike Howard, I never regarded Costello as having any real substance. Even after 11 years on the job, his mastery of his portfolio was a clever barrister’s mastery of his brief, not a serious understanding of economics. Despite his nervous start in the job, and a delivery of the Budget that wasn’t notable for rhetorical flair, Swan impresses me more as knowing what he is talking about. Turning again to the Opposition for contrast, I didn’t think much of Malcolm Turnbull’s response, claiming (on a basis he never made quite clear) that this was a “high-taxing, high-spending budget”, and edging perilously close to attacking the government for closing the alco-pops tax loophole his own side had created. Clearly the Liberals are still trying to work out what they stand for.

Coming to the main point, the government did a good job in keeping its promises, even if households on incomes over $150 000 may feel picked on. The means-testing of Family Payment B was announced before the election, and the threshold could scarcely have been higher than it was.

IIRC, the Howard tax cuts, largely copied by Labor were announced in nominal terms (without allowing for inflation). If so, the higher than expected inflation bequeathed to Swan is actually something of a gift, since it means that bracket creep will pay for (and justify) much of the promised cuts. Looking at the parameter revisions, most of which have been attributed to “the mining boom” it’s hard to believe that the $12 billion or so the government has gained from this source is all due to real increases in revenue, so I think bracket creep is playing a role here.

I was disappointed, if not very surprised, that the budget savings were made up almost entirely of odds and ends, with big targets like the dependent spouse rebate and the FBT exemption for cars left pretty much untouched (the rebate was subjected to the 150K means test). That said, there was enough fat left over from the previous government that it was possible to cut $7 billion or so without causing any obvious pain. It won’t be so easy next time, and I think it would have been better to take some pain this time around. Still with a surplus of 1.8 per cent of GDP, it’s unsurprising that they didn’t feel the need to cut further.

The one big new thing in the Budget (new in magnitude, but not in concept) was the announcement of $40 billion in infrastructure funds, building on the Future Fund and the Higher Education Endowment Fund. This seems promising, especially as the money seems likely to be invested in a mixture of equity and other assets, allowing the government to keep on issuing at least some debt.

Overall, this Budget is reasonable as regards its macroeconomic settings, cautious but reasonably sensible in fiscal terms, and likely to be politically successful (first budgets usually are). But it’s left some hard decisions to be taken later and, with a three-year term, there will only be one more chance before the next election year budget.

In praise of Rachel Carson

John Quiggin25 Comments

Tim Lambert and I have a piece in the online edition of Prospect, defending Rachel Carson against the tobacco/DDT lobby. It was cut down for publication from a much longer article, which I’ve appended over the fold. The article shows how the legend that Carson caused the banning of DDT, just as it was about to wipe out malaria, was invented and popularised by tobacco lobbyists, notably Steven Milloy and Roger Bate, who wanted to mount a flank attack on tobacco’s archenemy, the World Health Organization.

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Burma appeal progress

John Quiggin2 Comments

The Burma/Myanmar cyclone appeal has been a huge success so far, with donations so far totalling $1390 here and $2050 at Club Troppo. In the spirit of friendly emulation, I’d urge readers here to dig just that little bit deeper as the end of the campaign approaches. Remember that all donations will be matched by the joint efforts of the the Troppodilians and myself and that donations are tax deductible. So, if you are in the 30 per cent tax bracket, each dollar of post-tax income you give translates into a gift of nearly three dollars to those dealing with the aftermath of this disaster.

After the dollar

John Quiggin34 Comments

It’s unclear whether we are bound for a Post-American World in the near future, but it seems pretty clear that we are bound for a world in which the US dollar is no longer the unique ‘reserve currency’. The combination of chronically large trade and budget deficits and willingness of the US monetary authorities to tolerate sustained inflation means that decisions by national central banks to hold US dollar reserves are now driven by a desire to preserve the existing order rather than by calculations of risk and return. In the long run this can’t be sustained.

If the US dollar can no longer satisfy the requirements of a reserve currency, what are the alternatives? I can see two possibilities.

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Burma disaster aid appeal

John Quiggin28 Comments

Update: my email is j dot quiggin at uq dot edu dot au

I’m reposting this announcement from Club Troppo of a joint fundraiser to help cyclone relief in Burma/Myanmar. As regards logistics, I suggest readers here donate to a charity of their choice, and send me an email copy of the receipt for record-keeping purposes. Since the idea is to turn the spirit of competitive emulation to the general good, please feel free to announce your donation in the comments thread for this poist

<h3>Joint Myanmar appeal</h3>

With tens of thousands dead (possibly a hundred thousand) and hundreds of thousands of homes destroyed, the disaster in Myanmar is approaching the scale of the December 2004 tsunami. The difference is that it’s confined to one extremely poor country with particularly poor infrastructure. [Update: Ken Parish would rather call the country Burma, and recommends this discussion of the name issue.]

Aid agencies are working frantically to supply food, water, medication, tarpaulins and so on, to a million or so survivors of Cyclone Nargis who remain in desperate straits. Their initial efforts have been hampered by the paranoid Myanmar government and bureaucracy (see Ken’s post below) as much as by the blocked roads and unusable airports, but it seems progress is being made.

Some blogosphere veterans might remember that John Quiggin raised nearly $5000 in donations for aid organisations involved in the tsunami relief effort three years ago. John undertook to match every dollar pledged by a reader with a dollar of his own.

He is doing the same thing again, this time in collaboration with Club Troppo. We are hoping to persuade readers to give generously in the knowledge that every dollar of disposable income sacrificed translates to nearly four dollars of aid. John will donate fifty cents for every dollar pledged in the comments threads for this post, the comments thread for the twin post at his own site, or by email to John or me. Club Troppo contributors will put in another fifty cents.

The deadline for pledges is midnight Thursday 15 May, and we’ll announce the total collected this time next week. If you donate electronically, forward John or me the acknowledgment in due course, although it doesn’t have to be by the deadline. (The acknowledgments don’t usually specify the amount, but we’ll take your word on that.) Unless you ask to remain anonymous, we’ll list the contributors.

Donate to which ever reputable aid organisation you prefer. Some obvious candidates, who are operating in Myanmar now and also accept on-line donations, are Red Cross, CARE, World Vision, and Medecins Sans Frontieres. Oxfam is collecting funds, though they do not appear to be conducting their own operations in Myanmar. Readers are encouraged to add to this list of suggestions.

James’ email is j DOT farrell AT uws DOT edu DOT au.

Update 12/5/08 Readers have made generous donations. I’ll try to co-ordinate with Troppo for a progress report soon.