Years too late, the ACCC recognises the failure of the NEM

The latest ACCC report on the National Electricity Market is an incoherent mess, reflecting the breakdown of the neoliberal/market liberal assumptions on which both the ACCC and the NEM are founded. But I can at least endorse this statement

There are many causes of the current problems in the electricity market. At all stages of the supply
chain decisions have been made over many years by many governments that set the NEM on the
wrong course.

As I said in a report to the Electrical Trades Union in 2014

The National Electricity Market was implemented in the context of National Competition Policy and at a time when faith in competitive markets was at its peak. The [resulting’ design flaws  have led, over 20 years, to the failure of the NEM … These failures are not accidental. Rather they can be explained by fundamental and incurable flaws in the NEM model of pricing, regulation and incentives for investment. Marginal adjustments such as those being proposed at present will inevitably prove inadequate.

Back then, as I recall, the idea of that the NEM was a failure was not so popular. Rather, the only obstacle to complete success was said to be the remnants of public ownership in NSW and Queensland.

Voters understand better than commentators the trickery of state budgets

That’s the title of my latest piece in the Guardian.
Opening paras

Privatisation has been the last fiscal resort of desperate governments for decades. By now, just about everyone in the community understands that the supposed windfall achieved by selling income generating assets is spurious. Voters have routinely tossed out governments that have advocated or implemented privatisation, sometimes by stunning margins.

The only people who haven’t got the memo are the politicians who make budget policy and the journalists who write about it. The politicians’ reluctance to abandon privatisation is understandable if discreditable: when electors throw them out, they are virtually guaranteed a lucrative post-political career in the financial sector.

The failure of political journalists to understand what they write and talk about for a living is more surprising. Yet the coverage of the Queensland and NSW elections suggests that there has been no improvement in understanding of the basic issues.

Turnbull’s class war

The right is fond of decrying as “class war” any proposal that would benefit Australian workers and low income families. But, we finally have a genuine “class war” election in view and it has been launched by Malcolm Turnbull, with his attempt to tie future governments into massive income tax cuts for high income earners.

The good news here is that, despite some wavering, Labor held its nerve, opposed the second and third stages of the package and voted against the entire bill. Some people (I imagine the kind who call themselves “hardheads”) were worried that defeating the entire bill would be hard to explain to voters. They didn’t apparently consider how they would campaign against regressive policies they had already voted for (or maybe they supported those policies).

In any case, voters in Australia finally have a clear choice. Massive tax cuts for companies and high income earners, or a progressive tax system that provides the revenue we need to provide decent public services. It seems that a majority of younger voters, at least, know where they stand (more on this soon, I hope).

Social security won’t be around long enough for me to collect it (repost from 2014)

The claim that our current healthcare and pension policies are unsustainable is a classic zombie idea on the political right, embodied in the regular Interngerational Reports produced by the Australian Treasury which invariably fail to mention the real threat to the future posed by climate change and environmental destruction more generally.

In the US, the release of the trustees reports for Social Security and Medicare has produced <a href=”https://www.washingtonpost.com/opinions/the-cowardice-of-the-political-class/2018/06/10/71520c0e-6b40-11e8-9e38-24e693b38637_story.html?utm_term=.42caa7a6e650″>the usual crop of alarmist articles</a>, though with more pushback than in the days when the political class was united around the idea of a “grand bargain”. So, I thought I’d repost <a href=”http://crookedtimber.org/2014/03/23/social-security-wont-be-around-long-enough-for-me-to-collect-it/”>this piece from 2014</a>.

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Salon has a couple of interesting articles about millennials. Tim Donovan focuses on <a href=”http://www.salon.com/2014/03/22/this_is_not_a_typical_millennial_the_dark_truth_about_a_misunderstood_generation/”>the plight of young people without college education</a> who are suffering the combined effects of long-term growth in inequality and the scarring that comes from entering the worst labor market in at least a generation[^1]. Elias Isquith has a piece <a href=”http://www.salon.com/2014/03/22/rand_pauls_youth_snow_job_why_hell_never_ever_ever_win_over_young_voters/”>debunking Rand Paul’s prospects of pulling the millennial vote</a> (I’ve seen a few of these lately, which may or may not mean anything), which includes the following observation<blockquote>Despite the fact that a whopping 51 percent of millennials believe they’ll receive no Social Security benefits by the time they’re eligible, and despite the fact that 53 percent of millennials think government should focus spending on helping the young rather than the old, a remarkable 61 percent of young voters oppose cutting Social Security benefits in any way, full stop.</blockquote> The idea that “Social security won’t be around long enough for me to collect it” is a hardy perennial, and thinking about it led me to the following observation:

It’s now possible for someone to have spent their entire working life believing that Social Security would not last long enough for them to receive it, and now to have retired and started collecting benefits. This belief has been prevalent at least since the early years of the Reagan Administration when it was pushed hard by David Stockman, and I’m going to date it to the first big “reform” of the system in 1977. Someone born in 1952, who entered the workforce in 1977 at the age of 25, would now be turning 62 and eligible to collect Social Security.
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I’m betting that, in 20 years time, when the 1952 cohort reaches their average life expectancy, having enjoyed their full entitlement to benefits (assuming no ‘grand bargain’ intervenes) that the belief will be just as prevalent

[^1]: As I’ve argued <a href=”http://crookedtimber.org/2012/08/17/the-generation-game-2/”>many</a&gt; <a href=”https://johnquiggin.com/2003/12/07/can-we-stop-the-generation-game/”>times</a&gt;, the shared experience of entering the labor market in a recession is one of the few instances where membership of a particular generation is more than a marketing label.

L-A-W

I’ve stopped doing instant reactions on Budgets. There’s always plenty available now, at places like Inside Story, as well as in the newspapers.

But there’s often something of interest that gets overlooked a bit. In this case, it’s the government’s proposal to legislate tax cuts for the rich seven years in advance. This is an idea with a lengthy and inglorious history, taken to a new extreme.
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GMI + JG = paid work as a choice for all

I’ve been arguing for a while that a Guarantee Minimum Income (or Universal Basic Income) ought to be combined with a Jobs Guarantee to would make paid work a genuine choice for everyone. To spell this out, the GMI/UBI would make it possible to live decently without paid work, while a Jobs Guarantee would ensure that paid work was available to everyone. As a medium term policy, the best form of GMI would, I think, be the participation income advocated by the late Tony Atkinson. That is, a payment conditional on some form of social contribution, including voluntary work, study and childcare. Support for such a policy entails a direct confrontation with the punitive attitudes behind policies like Work for the Dole, while still maintaining the widely-held principle of reciprocity.

I was going to write more about this, but I just received an article by Felix FitzRoy and Jim Jin, in the Journal of Poverty and Social Justice which presents the argument very well. So, I’ll just recommend that to anyone interested in the issue.

Fortune favours the brave (updated)

Most of the political commentariat were convinced that Bill Shorten had got things badly wrong by announcing his policy on dividend imputation immediately before the Batman by-election. It was even more striking that, despite the pressure, Shorten didn’t cave into demands for changes to the policy. Michelle Grattan, for example, described the policy as an “own goal“. After Labor’s easy win, she backed off a little bit, but still claimed that Labor “has a selling job“. M

Maybe so, but I’d say the government is the one that has scored goals for the other side.

(Update 27/3) As predicted, Labor has tweaked the policy to exclude pensioners. That blunts the remaining lines of attack, but doesn’t cost much money, since the benefits go primarily to high-wealth self-funded (but massively tax-subsidised) retirees. By waiting until after the Batman by-election and the latest Newspoll, Labor looks gutsy (even Dennis Shanahan in the Oz conceded this) and Turnbull looks even weaker than before

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