I’ve just read ‘Tales of Fiscal Adjustment’ by Alesina and Ardagna, which appears to be the founding text for the idea of expansionary austerity. The level of scholarship, at least as it applies to Australia (which is their first illustration) is exceptionally poor, to the extent that it requires a rescuscitation of the ancient Internet tradition of Fisking. I’m going to quote excerpts from their text (about 50 per cent of the total), and intersperse them with my comments.
The 6-6-6 plan
Inspired by Michelle Bachmann, I’ve been thinking about what a 6-6-6 response to Herman Cain might look like. Being multiply disqualified from seeking election to the US Presidency, I decided to put in as much work as Cain and his team appear to have done, but no more. Hopefully, the magic of crowdsourcing will turn this into a comprehensive blueprint. So, here are the basic goals, and over the page, some of those devilish details.
The aim of the plan would be
(a) Reverse pro-rich and anti-worker policy changes of the past three decades to reduce, by 6 percentage points, the share of market income going to the top 1 per cent.
(b) Increase, by 6 percentage points of national income, the personal income tax revenue raised from the top 20 per cent of the income distribution
(c) Reallocate, or use more efficiently, current public expenditure equal to 6 per cent of national income
The aim would be to raise post-tax incomes for those in the bottom 80 per cent of the income distribution by around 20 per cent, while making around 10 per cent of national income available for new or better public expenditure.
For reference, US national income is currently around $13 trillion, so 1 per cent is $130 billion.
Has the US Defense Department killed a million Americans since 2001?
I’ve spent the day at a workshop on benefit-cost analysis where a lot of discussion is on valuing policies that reduce risks to life of various kinds. US policy, for better or worse, is focused on the idea of Value of a Statistical Life. Typically a policy that reduces risks of death will be approved if the cost per life saved is below $5million, and not otherwise. (There are similar numbers applied to publicly funded health care services, prescription drugs and so on, usually per year of life saved).
A striking thing I found out is that anti-terrorism policies of the Department of Homeland Security are subject to the same benefit-cost requirements as EPA and Transport. But Homeland Security is only one way the US government spends money with the aim of protecting Americans against attacks from terrorists and other enemies. Defense spending is far bigger and not subject to BCA, even though money spent on defense is money that can’t be spent on reducing terrorism risk through DHS or more reliably on reductions in environmental, health and transport risk
The numbers are quite striking. The ‘peacetime’ defense budget is around $500 billion a year, and the various wars of choice have cost around $250 billion a year for the last decade (very round numbers here). Allocated to domestic risk reduction, that money would save 150 000 American lives a year.
So, since 9/11, US defense spending has been chosen in preference to measures that would have saved 1.5 million American lives. That’s not a hypothetical number – it’s 1.5 million people who are now dead but who could have been saved. I think its fair to say that those people were killed by the Defense Department, or, more precisely, by the allocation of scarce life-saving resources to that Department.
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MLK and non-violent protest
Yesterday in DC, the Martin Luther King memorial was officially inaugurated. I was lucky enough to be invited to a lunch celebrating the event afterwards, where the speakers were veterans of the civil rights movement Andrew Young, John Dingell, and Harris Wofford. Video here
There were some interesting recollections of Dr King and his struggles, but not surprisingly, much of the discussion focused on the events of today, particularly the Occupy Wall Street movement. One of the speakers made the point that the Tahrir Square occupiers had been inspired by the example and ideas of Martin Luther King.
Now, of course, the circle has been closed with the example of Tahrir inspiring #OWS. There has been more direct inspiration too. When I visited the Washington occupation in McPherson Square to drop off some magazines for their library, I picked up a reproduction of a comic-book format publication of the civil rights movement (cover price, 10 cents!), describing the struggle and particular the careful preparation given to ensure a non-violent response, even in the face of violent provocation.
And that brings me to the question I want to discuss, one that is as relevant today as in the civil rights era. When is violence justified as a response to manifest and apparently immovable injustice? My answer, with Martin Luther King is: Never, or almost never.[1]
Tea Party didn’t mind bailing out Wall Street, only Main Street
My Fin column from last week is over the fold. It’s mainly about the Occupy Wall Street protests, but in this post I want to stress a misleading comparison with the Tea Party. It’s often suggested that the Tea Party arose in response to the bailout of Wall Street, and until I checked, I had somewhat accepted this claim, even if it was obvious that the protest served the interest of its supposed targets.
In reality, though, there is no truth at all to this claim. To quote from the article
The first Tea Party protests were held in February 2009, shortly after the inauguration of President Obama, and four months after the Bush Administration bailed out the banks. The event that did most to drive the Tea Party protests was a rant delivered by journalist Rick Santelli from the floor of the Chicago Mercantile Exchange. To the cheers of traders, Santelli denounced bailouts, but not the bailout of the financial sector. His ire was directed against attempts to help struggling homeowners refinance mortgages taken out during the real estate bubble.
I used to see the Tea Party as having had some genuine elements, but co-opted by Wall Street and the Repubs. Now, it’s clear that Repub activists ran the show from day one. Some individual participants may have been sucked in by anti-bailout rhetoric but the organizers were on the side of the 1 per cent all along.
Money for nothing?
Whenever I write anything about public expenditure and taxation, I’m likely to get someone commenting that Modern Monetary Theory has shown that a government with its own currency does not need taxation to finance public expenditure. I’ve tried a couple of responses to this, but now I think I can explain better why this argument is
(a) wrong in terms of (what I understand to be) the central claims of MMT
(b) regressive in terms of taxation policy
(c) politically pernicious
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Percentiles
One of the most striking successes of the Occupy Wall Street movement has been the “We are the 99 per cent” idea, and more specifically in the identification of the top 1 per cent as the primary source of economic problems.
Let’s hear it for a hung parliament!
Two great outcomes in successive days[1], and neither would have happened without a hung parliament. I never accepted the horror with which many commentators viewed the election results (after all, minority governments have been common at the state level and have generally worked fine), but now I’m a positive enthusiast. It would be a pity if the independents who supported the government are punished by their electors – I’d say we need more independents of all kinds as a check on the executive power of the PM and the majority party
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A long time coming …
… but the legislation for a carbon tax/fixed price emissions scheme has finally passed the House of Representatives, and is assured of passage through the Senate. Assuming the government can survive that long, it will come into force at the beginning of 2012-13.
Before any analysis, some (qualified) congratulations are in order. The Greens (with my support at the time, for what that was worth) took a big gamble in rejecting the badly-compromised Rudd-Turnbull deal, and have contributed to the passage of a much better bill now. Still, it turned out to be a long-shot. If the Gillard government had either won an absolute majority or lost to Tony Abbott, there would be no carbom tax. Kevin Rudd laid a lot of the groundwork, but failed to call a double dissolution, which he would surely have won, when the first version of the emissions trading scheme was blocked. Malcolm Turnbull has been a voice of sanity throughout, but still voted the party line. Last but not least, Julia Gillard, having almost succeeded in killing the whole idea in 2010 demonstrated her skills in getting an exceptionally contentious piece of legislation through, despite disastrous polls and the most fragile conceivable majority.
Now, a bit of a look towards the future
Gillard on equal marriage rights
In the event that Julia Gillard lasts as PM until December, she’ll presumably be faced with a resolution making equal marriage rights part of Labor policy. Gillard’s handling of this issue is emblematic of her disastrous leadership in general – simultaneously unprincipled, unconvincing and politically unsuccessful.
Unlike our PM, I’m just old enough to remember when the phrase “living in sin” could be used with a straight face to describe living arrangements like hers. So, I find it hard to believe that her stated opposition to equal marriage rights is sincere (unlike with Kevin Rudd). Rather it’s the result of the kind of political calculation standard on the right wing of the Labor Party (see also Kristina Kenneally), in which the ‘real’ Labor voter is typecast as an aspirational bogan[1] whose views on social issues are unchanged since the 1950s. The key text here is Michael Thompson’s Labor without Class. There’s no evidence for this – views on social issues in Australia are largely uncorrelated with social class.
Allowing that some Labor voters are socially conservative, Gillard’s strategy is still politically stupid. Given the desperate state of the polls, she can’t hope to win by caution on an issue like this. It’s probably too late now, but a strong stand in favor of equal marriage rights might have done something to stop the drift of Labor voters off to the Greens, independents or the kind of apathy that makes it easy to shift to the Liberals, given an attractive promise or two.
fn1. To be boringly clear, I don’t use or endorse the term “bogan” to describe anybody. But the stereotypical image of a bogan coincides perfectly with the Labor Right view of Labor voters.
John Quiggin 