Wind

John Quiggin68 Comments

It’s hard to know how to keep up with news on the problem of mitigating CO2 emissions – there’s just so much happening – so I’m just going to jot down a few thoughts. This piece on wind power in Salon by Joseph Romm has a couple of particularly interesting snippets I want to jot down.

* since 2000, Europe has added 47 GW of new wind energy, but only 9.6 GW of coal and a mere 1.2 GW of nuclear
* The carbon price required for large scale expansion in wind power (to 20 per cent of all US electricity by 2030) is estimated at $50/ton

Given our larger area of land per person, I’d imagine the economics in Australia would be at least as favorable. Ignoring for the moment the demand response, the revenue associated with permits sold at $50/ton in Australia would be about $25 billion (given current emissions around 500 million tonnes). Taking account of an emissions reduction of at least 20 per cent*, revenue would be $20 billion (enough to fund the abolition of payroll tax and a reasonably generous compensation program for low-income households). The net welfare loss would be much less than this – given the many problems with payroll tax, there might even be a net gain.

* The Salon article is only on electricity, but there are comparable savings to be made in other areas.

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Money Ruins Everything

John Quiggin16 Comments

Dan Hunter and I have a paper coming out in the Hastings Communications and Entertainment Law Journal, which economic and technical innovation is increasingly based on developments that don’t rely on economic incentive or public provision. The main examples, obvious enough for readers here, include open source software, blogs and associated technical and social innovations, and wikis. Abstract and links to SSRN over the fold.
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Burma Appeal preliminary results

John Quiggin4 Comments

We’re still awaiting some final confirmations, but the total amount promised by readers in the Burma appeal, which closed a couple of days ago, is a bit over $4000. My calculation show that this blog is marginally ahead of Troppo, but seasoned election-watchers will know that results can change with recounts and similar. Anyway, it’s been an overwhelmingly generous response. With our matching contribution raising the total to $8000, it’s the most successful fundraiser ever for this blog, which has now (with assistance from Troppo and many others) raised over $20 000 in total for appeals of this kind.

The situation in Burma remains disastrous, with natural calamity confounded by a government that seems utterly unconcerned with anything except the maintenance of its own power. Still, with pressure coming from the entire world, including ASEAN neighbors who’ve previously been inclined to give the junta a free pass, I’m sure the help to which we are contributing will get through in the end. It will still be sorely needed when it arrives.

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.