The Budget: The good, the bad and the ugly

John Quiggin3 Comments

I’ve just watched the Budget speech, and seen the immediate wrapups, but haven’t yet had time to read the Budget Papers (late night ahead, as I have to go on Life Matters tomorrow to discuss it). Here’s my instant reaction in three categories

h5. The Good

* Howard’s attempt to reinstate the cultural dominance of the single-income family has been dumped, with lots of assistance for families following the model preferred by most Australian households with dependent children, that if one full-time and one part-time job.

* The baby bonus has been dumped, and Labor’s idea for a replacement stolen.

h5. The Bad

* Nothing much for education, and nothing at all for health. Costello spent the entire health section of the speech on two initiatives that would barely get coverage if they were issued as a press release by the Minister for Health, one on equipment costs for people managing diabetes and the other on a cochlear implant for which there are currently 130 people on the waiting list. Of course, if you’re one of the people affected, this will be welcome use, but for the other 19.9 million of us, there’s nothing here. In particular, the obviously unsatisfactory measures taken so far to arrest the decline of Medicare were touted as if they were the answer to the problem

* Regressive changes to the tax scales, with significant benefits for those on high incomes and nothing for anyone below $50 000. The large segment of the population on below-average incomes, but without dependent children or ineligible for family tax benefit gets nothing at all from the Budget except another round of bracket creep.

h5. The Ugly

* Resort to vote-buying lump-sum handouts on a scale I can’t previously recall. Obviously this is a reaction to last year’s “sandwich and milkshake”, but it’s very dangerous stuff. The Fistful of Dollars rides again.

* The announcement in the 2004-05 Budget of a raid on the 2003-04 Budget, to finance the first instalment of the handouts mentioned above. As far as I know, this is absolutely unprecedented. Since the amount raided is almost exactly equal to the projected surplus for 2004-05, it would be more accurate to describe the Budget as being in balance rather than in surplus.

Interesting?

John Quiggin2 Comments

I’ve been meaning for a long time to collect my thoughts about US interest rates, and where they are and should be going. As is often the case, I’m largely in agreement with Paul Krugman, at least as far as long-term rates are concerned. On the other hand, I’m a bit more hawkish in relation to short-term rates than Brad DeLong, with whom I agree on a lot of things.

I’m planning on reworking this piece as I have new thoughts, and in response to comments. so please treat it as a work in progress.

Warning: long and boring (but maybe scary) post over the fold.
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Time to repeal Godwin’s Law ?

John Quiggin6 Comments

What kind of America-hating lefty would seize on an isolated incident like this

Three weeks ago in Highland Park, Texas, Mrs Dolly Kelton was arrested and handcuffed for failing to pay a traffic ticket after her car was stopped for having an expired registration. I doubt that Mrs Kelton was a threat to the safety of the arresting officer. She is 97 years old.

then follow up with this

We handcuff her… because some Western societies, and America in particular, use these procedures as a way of softening up the accused by humiliation and to underline the power of the authorities.

What kind of slippery-slope argument do you think is going to follow?
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Time to repeal Godwin's Law ?

John Quiggin6 Comments

What kind of America-hating lefty would seize on an isolated incident like this

Three weeks ago in Highland Park, Texas, Mrs Dolly Kelton was arrested and handcuffed for failing to pay a traffic ticket after her car was stopped for having an expired registration. I doubt that Mrs Kelton was a threat to the safety of the arresting officer. She is 97 years old.

then follow up with this

We handcuff her… because some Western societies, and America in particular, use these procedures as a way of softening up the accused by humiliation and to underline the power of the authorities.

What kind of slippery-slope argument do you think is going to follow?
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The inevitability of corruption

John Quiggin17 Comments

Over the course of the Iraq war, a lot of opponents of the war have made a big noise about corruption among US contractors, the most common target being Halliburton. More recently, the pro-war blogosphere has been in an uproar over the ‘discovery’ that Saddam bribed a range of officials, including some in the UN, so that he could get kickbacks from the sale of oil, which was supposed to be used solely for the purchase of food and other essential imports. There has been a sense of baffled rage that no-one is much interested in pursuing these ‘discoveries’.

The scare quotes around ‘discovery’ reflect the fact that everyone who was paying any attention knew about this all along, and, indeed could deduce it from first principles. For example, in a piece on financing the reconstruction of Iraq written in May 2003, I observed

A return to normal output would yield gross income of around $US 20 billion per year at current prices, but most of this money was already being spent under the Food-for-oil program and most of it be needed for the same purpose in future. About 25 per cent of the money was taken to pay interest on debts associated with reparations for the 1991 War. If these were forgiven, some additional money would become available. In addition, it appears that Saddam managed to cream off $1 billion to $2 billion per year. If this were returned to the Iraqi people in general, it would make a small but positive contribution.

I didn’t bother to point it out, but it was obvious that Saddam could only get his cut by bribing those on the other side of the deal, that is, employees of the UN, the oil companies and the governments involved.

In the same piece, I made the point that the US contractors doing the work in Iraq were bound to charge a lot and deliver little, so that the cost of reconstruction would be far beyond the minuscule amounts that had then been budgeted. The appropriate response was not to complain about corruption but to accept reality and the need to spend a lot more money.

Iin both cases, it was, or ought to have been, obvious that the policy in question would produce corruption. That was why the US and UK initially tried to keep sanctions much tighter, with the result that thousands of Iraqi children died of starvation or inadequate medical treatment. Those who supported the Oil-for-Food program, knew, or ought to have known, that Saddam would take a large cut, and supported it anyway. Those who supported large-scale expenditure on reconstruction after the war knew, or ought to have known, that unscrupulous contractors would make a fortune, and supported it anywar. I’m happy to admit to supporting both policies, and to accepting corruption as one of the inevitable costs.

Having said all that, corruption is a crime and those guilty of it should be punished. But, unless you favor starving Iraqi children or doing nothing about reconstruction, trying to use either Halliburton or ‘UNSCAM’ to score points regarding the desirability or otherwise of the war is just silly.
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Abhorrence

John Quiggin9 Comments

This NYT story gives a pretty clear indication of how the Bush Administration’s abhorrence of abuse and torture will be manifested:

* A short spell in jail for those silly enough to be caught on camera or caught holding one
* A reprimand and no future promotion[1] for their immediate superiors
* No consequences for those who set up the system
* A new coat of paint for Abu Ghraib

I hope the Muslim world is more favourably impressed than I am.

fn1. As far as I can tell, this is what is meant by the NYT description of the reprimands as ‘career-ending’.

Sorry to be right

John Quiggin11 Comments

Like most commentators, I’ve made some correct predictions about Iraq and some incorrect ones. In my case, I’ve mostly erred on the side of pessimism, which I think is appropriate with regard to war – more disasters have been caused by excessive eagerness to go to war than by excessive reluctance. This prediction, made about a week into the Iraq war, seemed a bit over the top in the subsequent months, during which very little evidence emerged to support it. In retrospect, however, it turns out to be almost[1] entirely accurate.

Given the increasing frequency of references to Northern Ireland and Guantanamo Bay it’s reasonable to assume that torture of prisoners classed as ‘terrorist suspects’ will begin within the next few weeks, if it hasn’t started already. This will be denied with great vehemence, then, when it comes out, defended as an inevitable response to Saddam’s evil methods.

fn1. To be fair, while the response of the Bush Administration has been pretty much as expected (I forgot to mention the standard intermediate step of blaming it all on ‘a few bad apples’), and plenty of right-wing commentators have treated the whole thing as good dirty fun, some supporters of the war have been genuinely horrified. Sgt Stryker, (following correspondent BruceR) makes the same suggestion as I have previously, to “level Abu Ghraib, as the Bastille of the modern world that it is, send any prisoners worth keeping to other facilities, release the rest, and then offer substantial recompense for Iraqis, one and all, who claim to have been wrongfully imprisoned/abused in custody while there” . Sgt Stryker also proposes dissolving the army units involved.

The social desirablity of social democracy

John Quiggin10 Comments

Recent opinion polls have shown overwhelming majorities in favour of devoting any additional resources to improvements in public services, particularly health and education, rather than to tax cuts. Discussing these results, Andrew Norton notes that some people may be “giving the socially acceptable answer, rather than what they really want” (see also here. I think he’s probably right, and I certainly hope so.

The reason I think Norton is probably right is that the majorities are so overwhelming (75-22 in this Nielsen poll and even more in others) that a fair number of people in the majority (people on above-average incomes with below-average needs for services) would almost certainly be worse off in a narrow personal sense. While some of these may be consistently altruistic, others may want to appear altruistic in a poll but might actually prefer the cash. Taking account of these responses would produce a less lopsided majority for services, but still a majority, as is shown by Labor’s electoral dominance at the state level.

The reason I hope he’s right is that it means that social democracy has won the public debate, at least for the moment. After all, if everyone believed that tax cuts would benefit, not merely a subset of high-income earners but the entire community, then the socially acceptable answer would be to support tax cuts. That certainly seemed to be the way things worked during the tax revolt of the 1970s and 1980s. At that time, opposing tax cuts was socially unacceptable. Well into the 1990s, I was regarded as wildly heretical for advocating higher taxes. Obviously, this has changed, though the political parties have been slower to catch up than the commentariat.
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