Catallaxy Files

It’s hard to believe that the ABC thinks that Brian Toohey should still be appearing on The Insiders, although he is probably better than some of the new teenagers they have been using.

But he was dead wrong on a point (Toohey just loves progressive income tax; marginal tax rates should be higher according to the Toohey playbook) he lamely tried to make during this week’s program.

The Treasury paper to which he referred did not compare the excess burden (deadweight loss) of the GST with our income tax arrangement, but the GST with a hypothetical flat rate income tax (my recollection that it was less than 20 per cent).

Toohey claims on this basis that income tax is not worse than the GST in terms of economic efficiency and then there is all the churning that goes on in terms of compensation for a higher GST.

Come on, mate, there is heaps of churning that goes on now – the compliance costs of tweaking the numbers is close to zero.

This is just willful misinformation by Toohey who has tried to make a name for himself by claiming that the Costello/Rudd income tax cuts were wrong.  Is he joking?  Just imagine where bracket creep would be now if we hadn’t had those adjustments to the income tax scales?

But if he wants to advocate a flat rate of income tax across all income levels, I’ll buy that in the heartbeat and be happy to ditch the GST.

Mind you, the other village idiots at the ABC wouldn’t have a clue about any of this.

Note however that Toohey makes strong points in his rejection of compulsory superannuation (and the relentless campaign by the rent seekers to have the rate of the SGC increased) and crazy government funded ship/sub building in Adelaide/Australia.

Oh my Lord.  Mark an anniversary and all the Abbott haters (Taylor, Coorey, Grattan, Seccombe, Bongiorno, Mark Kenny, etc. etc) come out to play to give us their two-bob’s worth about the lack of achievements on the part of the Abbott government.

When reading these opinionated diatribes, which are generally based on very slanted and ill-informed points-of-view, I am inclined to look on the positive.

The fact that the Abbott government is not behaving like a toddler after drinking a litre of raspberry lemonade is no bad thing.  The fact that relatively few bills have been passed by parliament is a good thing, not a bad thing.  We have really had far too much of ‘seeming rather than doing’ governments.

(I loved Thomas Sowell’s reworking of The Audacity of Hope to The Mendacity of Hope.)

And let’s face it, the Abbott government is spending a lot of time trying to clean up the many messes it inherited – eg. NDIS, NBN, school funding, RET, unlegislated tax changes.

Here are recent good points:

• Ditching the bank deposit tax (was Hockey kidding?) – a good outcome;
• Refusing to change Section 46 of the Competition and Consumer Act; the change would have lead to great uncertainty, huge transactions costs and unclear benefits;
• Sticking up for the benefits of the Free Trade Agreements, in particular ChAFTA;
• Specifying a carbon emissions target which is a bit too high (I wouldn’t have a target, but that would be step too far for this government) but is not ridiculous (shut up, Bernie, you wouldn’t know and you have no credibility) (and, Lenore, stop carrying on as you are some sort of world expert on climate science and policy: you are not);
• Defending Dyson Heydon against politically motivated and scurrilous attacks by the trade unions and the Labor Party.

To be sure, there are many aspects of the operation of the Abbott government and its decisions that I don’t like.  But foreign policy seems to have been a strength and the hard line on home-grown jihadists and the potential for terrorism here is to be welcomed.

Mind you, recall all the Howard hating stuff –  it was quite hysterical.  These same people now write flattering assessments of the Howard years – how hypocritical can you get.

If it’s not a Labor/Greens coalition, don’t expect the bleating to stop.  It would be just nice to see these ‘expert commentators’ (they will just make stuff up – see Peter Hartcher claiming that Abbott had ordered the proposed visa crackdown [something you might think the unions would like] in Melbourne) stop imposing their views and actually stick to some facts. But, I guess, letting facts get in the way of an Abbott666 story is just not their style.

And don’t forget the alternative is a trade union-beholden Shorten-led government.  Now that is something to bring on a cold sweat.

My article in this morning’s Herald Sun on the policy measures that bring us sub par living standards.

LAST week saw the completion of the National Reform Summit. This brought together a kaleidoscope of speakers from politics, business, unions and non-government lobby groups.

Participants agreed that we need greater productivity to enable higher living standards. The contention was on how to achieve this. Unions and social groups thought the secret of success lay in higher taxes and increased government spending. Though most business representatives advocated lower taxes to nurture growth, few promoted a radical pruning of government’s size or influence.

Yet, economies have flourished only when governments took a step back. And there has been no example of economic stagnation being reversed by bigger spending and more regulatory government.

Deregulation created the economic miracles of Japan and Germany in the post-1945 period; of Korea, Taiwan, Hong Kong and Singapore from the 1960s; and of China and India during the past 25 years. Meanwhile, once prosperous nations like much of Latin America saw a century of increased government economic interventions bearing the rotten fruit of sluggish increases in living standards. And the increased weight of such interventions has been instrumental in creating the economic mire seen in the western world — especially the EU — in recent years.

Australia has preened itself on its relative success. But our performance has actually been modest.

Australia, over the past quarter of a century, has benefited from being the raw material supply base tied to the booming Chinese economy. Yet, riding on China’s 10 per cent annual growth, we barely averaged 1.5 per cent. With Asian nations’ growth now slowing, Australia can easily experience the stagnation long felt by resource-rich economies in Latin America and Africa.

Recent lacklustre GDP figures and a sliding exchange rate are solid indicators of tougher times ahead.

Yet, not only are Australian governments proceeding as if our enhanced affluence has been impressive, they act as though increased prosperity is inevitable.

Thus, we see policies that divert investment into avenues like wind turbines which replace electricity from coal- based power stations at three times their costs. Governments are also pandering to populist cries with wealth-dampening restraints on business. Only this week, the Queensland Government announced it will stop sand mining. Victorian governments have banned factory fishing and, alongside those in NSW, placed interminable barriers in the way of gas development. And throughout Australia we have accumulated regulatory barriers that obstruct new coal mines, our second most important export.

Such measures also impede agricultural development by preventing irrigation, pasture improvement and land clearing. Those activities, over the centuries, have been indispensable to creating human civilisation, while also creating pleasing rural environments.

And we see accumulations of ill-conceived planning and environmental regulation driving up the cost of homes by creating artificial scarcities of housing blocks.

The prescription for a prosperous economy requires governments to balance budgets, cut spending and retreat from the regulatory state. Amid all the clamour for reform and economic reinvigoration there is, unfortunately, little stomach for moves in these directions by the main political parties.