If Gawd didn’t want him to say the words he’s saying He wouldn’t be blessing him with wealth and great appointments. Catch that Fire!!
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Scott Morrison thinks cutting taxes is ‘economics 101’. As an economist, I beg to differ
Richard Denniss
The prime minister is wrong to pretend that it’s the economy’s loss if high-income earners have less money to spend
At a time when the number of people studying economics is at a record low, the number of politicians citing economics 101 seems to be at a record high. Take our current prime minister, Scott Morrison. When asked to provide evidence that closing tax loopholes and collecting more revenue would weaken the economy, our policy maker in chief declared, “I think it’s just fundamental economics 101”.
Over the past 25 years, I have taught countless courses on introductory economics for undergraduates, postgraduates and even senior bureaucrats, and I confess that not once have I taught the “lesson” that collecting taxes weakens economies. In my defence, I have never read such a statement in any economics textbook I have used.
It gets worse. I have actually taught thousands of students that collecting more tax revenue can increase the efficiency of the economy. But again, I can rely on textbooks in my defence. For while introductory economics textbooks contain no chapters on why taxes apparently weaken economies, they almost always contain a detailed description of why taxes are an efficient instrument for reducing the things we don’t want – everything from cigarettes to pollution from coal-fired power stations.
The main lesson from economics 101 – indeed from the entirety of economics – is actually quite simple. The foundational principle of mainstream economics has nothing to do with money, taxes or even markets. On the contrary, the foundational principle of orthodox economics is the concept of “opportunity cost”, which simply states that every time we consume resources to produce one thing we give up the opportunity to use those resources to produce other things.
While economic debates are typically quite theoretical (which is the academic word for ideological) there is nothing at all theoretical about the current debate on our federal government’s taxing and spending policies. Bill Shorten’s ALP are promising to close tax loopholes, collect tens of billions of dollars in additional revenue and spend tens of billions of dollars more on health, education and infrastructure. Scott Morrison wants to cut the company tax rate, leave all the loopholes as is, and gradually cut spending on services and welfare.
There are clearly opportunity costs associated with both the government’s and the opposition’s plans. There is no doubt that if the ALP succeeds in abolishing cash refunds for so-called spare dividend imputation credits, Australia’s wealthiest retirees will have 5.6 billion less opportunity to spend money on their lifestyle or that of their grandchildren. And there is also no doubt that if the Coalition manages to implement its next round of company tax cuts that future governments will have less opportunity to invest in hospitals, schools and high-speed rail.
Closing tax loopholes and spending more money on health and education will reshape our economy
But for all of the talk about growing the size of our economy there is little discussion about the shape we want our economy, and our society, to take. Do we want our transport systems to look like that of Bangkok or of Berlin? Do we want our public health and education systems to be more like Sweden’s or more like Singapore’s? What direction do we want our nation to take?
There is nothing in economics 101 to help us decide whether we should invest additional resources in the production of more schools, or the production of more shoes. On the contrary, the textbooks are usually quite clear that it is up to us to make such decisions and that there is no right answer. Economists don’t know whether you want lower taxes and poorer quality services or higher taxes and higher quality services, any more than they know whether you prefer to go camping or on a cruise for your holiday.
Economists like myself tend towards the libertarian end of the spectrum precisely because our training instils in us the sense that individuals are usually the best judge of what they want for lunch, what they want to wear and whether they want a bigger retail sector or better quality essential services.
But the libertarian instinct of most economists, and most economics textbooks, in no way leads to the conclusion that taxes are bad. On the contrary, economics 101 makes it clear that collecting more revenue from something that causes harm (like coal) and spending that money on something that causes good (like education) will simultaneously help the economy, help the environment and make people happier. It’s a win-win-win.
Somehow the conservative politicians that tend to lean the heaviest on their alleged skill in “economic management” escape scrutiny as to why they are so determined to ignore the straightforward economic advice that taxing pollution is about the easiest thing a politician can do to improve the wellbeing of their citizens.
Economics is not about money, taxes or GDP, it’s about the consequences of choices. Just as most people accept there is no “right answer” to when it is best for parents to return to work after they have kids, when it is a good time to cease treatment for cancer, or whether camping is more fun than glamping – there is no “right answer” to whether we should spend more, or less, on public services.
Scott Morrison is right to claim that if we close tax loopholes, high-income earners will have less money to spend on the things they like to spend their money on. But he is wrong to pretend that their loss will be the economy’s loss. Just as a carbon tax would reshape our energy system, closing tax loopholes and spending more money on health and education will reshape our economy.
Economics is no better placed to advise citizens on whether they should buy high-quality health and education services or high-priced cars and coffee. But conservative politicians often prefer to conceal their personal preferences for lower taxes behind a cloak of supposed economic necessity. As Margaret Thatcher – the mother of this political strategy – said more than 30 years ago:
What’s irritated me about the whole direction of politics in the last 30 years [she spoke in 1981] is that it’s always been towards the collectivist society. People have forgotten about the personal society. And they say: do I count, do I matter? To which the short answer is, yes. And therefore, it isn’t that I set out on economic policies; it’s that I set out really to change the approach, and changing the economics is the means of changing that approach. If you change the approach, you really are after the heart and soul of the nation. Economics are the method; the object is to change the heart and soul.”
Australia is one of the richest countries in the world. Our GDP is the size of Russia’s and, just like our taxes, our public debt is among the lowest in the developed world. We can choose to cut our taxes further if we want, but if we do so the “opportunity cost” will be the opportunity to provide higher quality services to all Australians. Arguing that cutting taxes is necessary and efficient is a move straight out of Thatcher’s playbook, but support for that choice can’t be found in any economics textbook.
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Denniss might have also mentioned that, while the poor will tend to consume more if their income increases, thereby stimulating the economy, people who already have waaaaay more money than they spend aren’t necessarily going to spend any more or less as a result of moderate limitations to the growth of their surplus. It’s an accumulation fetish.
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Of course he does.
He just treats us like we don’t know the difference, like we don’t realise he’s a bought-and-paid-for lobbyist of the business sector; because he puts on baseball caps and goes to Hillsong.
Go Sharkies.
Thanks man. This and the state result has put my mind at ease a bit.
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I think he’s worse than Tone too. He doesn’t have the same sleaze quality but he’s definitely unhinged in all the wrong ways. You knew what Abbott was about. Morrison is just as ideological with the added bonus of being a grinning sneak.
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Cutting taxes to the people who can most afford to pay them has never made sense to anyone aside from those getting the cuts. Which is not all that many in this case. These guys are simply there as a protection racket for certain wealthy business owners. The fact they’re ignoring calls from various industry bodies to reform things in order to prevent problems shows that. It’s money for mates or masters. Kakistocracy running a plutocracy.
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I’d even argue that most Western “democracies” are starting to hurtle towards oligarchies, well particularly the U.S is most definitely an oligarchy.
As an aside, how is Tim Wilson still an MP?
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Interesting parallels between the police and other security( spy ) agencies.
As we know the likes of MI6 and ASIS participate in espionage, while MI5 and ASIO participate in counter espionage. In the espionage area the classic strategy is to cultivate “agents” from an early age and the easiest method is to “compromise” them, and once on the hook they can be used and used for many years in some cases. All that can be learned by anyone from reading a couple of spy books or watching spy movies. But the nation states in opposition regard this situation as standard operational procedure, and within any given state in peacetime this is a paramilitary operation and no operative nor the organisations themselves are held to account for any breaches of “rights” even when spying on their own citizens.
Change scene to the Victorian Police, who conduct a “war against crime” . We now learn that Lawyer X was compromised while a student in 1993, ( Herald Sun 7/2/2019 ) was recruited by the equivalent of an ASIS like control cell within the Victorian Police and used to “spy” on the enemy over about 12-15 years.
So certain elements are very similar. There is an undeclared “war” against crime, ( because it can destroy our otherwise orderly society) and most of the actors are citizens. Yet the police are severely criticised for running such an operation. The “spies” inside the legal profession are criticised for acting unethically.
Essentially the difficulty is that a different set of “ethics” apply to defence against foreign enemies intent on disrupting/destroying a society compared with the ethics applying to defence against internal enemies intent on disrupting/destroying a society.
However, in parallel with the war against crime there is now a war against terrorism, mostly involving citizens and it is being treated in a very similar manner to the use of spying against enemy nation states, even using ASIO to “spy” on citizens of our country and recruiting agents within groups where terrorists often originate.
Can anyone give me a reason why the war against crime should be different to the war against terrorism or the war against enemy nation states, all of which are undeclared most of the time?
Perhaps the only problem with the Victorian Police use of spies in the legal profession is that it needed to be kept secret, and possibly the enabling legislation precludes secrecy but allows it in the case of terrorism .
Just wow.
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Too many words for you Boot?
Really?
I won’t dignify that with a meaningful reply.
Seriously, we don’t all have time to read long posts , or write them. Particularly on mobile phiones It just happens that it interests me , its a complex issue and I have a laptop.
I would suggest that if you’re going to tear apart the ‘understanding’ for one side, then you should expect the other side to do the same.
Is this not more an AFP kind of black op? Do you really want to give vanilla police, often undereducated, aggressive, young and dumb people, such extraordinary discretion? Much respect for the good people in the force, but it’s a mixed bag at best. I don’t even know what this is about, it’s Blitz off season and I’m going troppo in the incessant rain of shizen
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Surely the police running the spies like Lawyer X are at the top level of the police force , probably have law degrees and maybe even ex AFP or similar security organisations. If, as you suggest they are inexperienced junior policemen, they ought not to be in charge of such operations.
Agent 64, do you not think that people who hire a lawyer have a right to expect that said lawyer should not have a conflict of interest?
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Well you’d hope this Stasi kind of operation which manipulated a law student (how old? What kind of price for what kind of transgression?) would be run by the older heads. The ones who’ve gone Jim Gordon and possibly Batman with their grievances.
It is interesting and quite a revelation. I’m mid impulse reply so I can’t track back to your post but who was it sanctioned by and how?
In todays Sun, it states that Lawyer X was a law student in 1993, when a police raid on his/her flat ( or flat he/she shared presumably) uncovered drugs and weapons. we are talking large qtys of Meth. and Cannabis. LawyerX was released without charge, and a short time later co-opted to become a registered police informer.
This is a classic recruitment of a compromised person with a potential career path in a legal or government profession. Straight out of a Le Carre novel.
Wow indeed. It’s fraught, no doubt. Goes to the definition of ‘terrorism’.