Direct job creation is in the air. Yesterday, the Federal government announced its Jobs Fund yesterday which will allocate (sorry: a measly) $650 million to “support and create jobs and improve skills, by funding projects that build community infrastructure and create social capital in local communities.” However, I estimate a maximum of 40,000 jobs will be supported by this initiative. Put together the $42 billion and the $650 million, and you have a maximum of 140,000 jobs being protected if all the modelling is correct. Not a good dividend from the scale of public outlays. But … at least direct job creation is now on the table … finally. Now to scale it up to an appropriate level!
I was asked by a journalist today to comment on employment trends in the public sector. I was also thinking about the statement made at the G20 meeting which has been reiterated by our Prime Minister – we will do whatever is necessary! Well what is necessary is a massive upscaling of public sector employment. The best place to start would be to offer employment at the minimum wage to anyone who wants a job and cannot find one. However, this week’s news about the revamped job-seeking program, Job Services Australia which appears to be the Australian government’s centrepiece employment strategy tells me that our Government, at least, is lying about being prepared to do what is necessary.
I received a call from a journalist at the Financial Review today asking how the Federal government could afford to run labour market programs given that it might suffer a substantial revenue loss if it cuts back net migration. I told him that irrespective of what happens to net migration and any losses to tax revenue that that might bring (should they cut it back), the Government will always be able to fund any labour market program if it thought that was the best use of its funds. It brings to mind a new theme in this period of turmoil – how can the government keep its programs going while at the same time bailing out all and sundry? Answer: easy, just keep funding them. The national government is not financially constrained and the size of its budget is nothing that can be determined independent of the shortfall of aggregate demand.
The US Government has come up with its latest plan to solve the financial crisis which has now well and truly become a real (GDP and employment) crisis. While the initial reaction from the financial markets is generally favourable (and why wouldn’t it be), if you appraise it from the perspective of modern monetary theory and impose an equity bias then you conclude: (a) it will represent a major redistribution of nominal wealth to the already wealthy; and (b) it probably won’t help reduce unemployment because it is not tackling the real problem.
The US President appeared on the US commercial television show 60 minutes program on March 22. He was talking about about the AIG debacle, the economy, and his first challenges in his new job. His responses to questions about the economy though were positively scary. The most powerful man in the World and he doesn’t understand how the modern monetary economy works. Very scary indeed.
A document was leaked from the Australian Bureau of Statistics which showed it is planning to sack around 200 staff to pursue efficiency dividends to allow a pay rise to occur. I was interviewed by ABC economics commentator Stephen Long as part of a segment he put together on the national ABC current affairs show PM tonight which examined this issue.
I read a headline in the Australian newspaper yesterday (March 19) – Nation building funding crisis as private sector fails to find cash. What? Nation building requires significant budget deficits. When was it dependent on the private sector having to trump up cash? I soon recalled that we have been living in the Public Private Partnership (PPP) era where governments have relinquished their responsibilities to build essential public infrastructure that not only supports a sense of public good but also underpins the prosperity of the private market economy. Its that time again. Time to debrief.
Two stories today make you wonder about the direction of our Australian government. The first relates to the changes to the industrial laws that the Greens finally were able to push through the Senate last night and the second relates to the threat of mass censorship using lists that are seemingly highly flawed.
Put People First group are running a grass roots campaign for all of us to send a message to the G20 about their priorities. The campaign symbol is the megaphone logo appearing below. Their campaign will culminate in a march in central London on March 28, 2009 to push a case for jobs, justice and climate. I am not associated with this group but I share their priorities, even if I might see them in different terms. Anyway, this is the first of my messages to the G20. In summary: they need to learn how the economy actually operates and then they would use their fiscal policy capacity to ensure everyone has a job in a sustainable economy.
Many readers have asked me to explain why social security and pension schemes run by national governments can never become insolvent. Some have heard me commenting on the radio recently about this. In the current recession, where automatic stabilisers are pushing the budget back into deficit to dampen the fall in aggregate demand there are now renewed cries that social security funds around the World are likely to become insolvent. There are the familiar howls that all the “debt” that is being built up as governments go into deficits (mostly because they have been dragged into them by the cycle) will require huge future tax burdens that will undermine the capacity of governments to deliver adequate social security and health care systems. I think its time to de-brief again. The short answer to these claims is: sovereign governments can always fund social security in their own currency. Always, always, and even always.