I am travelling most of today with heavy commitments at the other end so only a short blog today with some great music to calm the soul. Yesterday, a group of high-profile, so-called progressives in Australia placed a paid-for advertisement in the leading daily newspapers as part of a new campaign for the government to increase taxes to get back into surplus so that (as their narrative goes) it can afford to maintain services for the needy. Yes, it was not the Right voices in our debate articulating this. The campaign is being led by a group that is often referred to as ‘left-leaning’ and calls itself the “most influential progressive think tank” in Australia. Modesty doesn’t exist it seems. But these sorts of descriptors are when the English language loses all meaning. The advertisement and subsequent follow-up interviews in the media yesterday by signatories and supporters of the “Letter” articulate a pure neoliberal line of deception about fiscal positions, the role of taxes and the virtuousness of fiscal surpluses. From my assessment, this headline-grabbing display of stupidity will set back the progressive debate in Australia even further. A total disgrace.
A sad day for progressive debate in Australia
I don’t want to write much on this. I personally know many of the signatories to the Open Letter that was included as a full-paid advertisement in the major Australian newspapers yesterday (April 17, 2018).
Some of the signatories are leading members of the Society of Heterodox Economists (SHE) in Australia.
Others are from the Political Economy program at Sydney University.
Others are from leading social policy agencies.
Some have previously held high political office under Labor governments.
Others are from a think tank, which the press calls “left-leaning”, and, which it bestows upon itself the (inflated) title of being Australia’s “most influential progressive think tank” and claims its work it to “inform public debate and bring greater accountability to the democratic process”.
Those sort of descriptors are when the English language loses all meaning.
I heard interviews on the radio from some of the signatories yesterday who would claim to be leading progressive voices in the economics debate here.
They basically laid out a neoliberal narrative as pure as you would find dressed up as a concern for equity and fairness.
Here is the original – Full-page advertisement – with all the signatories.
The text of the Open Letter read:
To Prime Minister Malcolm Turnbull
Data from the OECD, IMF and World Bank make clear that Australia is a low taxing country. To have world class health, education and transport services we need to collect the revenue to fund them.
A debate about tax reform should begin with the question of how much tax is required to fund the services we need to build a fair and decent society in Australia.
And real tax reform also requires fairness. A serious tax reform package designed to be ‘fair’ should address as a priority the current generous tax concessions to the top end of town, the inequitable distribution of superannuation tax concessions and the capital gains tax discount, not how to give big business large company tax cuts at the expense of services that everyday Australians rely on. Cutting programs which support needy Australians to give more tax benefits to companies or large income tax cuts to the wealthiest is not fair.
The OECD says inequality harms growth. While inequality will always be in the community, what matters is its extent, its direction, and its causes. What’s more, increasing inequality hurts the economy and divides the community.
The pursuit of equity and fairness must lie at the heart of our national goals. Fortunately, not only is the pursuit of equity broadly supported by the community, it is good for our economy as a whole. Collecting more tax, more equitably, will make Australia a better place to live and work.
We urge the Prime Minister and all political leaders not to cut taxes at this time — and certainly not for companies.
The wording is framed in the constructs and language of neoliberalism.
For example, “required to fund the services” – in other words, conveying the message that it is necessary to tax the higher income groups more to provide essential government services to the disadvantaged and those missing out.
The so-called progressiveness is based on their opposition to the current government policy to extend tax cuts to corporations, which they claim will necessitate “Cutting programs which support needy Australians”.
That is only inevitable if the sort of arguments that this lot choose to perpetuate and give authority to are not challenged and debunked.
The assertion that “collecting more tax … will make Australia a better place to live and work” is an absurd claim as it stands.
It is clearly a progressive concern to ensure that equity is advanced. I am the Director of a research centre called the Centre of Full Employment and Equity. So it is central to my own work that we have fairness in the way in which the government and non-government sectors interact.
But it is ridiculous for a progressive to conflate that concern with the standard neoliberal macroeconomic propositions that the Australian government can run out of money and cannot ensure fairness and service delivery to the ‘needy’ unless it taxes the rich more.
To see how bad this is as a public intervention, the Open Letter was “backed” by a former Cabinet secretary Michael Keating who expanded on the campaign in this interview with the ABC (April 17, 2018) – Open letter urges Prime Minister to collect ‘more tax, more equitably’ to make Australia a fairer place.
The ABC as a major neoliberal media machine these days chose not to scrutinise any of the macroeconomic propositions put forward in the Letter – it thus became just another media mouthpiece.
I note that since the appointment of the new CEO to the ABC by the conservative government the number of interviews I do has dropped to close to zero. I was often interviewed on economic matters. But that voice is not wanted as it fine-tunes its neoliberal message.
Anyway, Michael Keating told the ABC that:
… by raising taxes we could avoid crisis levels of deficit and pay for the services “that everyday Australians rely on”.
The ABC reported that the so-called leading progressive think tank (Australia Institute):
… warns if we do not improve the nation’s tax take, future governments will not be able to fund the services and infrastructure that the country needs.
And Keating claims that the current “federal budget is … a ‘structural deficit’, meaning the Government is spending beyond its means”.
This is the well-known deficit dove (which is just neoliberal in another guise) claim that there should be a structural balance with cyclical swings around it possible.
That doesn’t even stack up.
If the private domestic sector wants to save overall and there is an external deficit (both conditions holding in Australia at present), then there has to be a fiscal deficit at full employment – that is, there has to be a structural deficit, or else the economy will fall into recession.
But seemingly blithe to that reality, Keating still demands the government return to surplus.
Think about this:
1. Australia’s real GDP growth rate is around 2.2 to 2.3 per cent per annum whereas the previous trend (prior to the GFC) was close to 3.2 per cent.
2. Australia’s broad labour underutilisation rate is close to 15 per cent (probably a bit higher given depressed participation rates).
3. Youth labour underutilisation is reaching chronic proportions with the NEET rate rising.
4. Real wages are flat to falling.
5. Inflation is subdued and below the central bank target.
6. Households are carrying record levels of debt and the current saving rate is half of what it was before the credit binge.
7. Australia has had an external deficit of around 4 per cent of GDP since the mid-1970s, with no change in sight, largely because we rely on imported capital for business investment.
Then ask whether the Australian government should be cutting its deficit.
If we followed Keating’s advice and the strategy outlined by these so-called progressives in the Open Letter to the Prime Minister, Australia would be in recession or growth would only be maintained by increasing private domestic sector indebtedness. That is what an understanding of the sectoral balances indicates.
Sure, the external deficit would shrink a little because the resulting recession would crimp imports with the commensurate loss of living standards and productivity growth.
But trying to run a fiscal surplus when the nation is in this sort of shape is a recipe for disaster.
Only fools advocate surpluses in these conditions.
Keating also invoked the intergenerational claim (grandkids being burdened, government deficits rising) and all that nonsense but failed to point out that by suppressing economic activity now via the pursuit of surpluses we also undermine the future (lower productivity, wasted labour, lack of work experience, etc).
It might be reasonable to change the tax mix if you want groups that currently have higher disposable income to have less and so on.
It is certainly a progressive strategy to redistribute purchasing power to those with less and away from those with more. But it is not sensible to do that while at the same time reducing aggregate demand via increasing taxes.
Claiming that raising taxes overall – and thus cutting the fiscal deficit – is a responsible strategy is plainly false.
It was a really shocking day (yesterday) for the advancement of progressive ideas in Australia.
The Right must be sitting back, relaxing, laughing their heads off. They know the government won’t increase taxes along the lines that these high profile Australian progressives are demanding.
And they also know that these so-called progressives are just reinforcing and advancing the right-wing neoliberal narratives about fiscal austerity and the dangers of deficits etc.
Here we have a situation where the so-called Left (once again) are perpetuating the very things they should be rejecting.
Music for the plane trip …
I first saw Taj Mahal in the early 1970s when I was first at university. He is such a skilled performer and I recently saw a concert with him. So durable to.
This is one of my favourite songs and his version is from his 1993 album – Dancing the Blues.
This classic R&B track was written by the American songwriter Roosevelt Jamison who was made famous by the song, largely because in 1965 Otis Redding covered it.
Then, in the same year, it was released on the brilliant Rolling Stones album Out of Our Heads.
Here is my favourite version by The Rolling Stones.
Recorded May 10 & 11, 1965.
The piano parts were played by Ian Stewart (who was really the sixth Stone).
All calming after the opening salvo above.
That is enough for today!
(c) Copyright 2018 William Mitchell. All Rights Reserved.