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Intergenerational Report – the past is catching up with the government and the game is up

It’s Wednesday, and I have been filming most of the day some of the material that will appear in the next set of course material offered by – MMTed. We hope to offer some new courses later in September. But progress is slow (see below). Today, I provide some brief comments on my response to the Federal government’s latest – 2021 Intergenerational Report – which is one of the ridiculous, smokescreen-creating exercises that allow the government to avoid political responsibility for its fiscal surplus obsession. They come out every five years and are usually jam-packed with scaremongering about unsustainable fiscal deficits and the need for spending cuts. The only difference this time is that the damage caused by the years of following the austerity path – to health care, to aged care, to skills development, etc, have changed our attitudes. We have also seen that the government can spend what it likes without taxes going up and without bond markets declaring the government insolvent. We have now lived with large deficits as a result of the pandemic and the game is up on the deficits are bad and the sky will crash down story line. Our changing view on what we now demand from the Government is reflected in this latest effort.

The latest nonsense from the Australian government

Last week (June 28, 2021), the Australian Treasury published its – 2021 Intergenerational Report.

If you thought that burger flipping jobs were low-skill, sh@# jobs, then the activities that go into preparing this five-yearly piece of nonsense has nothing on them.

Highly educated people spent hours preparing these reports over a five-year period and end up producing nothing of value to anyone other than the neoliberal governments of both political persuasions (which tells you a lot) that oversee them.

In fact, the introduction of this cycle of madness was designed to deflect the damage that the government surpluses were creating in the mid-1990s, when the Conservative government took office and accelerated the austerity that the Labor Party (yes, them again) had initiated from the mid-1990s.

After 25 years of these things, almost everyone must be able to see that the radical projections that were made about fiscal positions becoming unsustainable, about debt insolvency, about higher tax burdens, and all the rest of the scaremongering.

Not one prediction or modelling projections has been accurate.

It must be embarrassing for Treasury workers to be coerced by their bosses into producing this garbage and to be so far out each 5-year Report.

The mistakes are systematic – they are always wrong – because the underlying framework that assumes the government will run out of money as we all get older and require pensions and health care.

My previous reviews of past Reports can be found in these blog posts:

1. Friday lay day – more Intergenerational Report nonsense (March 6, 2015).

2. Australia – the Fourth Intergenerational Myth Report (March 5, 2015).

3. Ageing, Social Security, and the Intergenerational Debate – Part 1 (September 11, 2013).

4. Lower deficits now, undermine our grandchildren’s future (May 7, 2013).

5. When 50 per cent youth unemployment is (apparently) protecting the grand kids (June 18, 2012).

6. 66,592 children relieved of debt burdens by their parents (April 11, 2011).

7. Our children never hand real output back in time (December 13, 2010).

8. Another intergenerational report – another waste of time (February 2, 2010).

9. The myths of the ageing society debate (August 21, 2009).

10. The rising future burden on our kids (August 2, 2009).

11. Democracy, accountability and more intergenerational nonsense (May 22, 2009).

There has been a host of other posts related to the topic or developing principles that allow the reader to see through the logic used to justify the neoliberal approach adopted in these Reports.

Those blogs countenance all of the arguments that are put forth in these tawdry political exercises designed to convince the public that they should lower standards of public services and higher unemployment because it is good for their grandchildren.

These intergenerational reports are really a confection of lies, half-truths interspersed with irrelevancies and sometimes some interesting facts.

There is very little economics in these reports.

The routine is this:

1. Invent some assumptions about the next 40 years.

2. Produce some scary graphs and if the first effort doesn’t produce scary enough graphs change the assumptions until you get them scary enough.

3. Convince the public that a few lines going off the top of a graph is actually scary and will undermine their future.

4. Ring your mates in the business and financial sectors and assure them that all corporate welfare will be maintained if not increased.

5. Cut the rest of public spending, deliberately increase unemployment and harass those on income support all in the name of those lines going off the top of the page.

Both major political parties have done this.

What parades as economic analysis is just the usual neo-liberal mainstream nonsense that currency-issuing governments have run out of money and fiscal deficits are dangerous.

The Treasurer, typically goes out in the media selling the Report on the grounds of “intergenerational theft” (the classic anti-fiscal deficit argument about mortgaging our future grand children’s future).

They create a smokescreen that allows the government to justify pursuing austerity biased fiscal policy – the surplus obsession – under the guise of saving our future generations from massive and crippling debt burdens.

Of course, the real intergenerational theft though is embodied in fiscal strategies that deliberately undermine the employment prospects for our young people, create precarious gig economy jobs and claim them to be ‘flexible’, and hacks into public infrastructure and public service provision as a strategy to create fiscal surpluses now.

That is a sure fire way to undermine future prosperity for everyone.

The latest Report not only shows how stupid and irrelevant the previous ones were, for reasons I will explain, but adds a new dimension of comedy to this tragic waste of resources.

First, the latest Report projects fiscal deficits for every year (40 of them) until 2060-61.

You read it.

The ‘immediacy-of-surpluses’ narrative is gone.

The Report blames excessive government spending which is apparently going to double over the projected period.

That is one of many (most) assumptions that will be proven false.

Apparently, health care and aged care spending will go through the roof.

I hope it increases that is for sure, given the parlous state of that area of need at present.

But this suits the narrative doesn’t it?

Forces outside the control of the government are forcing it to spend more and so we will have to cut elsewhere.

But when I read the Report (as quickly as I could to avoid ruining my last weekend), I actually couldn’t find this ageing population effect in the assumed spending increase.

Less than half of the projected spending increase is due to the ageing effect proposed.

One reason is that we are demanding better public aged care. There has been a Royal Commission into this sector recently and the revelations were shocking.

The abuse of our senior citizens in private and federal-government run aged care homes was terrible.

All the privatised and cut-price aged care strategies that the government deployed as part of its surplus obsession are now coming home to roost.

We want ‘nappies’ on our old folk changed when they are needed to be changed not when a depleted workforce can find the time and motivation to do it – for example.

The other reason projected public spending is to rise is because we will be requiring governments to improve their health care for all including providing better technologies and prescription medicine under the Pharmaceutical subsidy thing, where the government subsidises the outrageous profit gouging from drug companies to make sure the citizens get cheap drugs.

As part of our national health system, the government is forced (politically) to make the latest and the greatest available to us at reasonable prices.

They lose votes quickly if they don’t.

Second, even though deficits are projected for the entire 40 year period, the actual growth in public spending in real terms is well below past decade averages.

Third, the tax cuts for the rich strategy that successive governments have deployed has reduced the income tax base. While the revenue is not required to fund the spending, the projected shortfall in revenue helps explain the on-going deficits projected rather than some out-of-control spending binge.

The only actual thing that mattered about the Report was the population projections which indicated that by 2061 the dependency ratio will have risen quite substantially – 2.7 workers for each person over 65, rather than 6.6 in 1980.

So what is the problem?

The real problem is one of productivity.

Those 2.7 workers will have to produce more per hour than those 6.6 had to in 1980.

The fiscal strategy then should be to ensure there is sufficient funding in the areas that boost productivity.

The problem is these are the areas that the government has been decimating with funding cuts – research, skill development, higher education, school-to-work transitions, etc.

By trying to ‘save’ money now, they cut the very things that will ensure we maintain material living standards as the dependency ratio rises.

Of course, the climate issue will also require we pare back our material aspirations anyway.

So the productivity challenge is less daunting.

In that sense, the government should be funding more activity in the arts sector, which typically is greener than other sectors.

Of course, it has been cutting support to that sector and excluded more than a million workers in that sector from the wage subsidy scheme during the early days of the pandemic.

I will write more about the assumptions underlying these demographic projections.

They don’t add up and continue the history of these Reports that predict disaster only to see the forecasts revealed as being substantially wrong.

Finally, the greatest challenge facing humanity once the pandemic is ‘solved’ is the climate issue.

This will require a massive redeployment of productive resources over the next decade or more and a much larger role for the public sector.

What has the Report to say about that?

Nothing.

The Chapter entitled ‘Environment’ doesn’t try to estimate the necessary fiscal outlays required to make the transition to a low carbon economy possible.

On a positive note, I will be appearing on the ABC program – The Economists – in a couple of weeks and talking about these issues, the Job Guarantee, and how low the unemployment can go.

I will update details when they become apparent.

Next MMT event – MMT and the Media: Taking Charge of the Narrative

Tomorrow night (July 8, 2021), I will be part of a discussion hosted by Modern Money Australia entitled – MMT and the media: Taking charge of the narrative.

I will be appearing with popular actor, comedian and writer Luke McGregor, who promised to let me be the comedian and he the MMT expert.

We should have some fun.

The event has sold out but the organisers have indicated that anyone can catch the live YouTube stream from 19:00 Australian Eastern Standard Time at this link – https://youtu.be/uiDZR3mrHe4

The event will run for an hour until 20:00.

MMTed Update

As I noted in the Introduction, we are in the process of developing more course material, which we hope will be offered by September 2021.

The process is very time consuming and we are operating in an environment of extreme funding scarcity.

But things are moving along.

I can also note that I am in discussions at present with some other interested parties about the possible development of a new liberal-arts venture that would include MMTed but also offer much broader options in humanities and social sciences.

The Australian government is issuing new guidelines for higher education, which some might cynically (and accurately) suggest is to make it easier for their mates in the conservative evangelical christian movements to create religious higher ed institutions.

But never let an opportunity go to waste eh!

The guidelines that suit that opening also can allow other parties to enter the higher ed sector more easily.

Like a progressive, liberal arts college.

Stay tuned.

MMTed still needs significant sponsors to ensure that we can run the educational program with negligible fees and to ensure it is sustainable over time.

If you are able to help on an ongoing basis that would be great. But we will also appreciate of once-off and small donations as your circumstances permit.

You can contribute donations in one of two ways:

1. Direct to MMTed’s Bank Account – this is the preferred method because it avoids Paypal fees.

Please write to me to request account details.

2. Via PayPal – the PayPal donation button is available via the – MMTed Home Page – or via the – Donation button – on the right-hand menu of this page (below the calendar).

Please help if you can.

We really appreciate the support we have gained so far.

Music – I dug this out today

This is what I have been listening to while working this morning.

I seem to forget the great albums that I have acquired over the years.

So I have to go digging and I then get a really pleasant surprise when I find some gem or another in the stack.

This is an album that I bought in 1970 at the import shop in Bourke Street, Melbourne.

The album – First Take – was the first record released by – Roberta Flack – and this track features the magnificent bass playing by – Ron Carter.

Also playing are:

1. John ‘Bucky’ Pizzarelli (guitar)

2. Ray Lucas (drums).

This song – Compared to What – marked Roberta Flack’s early days as a protest singer rather than the slicker singer she became as her days with Atlantic records unfolded.

It was written by – Gene McDaniels – as a protest against the Vietnam War and LBJ.

A wonderful piece of music.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

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    This Post Has 9 Comments
    1. This from the UK Office of Budget Responsibility (what a stupid title) – someone just posted as comment on FB:
      “Our final scenario explores the extreme case of a loss of investor confidence in the UK’s creditworthiness that causes a flight from UK government bonds. This leads to a vicious circle where rising debt raises borrowing costs, which in turn increase the rate at which debt rises. In this scenario, an adverse shock, similar in magnitude to that experienced in the financial crisis, and a loss of investor confidence lead to a sterling depreciation and a rise in the risk premium on gilts. Higher inflation and the falling pound also force the Bank of England to raise Bank Rate to 4 per cent. The higher borrowing costs mean that growth remains weak. The escalating crisis also forces the Government to borrow at shorter maturities so that higher market rates feed through into debt interest costs even more quickly.”
      We’re all doomed, I say.

    2. Arguing with neoliberal economists is like a game of intellectual whack-a-mole, if it’s not inflation it’s we’re running out of money if it’s not that it’s the bond vigilantes, if not we’re back to inflation, rinse and repeat.

      Great news about the liberal arts venue, all the best with it!

    3. The OBR quotes comes from their “Fiscal Risks Report – July 2021”.

      https://obr.uk/frr/fiscal-risks-report-july-2021/

      “This year we cover three large, and potentially catastrophic risks, in depth:

      – The economic and fiscal impact of the coronavirus pandemic over the past year and its potential medium- and long-term legacy for the public finances.

      – The risks to the public finances presented by climate change including a range of scenarios illustrating the fiscal impact of different ways to get to net zero by 2050.

      – The risks posed by changes in the cost of debt and the sensitivity of the public finances to global interest rates, inflation and an extreme case of a loss of investor confidence.”

      You’d think it would be a comedy, but it falls squarely into tragedy.

    4. Mortgaging our children’s future.

      What on earth do they think student loans are? I have just deferred an offer to start Political Economy at USYD, for full fees thanks very much after recent cuts to social sciences. University fees are the ultimate neo-liberal lie. We’ve moved far beyond mere exploitation of labour. Now they make us pay, in advance, for the value that we might create in the future! And they wonder why productivity growth is declining?

      I am definitely not doing this so I can work in a bank, yet all the University business and economics schools are selling careers in banking (as if it justifies the fees). It’s privatisation by stealth, and it is having perverse outcomes on education and the whole discipline of economics. Could this be why I heard Alan Kohler whinging on ABC news the other night that nobody wants to study economics any more? Maybe, hopefully, the kiddies just aren’t that interested in being bankers these days.

      However you look at it, cuts to education, creeping privatisation and financialisation, and University fees are a massive drag on future productivity. Not only will some some people be deterred from study altogether, never reaching their full productive potential, those who do study will have already sold their future production to student debt.

      All of this doesn’t even begin to account for the innovation that doesn’t happen because everyone is focusing on money instead of ideas.

      I’m pretty sure this is why stupid conspiracy theories are so popular, because looking too deeply into this reality is disgusting. And I’m going to pay to look into it deeply! Aargh!

    5. The obvious and effective strategy of the elite neoliberal PTB is to appeal to the non-elite “haves,” who are not gorging on the economic pie but do have a viable piece of it. Relentlessly, the PTB cause these “haves” to believe that giving more than a small bit of crust to the “have-nots” will greatly reduce or take away the piece they have. What scares the PTB about MMT is that it shows that the economic pie can be more equitably shared, because we are continually baking new ones. I’m sure that others can come up with better images or metaphors, but we need to convey the fundamental MMT message to the masses in simple, ordinary terms which can be quickly and easily understood. As for the devil being in the details, thank God we have people like Bill.

    6. “And the dog didn’t bark!” A line borrowed from Sir Arthur Conan Doyle’s Sherlock Holmes novel Silver Blaze, by economist Michael Hudson to help paint the picture of the type of problem we see here.
      Bipartisan cooperation in long term planning is probably essential in western democracies; however, the fact that not one government economist ,and few MP’s ever seem to sound an alarm when past plans haven’t delivered the expected result to the present, and are then reapplied with little change, is disturbing.
      Repeating the same ineffective action over and over again in hopes that it might work if you just keep doing it, is a symptom of insanity. Why keep banging your head through the wall when you can just take two steps to the left and then proceed through a door?

    7. @Bradley, my oldest grandson is in 4th year chemistry (UK). He flunked this year owing to depression from losing his dad last year and horrendous 4 years of family break-up. His accommodation in Brighton costs nearly £2k a term. He will leave with over £100k of student debt. I am so angry for him. I did econ as a mature student – no fees + generous maintenance grant (the only reason I did degree).

    8. @ruru: I don’t think the neoliberal paradigm is yet being seriously challenged as the neoliberals have megaphones that regularly reinforce the debt and inter generational unsustainability claims. I cannot make up my mind whether some genuinely believe what they say or have a vested interest in telling lies.

      Maybe some from column A and some from column B.

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