A Budget that reduces growth and increases joblessness – for no sound reason

Posted on Wednesday, May 15, 2013 by bill

Last night, the Federal Government brought down the – 2013-14 Budget – claiming it was a responsible response to the circumstances it faced (declining world growth, declining terms of trade and persistently high exchange rate) and that it emphasised growth and jobs. Neither claim is remotely correct. It is a pro-cyclical budget – that is, a contractionary budget that builds on the contractionary fiscal shift in 2012-13, which by its own arithmetic reduces growth and causes the unemployment rate to rise. It will damage employment growth and increase poverty rates. It reflects a failure to acknowledge the state of the economy (4 per cent output gap) and to implement the correct counter-cyclical fiscal response (a significant rise in the projected budget deficit). It might have some education and disability spending in it. But even in those areas the spending is inadequate and, in the case of education, based on a neo-liberal view that the federal government should be funding the private schools, which, in general, educate the children from wealthy and high-income families. Overall, a destructive fiscal plan given the state of the economy.
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Posted in Economics, Fantasy Budget | 14 Comments

Serial liars who stand for nothing that is worth supporting

Posted on Tuesday, May 14, 2013 by bill

Tonight is the Federal Budget night. Tomorrow’s blog analysis could be as long as “its appalling”. We already know that. So I might take a day off and leave it at that. Some of the policy changes announced already are certainly appalling. Regular readers will know I have been keeping tabs on the way the Federal unemployment benefit in Australia has failed to keep pace with the poverty line and the Government has refused to do anything about it. At present, the single unemployment benefit stands at $35.50 a day which is well the single unemployed poverty line of $A64.10 per day. For married couples the unemployment benefit is currently at $56.47 per day, while the corresponding poverty line is set at $79.99 per day. While the Government has been under intense pressure from a number of different sources (including the typical welfare lobby groups, the OECD (not typical) and even right-wing columnists (definitely not typical) to address this disgrace. It has resisted any rise in the benefit and continually claims it is about jobs not welfare and is in the process of creating work. Not much action seems to happen on that front. Tonight’s budget will announce their latest offering in this regard. They are going to allow the unemployed to earn an extra $A19 per week before their benefits is cut. It claims it cannot afford any more because it has run out of money and needs to get back to surplus as soon as possible. The reality is that it can never run out of money, it needs to triple the current budget deficit to address the growing output gap, and is once again failing the most disadvantaged Australians that it professes it care about. The Government is also comprised of serial liars who will be decimated in the upcoming Federal election because their political support base has shrunk so much because they stand for nothing that is worth supporting.
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Posted in Labour Force, Politics, Unemployment Benefits | 12 Comments

Neo-liberalism – the antithesis to democracy

Posted on Monday, May 13, 2013 by bill

I recall a professor in my student days (formal that is, given we are always students if we remain open) telling a postgraduate class that economic development could only occur if the social democratic pretensions of the left, including tolerance of trade unions, were suppressed – “in the interests of progress”. He laughed and said that it was no surprise that the most right-wing nations grew the fastest. His poster child was South Korea. I recalled that experience when I read two articles recently in the UK Guardian. They are reflections on how neo-liberalism is really the antithesis to democratic ideals. The so-called free markets have nothing to do with freedom or political inclusion.
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Posted in Eurozone, IMF, UK Economy | 9 Comments

Saturday Quiz – May 11, 2013 – answers and discussion

Posted on Sunday, May 12, 2013 by bill

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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Posted in Saturday quiz | 7 Comments

Saturday Quiz – May 11, 2013

Posted on Saturday, May 11, 2013 by bill

Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
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Posted in Saturday quiz | 1 Comment

Buffer stocks and price stability – Part 2

Posted on Friday, May 10, 2013 by bill

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
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Posted in MMT Textbook | 13 Comments

Australian labour market – fluctuating around a weak trend

Posted on Thursday, May 9, 2013 by bill

Today’s release by the Australian Bureau of Statistics (ABS) of the – Labour Force data – for April 2013 shows reasonably strong employment growth. The data looks good – employment up, full-time employment up, participation up, monthly hours worked up. But the message you need to get is that the data is very volatile at present and hard to interpret. We have to go to the underlying trends to get a better impression. The fluctuating monthly fortunes are over what remains a fairly weak labour market. It is not collapsing but it is not growing strongly enough to really bring down the substantial stock of underutilised labour.
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Posted in Labour Force | 9 Comments

The glorious gouging of the public purse

Posted on Wednesday, May 8, 2013 by bill

It is budget time in Australia this month. The federal government will release their Budget next Tuesday and the State and Territory governments all put them out around the same time. Yesterday, it was the turn of one of our larger states Victoria. I will come to that in a moment. The mania intensifies around May and every day and night on TV, radio and in the printed media there is a constant commentariat and an almost uniform message, which was summarised by one so-called expert last night – “the Budget is broken”. I remember this chap in the 1980s as a junior Treasury official aspiring to be important. I wondered about the analogy. There are lots of “black holes” (buckets) and “drunken sailors” (big spending) but “broken”. I guess the only thing is that broken is bad – using broken as an adjective. All the commentary is about how bad the deficit is given the terms of trade are slowing and undermining tax revenue. While the deficit is way to low, it is good that we have one. It is good that America and Japan and the UK have deficits. There is at least some net spending flowing each day to support the economy. Anyway, time to look into the glorious gouging of the public purse that only the neo-liberals can make look as though it is financial responsibility at its best.
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Posted in Economics | 5 Comments

Lower deficits now, undermine our grandchildren’s future

Posted on Tuesday, May 7, 2013 by bill

It been quite a few weeks for the prophets of doom. R&R revealed they can’t handle a simple spreadsheet competently, and then try to claim a positive number is really a negative number. And who said they said there was a threshold of debt anyway? They now deny there is a threshold. History tells us this is a new denial. Then their Harvard colleague, the so-called historian throws himself off a cliff – again – with his remarks about JMK. Again? Joe Weisenthal has – Ferguson’s Horrible Track Record on display. He reports that Ferguson has “self-immolated a number of times trying to fight an ant-Keynesian battle”. What is it about Harvard? Has there been an internal inquiry set up to consider whether R&R committed academic fraud or were just incompetent? Why do they still continue to employ Ferguson after his homophobic remarks? It is not as if he displays any acumen when it comes to economic commentary. How much does he receive in appearance fees for telling all and sundry what is not going to happen, even though he says it will? I guess as an historian, Ferguson might know one thing. Fools have a habit of reappearing and repeating the nonsense that prior fools claimed was the truth.
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Posted in Economics, US economy | 3 Comments

The Fantasy Budget 2013-14

Posted on Monday, May 6, 2013 by bill

This is my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. This blog is relatively short and more or less within the constraints I was given with respect to words. I have added a section on the sectoral balances for clarity and some more detail about cuts.
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Posted in Fantasy Budget | 18 Comments