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The cost of government debt is falling – thanks to quantitative easing. So why is everyone obsessed with repaying it?

Published by Anonymous (not verified) on Thu, 26/11/2020 - 6:24pm in

Forgive me if I appear absorbed by my concern with government debt when commenting on yesterday's Spending Review, but given that debt management is the predominant Tory economic narrative that dictates all other policy it seems appropriate to concentrate on it in the first instance.

This chart comes for the Office for Budget Responsibility review of the Budget proposals:

My belief is that borrowing will be at the top end of the OBR forecast range, and not where they suggest it is likely to be.

However, it is the paragraph numbered 1.38 that is most important, in my opinion. This is one of a number of references within their report that make it clear just how beneficial QE is at present. The cost of government borrowing is at a record low, and is going to remain that way, even with the forecast significant increases in debt. Even my higher expectations will not change that by much.

And the reason for this? This is the OBR forecast on Bank of England base rates:

Note that they now forecast that these will go negative, and the rise is to 0.3% by 2025, which has little impact on their forecast cost of debt.

Indeed, as they note:

The average effective interest rate on new issuance has fallen from 2.8 per cent in 2010-11 to 1.9 per cent in 2015-16 to 0.3 per cent in 2020-21.

Inflation is higher than this: the real value of debt is declining. And yet the obsession with debt continues when the cost of servicing it - which is the only issue that matters, is falling, which fact is unsurprising as it remains almost wholly within the control of the government given the scale of the debt that it now controls directly, by owning it, and indirectly via the consequential balances that are held by UK banks and building societies on Bank of England central bank reserve accounts.

The debt obsession is misplaced in other words. And in  case anyone thinks I have ignored inflation, this is the OBR inflation forecast:

The expectation is that inflation will struggle to reach its target rate. The OBR does not, then, expect money creation to cause problems.

All that is odd in that case is that they are not forecasting more of it. I will, though. I will forecast that quantitative easing will exceed £100 billion, and quite possibly £150 billion a year until 2025, at least. Whether conventional economists like it or not, money creation is the foundation of our government's finances now.

The Tory’s debt obsession is precisely the thing that will guarantee that debt will continue to grow

Published by Anonymous (not verified) on Thu, 26/11/2020 - 5:50pm in

The Conservative's obsession with debt repayment was on display in the House of Commons yesterday. As I noted when live-tweeting on comments made by MPs after Rishi Sunak's Spending Review:

You will note that the sentiment resonated.

What was particularly telling was that the obsession is not matched by the practice seen within the statement. This table comes from the Office for Budget Responsibility (OBR) summary of the proposals being made:

The critical line is the one three from the bottom. Despite the obsession with debt repayment Sunak is forecasting a deficit of £394 this year and expects to borrow £100 billion or more for the next few years to come. Debt rises every year except 2024-25 and that is because of an accounting quirk (which reflects the absurd way in which national debt is calculated, but that is another issue).

Sunak will, of course, prefer to highlight that this forecast suggests that debt as a proportion of GDP falls by the end of the period. But, as I have already noted, the assumptions that underpin this are that business and consumers spend, spend, spend from 2022 onwards and there is simply no evidence based on past economic recoveries, where caution persists for a long time after recovery begins, to suggest that this is likely. If the behaviour is more normal, as I strongly suspect it will be, then borrowing will be approximately double that which Sunak is forecasting - and will be roughly £200bn a year, and debt will most certainly rise significantly, as measured in this way.

Does that matter? I suggest so for three reasons. First, Sunak pandered to this wing of Tory thinking yesterday. He has set himself up to fail as a result. This Spending Review will be added to all the other OBR wildly optimistic forecasts which have characterised its whole history. And he will be held to account for this. His star will fade pretty quickly, I suspect.

Second, the debt paranoia has already had an impact. The spending cuts announced are intended to achieve the goal of lower borrowing and will not achieve that aim but will absorb massive political capital for Sunak. Fighting civil servants on pay and his own backbenchers on overseas aid will harm him, but also harm the government: these are foolhardy policies that in the overall scheme of things are not worth the fight.

Third, when this paranoia translates into tax increases (as it surely will) then Sunak will make the continuing downturn (because that is what it is compared to expectation) so much worse, as he drains yet more demand from the economy when it will be very badly needed.

In that case what Sunak's debt obsession does is actually make the debt worse, which is very bizarre, but also true. His own belief that he cannot afford to spend more to stimulate the economy, which is the only way he has to restore the balance he desires, is precisely what is stopping him achieving this debt goal. You could not make such incompetence up.

The IFS Green Budget is a manifesto for a bank that wants to see increased interest rates rather than a report that approximates to objective comment

Published by Anonymous (not verified) on Tue, 13/10/2020 - 4:26pm in

The Institute for Fiscal Studies has issued its Green Budget (i.e. its forecasts for what it sees the budget scenarios to be) for autumn 2020 even though no budget is now expected. I think it fair to say that some of what they say is unsurprising, most especially as the work is being done with Citi, the US bank that has extensive operations in London.

They forecast growth as follows:

They make clear that this is impacted by Brexit:

And then they show the impact on the government's balance sheet:

It is annoying that this last is stated in percentage terms, as is this chart:

The implication of both is, however, that the government will have to undertake what the IFS thinks to be borrowing over the next five years, and at rates much higher than those forecast in March 2020.

As the report says:

The UK has traditionally shown itself to be a relatively flexible economy. This reputation is likely to be tested to the extreme over the coming years. We expect substantial restructuring of the UK economy in the years ahead as it responds to the new shape of demand from UK consumers in the wake of COVID-19 and the new shape of trading relationships in the wake of Brexit. Such restructuring implies a more protracted economic recovery and a substantial loss of economic capacity as some of the expertise and capital specific to now shrinking sectors becomes surplus to requirements.

In other words, expect turmoil, massive rates of corporate insolvency, major economic restructuring (the basis of which they do not seem to predict) and the need for significant state support.

And as they add:

In addition, we think COVID is likely to have hampered public and private preparations for the end of the Brexit transition period, compounding the near-term economic cost. We expect GDP growth in 2021 to be 2.1% lower than in the event the UK were to remain in the EU Single Market and Customs Union. In a normal year, this would be enough to push the economy into recession. Some of this growth is likely to be made up in 2022.

A third of the deficit will, in that case, be Brexit related, in their opinion. And it is their opinion that this must be compounded by moves towards austerity. As they say in their summary briefing:

Persistent policy support will be needed to help the economy through this transition. However, fiscal policy will also have to tread a fine line between supporting growth in the near term and charting a path to fiscal sustainability in the medium term. This is a significant challenge.

It is an obsession that permeates the report, that is paranoid about 'sound government finances', without appreciating that this is precisely what we now have. For example, they say:

This year’s deficit will reach a level never before seen in the UK, outside of the two world wars of the 20th century. But what matters much more for the long-run health of the public finances is how complete the economic recovery will be. With the cost of borrowing at a record low, additional spending now that helps to deliver a more complete recovery would almost certainly be worth doing. For now, the government should focus on designing and delivering such support. But, in the medium term, getting the public finances back on track will require decisive action from policymakers. The Chancellor should champion a general recognition that, once the economy has been restored to health, a fiscal tightening will follow.

I highlighted the last point, but it is repetitive, with foreign-owned debt being their excuse for this:

The economic response to COVID-19 has seen monetary and fiscal policy complement each other, as the Bank of England and the government both seek to support the economy. However, this complementarity is less assured in the medium term: upward pressure on inflation (and particularly inflation expectations) could lead to the Bank tightening monetary policy even if fiscal policy still needs to remain loose. The UK’s dependence on foreign credit remains a notable additional vulnerability. More fiscal support will likely be needed in the near term. But getting the public finances on a sustainable trajectory in the medium term is also now a key challenge.

And as if to make clear that obsession they focus heavily on the foreign ownership of UK government gilts, before noting what they claim is the resulting cost of this dependence:

The COVID-19 crisis has pushed up government borrowing substantially, meaning that the Debt Management Office (DMO) will need to sell a much larger value of gilts than normal. Our central scenario is for over £1.5 trillion to be raised through gilt issuance over the next five years, double the £760 billion forecast in the March 2020 Budget. There is considerable uncertainty around this amount.

This sum is not all new debt, of course: much is rolled over debt. And they add:

The expansion of the Bank of England’s programme of quantitative easing means it bought £236 billion of gilts between March and September 2020, almost exactly the same as the £227 billion of gilts issued by the DMO over the same period. As a result, private borrowing has not been crowded out by government borrowing. The financing cost of quantitative easing is Bank Rate, which is at record low levels, and has therefore further depressed government debt interest spending from already record lows as a share of receipts. However, the tilt towards Bank of England held debt means that the government’s debt interest bill will rise sharply if Bank Rate rises.

To this they add:

The expansion of the Bank of England programme of quantitative easing means that virtually all of this new debt has been bought by the Bank. The cost of financing this debt is the Bank Rate. While this remains historically low, it helps to hold down the government’s debt interest bill; however, debt interest spending will rise suddenly and sharply when the Bank Rate increases. Since government spending is now more closely tied to the Bank Rate, it will be even more important to ensure that the Bank of England continues to be – and be perceived as – independent and focused on its monetary policy mandate.

But they cannot, or do not, explain why this is the case. They say:

Quantitative easing reduces the effective maturity of government borrowing. This – combined with elevated issuance over the next five years – means that a 1 percentage point increase in all yields would now add £19 billion to debt interest spending in 2024–25, some 76% higher than the £11 billion forecast in March 2020.

So, for the sake of £8 billion, which is utterly immaterial in the context of this analysis, they want the whole of the economy to be run on the basis of the fact that there is austerity to come. The reasoning is not explained.

Nor is there a hint that there may be further quantitative easing to cover debt issues in the years to come, even though the chance that this will happen is extraordinarily high.

And there is no hint of the fact that since these issues are effectively made at base rate, and that the reserve balances in question are now likely to be in excess of £600 billion, and maybe more, the Bank of England has almost total control of short term rates as a result of this structure, as well as long term rates via QE. In other words, it is a strength and not a weakness.  a

They also give no hint as to why rates will be rising in the next few years, when there seems little chance of that around the world with Fed, ECB and Bank of Japan policy as it is, so why they think the UK will be so out of line is hard to imagine. Unless, that is, because an independent Bank of England might decide to increase them for the reason that the IFS suggests, which is that, as they put it, without explanation:

Rising yields accompanied by stronger growth would be welcome.

So why do they say this, and what's the reason for the obsession? I can only offer one explanation, and come back to the fact that this report was written with Citi, which is a City-based bank as far as the UK is concerned. And, of course, it wishes for an increase in yield: that's a way for it to make money.

This report from the IFS is not objective in that case. Nor is it fair comment: it is simply a reflection of the obsession fo a bank with increasing interest rates, for which there is no justification, or need. And it is a reflection of the desire of that bank to suggest that bond markets are still in charge of those rates, when they are not. And it is a reflection of the desire of that bank to suggest that what we need is independent control of monetary policy, irrespective of fiscal policy, so that bankers have the best chance of delivering those increases in rates in the interests of bankers but not the economy as a whole.

This report has, then, to be read not as any form of objective review, bit simply as a manifesto for neoliberal policies that maintain the status quo in the interests of the banking community of the UK. The fall of the Institute for Fiscal Studies from any sort of credibility is just about complete. They are instead simply a cover for the wealthy to demand the policies that they desire. It would only take a 55 Tufton Street address for that to now be completely apparent.

Higher Ed Needs an Actual Recovery Plan, Not Wishful Thinking

Published by Anonymous (not verified) on Sat, 10/10/2020 - 3:58am in

Tags 

Budget, governance

Neither major party has one, for higher ed or for anything else. Higher ed boards and presidents don't either. (Pictured at left: UC Regents Gareth Elliott, John Pérez, and Sherry Lansing.)  Rebuilding this system is pretty much up to us.

I say this because however universities' operations people struggle to hold fall term together, the larger policy response has lost its grip on the unfolding disaster.  The most vulnerable students are disproportionately dropping out, academic programs are being closed, doctoral programs are being suspended, early-career women faculty's academic futures are put in jeopardy, student enrollments have been further destabilized, and testing and tracing regimes are too uneven to assure general reopening in spring.

There's also higher ed employment. At the Chronicle of Higher Education, Dan Bauman pulled together data on the worst higher ed employment collapse since modern statistics began. Since March 2020, the sector has lost seven percent of its workforce.  Here's the gruesome chart.

The rising employment trend you see largely tracked student enrollment growing by about 25 percent in this period. When Covid hit, most universities hadn't fully recovered from the Great Recession.  Employment during that downturn merely went sideways, rather than going off a cliff.   Now it is going off a cliff.

The minds of policymakers and governing boards have been dulled by promises of a V-shaped recession. Everything is supposed to bounce back when dorms and classrooms re-open.  You can see a small bounce above.

A bounceback in employment requires both political will and money. The two are linked.  In Bauman's other chart, note where the bouncing is not happening.

In spite of all the rhetoric about access and inclusion, politicians are not allocating money to the institutions--largely public--that offer those.  Everyone is concerned about the diversity of the academic pipeline.  Collapsing higher ed employment, much in various kinds of student services, squeezes the pipeline at its most diverse point.   (Private colleges both wealthy and reputable are also suffering: Ithaca College has announced a plan to cut 25 percent of its faculty.)

Lying behind this is the negative role now adopted by state governments. They applied austerity and helped deepen the Great Recession. They are playing the same destructive role againRepublican state governments are cutting higher ed. But Democratic state governments do the same, with New York and California in the forefront.  In spite of what you hear around UC, the Democratic legislature gave UC's general fund a 12.2 percent cut (details here).

Legislators and governors blame a Covid crash in tax receipts. States are having a terrible tax revenue year:  some expect to lose a fifth or even a third of their budgets (CBPP's State Budget Watch has an appalling chart of estimates state by state.)  But this problem is partially self-inflected. States can raise revenues by raising taxes on people and business that have wealth and income. Covid has been bad for labor and good for capital; bad for lower incomes and okay for higher.  Legislators could pass a solidarity income tax surcharge on high earners. They could pass a Facebook tax, a Google tax, an Apple tax, a Microsoft tax, and especially an Oracle tax; in New York they could pass a Goldman Sachs tax, etc. These would be taxes on the very wealthy and currently prosperous individuals and sectors these companies represent.  But today's Democrats are no more likely to pass even temporary taxes than are Republicans.

What about governing boards?  They are fiduciary authorities, and their job is to maintain the revenues that allow for the full functioning of their institutions.  In California, that means money to pay for non-commodity learning and (always) money-losing research while minimizing the debt of students emerging from a population with Deep South levels of economic inequality and the nation's number one poverty rate (corrected for cost of living), while dealing with Covid losses and added expenses. Instead of taking a $500 million cut, the regents should be pounding the table for a $1-2 billion raise.

(The same goes for senior people in public health, fire fighting, forest and other environmental remediation, disaster relief, housing and community rebuilding--all leading to using the full rainy day fund, raising taxes now to meet actual urgent needs, hiring unemployed people to do all the work of reconstruction, which would massively stimulate economic activity, tax receipts, etc.  Keynes did live and write his books, and he and his heirs are still correct. )

Given the need and the possibility, what happened at the UC Regents meeting? After the budgetary vaguenesses of their July meeting, board chair John Pérez demanded real data in September.  In September, there were if anything fewer data than in July.  UCOP presented a lesson on the 2009 furloughs.  The one bright spot was that it was interpreted to mean that furloughs aren't a magic bullet. The discussion gave the regents the chance to favor steep progressivity in the furloughs that they said they didn't want to impose, and also to oppose layoffs of frontline staff.

Fine, but there was no plan, and also very little data. For example:

There are no numbers attached to any of these very significant problems.  How bad is the total problem?  No one really asked, and UCOP folks didn't really say.  UCOP works to demobilize the regents, and vice versa, and anyone who wants to rally for the cause of proper Covid funding is cast outside the pale.

The low moment in the charade of deep uncertainty was the refusal to admit that the federal bailout is not going to happen, and getting proactive about the fact that the Democratic cut of 12.2% will start in the current year.  I noted in my last budget post that this is really at 20% cut from the regents' fairly modest request of November 2019.  But not a word about the problems this will present to campuses, faculty, staff, and students.

Rather than saying the feds won't save us, pushing the regents to demand a new deal from the state, UCOP continued to suggest the money will come. Dan Mitchell reports that in an October 6th meeting, a regental committee was told that even if they miss the October 15th deadline (a dead certainty), the state may get money later from a Biden administration and pass some on mid-year to UC.  This isn't planning but wishful thinking, and a commercial investor would dump the stock.

In one case, the slide title belied the data.

In fact, August losses increased again. Given the state's erratic Covid suppression, medical center losses may continue to increase.  The regents' asked no questions about this.  The routine is pretty well established: every regents meeting features UCSF Chancellor Sam Hawgood mechanically intoning that UCSF isn't really losing money after all--it has a "positive EBITA." Nobody asks him, given $850 million in med center revenue losses, what the hell he's talking about.  But the effect is to create enough uncertainty to dull the sense of urgency. 

Discussion of borrowing capacity has the same effect. UCOP's Nathan Brostrom noted new bond revenues of $1.5 billion over the summer, plus $10 B in available liquidity in STIP, and, in passing, identified another $5-6 billion in further borrowing capacity.  So UCOP makes the regents feel that cash flow is in very good shape.  Regent Lark Park observed at some length that the legislature has too many problems to give UC more money.  Regent Pérez said that the goal is smoothing losses so that they are spread out over several years.  Between the regents's desire to protect the legislative Democrats from the University, and their desire to avoid responsibility for layoffs, they will support further borrowing and campus cuts spread out over 2-5 years.  UCOP and the Board are locking in years of campus cuts where there is already nothing left to cut, but without ever actually saying so.

Earlier, new president Drake gave a short introductory talk that mentioned good things like rising awareness of systemic racism while never mentioning the budget.  His lack of affect and vague formulations said "caretaker president." I hope I misheard, since pressure tactics are required.

New Senate chair Mary Gauvin committed the Senate to supporting the Green New Deal project developed by UCSD faculty, and said good things about the need for greater mutual support during the pandemic.  She also said nothing about the budget-- or about the shared governance crisis.  All these good projects require money. But nobody would talk about the money.

The effect is a denial of the size of the budget problem.  In August, I detailed the possibility of a 16.6% reduction in 2020-21 revenues from January projections. What data in the September meeting refuted this? There is some good news, like resident student enrollments holding up. But UCOP offered no specific data that could dismantle a middle scenario like mine, much as I would like that to happen. 

Groups like UCOP and the Board of Regents can't fend off the worst because they won't openly plan for it, or even mention it. They can't negotiate a no-cuts budget with the legislature because they don't explain why it's necessary. Much of the damage to public universities after 2008 was self-inflicted.  We are watching the same exact internal leadership failure happening again.  Its first victims will be the lower-income employees and most vulnerable students that Democratic governing boards want to protect. 

The current board--presidential system hasn't worked well for a while. In my next post, I'll suggest a distributed governing system that would do better.

Barnaby Demands To Be Appointed Minister For Women Promises To Inject A Stimulus

Published by Anonymous (not verified) on Thu, 08/10/2020 - 7:57am in

Former deputy Prime Minister Barnaby Joyce has demanded that the Prime Minister do something for the countries Women by appointing him, the Member for New England as the countries Minister for Women. With a promise to urgently inject a stimulus package into those in need.

”We got a lot right with the budget but in the case of Women we didn’t really hit the spot,” said the Member for New England. ”You know my record I am definitely a Ladies man and ScoMo, you know I am a man the man for the job.”

”Let me loose on the on the ladies and I’ll get things moving, heck I may even raise the countries birth rate.”

When asked what stimulus packages he would propose to make the lives of Women in Australia better, the Member for New England said: ”If there’s one thing I know it’s what Women want.”

”Women want a man, they want security, lovin’ and I can provide all of this.”

”So, Ladies if you haven’t got a ring on it, call me…..heck even if you do have a ring on it get in touch so I can return the favour.”

Mark Williamson

@MWChatShow

You can follow The (un)Australian on twitter @TheUnOz or like us on Facebook https://www.facebook.com/theunoz.

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Amazon Founder Jeff Bezos Thanks Australian Government For The Tax Cuts

Published by Anonymous (not verified) on Wed, 07/10/2020 - 8:09am in

Jeff Bezos, the multi-billionaire owner of online ordering behemoth Amazon, has thanked the Australian Government for including income tax cuts in their 2020 budget.

”Great Government you have down there in Australia,” said Mr Bezos. ”Those income tax cuts will definitely help out Amazon, what with all you Aussies loving to spend up big shopping online.”

”I tell ya if you didn’t have a minimum wage down there I’d almost consider moving my headquarters down under.”

When reached for comment on Mr Bezos’ praise for the budget, Prime Minister Scott Morrison said: ”I thank Jeff for his kind words and say to all Australians that this is an example of someone getting a go for having a go.”

”This is what my Government does, we give opportunities to those people who have a go. Whether it be billionaires or multi-billionaires.”

”Now, if you’ll excuse me, I’m off to have a go at Engadine Maccas. That should provide the cleaners with a nice little surplus to deal with.”

Mark Williamson

@MWChatShow

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Scotty From Marketing Moves The Budget Lock-Up To Engadine Maccas

Published by Anonymous (not verified) on Tue, 06/10/2020 - 8:06am in

The Australian Prime Minister Scotty from marketing has announced that the traditional Budget lock-up, a process whereby journalists are locked in a room to run the rule over the budget will be moved from Parliament house to Engadine Maccas.

”We are in the middle of a pandemic so every precaution will be taken to ensure everybody’s safety,” said Prime Minister Scotty. ”Therefore, I feel it is best that the budget lock-up be held in a place where I know the cleaning standards to be exceptionally high.”

”Trust me, when I tell you that the Engadine Maccas crew are the best in the business at cleaning up spills.”

When asked what Australians could expect to see in the budget, the Prime Minister said: ”There will be plenty of opportunities for those in the budget who have a go, to get a go.”

”The next few years in Australia will be crucial and I promise you that I will cross the country making announcements and having my photo taken in every possible way that makes me look like a tradie.”

”Now, if you’ll excuse me, I’m off to Engadine Maccas to test the cleaning staff so to speak.”

Mark Williamson

@MWChatShow

You can follow The (un)Australian on twitter @TheUnOz or like us on Facebook https://www.facebook.com/theunoz.

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Budget Turmoil After Cormann Revealed To Have Been The One To Crunch The Numbers

Published by Anonymous (not verified) on Mon, 05/10/2020 - 11:04am in

The Australian Government is in turmoil today as it learned that the budget, due to be released tomorrow was in fact calculated by noted ‘numbers man’ Finance Minister Mathias Cormann.

”This is an absolute disaster, who knows how far out he is with the numbers,” said a Government Insider. ”I mean dear God, Cormann thought Dutton had the numbers to be Prime Minister!”

”Who knows whether the budget is in the red or black. I just wish we knew Cormann had been involved with it before we went out and printed all those blasted coffee cups.”

When asked how someone with such a dire history with numbers like Cormann could be put in such a position as Finance Minister, the Government Insider said: ”Bloody Scotty is stubborn and won’t sack anyone. I mean as bad as Cormann is he’s no Angus Taylor that’s for sure.”

”Anyway, Cormann will be gone in a few months so hopefully we can weather this storm, not like the Oppposition will do much damage to us anyway.”

”Now, if you’ll excuse me, I’m off to Bunnings to buy something else for the PM to be photographed putting together, just in case people get pissed about the budget.”

Mark Williamson

@MWChatShow

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Top economists back boosts to JobSeeker and social housing over tax cuts in pre-budget poll

Published by Anonymous (not verified) on Mon, 28/09/2020 - 10:40pm in

Tags 

Budget, Newstart, tax

Overwhelmingly, Australia’s leading economists want the budget to boost social housing and the JobSeeker unemployment benefit rather than bring forward personal income tax cuts.

The 49 eminent economists who responded to Conversation-Economic Society of Australia pre-budget survey were asked to rate 13 options in terms of “bang for the buck” – effectiveness in boosting the economy over the next two years.

Among the options offered were boosting JobSeeker (previously called Newstart), wage subsidies beyond the expiry of JobKeeper, one-off cash payments to households, big infrastructure spending, bringing forward the personal income tax cuts, and company tax cuts.

The options were selected by a committee of the central council of the Economics Society and were presented to each surveyed economist in a random (shuffled) order.

The economists surveyed are Australia’s leaders in the fields of microeconomics, macroeconomics, economic modelling and public policy. Among them are former and current government advisers, former heads of statutory authorities, and a former member of the Reserve Bank board.

Each was asked to nominate the four most effective options for boosting the economy.

Economic Society of Australia/The Conversation, CC BY-ND

The most popular option, endorsed by 55% of those surveyed, was boosting spending on social housing.

Monash University econometrician Lisa Cameron said the budget provided an unusual opportunity to fix things for the long term while boosting the economy.

Social housing would leave us with something worthwhile (as did the school hall building program during the global financial crisis) in addition to providing work for the building industry. Alleviating homelessness would be a lasting benefit.

If it goes to the unemployed, it will be spent

The second most popular option, endorsed by 51%, was permanently boosting JobSeeker, previously known Newstart. The temporary boost in the A$282.85 per week payment was wound back last week and will end in December.

Melbourne University economist John Freebairn pointed out that with no real increase in Newstart since 1993 and many on it in demonstrable poverty, every extra cent spent on it will be spent rather than saved.

Supported by fewer than half of those surveyed, but third most popular at 45%, was more funding for education and training.

Read more: Should the government keep running up debt to get us out of the crisis? Overwhelmingly, economists say yes

Flinders University labour market specialist Sue Richardson said education was labour-intensive, which would help with employment, and would assist young people severely hit by the pandemic to get the skills they would need to get jobs rather than stay unemployed.

Matthew Butlin, who heads the South Australian Productivity Commission, said the decimation of income from student fees means universities will have less money to subsidise research. There was a case for more direct funding of university research in the form of competitive grants for projects with practical applications.

The fourth most popular option was infrastructure spending, supported by 41%.

Why not a Hoover Dam, a new Opera House?

Many made the point that the projects chosen would have to be worthwhile in their own right, and feared this might not be the case. Others looked to big “nation building” projects along the lines of the Hoover Dam in the United States which was built during the Great Depression and employed 21,000 people.

“Why not building a massive dam in Australia? Why not building a new Sydney Symphony Orchestra building like the Berlin Philharmonie? Why not expand the National Parks? Why not building green libraries all over Australia?,” asked Sydney University’s Stefanie Schurer.

Read more: Homelessness and overcrowding expose us all to coronavirus. Here's what we can do to stop the spread

Done right, like the Sydney Harbour Bridge which was completed during the Great Depression, big imaginative projects could leave us with something valuable.

There was less enthusiasm for continued wage subsidies (35%) and an expanded investment allowance (29%) with University of NSW economist Gigi Foster saying investment allowances could be replaced with income-contingent loans along the lines of the Higher Education Contributions Scheme.

That way businesses could borrow to invest, with an obligation to repay if the investment paid off.

If it goes on tax cuts, it might not be spent

The same approach was taken by some to funding higher quality aged care (supported by 31%) and increasing subsidies for child care (29%).

Economic modeller Warwick McKibbin suggested funding child care through income-contingent loans (repayable on the basis of income) rather than subsidies.

Bringing forward the leglislated personal income tax cuts as proposed by the government and cash payments to households were relatively unpopular, supported by 20% and 16%.

Saul Eslake said that while he agreed with the treasurer that early tax cuts would “put money in people’s pockets”, there was no guarantee the high earners “into whose pockets most of that money would be put”, would take it out and spend it in sufficient quantity.

Read more: Frydenberg is setting his budget ambition dangerously low

Eslake suggested that rather than supporting households with cheques as happened during the financial crisis, households could be handed time-limited tradeable vouchers that could be spent in areas hurt by restrictions, such tourism and the arts, or used for other worthwhile purposes such as childcare or reskilling.

Among those who did support bringing forward the tax cuts was John Freebairn, who said that although presented as cuts, what was proposed would do little more than restore what had been lost to bracket creep, keeping income tax steady.

Company tax cuts an also-ran

Company tax cuts, once touted by former prime minister Malcolm Turnbull as the key to jobs and qrowth garnered minimal support, being backed by just six of the 49 economists surveyed.

The least popular option, backed by only two economists surveyed, was government support for cleaner fossil fuels such as natural gas, as the prime minister is promising. In contrast 13 (26%) backed support for renewable energy.

Individual responses

The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Peter Martin is economics correspondent for The Age and the Sydney Morning Herald.

He blogs at petermartin.com.au and tweets at @1petermartin.

ScoMo Sees Nothing Wrong With Tradies Being Able To Take Arts Workers Lunch Money

Published by Anonymous (not verified) on Fri, 04/09/2020 - 7:32am in

morrison map

Prime Minister Scotty from marketing has told reporters that he sees nothing wrong with tradies being able to legally demand an arts worker hand over their lunch money.

“Arts workers need to realise that they need to be a part of team Australia,” said Prime Minister Scotty. ”If they can do their bit to keep more valuable members of society, like tradies going, then they should do it.”

”After all ,we are all in this together.”

When asked why his Government is turning it’s back on the billion dollar arts and entertainment industries, the Prime Minister said: “I reject the premise of your question.”

“My Government has done all it can to support the NRL and AFL. Sure some of you inner city elites don’t view this as entertainment but I’ll tell you, more people watch the mighty Sharks on a Friday night than any old poncy ballet recital.”

“Now, if you’ll excuse me, I saw a league player who was short of a few dollars for a coffee, I will go and raid the ABC budget to help him out.”

Mark Williamson

@MWChatShow

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