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The Forum > Article Comments > Respect the dismal science: public policy needs some economics > Comments

Respect the dismal science: public policy needs some economics : Comments

By Tony Makin, published 15/9/2016

There are many examples of countries from Argentina to Zimbabwe where the demise of economics as a foundation for policy became a first step to economic demise.

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Another armchair economist with a lot to say, but no real solutions to any real problems. You need to get ahead of the game mate. You are supposed to be an expert.

David
Posted by VK3AUU, Thursday, 15 September 2016 10:52:45 AM
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Time tested economic theory (Thatcherism Reaganism) putting more and more of our finite wealth into fewer and fewer hands, created the great depression and the GFC!

Tax cuts, money shifted from the poorest to the wealthiest, are a recipe for crippling the economy! If all you achieve with this ideological imperative/dogma, is to wind down the discretionary spend dependant domestic economy that absolutely relies on it for its very survival!

We need to value add everything we export or just not export it! Iron ore should only leave these shores as finished steel or cars, trucks, firearms etc etc. Grain as milled flour, bread, biscuits, milk as butter, cheese, powdered milk and baby formula, and sugar as ethanol and related products!

You get the picture and in all cases absolutely dependant on the supply of not for profit publicly supplied ultra cheap energy, such as would be available if we allowed ourselves to get into the cheaper than coal thorium based energy market!

All that prevents that is a nonsense ideological imperative that exclusively serves private/foreign interests!

Did you know for example it may be possible for you to power your car, without refueling for 100 years, with just 8 grams of thorium? And the very reason for the phenomenal resistance by the fossil fuel sector!?

Look, we own around 40% of the world's supply of this energy resource, abandoned in the fifties, given there was no weapons spin off! We have a super fund now around two trillion and just need a different mind set and bold policies to make it available as investment capital working exclusively for us, along with a further two trillion marking time in foreign company coffers!

Every western style economy is supported by energy and capital! and we need more of both, ( not more of the same simplistic nonsense, merely masquerading as economics) to get up off the floor and back into the economic contest and the championship rounds!

Doing what you've always done while expecting a different result is time tested madness!
Alan B.
Posted by Alan B., Thursday, 15 September 2016 12:28:36 PM
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Addendum: Every western style economy is supported by just two economic pillars, energy and capital, and every domestic economy is absolutely reliant on the discretionary spend! None of which is any way assisted by the sheriff of nottingham's economic theory; take from the poorest and most vunerable to give it to the already obscenely wealthy. Boiled down into the simplest terms, we get rich(er) as a nation when we sell more to the world than we buy from it! Thus endith the economic lesson for today.

We invented the direct reduction (arc furnace) one step steelmaking process, and given maximised automation, the cheapest steel in the world with the smallest carbon footprint! [And it could be argued, it wasn't Chip Goodyear's property to sell or give away?] But only if the energy input is also the cheapest! As would be the case of it was supplied by a very local cheaper than coal thorium reactor!

Think, Aluminium is described as congealed electricity and every manufactured or processed/transported product is reliant on an energy quotient for its existence! Ditto all irrigated primary production!

And I'm sure everyone understand electrified rail's economic implications in every phase of manufacture or processing or just getting finished production to market, domestic or export!

We need bold leadership and nuclear power! Just not any nuclear power but cheaper than coal thorium power!

And if we really do need at least a decade to get up to speed on nuclear power!? We've already wasted far too much valuable time prevaricating!

What's your pleasure, decisive action or yet another interminable talk fest?

Choose wisely, one alone achieves an essential outcome, the other just kicks our suspended economic prosperity into the never never!
Alan B.
Posted by Alan B., Thursday, 15 September 2016 1:14:02 PM
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"Time tested" economic principles should mean those that have passed the test of time, but Tony Makin seems to have included those that have failed. I can't avoid the conclusion that he is incompetent. But incompetence is not unusual in the economics profession. I wouldn't be surprised if economists had recommended the fixed exchange rates that were the real first step to the economic demise of Argentina and Zimbabwe.

He either assumes, or concludes from faulty assumptions, that fairness would come at the expense of economic growth. But the reality is that fairness would enhance economic growth, especially in the current economic conditions.

Company tax cuts are an extremely expensive and inefficient way of boosting Australia’s international competitiveness and improving long-term growth. It would be much cheaper and more effective to create the conditions where it's easier to make a profit in the first place: a highly skilled workforce, permanently low interest rates, good infrastructure and a high domestic demand.

The GST cannot be raised to alleviate Australia’s serious fiscal problem because Australia's serious fiscal problem is that the government's deficit is far too SMALL! And as for raising the GST, it would indeed be unfair on low-income households, many of which pay no net income tax and are young. Being richer in the future doesn't ignore the fact that they would immediately become poorer – as indeed would retirees reliant on their savings. Seriously, the best solution's to abolish the GST: it would make our retailers more competitive with private imports, it would slash red tape for small businesses, and it would lower the cost of living. In the long term a broad based land value tax would be the best replacement for the GST. In the short to medium term, other taxes would have to rise. That shouldn't be a problem, as other taxes have nowhere near the same negative effects. And it shouldn't be forgotten that a higher short term deficit would be the economically responsible course of action, as it would solve the problem of depressed demand.

(tbc)
Posted by Aidan, Thursday, 15 September 2016 1:24:39 PM
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(continued)

Maybe a quarter of a century ago it was poorly appreciated that a vibrant business sector is necessary to grow the economy. But nowadays it's well understood. What is not well understood (indeed Tony's failed to understand it himself) is that higher debt is NOT a future tax.

Populist protectionism is likelier to thrive when governments abandon fairness, as free trade's a convenient scapegoat for the government's abandonment of the interests of the less well off. If we killed off the notion that productivity-enhancing reform meant shifting the burden of tax onto those least able to pay it, far more people would be willing to give it a fair go.
Posted by Aidan, Thursday, 15 September 2016 1:25:38 PM
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Locally based/headquartered companies! Would benefit from changes to the tax rules, to collect all tax as a very modest expenditure tax of say 5%?

Collected via bank main frames as money left accounts?

I've read economists who claimed that all income tax could be more than replaced by a 2% transactions tax? Others who are on the public record claiming that one third of one percent collected as a transaction tax would replace PAYE?

I can't see any reason for not trialling the latter if the net take home pay packet remained unaltered! Which together with the reform would massively simplify PAYE?

That said, I prefer my proposed expenditure tax, taken in lieu of every other tax as the only tax collected? (GST, fuel excise etc) which could be adjusted up or down region by region to alone control all inflation or stagnation?

A stand alone unavoidable expenditure tax, would allow the 7% averaged, currently ripped from the average bottom line as tax compliance costs, to be returned to the total bottom line! So and to encapsulate, nobody no matter how clever could avoid our tax!

Those paying high priced accountants to hide Australian profits in various nefarious tax avoidance schemes or tax havens, would be wasting their money, whereas, those headquartered here and just paying a fair share of a shared burden would see their bottom line improved by at least 7%, the saved and no longer necessary tax compliance costs!

And given the same tax rate would apply as a universal constant, lift household disposables by 20-35%? Make a 15% non contributory super immediately doable as well as seriously lift discretionary spending?

I've seen numbers that strongly suggest that tax avoidance in total, by foreign based firms could be a high as 60 billion per? This money if unable to be successfully avoided would, repair the budget, increase defense spending and make a far more generous social compact doable?

This arguably is how you do root and branch, genuine tax reform that then also stimulates the national economy!
Others can please themselves!
Alan B.
Posted by Alan B., Thursday, 15 September 2016 3:43:17 PM
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