The St Louis branch of the Federal Reserve Bank offers – FRED2 – which is an excellent repository of US statistics as well as a nifty graphical analysis tool. I use it regularly and even though it is just a collection of data available elsewhere it is very convenient. The same organisation also publishes what it calls its – PAGE ONE Economics Newsletter – (the so-called “back story on front page economics”) which is designed to be used by students as a means of educating them in economics. Any reasonable assessment of the material presented in these newsletter is that they are unadulterated nonsense. The most recent edition (published January 13, 2012) – “Choices Are Everywhere: Why Can’t We Just Have It All? – exemplifies how these major institutions choose to mislead those they seek to elucidate.

Two papers have come out in the first week of January that provide further evidential support for the argument that the majority of macroeconomics that is taught in standard university programs is worthless. The first (published January 3, 2013) – Growth Forecast Errors and Fiscal Multipliers – from the IMF attempts to explain why the planned fiscal austerity measures in advanced economies have been more damaging than mainstream economists predicted. It is an excruciating attempt at regaining credibility for the seriously wayward IMF. The problem is that its credibility is so far in deficit that it has a lot of consolidation to do before anyone should believe them again. The second paper (published January 2013) – A Boost in the Paycheck: Survey Evidence on Workers’ Response to the 2011 Payroll Tax Cuts – from researchers at the Federal Reserve Bank of New York “presents new survey evidences on workers’ response to the 2011 payroll tax cuts”. The results of the survey? Much higher estimates of the consumption propensities than were predicated from mainstream economic theory. Implication? The standard theory taught to students is wrong and should be disregarded.

The Australian version of the “fiscal cliff” is about poor people living on income support waking up on New Year’s Day when everyone is full of bonhomie for their fellow Australian and finding out that recent legislative changes made by the supposed pro-disadvantaged government, which have now become active, will leave them, in some cases, $A120 worse of a week. That is, they are losing a considerable proportion of their income. The way I judge public policy is not by how rich it makes the highest earners and asset holders in our midst but how rich it makes the poorest members of society. A policy framework that deliberately targets the most disadvantaged and makes them poorer is a sign of a failed state. The recent legislative changes reinforce the Australian government’s refusal to provide sufficient income support for the unemployment despite it being widely accepted that they are being forced to live well below the poverty line. The Government’s justification is that they need to pursue a budget surplus and have deliberately undermined the capacity of the economy to generate enough work as a result. The relentless attacks on the poor in this country violate my pubic policy assessment rule and indicate we are indeed a failed state.