Today I have been working on part of a new book I am writing on the pathology of recessions. I have written a lot about this in the past and my last book was about this topic. But you can never say it enough – recessions impose huge social costs on the most disadvantaged members of our society and it is the responsibility of national governments to do every they can to avoid them. The neo-liberal onslaught on public policy has seen governments all around the world abandon this responsibility with obvious (ugly) consequences. Anyway, here is a way of thinking about all of this. It is not a happy story.

Here is some twisted logic if you ever saw it. Sydney Morning Herald main economics writer Ross Gittins wrote yesterday that the Opposition leader’s scaremongering about the build-up of debt is a faux concern and amounts to hysteria. So he sets about soothing us with some explanation. But it is the explanation that leaves out some of the more important insights which if known would alter the way the reader understood the article and the issue being discussed.

The public debate is constantly distorted by claims that cannot be substantiated. One such claim is that the current period of budget deficits is building a stock of future claims on the well-being of the future generation – our kids. Accordingly, the neo-liberal deficit terrorists claim that the best thing we can do for the future generation is to avoid running deficits. My view is that we have been imposing a huge future burden on our children but this would be larger if we tried to run surpluses now. In fact, the years of surpluses exacted a huge toll on our children’s prospects that they will have to endure for years to come.

While I am still reflecting on the UNDP workshop I participated at earlier this week in New York, another issue which came up repeatedly during the workshop is the on-going dispute between those who advocate income guarantees against those (such as me) who advocate employment guarantees. I didn’t cover this dispute at all in yesterday’s blog – Bad luck if you are poor!. When you start digging into the claims made by the income guarantee lobby you realise that most of their case is built on a failure to understand how a modern monetary economy works. For those who understand the opportunities available to a government which issues a sovereign currency, then the attractiveness of income guarantees disappears (in my opinion). So this blog documents some of this debate.

I am now in New York on business for the next few days then off south to the capital Washington. In this blog I want to outline the horrible scenario that everyone has been predicting would happen – the increasing fiscal deficits will increase taxation. I know that has been on our minds. I have reached the ineluctable conclusion that future taxation will increase as a direct consequence of the current deficits. The tax revenue gained by the government will also reduce future deficits. Wouldn’t it be preferable that we didn’t push future taxation up and instead controlled net government spending? If you believed that you would have rocks in your head. In this blog I will be also be discussing debt, inflation, and other nasties.

I saw this in The Australian (on-line) front-page today – “POLL: Do unions have too much power?” So the campaigns are emerging: deficits, debt and union power. Seems like we are back in the 1970s when the conservatives last ran the union power campaign. The topic is apposite given the Government’s reaction last week to union requests to eliminate some of the nasty elements that remain from Work Choices. I laughed when I saw the poll – who are they trying to kid. Anyway, the current Government is playing hard cop with the union movement exploiting the lack of capacity of the latter to fight back.

It is interesting when a local journalist exploits the work of a foreign journalist to perpetuate neo-liberal myths about the way the modern monetary economy works without any critical scrutiny of the underlying ideas that he is mimicking. So we have one US journalist reiterating the views of a so-called “top US policy maker” without critical scrutiny then being copied a few days later by a senior Australian journalist who also doesn’t bother to question whether the underlying economics being fed to his readers makes any sense at all. Pretty poor really – the power of the conservative press!

Yesterday we had the rather unusual situation of the Treasury Head presenting a robust defence of his Department’s work after various commentators have suggested the forward estimates were flaky to say the least. Overall, it is an amazing exercise given that the issue is about how quickly the federal budget balance will return to surplus. So instead of a robust debate about why the Government is allowing unemployment to blow out and long-term unemployment to become entrenched again, all the hot air is about how quickly the federal government can start trashing the saving capacity of the private sector again. You get some feel for how low brow the debate actually is out there in expert media commentary and interview land by reading the ABC 7.30 Report transcript from last night when the presenter tried to question the Opposition Treasury spokesperson. It was as bad as it gets.

Today I am in Melbourne (my home town) presenting a workshop on skills development for the new green jobs economy which is a joint Victorian Government/Brotherhood of St Laurence show. But that is not what I am writing about here. Regular readers of billy blog will know that when I talk about budget deficits I typically stress two points: (a) that the Government is not financially constrained and therefore all the hoopla about debt and future tax burdens are just a waste of time. But just because the Government can buy whatever is for sale by crediting relevant bank accounts doesn’t mean they should not place limits on the size of the deficit; and so (b) given the federal deficit “finances” private saving, it should therefore be aim to “fill” the spending gap left by the private desire to save. If the Government does that then it can maintain full employment and price stability and move towards a more equitable society. So it is of importance that we have some idea of the size of this spending (or output) gap.

Today I released a major new research report Red alert suburbs: An employment vulnerability index for Australia’s major urban regions which was the result of a collaboration with Scott Baum (URP, Griffith University) who I share a large ARC Discovery Grant with. The Report and its findings has already received front page coverage in the large Australian dailies – The Age and the Sydney Morning Herald.

After yesterday’s shock admission that our Federal Finance Minister Lindsay Tanner was losing sleep because he was worried about the Federal debt buildup, there he was on the ABCs 7.30 Report last night giving us more cause for concern that his sleeplessness is having a negative effect on his ability to conduct reasonable dialogue on economic matters.

Senior journalists often do more harm than good when they write about technical issues that they clearly do not understand. In many cases, they rely on the technical knowledge of their favourite economist or the flavour of the month economist and they are not skilled enough to know when their “economist” is also talking rubbish.

Today in the Fairfax press, economics writer Ross Gittins in an article entitled No good reason to feel depression claims that we should not be too worried about the looming recession because after all things aren’t likely to be that bad. Well from my perspective recessions are episodes that wreak havoc on the most disadvantaged citizens in our society and should never occur.