The Australian government will release the Fourth Intergenerational Report today with much fanfare, scaremongering and lies. Our boofhead Treasurer has been doing the rounds of the media outlets giving his evangelical sales pitch on how scary the future is unless we cut the fiscal deficit now and get the balance back in surplus as soon as possible. These intergenerational reports are really a confection of lies, half-truths interspersed with irrelevancies and sometimes some interesting facts. There is very little economics in these reports. What parades as economic analysis is just the usual neo-liberal mainstream nonsense that currency-issuing governments have run out of money and fiscal deficits are dangerous. The Treasurer is selling the Report on the grounds of “intergenerational theft” (the classic anti-fiscal deficit argument about mortgaging our future grand children’s future). Apparently, this justifies large cuts to the fiscal deficit now in order to turn it into a surplus so that our future generations are left with no debt. The real intergenerational theft though is embodied in a current fiscal strategy that leaves around 45 per cent of our teenagers unemployed, underemployed or NEET (Not in Education, Employment or Training) and hacks into public infrastructure provision as a strategy to create fiscal surpluses now. With private spending subdued at present and the external sector also draining expenditure from the economy relative to its income, trying to impose fiscal austerity now in the name of defending future prosperity is a grand lie and will ensure that the future prosperity is undermined.

This is the second part in my discussion about Henry George and Modern Monetary Theory (MMT). In general, there is nothing particularly incompatible between the introduction of a broader LVT at the Federal level to replace or reduce other taxes currently levied and the insights provided by MMT. However, once you understand MMT, you realise that the discussion of the design of the tax system is quite different than just raising income from the most ‘efficient’ means. The Georgists would do well to come to terms with that and demonstrate how a land value tax (LVT) would work to free up real resources to give the real space for governments to spend. There doesn’t appear to be any analysis provided by Georgists to calibrate the impacts on non-government spending of such a tax and how this would alter the tax mix required to maintain full employment spending levels and satisfy the socio-economic spending goals of government. There are other things that might be done as well (if not prior to imposing a LVT) which would reduce the likelihood of property price bubbles. Finally, the obsession with the single LVT as a saviour is in denial of the causes of recessions and the the role that financial capital plays in destabilising economic systems. A LVT alone will do little to resolve those problems.

There was an extraordinary article published on the University of New South Wales News page (January 29, 2015) by a Professor of Finance (Peter Swan) entitled – Federal finances and family budgets have a great deal in common. Juxtapose that with a blog I wrote in December 2012 – Government budgets bear no relation to household budgets. Seems – we have a problem, Houston. Well, Peter Swan has a problem and along with him a raft of mainstream economists, including some who claim to be progressive. They are coming out of the woodwork where they hid during the peak of the crisis, as fiscal stimulus packages were saving the World economies, and are now rehearsing their usual erroneous claims about the dangers of on-going deficits. Their grasp of history and facts appears to be flimsy and their logic nonsensical.

Next week (Wednesday), I am giving the annual Clyde Cameron Memorial Lecture in Newcastle. Details are below if you are interested. Clyde Cameron – was a former Labor government Minister of Labour and other ministries (1972-75), a dedicated trade unionist, a defender of workers’ rights, and was aligned with the old-fashioned left-wing of the Party. He fell out with the Prime Minister at the time (Whitlam) over economic policy, in particular wages policy. The period of his demise is particularly interesting from an economic policy perspective and marked the beginning of the neo-liberal period in Australia and the rise of Monetarism as a macroeconomic policy framework. The type of propositions that were entertained by the Australian Treasurer, which were presented as TINA concepts in the public debate were flowering in policy making circles throughout the world. To some extent the current austerity mindset is the ultimate and refined expression of the trends that began around this time. The fetish against deficits first appeared in detail in the 1975-75 Commonwealth ‘Budget’ Papers. Cameron’s political demise in 1975 was intrinsically linked to his resistance against that fetishism, although his own solutions were similarly based on macroeconomic myths about the capacities of a currency-issuing government.

You get a sense as to why the public are confused about economic issues when you read this article in the Fairfax press this morning (February 3, 2015) – The brutal politics of privatisation stark after Queensland election shock – written in the aftermath of the conservative electoral bloodbath in the state of Queensland last weekend. The writer is a ‘well-respected’ business journalist, which just goes to show how ‘respect’ is easily gained if you sing from the appropriate hymn sheet. It is all in the conclusion: “The clock is ticking for Australia. With an infrastructure backlog and big budget deficits, we can build the infrastructure we need only by selling assets and attracting private capital”. Which is a barefaced (and ignorant) lie, even when applied to a state government that uses the currency issued at the federal level. Privatisation is not TINA. But while the public might be confused at the level of understanding (about how the monetary system operates etc), it is clear they are becoming increasingly focused at the level of feelings/sentiment. More and more people are seeing that neo-liberal remedies – privatisation, austerity, structural ‘reform’ etc – do not live up to their claims. Increasingly, we are seeing rising income and wealth inequality being associated with these attacks on workers. Several recent election outcomes around the world have categorically affirmed the obvious – citizens all over are starting to rebel against austerity and neo-liberal so-called ‘solutions’ (such as privatisation and public sector job cuts). In Australia we have just witnessed a remarkable electoral rout in the Queensland State Election where the neo-liberal, privatising conservatives were tossed out of office on Saturday exactly as a result of a widespread rejection of these policies. The Greek elections a few weeks ago provided a more profound signal of this trend. The European Parliament elections in May last year another. Time is running out for neo-liberalism. The smugness that the elites have had is

The UK Guardian article (January 20, 2015) – Davos 2015: sliding oil price makes chief executives less upbeat than last year – reported that the top-end-of-town are in “a less bullish mood than a year ago” and that “the boost from lower oil prices is being outweighed by a host of negative factors”. The increasing pessimism is being reflected in the growth downgrades by the IMF in its most recent forecasts. A significant proportion of the financial commentators and business interests are now putting their hopes on the ECB to save the world with quantitative easing (QE). That, in itself, is a testament to how lacking in comprehension the majority of people are about monetary economics. QE will not save the Eurozone. But I was interested in this pessimism in the context of falling oil prices given that with costs falling significantly for oil-using sectors (transport, plastics etc) and disposable income rising for consumers (less petrol costs), the falling oil prices should be a stimulating factor. I recall in the 1970s when the two OPEC oil price hikes were the cause of stagflation. So why should the opposite dynamic cause ‘stag-deflation’ (a word I just invented)? There is a common element – fiscal austerity – which explains both situations.

The deranged individual who held the people hostage in Sydney over the last 24 hours wasn’t an Islamic State terrorist despite what the commercial news frenzy tried to tell us. He was a deranged individual. But while the news frenzy was as deplorable as his act (see this more sober account), it did one other thing – it kept Joseph Pinstripe Bulgington Hockey off the front page. Who is JPB Hockey? The Australian Treasurer and yesterday he released the Federal Government’s – Mid-Year Economic and Fiscal Outlook – which was comedic, hypocritical and demonstrates that we haven’t come very far since the days we believed the world was flat. The hostage drama in Sydney meant JPB had to take back stage and the 16 ridiculous pages that the News Limited rag the Daily Telegraph in Sydney devoted to what they called an “attack by the Islamic State”, effectively choked the coverage of the MYEFO. Some saving grace.