I am now in the US with a hectic week ahead. At present I am in Florida and for those who haven’t been here just imagine taking a landscape and pouring as much concrete as you can mix over as much of that landscape that you can access. Then once that sets, you build massive high-rise buildings and suburbs that span hundreds of kilometres and you have it. Oh, and plant a few palm trees as you concrete. But then there is surf nearby and before work this morning I am off to check it out. Anyway, in between other things I have been reading the so-called public debt exposition that appears in the latest issue of the The Economist Magazine. It will take a few blogs to work through it but here is Part 1. It might happen that there will be no Part 2 if I get so sick of reading this nonsense.

I have been doing work on international trends in unemployment today and spent some time on the UK economy. Of-course, Britain is in the news at present because its polity is melting down rapidly. We have been laughing a bit I am sure about the so-called rorts scandal, especially the story about the ducks not liking their island anyway. I laughed anyway. I also applauded the skilled research that tracked the island down on Google Earth. Anyway, the rorts scandal is a sideshow in a much bigger problem that is unfolding in Britain at present. Its labour market is in free fall!

The euphoria over a 0.4 quarterly growth figure which translate into annualised GDP growth being at least 2.5 per cent less than would be required to keep the unemployment rate from rising should be attenuated by the fact that National Accounts data is very slow to come out. The picture it paints which conditions our current expectations and debates is old – at least 3 months old by definition. And it is sobering when amidst all the self-congratulation and applause for our strong export performance that newer data has come out today which suggests that GDP growth is probably now negative although we won’t find that out for three more months. Meanwhile the debt and deficits argument continues in the public debate. Here is an update.

Well the conservatives are scrapping between themselves, which is just as well because it might derail their drivel campaign about the trillion (whatever!) dollar debt wave that we are about to drown under. Me, I will surf it out with my longboard and enjoy the experience! Anyway, seems Mike wants to end our little engagement which is fine because tomorrow I will be talking about “R we or R we not”. National Accounts are out at 11.30. So this blog summarises where I think we are at. Remember that it started with the blog – Neoliberals invade The Greens! and the space theme continued with Mike conjuring up the Mitchell Strikes Back and today The return of Mitchell. Whatever, it is more clear than ever that the conservative macroeconomics has The Greens in its grip – sadly.

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!

Some readers have asked me to comment on the economic policy of The Australian Greens and how it sits with the other major political parties. I base this assessment on what appears to be the policy statement which was current as at November 2008. There is not a single reference to employment, unemployment or full employment as key economic goals. Moreover, there is as much neo-liberal macroeconomics in the document as you would find in the papers espousing the approach of the main parties. And worse still … if The Greens actually tried to implement some of their macroeconomics principles then they would undermine most of their other major policy goals. So there is no joy to be found in this place for a progressive who understands how the modern monetary system operates.

I was in Sydney today doing various things (see below). It was an interesting day but this morning’s activity gave me some hope that there are community leaders out there who want to fight back and jettison the neo-liberal garbage that is constraining their ability to deliver social equity and job security for their members. My input to the discussion was to tie this in to the macroeconomic debate. These macroeconomic matters – which I write hundreds of thousands of words every year about – really lie at the heart of the problems facing low wage workers and the unemployed. Unless we successfully counter the orthodoxy then tinkering around the edges will be all that we can do. I realise the macroeconomic concepts are difficult to talk about in an accessible way. I also realise that the neo-liberal orthodoxy has been incredibly successful in inculcating notions that the Federal budget is akin to a household budget. Readers of this blog will know it can never be that way. So the challenge for our community leaders is to develop a macro narrative which can permeate the public debate and slowly redefine how we see government; what goals we want the government to pursue (full employment) and how they do business with employers. That is an interesting challenge and I like things like that.

In the 1980s, as high unemployment persisted following the 1975 OPEC oil shock and the stagflation that accompanied it and then the 1982 recession and its aftermath, neo-liberals started to seek new ways of justifying the lack of government action in restoring full employment. Being very clever, they came up with an ingenious solution – redefine what full employment means. So as the unemployment rate rose they claimed that the so-called “equilibrium unemployment rate” had also risen which meant that attempts to reduce it by expansionary policy would be inflationary. They claimed the only way the government could act was to initiate “structural reforms” aka privatisation, labour market deregulation, anti-union legislation and harsh welfare measures. Why should we be so surprised that they are at it again? The truth is that recessions cause structural imbalances which are corrected again if economic growth is strong enough in the post recession phase.

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.

Lat night’s ABC 7.30 Report had a segment titled Australian economy resilient in tough times. It was so bad I was prompted to write to the ABC complaining of their neo-liberal bias. All the commentators were the usual coterie of investment bankers and private consultants all of who have particular vested interests which are not disclosed when they are held out by the ABC as so-called experts! Not one independent researcher was included in the segment. In another world, this might have been the way the show evolved.

A good way to understand the origins of the current economic crisis in Australia is to examine the historical behaviour of key macroeconomic aggregates. The previous Federal Government claimed they were responsibly managing the fiscal and monetary parameters and creating a resilient competitive economy. This was a spurious claim they were in fact setting Australia up for crisis. The reality is that the previous government created an economy which was always going to crash badly.

Opposition leader Turnbull has decided to go to the wall in opposing the $42 billion package. In particular, they want tax cuts rather than the $12.7 billion in cash handouts. He said they will not be provide economic stimulus and that December’s $10.4 billion in handouts had not worked. Soon after Turnbull provided these conclusions the ABS released the latest retail trade figures which showed that consumer spending shot up by 3.8 per cent in December, the highest monthly increase since August 2000 (since the GST came in).