US tax debate shifting the agenda

I had the following letter hidden behind the AFR paywall this morning.

‘In yesterday’s AFR Ben Potter Romney can’t romp ahead pointed to pitfalls in “centrist” Republican front-runner Mitt Romney’s progression to the candidature. 

 ’John Quiggin The right’s wrong turn, anointed Romney as the Republican candidate.  In a thinly disguised attack on Tony Abbott, he even puts rank outsider Jon Huntsman as the only alternative, largely because Huntsman is alone on the Republican side in unambiguously supporting a carbon tax. 

‘ Quiggin considers Obama will trounce any of the Republican candidates.  Astonishingly he now says the right has lost the “intellectual dominance” of the 1990s, a dominance he never recognised at the time. 

 ’Quiggin’s own support for ever increasing government spending has blinded him to a key feature of the campaign – an auction among the Republicans for lower taxes and lower spending.  Herman Cain with his triple 9 per cent taxes on corporate incomes, individual incomes and sales, is campaigning for a 20 per cent cap on federal spending, which is currently 25 per cent.  The share targeted by Rick Perry is 18 per cent. 

 ’All Republicans are focussed on expenditure cuts, while the Democrats are falling back on increased taxes on the rich, taxes that could never deliver the dividend of a balanced budget. 

 ’What leftist writers are missing is the agenda change brought about by collapsing European economies and the US federal budget deficit at 10 per cent of GDP.  The issues are shifting to spending cuts.  Spending cuts are increasingly urgent in Australia and are policy imperatives in the US, Japan and most European countries where debt is greater than GDP.’

Andrew Robb is seeking to identify savings, targetting $70 billion which the ALP considers to be huge but which Judy Sloane on Q&A demonstrated to be almost easy within the context of four years and the agggregate level of government spending. 

However, many within the coalition are however still talking about increased spending on social program areas.  Moreover an in-coming coalition government still has to determine how to extricate the taxpayer from the carbon tax commitment costs that the current government wants to leave as its legacy.  It also has to figure out how to dismantle the increasing costs of its renewable energy requirements and how to stop pouring money into snake oil schemes like the Queensland Zerogen proposed $4 billion carbon capture ‘world first’ power station the collapse of which, at a  cost to taxpayers $160 million, was revealed this morning.  

 

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56 Responses to US tax debate shifting the agenda

  1. Skuter

    Andrew Robb is seeking to identify savings, targetting $70 billion which the ALP considers to be huge but which Judy Sloane on Q&A demonstrated to be almost easy within the context of four years and the agggregate level of government spending.

    Alan, don’t forget that over that four year period of forward estimates cash payments are projected to hit $406.464 billion, up from an actual figure of $346.102 billion in 2010-11 or an estimated figure (soon to be updated in MYEFO) of $362.078 billion in 2011-12. Most of the job could be done by freezing spending at current levels, even with an allowance for inflation. You’d be able to hear the public servants’ (and ACT politicians’) wailing from Perth though…

  2. Irving J

    its an inherent catastrophe that gov grows in line with and often exceeds gdp and not population growth.

  3. David Elson

    Government is just the place for bureaucratic “empire” building. Sadly this results in greater costs for tax payers :P

  4. Jim Rose

    Quiggin considers Obama will trounce any of the Republican candidates

    I hope that this belief is common on the left.

    Complicacy among the incumbent’s supporters, strategists and donors never hurt.

    An early test will be the number of democratic party candidates in close races who invite Obama to campaign for them.

  5. John Quiggin

    You shouldn’t believe everything you read in Catallaxy, Jim. What I actually wrote about Obama’s chances was:

    Yet despite all these misjudgements, and the lack of any sign of improvement in the economy, Obama is widely favoured to win in 2012, and is tied in opinion polls with his presumptive opponent, Mitt Romney.

  6. John Quiggin

    And while I’m at it, what’s “thinly disguised” about

    [The intellectual collapse of the right] has been completed by the ascension of Tony Abbott. Disdaining the seriousness exemplified by John Howard and Malcolm Turnbull, Abbott happily says whatever will please his audience, no matter how little factual basis his claims may have.

  7. Jim Rose

    Obama is widely favoured to win in 2012, and is tied in opinion polls with his presumptive opponent, Mitt Romney

    Thanks John, I do not know where your original post was posted.

    Being just tied with Romney does not sound like a strong position to me.

    Are you giving Obama better odds that Bush in 2004?

    In 2004, the Democrats had to ask for volunteers.

    Republicans are queuing up to challenge Obama in 2012 so they do not miss the main chance.

    In 2008, an otherwise unemployed Mike Huckerbee was the runner-up to McCain.

    The U.S. economy is very weak in 2011 and unlikely to experience a robust recovery by Election Day. Key voter groups have soured on Obama. He’s defending unpopular policies and he’s made bad strategic decisions.

    President Obama faces a “titanic struggle” to win reelection, his top campaign strategist, David Axelrod, said in late September, given the high unemployment rate and the poisonous partisan atmosphere in Washington.

    “In 2008, we had the wind at our backs,” Axelrod said, “Now, we don’t have the wind at our back. We have the wind in our faces, because the American people have the wind in their faces.”

    See http://articles.latimes.com/2011/sep/27/news/la-pn-obama-axelrod-20110927

    p.s. I do not know how you find the time to run your own blog and still post on others.

  8. John Quiggin

    I’ll post the column on my blog – it makes all the above points, then follows up by observing that, despite all this, he is still slightly ahead, thanks to the appalling intellectual state of the right, exemplified by candidates like Perry and Cain.

    For info, Obama is (just) odds-on to win at Intrade.

  9. alan moran

    John,

    Your AFR piece was a thinly disguised attack on Abbott because it was ostensibly about the US elections but quickly descended to an agitprop rant against your favourite local target.

    I am pleased to see that you finally acknowledge after 15 years that the right had the “intellectual dominance” in the 1990s. At the time you categorised all that the expenditure restraint, privatisation and budget balancing in terms similar to the “appalling intellectual state of the right” which you use to describe the policies of Perry and Cain.

  10. Jim Rose

    Obama is widely favoured to win in 2012

    thanks John,
    you now have said that Obama is widely favoured to win in 2012 and he is tied in the polls and he is still slightly ahead in the prediction markets.

    A candidate who is tied with would be opponents is not widely favoured to win.

    In the republican field, Romney is far more impressive than first term senator Obama in 2008 and a nobody called Clinton 1992 at similar stages of their presidential candidatures.

    Romney’s problems with the republican base are shape shifting and his religion.

    Perry can’t talk and walk at the same time. A drawback that is hard to overcome.

    As the democratic party rest in 2008, Hilary aside, the others were John Edwards (!), Biden and other nobodies. Biden got less that 1% in the Iowa caucuses and withdrew.

    Did you see John Edwards’ police mug-shot?! I hope you did not support that rancid populist in 2008.

    Biden can’t seem to get anyone to vote for him and yet he ended up as vice-president.

    The first of many poor choices, but Obama had to find someone who would not overshadow his own resume, which was thinner than Palin’s.

    Biden declined Obama’s first request to vet him for vice president, fearing the vice presidency would represent a loss in status and voice from his senate position.

    Rudy Giuliani spent $50 million to win one delegate.

    Keating got out of a deep hole in 1991 to 1993 by admitting he was in a hole and had to change to win. Ditto Clinton after the 1994 congressional elections.

    Obama must change tack to to win. you dig your way out of a hole by turning around and climbing.

    A wise man does not fall into a hole that a clever man can climb out of. Obama is clever, but not wise. His lack of prior job experience is the reason.

  11. John Quiggin

    On the first point, how can an “agitprop rant” be a “thinly disguised attack”? At least get your insults straight.

    On the second, I argued against rightwing views in the 1990s, but it would have been absurd to deny they were dominant, or that the left was in retreat. I wrote several books about this, and many articles, all very clearly arguing against the then-dominant views.

    As for Cain and Perry (and Abbott!), if you think these guys are credible standard bearers for your cause, I don’t have any reason to set you straight. But you might want to talk to Ross Douthat, whom I quoted in my piece, or to the US rightwing bloggers who are mostly in despair over the appalling state of the Republican field.

  12. .

    This is why economists shouldn’t play politics.

    Keating and Button started the reform process and Howard and Costello managed the fruits of this during the greatest phase of economic growth in modern Australian history.

    It was a success.

    All Abbot has done (as opposition leader) is said no to three hare brained policies (RSPT/MRRT, ETS and Malaysian solution) which were botches of the ideal. Abbot gets stick for doing his job? Why are the proponents of the RSPT/MRRT and ETS deluding themselves that these are anything like the ideal? Where did Swan get the idea to tax firms at a “super profit rate” below their cost of capital?

    What exactly is wrong with Cain, Professor? My problem with his policy is he assumes America is capitalist. Their total spending (all levels) to GDP ratio is 46%. He is about 30 years too late.

  13. .

    the US rightwing bloggers who are mostly in despair over the appalling state of the Republican field.

    I am in great despair over the results of years of political inbreeding in Australia, which sees a very low talent standard in our Parliament. Personally I think it affects the ALP more than the Coalition, but clearly the 1980s and 1990s saw a superior quality of front bencher at the Federal level and here in NSW.

  14. Jim Rose

    thanks John,
    Cain is a loon, as was huckerbee. both are smooth talking preachers.

    One of Abbott’s great political skills is being continually under-estimated by his opponents. A 60-40 lead in a good economy is not enough to suggest success due to skill.

    Reagan had this skill too. The only election senile old Reagan lost was missing out by 100 delegates on unseating a sitting president from his own party.

    Abbott is the best opposition leader since Menzies.

    Hawke, Rudd and Howard were the undertakers for old, tired and smelly governments.

    Whitlam just beat dopey old Billy McMahon by 9 seats. There was no landslide when it was time to throw out a 23 year government.

    Fraser benefited from a political mass suicide and stagflation.

    Did Abbott meet and exceed the realistic expectations of impartial spectators when he became the surprise Liberal Party leader by one vote?

    No one gave Abbott a chance.

    Abbott was supposed to be a seat warmer who might narrow the require winning margin against Rudd in the federal election in 2013.

    Within 6 months, Abbott has saw off a previously immensely popular first term PM through his focused attacks on him.

    He then pushed a previously popular first term government into a minority coalition. The last australian government not to be reelected with a majority was scullin in 1931.

    Abbott connects with the forgotten people. Why the ALP has forgotten bread and butter swinging voters with families is yet to be explained.

    The ALP should stop chasing the green vote because green voters now have nowhere else to go.

    p.s. on the appalling state of the Republican field, Clinton must be still bitter. she was a class well above the rest in 2008 and still lost. when was the last time there was a classy field in the primaries?

  15. Jim Rose

    The last australian government not to be reelected with a majority was scullin in 1931

    should be the last first term australian government not to be reelected with a majority was scullin in 1931.

  16. Jim Rose

    The voters never had a scintilla of doubt about who they were voting for and the approach to governance that each symbolised when the real John, the real Bob and the real Paul were stumping for the PM’s office in 1980s, 1990s and up to 2007.

    The voters thought they were voting for the real deal in Kevin07. they dumped him with no second chances for a come-back when they found out that they were deceived on a core issue.

    Abbott is what you see is what you get. None of this “being for something after being against it” double-dealing.

    There is one thing the voters hate more that a double-talking politician, it is a phoney indecisive politician.

    The voters will elect strong decisive politicians. Nothing less will do.

    Gillard is not seen as strong and decisive. Romney too has the probelm of being seen as a phoney.

  17. johno

    Well said Jim.

    The Left are so desperate to paint Abbott as Mr Negativity, but the polls show he is doing exactly what an Opposition Leader should be doing.

    I have no idea what Tony Abbott will be like as Prime Minister, but given that my expectations about every new Prime Minister has been spectacularly wrong, I’m not too fussed about not knowing.

    One thing I do know, given the ministerial experience that he, and his front bench, will bring to government, we can at least expect to see the return to competent government, which has been the norm since Whitlam’s defeat. Bad policy has always been a feature of Australian politics, but a systematic inability to actually implement policies has been the defining feature of the Rudd and Gillard governments.

  18. Jim Rose

    thanks Johno,

    I was thinking, when was the last time a federal opposition won an election that could not have been won by a drover’s dog?

    australian federal changes of government usually follow from a mercy killing at the ballot box.

    political power usually takes 9 to 12 years in office to turn into a terminal cancer consuming the whole body.

  19. Johno

    political power usually takes 9 to 12 years in office to turn into a terminal cancer consuming the whole body.

    Nine to 12 years! Gillard is ahead of her time. :-)

  20. .

    Cain is a loon, as was huckerbee. both are smooth talking preachers.

    Please explain.

  21. wreckage

    “Appalling intellectual state of the right”, eh? It is my experience that the left (arguments over relative civility notwithstanding) ALWAYS consider the right to be in an appalling intellectual state. They believe this of successful centre-right governments with clear goals and solid outcomes, they believe it of Liberal, Libertarian, and any other less-than-socialist intellectual or idealist.

    “The appalling intellectual state” excuses them from arguments on effectiveness, which they have historically lost. It also feels correct to the left; after all, in their view, free-market idealists aren’t intellectuals, they’re brutes; nationalists aren’t idealists, they’re violent psychopaths; and Libertarians aren’t committed to a vision of freedom and equality, quite the opposite.

    So, given that they already believe that anyone on the right is appalling except insofar as that person leans left, any statement on the intellectual state of the right is a circular argument at best, and tribalist bleating at worst.

    There are plenty of left-wingers of whom this is not true, but they tend not to get published.

  22. .

    Wreckage,

    Anyone who isn’t a libertarian needs their head checked.

    I know I am biased. Lefties have brainwashed themselves into thinking they are not.

  23. Jim Rose

    Cain is a loon, as was huckerbee

    Cain has his 9,9,9 plan. huckerbee proposed a sales tax of 25% to replace the income tax.

    Populists who want to raise tax on the low paid and are silly enough to think the income tax would stay down at 9% or zero.

  24. wreckage

    A flat tax plus GST may not be mainstream, but it isn’t lunacy either. 9,9,9 would be a tad low, IMO, but I haven’t seen the numbers.

  25. .

    Populists who want to raise tax on the low paid and are silly enough to think the income tax would stay down at 9% or zero.

    Ah Jim, “your” theory that the king’s reach was terrible but it was short.

    It’s a bit nihilistic isn’t it? What about a TABOR?

    The problem is Americans want pork. 46% total Government spending to GDP ratio. I saw it yesterday at the US Debt Clock.

    Every (just about) State must have military bases for example.

  26. Jim Rose

    After the 1970s tax revolts and California’s Proposition 13, Buchanan and Brennan wrote The Power to Tax, which was one of the best and most important books on public finance of the twentieth century.

    Their message was if you don’t always trust governments, beware of efficient taxes.

    Efficient taxes make it easier for government to extract more revenue with less political resistance.

    When Brennan made this point at a conference 20 years ago, no one understood him because, idealists all, the audience assumed they were advising a benevolent government, not a size maximising leviathan. A beast that needed to be staved with constitutional constraints on tax bases and tax instruments.

    Fiscal arrangements are analysed by Buchanan and Brennan in terms of the preferences of citizen-taxpayers who are permitted at some constitutional level of choice to select the fiscal institutions they are to be subject over an uncertain future.

    Those in elected office are assumed to exploit the taxing power assigned to them to the maximum possible extent: government is a revenue-maximizing Leviathan.

    the last chapter of their book entitled ‘Towards authentic tax reform’ is online.

  27. John Quiggin

    None of this “being for something after being against it” double-dealing. (Abbott)

    I think Malcolm Turnbull compared him to a weathervane for having taken every conceivable position on climate change. Certainly he has done so.

    Similarly, he has denounced “Great Big New Taxes” and also proposed his own, to finance parental leave.

  28. .

    Jim I didn’t properly ask a question but I don’t think you answered it at all.

  29. Jarrah

    “Efficient taxes make it easier for government to extract more revenue with less political resistance.”

    And also less distortion of the underlying economy.

  30. sdfc

    Jim

    If the community wanted lower taxes and services they could always vote in a party that will give them those things.

    I’m thinking you don’t have the numbers.

  31. .

    Have a TABOR, demand cost benefits tests and let economic growth make up for losses and eventually ameliorate poverty and reduce the demand for services.

    No sdfc – even Howard went bonkers after cutting early on. Some stuff was just asinine crap, not social services.

  32. sdfc

    Dot your major expenditure items are social security health and education. For this you need taxes.

  33. Jim Rose

    I’m thinking you don’t have the numbers

    federalism is a major constitutional constraint on higher taxes. federalism is popular.

    The will of the people is constantly tested and remeasured in a federal system with elections at one level or another every year or so contested on a mix of local and national issues.

    in consequence, total taxes are lower in federal states.

    In a unitary unicameral parliament, those crazies to the right or left of you are tempered by an occasional general election only every 3 to 5 years.

    Little wonder that UK Labor reconsidered devolution, an assembly for London, and regional government after 15 years of Maggie Thatcher, good and hard, with her unfettered right to ask the house of commons to make or unmake any law and tax whatsoever.

  34. sdfc

    I’d be very happy if the states raised their own funds. The federal government is a parasite.

  35. JamesK

    I think Malcolm Turnbull compared him to a weathervane for having taken every conceivable position on climate change. Certainly he has done so.

    Has he?

    His op-ed in The Oz July 2009 is completely in keeping in terms of his position of the science of AGW now. He signalled that a pragmatic political retreat was ineviatble is all.

    He saw that the MSM leftist fear campaign had won and supported his leader in negotiating with the Government for at least a less damaging CPRS.

    The politics changed and he read the electorate.

    That suggests no change in his ideology.

    It suggests an independently minded politician able to read the grassroots of his party and the electorate who was willing to buck the insider elitists who evidence their attitude that the electorate are dumbf-cks who need to be manipulated.

    In fact, it shows Abbott to be principled, brave and nimble.

  36. .

    Dot your major expenditure items are social security health and education. For this you need taxes.

    Where the fuck does this come from? Are you pissed again?

    I’m going to join you after supper. Coopers Sparkling Ale.

  37. sdfc

    We’re talking about taxes and expenditure aren’t we Dot?

  38. sdfc

    It’s the point I made to Jim prior to you joining the discussion.

  39. sdfc

    You addressed me. Are you on drugs?

  40. .

    I don’t get what you are getting at. Why bother telling me that after I addressed you?

  41. Jarrah

    “That suggests no change in his ideology.”

    Only if his ideology is to do anything currently popular, regardless of principle.

  42. .

    No sdfc – even Howard went bonkers after cutting early on. Some stuff was just asinine crap, not social services.

    Then you reply:

    *Dot your major expenditure items are social security health and education. For this you need taxes.*

    So you’re telling me we should just give up in demanding value for money as taxpayers? How do you deal with this? Legal tax minimisation or biting the pillow?

  43. JamesK

    Legal tax minimisation or biting the pillow

    Jarrah doesn’t bite.

    He’s receptive.

    An unavoidable nuisance is all.

    Cheap at twice the price

  44. sdfc

    No Dot

    Now read very carefully. Jim proposed efficient taxes are sub-optimal because they reduce resistance to government’s extracting revenue.

    I merely made the point that the community on balance supports government revenue raising and public expenditure activities.

    I have no idea what you are on about. Other than to say that Howard cut the low hanging fruit.

  45. .

    Ok now I get it. Very clever. I agree they should get value for money, they earned it.

    Howard did not provide value for money in his senile years.

  46. Jim Rose

    Abbott!), if you think these guys are credible standard bearers for your cause, I don’t have any reason to set you straight

    If Abbott was not a credible standard bearer, why are his political opponents suggesting he change tack and mellow on out?

    Political opponents rarely offer advice to opponents on how to be more effective in winning office. This is especially so when they are well ahead in the polls.

    Napoleon said never interrupt an opponent when he is making a mistake. Never interfere with the enemy when he is in the process of destroying himself.

    Good hearted opponents of Abbott, and even new double-secret friends of the hard right such as John Quiggin, appear to be interfering all the time with advice that Abbott should change course to more vote winning strategies such as those similar to those that sent the ALP into the political toilet.

    Never interfere with Abbott when he is in the process of destroying himself should be the rule, if indeed he is in the process of destroying himself. The 60-40 lead must be due to others in his party.

    The Left find Abbott infuriating because he is winning. The Left likes Turnbull and his policies because he did not put a scratch on Rudd.

    Beware of Greeks baring gifts.

  47. .

    Beware of geeks subverting grifts!

  48. Sean

    Abbott is lurching so far to the left on industrial relations that soon it will be his own party (other than just outsiders Reith and Costello) telling him to change course.

    I can only presume he will do a Kevin Rudd. Go me-2 on all the policies the public like and then get elected and backflip slowly.

  49. Jim Rose

    Abbott is lurching so far to the left on industrial relations that soon it will be his own party

    if you oppose the liberals, never interfere with Abbott when he is in the process of destroying himself.

  50. .

    As a libertarian, the major parties destroying themselves is fortuitous, but as an Australian, at the same time, tragic.

  51. wreckage

    I’m not sure the majors dying would result in more liberty, Dot. More likely fascism IMO.

    Abbott’s IR policy is to not lose the next election. That’s a reasonable goal and a rational policy. There is plenty else going horribly wrong right now and plenty of places he could pick up some economic growth without causing a stampede.

  52. .

    I did make that disclaimer “as an Australian”.

    God help us if the Greens and One Nation or it’s equivalent ever get more than 50% of the vote.

    Backwards, anti development, deep green, jingoistic socialism to boot.

    Makes me appreciate dunderheads like our stupid pet Cory Bernadi.

  53. Dan

    . said:

    ‘Anyone who isn’t a libertarian needs their head checked.’

    Ideology looks like common sense from the inside, eh?

    Hey, at least some people are willing to have a think about why otherwise sensible, smart, nice people might have godawful politics. You’re stuck in a bubble.

  54. Did anybody here, specially Quiggin, ever hear of Romney and Gingrich, who are the frontrunners to take on Obama?

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