Rewriting climate history

No. I’m not referring to “hiding the decline” or other scientific falsifications, rather rewriting of the narrative around the carbon tax. This morning we read:

Finally, abolishing the carbon price costs about $6 billion a year. As Ross Garnaut has pointed out, the carbon price wasn’t just a sound environmental policy; it was also an important fiscal policy. Scrapping the carbon price has blown a huge hole in the budget, and the government has chosen to make up the revenue by cutting health, education, pensions and social payments. This means fewer resources for a child in a disadvantaged school, for indigenous legal aid, or for a young man who loses his job in Devonport.

That’s Andrew Leigh spruiking the carbon tax – apparently forcing poor people to pay more for their electricity and/or shiver through winter is good for inequality. To be sure it equalises the poor today with the poor of yesteryear and while it is somewhat impressive that the former government was able to sell such a policy, it can hardly be described as being progress.

I seem to recall, however, the Gillard government claiming that the carbon tax was revenue neutral, because they were spending all the money. A new definition of the term revenue neutral, to be sure, but that was the claim. To the extent that is true, then Andrew Leigh’s claim is wrong – repealing the carbon tax doesn’t blow a hole in the budget, it reduces the size of the budget. To get an idea of the net impact of the carbon tax and associated policy on the budget Alex Robson traced out the fiscal impact of the various policies in his 2013 paper Australia’s Carbon Tax: An Economic Evaluation.

Alex - carbon tax

Looks like the carbon tax policy resulted in more expenditure than any revenue it was likely to raise. Before we leave this point – that outcome is the policy design, not the ex post outcome.* That also means that repealing the carbon tax does not reduce any revenue available for increased welfare spending such as “resources for a child in a disadvantaged school, for indigenous legal aid, or for a young man who loses his job in Devonport”. To the extent that the Abbott government had been willing to repeal the carbon tax policy in toto it would have freed up resources for increased welfare payments.

On a related matter, Andrew Leigh has a go as Maurice Newman:

Maurice Newman … thinks inequality doesn’t matter — or if it does, then the solution is weakening labour laws and cutting the top tax rates.

Newman is entirely correct – inequality doesn’t matter, but if it did the best solution is for people to get a job. The only thing government can do to ensure that people can get jobs is to make it easier for entrepreneurs to employ and profitable for entrepreneurs to employ. That means labour market flexibility and lower taxes.

* To the extent that repealing the carbon tax does now result in a net budget loss to the government that’ll be because the tax didn’t raise as much revenue as expected, the ALP over-compensated, and the Abbott government hasn’t repealed the policy in total. In other words, the net increase in government spending is ALP policy from 2011 – Andrew Leigh can hardly complain about that.

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22 Responses to Rewriting climate history

  1. Paul

    Indigenous legal aid is wasted money. Up here they commit crimes to get IN to jail. Record doesn’t matter when you never work, many of their family and friends are there, they get better food and lodging. Its not unusual to see them committing petty crimes before upcoming football matches, Christmas or any other event of interest to them. For the younger ones its a manhood initiation. Legal aid? They’re managing quite nicely without it thank you.

  2. I am the Walrus, Koo Koo K'choo

    So, Andrew Leigh is a partisan hack using his training to mislead the public in the service of the Trades Unionist Party?

    Well, bugger me.

    Who’da thunk it??

  3. Rabz

    That’s Andrew Leigh spruiking the carbon tax

    Am I missing something – why does anyone take this imbecile seriously? I recently had a discussion with a Fauxfacts national peanut gallery journo at a mate’s 50th and he became seriously animated when discussing the former economist above, stating Leigh was the most intelligent MP in the labor pardee.

    I attempted to disabuse him of that notion, with no great success. In fact, I might as well have told it to a fence post. Seriously disillusioning stuff.

  4. Token

    That’s Andrew Leigh spruiking the carbon tax – apparently forcing poor people to pay more for their electricity and/or shiver through winter is good for inequality.

    Will this mean real economists turn their back on him at conferences like they did to Nelson a few years back?

  5. Token

    …he became seriously animated when discussing the former economist above, stating Leigh was the most intelligent MP in the labor pardee.

    If I had the chance I would not try to change that type of mind. I would hammer them on why they are allowed such a “talent” to waste away pandering with populist crap everyone with 2 brain cells to rub together knows is short term & destructive. Humiliation is the only choice.

  6. C.L.

    … the carbon price wasn’t just a sound environmental policy; it was also an important fiscal policy

    LOL.

  7. Dr. Sir Fred Lenin

    The elderly and poor of Australia should be proud to suffer to help filthy rich overseas “investors” make squillions out of the untidy nayshuns inspired ” karbintaks” as the late chools used to call it.
    The u.n. is pissed off with us ,”wheres our ten oercent ” they cry.
    Starve you Bludgers Starve!

  8. Elizabeth (Lizzie) B.

    “an important fiscal policy”???

    Take warmth from the poor. Destroy their employment. Distribute largess to mates.
    Fiscal under their definitions, but not mine. I call it another ‘f’ word: fraud.

  9. Roger

    Newman is entirely correct – inequality doesn’t matter
    Really?
    I don’t subscribe to the socialist belief that we should normalise equality through legislative measures but didn’t Adam Smith regard high levels of inequality resulting from a concentration of wealth as a sign of a society in decline due to a corruption of the free market? I think he would have a stinging critique to make of our banking system, for instance.

  10. That’s Andrew Leigh spruiking the carbon tax – apparently forcing poor people to pay more for their electricity and/or shiver through winter is good for inequality. To be sure it equalises the poor today with the poor of yesteryear and while it is somewhat impressive that the former government was able to sell such a policy, it can hardly be described as being progress.

    What’s all this, Sinc? Is the bromance finally over? If so, I am hugely relieved … :)

  11. Sinclair Davidson

    Is the bromance finally over?

    There is no bromance – just that I think criticisms of Andrew (and others) is sometimes OTT and not to the matter at hand.

    As it happens Andrew and I will speaking at the same conference at the weekend.

  12. stackja

    The old poor should shiver through winter or die of cold and save ALP budget for important to ALP projects not wasted on old age pensions.

  13. Jock

    Sinc

    Mr Leigh and Garnaut may wish to comment on the fiscal cliff that approached when the tax was turned into an ETS. The problem was always that the tax didnt fit the supposed ETS. The lack of revenue from the ETS to fund the redistribution of the initial carbon tax . What was the plan to deal with this??

  14. Peter from SA

    Maurice Newman … thinks inequality doesn’t matter — or if it does, then the solution is weakening labour laws and cutting the top tax rates.

    This is the main difference between Labor and “conservatives” (although only a few conservatives are gutsy enough to advocate these policies). Labor really think such solutions are laughable. They actually laugh about these things.

    This is akin to the Protectionists versus Free Trade arguments in the 20th Century. Protectionism destroys wealth. But Labor was usually happy to argue otherwise.

    In both cases the left is arguing for institutional control of the economy, via unions and/or tariff boards / nationalised industry.

  15. Ant

    The only thing government can do to ensure that people can get jobs is to make it easier for entrepreneurs to employ and profitable for entrepreneurs to employ. That means labour market flexibility and lower taxes.

    A no-brainer for anybody with a functioning brain.

  16. entropy

    Jock
    #1421046, posted on August 18, 2014 at 12:09 pm
    Sinc

    Mr Leigh and Garnaut may wish to comment on the fiscal cliff that approached when the tax was turned into an ETS. The problem was always that the tax didnt fit the supposed ETS. The lack of revenue from the ETS to fund the redistribution of the initial carbon tax . What was the plan to deal with this??

    You know what your problem is, don’t you Jock?

    You just don’t have enough faith. Not enough faith that the price set by the ETS will be greater than the price set by the tax. Not en lough faith that an ETS will automatically solve all the little petty fiscal problems. Not enough faith that there will be no need to talk about how much that price would have to be to cover our largess with Other Peoples’ Money, as that would upset the peons.

  17. Tom

    “To the extent that the Abbott government had been willing to repeal the carbon tax policy in toto”. That’s cute, Sinclair: as you well know, the Abbott government isn’t repealing the household assistance: the impact on the budget of the actual proposed repeal (keep compensation, ditch tax) as legislated will be a net worsening of the fiscal position as compared to the counterfactual (keep compensation, keep tax).

  18. 2dogs

    Is Shorten planning to offer any compensation with his re-introduction of the carbon tax?

  19. jupes

    Mark Butler is currently on PVO banging on that the RET reduces the price of electricity and if it is repealed then electricity prices will increase.

    Of course that bit of bullshit went unchallenged by PVO.

  20. Bruce of Newcastle

    Is Shorten planning to offer any compensation with his re-introduction of the carbon tax?

    No. He was on the teev (SBS News) just now proudly saying how they’d brought in the start of evil carbon emissions reduction. So I doubt he’d compensate the victims (ie business people who try to make a buck and employ people). More likely he’d spit on their graves.

    Maybe a glacier flattening all of Canberra would convince him, but then maybe not.

  21. Andrew

    Maybe a glacier flattening all of Canberra would convince him, but then maybe not.

    That would be proof of extreme catastrophic climate weirding disruption change.

  22. motherhubbard'sdog

    Andrew Leigh can hardly complain about anything. He sold his soul to the devil for a seat in Parliament. Now he has to spout claptrap that he knows is false, because his position demands it.

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