Catallaxy Files

I really did hope that this year’s Budget Lockup would be better than last year’s.  How much can a girl take?

Sadly, I have to report that it was worse.  It is just so hard to concentrate on thousands of pages of fairytales, all the while knowing that you have to bash out some vaguely coherent commentary.

And then there is the distraction of the ministers and their teenage minders swanning through the place, trying to grab the attention of the persons deemed to be most important in the room.

Some of the senior bureaucrats also float through.  I did have a chat to one of them in order to tackle the mangled use of the word ‘save’, to include tax increases.   He did not seem to have a problem with combining cuts to expenditure with tax increases.

His reply was that “the impact on the figures is the same”.  I guess this is the Canberra view of the world – just up the tax burden and Bob’s your uncle.  Don’t worry about any second round effects.

Budget Paper No. 1 looked like a very rushed piece of work.  Some of the charts did not have labels on the axes and quite a lot of the prose did not make sense.  And there is such so much repetition.

And as for this weird exposition of setting out ten year projections of expenditure on particular programs (DisabilityCare and Gonski) and then arbitrarily attaching particular revenue lines and ‘saves’ to the various years – I really wonder who dreamt this up?  These diagrams did not show that these programs are ‘funded’ – after all, all expenditure commitments have to be covered, one way or another, given the government’s commitment to run a net budget surplus in the medium term (stop that guffawing, Cats).

The one thing that these charts do tell us is that the costs of these two large programs do not ramp up until beyond the forward estimates and just before the election after this one – around 2016-17.

One of the most amazing things about the lockup is the sheer number of people who are prepared to be jailed for 5+ hours.  My assessment is that close to a third – maybe more – are not journalists but lobbyists, NGO types, industry association workers, etc.

I’m not sure why they would do it.  I guess some of them appear on the media relatively quickly and therefore feel they need to be briefed.

I’m hoping someone might see the sense of ditching the lockup in the future.

Last month Luke Malpass asked the tough questions (pdf here):

How exactly is it that New Zealand – a country that went into recession in early 2008, had a collapsed non-bank finance sector, didn’t have a mining boom, has a historically high dollar and had its second-biggest city basically levelled by an earthquake – is on track to record a budget surplus as scheduled and on time in 2014-15? This question raises a second one: why is Australia not in this position?

This graph answers that question.

Luke Malpass has an op-ed in the AFR today where he expands on the NZ budget success story.

To put this into context, whereas English has had no money and cut back, beating a credible path to surplus, since Wayne Swan became Treasurer, Australian tax receipts have increased by more than the entire New Zealand budget ($NZ60 billion revenue, $NZ69 billion expenses). Wayne Swan has literally had enough new revenue to run a small country and has delivered a whopping deficit.

Read that sentence again: “…Australian tax receipts have increased by more than the entire New Zealand budget…”. Wow. Yet Swan has still managed to run a deficit.

The government like the pooh pooh the New Zealand experience pointing to the fact that it did go into recession in 2008, and did increase the GST, and is a lot poorer than Australia. But here is the thing – this is an economy that was in worse position than Australia going into and during the GFC, without a mining boom, without the massive increases in revenue that the Rudd-Gillard government enjoyed and they have managed to get their budget in order.

(H/T The New Zealand Initiative)

Until today I thought he might get through it, even with the media more and more offside. But now I think the flow is in the other direction, and it is this article that has convinced me. Titled, “The IRS Scandal Started at the Top” and from The Wall Street Journal, it describes the Obama modus operandi in getting the IRS to attack opposition groups. Here is the killer passage:

Mr. Obama now professes shock and outrage that bureaucrats at the IRS did exactly what the president of the United States said was the right and honorable thing to do. “He put a target on our backs, and he’s now going to blame the people who are shooting at us?” asks Idaho businessman and longtime Republican donor Frank VanderSloot.

Mr. VanderSloot is the Obama target who in 2011 made a sizable donation to a group supporting Mitt Romney. In April 2012, an Obama campaign website named and slurred eight Romney donors. It tarred Mr. VanderSloot as a “wealthy individual” with a “less-than-reputable record.” Other donors were described as having been “on the wrong side of the law.”

This was the Obama version of the phone call—put out to every government investigator (and liberal activist) in the land.

Twelve days later, a man working for a political opposition-research firm called an Idaho courthouse for Mr. VanderSloot’s divorce records. In June, the IRS informed Mr. Vandersloot and his wife of an audit of two years of their taxes. In July, the Department of Labor informed him of an audit of the guest workers on his Idaho cattle ranch. In September, the IRS informed him of a second audit, of one of his businesses. Mr. VanderSloot, who had never been audited before, was subject to three in the four months after Mr. Obama teed him up for such scrutiny.

The last of these audits was only concluded in recent weeks. Not one resulted in a fine or penalty. But Mr. VanderSloot has been waiting more than 20 months for a sizable refund and estimates his legal bills are $80,000. That figure doesn’t account for what the president’s vilification has done to his business and reputation.

This will have been magnified thousands of times over for any group that might in any way have been a threat to the President. Start a Tea Party group, here comes the IRS. Donate to Romney, here comes the IRS. Oppose the President, here comes the IRS. This is the worst scandal in American history, one that goes to the heart of democratic governance. If the Americans do not root this corruption out, American democracy is a sham, and everyone will know it.

Obama must go.

Peggy Noonan update: From her latest column with the title, “This is no ordinary scandal: Political abuse of the IRS threatens the basic integrity of our government“:

What happened at the IRS is the government’s essential business. The IRS case deserves and calls out for an independent counsel, fully armed with all that position’s powers. Only then will stables that badly need to be cleaned, be cleaned. Everyone involved in this abuse of power should pay a price, because if they don’t, the politicization of the IRS will continue—forever. If it is not stopped now, it will never stop. And if it isn’t stopped, no one will ever respect or have even minimal faith in the revenue-gathering arm of the U.S. government again.

You can already see the punches being pulled. The issue is not the integrity of the IRS, it is the integrity of the President of the United States. When Henry II cried, “Will no one rid me of this troublesome monk?”, it was he who had to beg forgiveness, not those minions who took him at his word.

Viscount Ridley: My Lords, I wish to speak on the subject of energy and, in response to the prominent references in the gracious Speech, on the importance of economic competitiveness. However, as this is my first time speaking in the House, I hope that noble Lords will indulge me in a few preliminary remarks.

It is an enormous privilege and a daunting responsibility to speak in this House for the first time. I know that it is customary on such occasions to pay thanks to the staff but I have to say that I have been genuinely overwhelmed by the generosity and thoughtfulness of all the staff since I have come here.

I have also been touched by the warmth of the welcome that I have had from noble Lords on all sides of the House. I particularly thank my noble friends Lady Seccombe and Lord Henley, who have mentored me in my early weeks.

Listening to debates over the past few weeks, it has become clear to me that this is a House that not only respects but expects knowledge and expertise. This is something that my father made clear to me when he was enjoying a long and distinguished career in this House, but he would speak only on subjects that he knew something about—in his case, particularly the Territorial Army, the north-east of England and local government. When I spoke to the hustings a few weeks ago before being elected here, I said that if elected I would speak on three main issues: the north-east of England, science and technology, and enterprise and innovation.

I am here to fill the vacancy caused by the sad death of Lord Ferrers, and I pay tribute to that giant of a parliamentarian, who was on the Front Bench under no fewer than five Prime Ministers. I may hope to match his long legs but I do not expect to match his length of service.

I am that strange chimera—an elected hereditary Peer. As a result, I am acutely aware that I am here thanks at least as much to the efforts of my ancestors as to my own. I would not be human if I did not feel a smidgen of pride in being the ninth Matthew Ridley in direct succession to sit in one of the Houses of Parliament since the son of a buccaneering Newcastle coal merchant was elected to the other place in 1747. That brings me to the subject of my speech.

In 1713, exactly 300 years ago, the Newcomen steam engine was just coming into use all over the north of England. One of the very first was commissioned at Byker on the north bank of the Tyne by my buccaneering ancestor, Richard Ridley, in 1713. Within 20 years, more than 100 of these great clanking monsters were transforming the coal industry by pumping water from deep mines and vastly increasing productivity.

The effect of that innovation was momentous and global. By lowering the cost of energy and raising the wages of labour, it set in train a whole series of events, including the mechanisation of industry and the increase in demand for the products of that industry, and so the great flywheel of the industrial revolution began to turn. For the first time, an economy grew not through an increase in land or labour but through an increase in energy, because mineral energy from beneath the ground showed an unusual property that had not been shown by wood, wind and water or by oxen or people—that is, it did not show diminishing returns; the more of it you dug up, the cheaper it got.

At this point, I should like to declare an interest because I am still in the coal-mining business, albeit indirectly. However, my aim here is not to praise any particular kind of energy but to praise the cheapness of energy.

Today, an average British family uses as much energy as if it had 1,200 people in the back room on exercise bicycles pedalling away on eight-hour shifts. It is worth remembering that when people talk about how many jobs can be created in any particular sector of energy. We could create a lot more jobs by making energy on treadmills. What counts is not the jobs we create in producing energy but the jobs we create in consuming energy if we make it affordable—or, indeed, the number that could be lost if we make it unaffordable.

One reason why we in this country are falling behind the growth of the rest of the world is that in recent years we have had a policy of deliberately driving up the price of energy. To quote a recent report from the Institute of Directors:

“The UK’s energy and climate policies are adding more to industrial electricity prices than comparable programmes in competitor countries, putting UK industry at a disadvantage and making a rebalancing of the economy more difficult”.

Household energy costs have doubled in the past 15 years. In the US, where gas prices used to be the same as they are here, they are now one-quarter or one-fifth of the level here. That is an enormous competitive advantage to the US and a disadvantage to us. The chemical industry, as a result, is very keen to move to the United States, and other industries, including the cement industry, are feeling the pinch from high energy costs. Near where I live at Lynemouth on the north-east coast, the country’s largest aluminium smelter recently closed with the loss of 515 jobs, largely due to the rising cost of energy.

A nation can compete on the basis of cheap labour or cheap energy but if it has neither then it is likely to be in trouble. Surely these are not controversial remarks. I know that I am not supposed to be controversial in a maiden speech so, lest I go too far, I will now revert to talking about the north-east of England.

It is worth noting that the north-east is the only region of England with a trade surplus with the world, something to which the noble Lord, Lord Adonis, drew attention in his recent report on the region. We are also a region with strong offshore engineering capability, and I think that the north-east could once again steal a march on the world and deliver competitive energy to the rest of the world. There are 3,000 billion tonnes of coal under the British sector of the North Sea and, thanks to pioneering work at Newcastle University and elsewhere, the technology now exists to gasify this coal, getting carbon monoxide, hydrogen and methane from it and putting carbon dioxide back in. If this technology can be made to work then we can bring plenty of jobs not only to the region but, more importantly, to the whole economy by lowering the price of energy. There is enormous entrepreneurial spirit in our regions but it is held back by the high cost of energy.

So, for the sake of pensioners in fuel poverty, for the sake of small businesses struggling to meet their energy bills and for the sake of large businesses all too ready to leave these shores, let us repeat what our ancestors did in the early 18th century and drive down the costs of energy so that we can drive up living standards.

Source.

If even Chris Matthews is done with Obama, who’s left? You can even watch the video here but this is the text:

‘What part of the presidency does Obama like? He doesn’t like dealing with other politicians — that means his own cabinet, that means members of the congress, either party. He doesn’t particularly like the press…. He likes to write the speeches, likes to rewrite what Favreau and the others wrote for the first draft,’ Matthews said.

‘So what part does he like? He likes going on the road, campaigning, visiting businesses like he does every couple days somewhere in Ohio or somewhere,’ Matthews continued. ‘But what part does he like? He doesn’t like lobbying for the bills he cares about. He doesn’t like selling to the press. He doesn’t like giving orders or giving somebody the power to give orders. He doesn’t seem to like being an executive.’

On Tuesday’s program, Matthews similarly called Obama ‘a ship with the engine off.’

“A ship with the engine off.” He’s actually much worse than that and far more destructive but it will do for now.

Tonight, I want to directly address you, the Australian people.
While it’s easy, and understandable, that you should be pessimistic about this government, everyone should be optimistic about our country.
Our health researchers have saved hundreds of millions of lives through breakthroughs in everything from infectious diseases to cancer vaccines to ulcer treatments.
Our military personnel stand ready to protect people in some of the world’s worst trouble spots.
Our universities are educating the future leaders of our region.
Our musicians, artists, actors and film-makers are making their mark all over the world.
Our resource exports have helped hundreds of millions to move from the third world to the middle class.
And, with the right product, our manufacturing, too, is capable of competing with the best in the world, even with the high dollar – as demonstrated by Cochlear, Blackmores, Murray Goulburn and RM Williams, whose boots I’m wearing tonight.
We are a great country and a great people let down by a bad government.
Bad governments always pass.
What should never dim is our faith that Australia’s best years are ahead of us.
So my purpose tonight is to assure you that a Coalition government will do what’s needed to restore the hope, reward and opportunity that should be your birth right.
Our Real Solutions Plan will build a strong and prosperous economy for a safe and secure Australia.
Margie and I know the pressure that every Australian – that each one of you – is under.
We’re not crying poor but we run a household with power bills, rates, health and education costs to be paid all the time.
Margie runs a community-based occasional care centre which has to live within its means just like every small business and every family.
Governments’ first job is not to make your life harder.
But this government has – with its carbon tax, broken promises, and skyrocketing debt.
Australian families are paying for this government’s mistakes yet all you ever hear from the Prime Minister and the Treasurer are excuses and promises to do better next time.
Should the Coalition win the election, there will be no nasty surprises and there’ll be no lame excuses.
No surprises and no excuses.
The Coalition’s Plan has two objectives: first, to take the budget pressure off Australian households; and second, to strengthen our economy so that, over time, there’s more to go round for everyone.
Only by delivering a strong economy can government deliver a sustainable National Disability Insurance Scheme and better schools.
You need certainty to plan your future and you need cost of living relief.
So tonight I announce a major initiative to ease the financial pressure on Australian families.
A Coalition government will keep the current income tax thresholds and the current pension and benefit fortnightly rates while scrapping the carbon tax.
The carbon tax will go but no one’s personal tax will go up and no one’s fortnightly pension or benefit will go down.
So with a change of government, your weekly and fortnightly budgets will be under less pressure as electricity prices fall and gas prices fall and the carbon tax no longer cascades through our economy.
This will strengthen our economy – because there’ll less tax hitting Australian businesses but not their overseas competitors.
And it will help families – because you’ll have tax cuts funded by smaller government, not by taking money out of one pocket to put it in the other.
Our plan starts with recognition of economic reality.
Government doesn’t create wealth; people do.
Government doesn’t spend its own money; it spends your money.
This year’s spending is either this year’s taxes or it’s this year’s borrowing – that’s next year’s taxes.
Government spending is not a free gift but something that everyone is paying for, now or in the future.
That’s why good governments are at least as careful spending the money they hold on trust from the people as you are when making decisions that affect your family’s budget.
Parents don’t mortgage their children’s future and neither should government.
Last year, the Treasurer began his budget speech declaring, and I quote: “the four years of surpluses I announce tonight are a powerful endorsement of the…success of our policies”.
Well, surpluses would have been a vindication.
But there are no surpluses.
Not this year.
Not next year.
Not the year after that.
The Treasurer now says that there will be a surplus in four years’ time.
That’s four years after the Treasurer and the Prime Minister said that it had already actually been delivered and spent tens of thousands of your dollars boasting about it in letters to their constituents.
If a public company made these sorts of claims its directors would most likely face serious charges rather than asking to be re-elected.
If this had been the only dodgie promise, they might have got away with it but this government never gets it right.
It got the mining tax numbers wrong.
It got the carbon tax numbers wrong.
And last year’s budget commitments to boost family payments and to cut taxes didn’t even make it to this year’s budget.
This year’s supposed revenue shortfall went from $7 billion, to $12 billion to $17 billion in just two weeks – so how can ministers possibly predict a decade ahead?
The Prime Minister guaranteed there would be no carbon tax – but there is.
She guaranteed there would be a surplus – 165 times she guaranteed there would be a surplus – but there isn’t and there never will be under the government.
After seven deficits totalling $220 billion, the Treasurer can hardly congratulate himself over an almost invisible surplus, if nothing goes awry, if he’s still there, in four years’ time, in his ninth budget.
The government originally said that the deficit was “temporary”.
With seven in a row, the Second World War was more temporary than this government’s deficits.
The government promised a surplus over the cycle but this isn’t a cycle – it’s a spiral, deeper and deeper into debt which is now surging towards $400 billion even on the government’s own figures.
The last time a Labor Treasurer stood in this parliament to deliver a surplus was way back in 1989 so it’s hardly surprising that this year’s Labor surplus promises are no more believable than last year’s.
In the second line of this week’s budget speech the Treasurer said that it was a budget for jobs and growth.
In fact, unemployment increases and growth decreases.
The Treasurer spent much of his speech complaining that he was the victim of a sudden collapse in government revenue.
In fact, revenue is up 6 per cent this year and will be up 7 per cent next year.
Next year, revenue will be up $80 billion on six years ago.
That’s right, the Treasurer has $80 billion more to balance his budget than Peter Costello ever had – yet Costello delivered surplus after surplus.
We have a $20 billion deficit now rather than the $20 billion surplus then not because revenue is down but because spending is up: by $120 billion.
Madam Speaker, in 121 days, there will be an election.
It will be a tipping point in the life of our country.
The choice could hardly be more stark: three more years of broken promises, nasty surprises and weak excuses.
Or change for the better with an experienced team that will not just rebuild the economy but also the bonds of trust that should exist between you and your parliament.
The last Coalition government grew GDP per person by well over two per cent a year – under this government it’s limped along at well under 1 per cent.
The former government grew jobs by two and a quarter per cent a year – or enough to create over 2 million new jobs within a decade.
Since then, they’ve grown by just 1.6 per cent a year.
With the Coalition, you could trust government to save.
With Labor you can be sure government will spend which is why worried households are saving at the highest rate in a generation.
During the Howard years, real wealth per person more than doubled – since then, it’s actually declined thanks to weaker growth, subdued house prices and lower share prices.
Change won’t come overnight but a Coalition government will do what’s needed to strengthen economic growth and prosperity.
All the Coalition’s main policies are designed to make it easier for you to get ahead and for businesses to be more productive.
We will abolish the carbon tax – because that’s the quickest way to reduce power prices and take the pressure off cost of living and job security.
Let me repeat: We will abolish the carbon tax – because it’s a kind of reverse tariff that hurts local businesses but not our overseas competitors.
There is no mystery to how this will happen.
What one parliament legislates, another parliament can repeal and the carbon tax repeal bill, should we be elected, will be the first legislation that a new parliament considers.
We will reduce emissions with targeted incentives, not clobbering business with the world’s biggest carbon tax.
We will abolish the mining tax – because that’s the quickest way to support investment and jobs.
We will cut red tape costs by at least $1 billion a year – to give small business a much-needed break – and we’ll have parliamentary days dedicated to repealing laws, not passing them.
By cutting tax and regulation, we will boost productivity.
That will give Australian manufacturers the more level playing field they need to remain at the heart of a five pillar economy along with services, education, agriculture and resources.
We will have a once-in-a-generation commission of audit so that government is only as big as it needs to be to do what people can’t do for themselves.
We will set up a root and branch review of competition policy to ensure that small business gets a fair go and small business will be a cabinet portfolio within the Treasury department.
There’ll be an affordable and responsible Paid Parental Leave scheme because women should get their full wage while on maternity leave just as men should get theirs while on annual leave.
We will revitalise work for the dole because people who can work, should work, preferably for a wage but, if not, for the dole.
Within three years, the Coalition’s NBN will deliver broadband speeds at least five times faster than the current average for $60 billion less than Labor’s version.
We will start work within 12 months on Melbourne’s East-West Link, Sydney’s WestConnex, Brisbane’s Gateway Motorway upgrade, Adelaide’s South Road, and Tasmania’s Midland Highway, as well as key roads in Perth and parts of the Bruce Highway, because when you’re stuck in traffic jams, you aren’t at work or at home with your family.
We will duplicate the Pacific Highway, finally, well within this decade.
We will establish a one-stop-shop for faster environmental approvals so that new projects can get up and going more quickly.
We will re-establish a tough cop on the beat, the Australian Building and Construction Commission, to deliver (as it previously did) $6 billion a year of productivity improvements in a troubled industry.
We will return the workplace relations pendulum to the sensible centre, under the existing Fair Work Act, with fairer rules for right of entry and for new projects.
And we will establish a new, two-way street version of the Colombo Plan taking our best and brightest to the region as well as bringing their best and brightest here.
It will be part of a foreign policy that’s focussed on Jakarta, not Geneva.
All these commitments are affordable and deliverable.
We will deliver them in our first term of government, if we win, and will provide all the funding details after the pre-election fiscal statement is released.
But tonight, I set out specific savings to cover keeping tax thresholds and pension rates without a carbon tax to fund them.
The Coalition has already announced that we will rescind the increase to the humanitarian migration intake because – until the boats are stopped, and we will stop them – it’s the people smugglers who are choosing who comes to Australia.
We’ve announced that we’ll reduce by at least 12,000, through natural attrition, the size of the Commonwealth public sector that’s now 20,000 bureaucrats bigger than in 2007.
We’ve also announced that we’d scrap Labor’s green loans scheme for projects that the banks won’t touch.
Tonight, I confirm that we won’t continue the twice a year supplementary allowance to people on benefits because it’s supposed to be funded from the mining tax and the mining tax isn’t raising any revenue.
As well, we won’t continue the low income superannuation contribution because that’s also funded from the tax that isn’t raising any revenue.
I announce that we will delay by two years the ramp up in compulsory superannuation because this money comes largely from business – not from government – and our economy needs encouragement as mining investment starts to wane and new sources of growth are needed.
These measures alone will produce nearly $5 billion a year in savings which is more than enough for tax cuts without a carbon tax.
The Coalition won’t shirk the hard decisions needed to get the budget back into surplus.
Living within your means is not mindless austerity – it’s simple prudence.
It’s recognition of the reality that you can’t spend what you don’t have.
Households know this and it’s time governments did too.
At least for a first term, until we’re on an honest path not just to surplus but to re-paying debt, an incoming Coalition government will resist new spending commitments that aren’t fully funded, nearly always by offsetting expenditure reductions.
As far as the Coalition is concerned, the next election won’t be an auction.
Talking to people all around the country, the last thing you want is more “historic” announcements or so-called “revolutions” that never justify the hype.
Let me be clear.
Many of the measures in this budget are objectionable, the attacks on Medicare; the abolition of the baby bonus which the government had promised never to touch; robbing Peter to pay Paul on education; and forcing more businesses to do the tax paperwork monthly, not just quarterly.
But thanks to Labor’s poor management over five years, there is now a budget emergency.
Hence the Coalition may decide not to oppose any of them; doesn’t commit to reverse any of them; and reserves the option to implement all of them, in government, as short-term emergency measures to deal with the budget crisis Labor has created.
Far from cutting to the bone, we reserve the right to implement all of Labor’s cuts, if needed, because it will take time to un-do all the damage this government has done
By keeping, if needed, all Labor’s budget cuts – and – by not implementing any of their budget spending measures unless specified, we will achieve the first duty of every government: namely, to preserve the nation’s finances.
We will keep the announced spending on the National Disability Insurance Scheme and we’ll ensure that the scheme reflects the Productivity Commission’s recommendations rather than becoming just another big government bureaucracy.
I would not have ridden 1000 kilometres, the week before last, to raise money for Carers Australia if I was half-hearted about the NDIS and would never claim for just one side of politics this reform that should be an achievement for our whole nation.
On the other hand, the key to better schools, at least as much as more money, is better teachers, better teaching, higher academic standards, more community engagement, and more principal autonomy.
So that’s what we’ll work with the states to deliver.
We won’t back a so-called national education system that some states don’t support especially as this government has a history of spending more while schools’ performance actually goes backwards.
Regardless of normal political allegiance, Australians are sick of leaders who play politics ahead of governing the country and who blame everyone but themselves when things go wrong and the numbers don’t add up.
You want a grown up government like the ones that John Howard and – yes – Bob Hawke too used to run.
As soon as people know there’s a government with an economic strategy to build the country rather than just a political strategy to save its own skin, confidence will start to return to our economy.
Tax reform starts with immediately repealing the carbon tax and the mining tax and giving a modest company tax cut as soon as it’s affordable – but it doesn’t end there.
Within two years, an incoming Coalition government will consult with the community to produce a comprehensive white paper on tax reform.
We’ll finish the job that the Henry review started and this government squibbed.
We want taxes that are lower, simpler and fairer and will take proposals for further tax reform to the following election.
Right now, the blame game between the Commonwealth and the states that Kevin Rudd promised to end has become worse than ever.
Typically, over the past three years, the Prime Minister has announced massive new programmes in areas that are the states’ responsibility so she can claim the credit but the states have to pay.
It’s no way to run the country and it’s no way for adult leaders to behave.
Within two years of a change of government, working with the states, the Coalition will produce a white paper on COAG reform, and the responsibilities of different governments, to ensure that, as far as possible, the states are sovereign in their own sphere.
The objective will be to reduce and end, as far as possible, the waste, duplication and second guessing between different levels of government that has resulted, for instance, in the Commonwealth employing 6000 health bureaucrats even though it doesn’t run a single hospital.
Again, a Coalition government will seek a mandate at the subsequent election for any proposed changes.
One of the best ways to ensure that governments don’t make mistakes is to have a proper cabinet process.
That’s how Bob Hawke and John Howard ran their governments but that’s not how government is run now, as the four former ministers now sitting on the backbench have testified.
My ministers won’t need to learn how to be a good government because they’ve been one before.
Sixteen members of the Coalition shadow cabinet were ministers in the last government that actually delivered surpluses, as opposed to just promising them.
Those surpluses weren’t just John Howard’s and Peter Costello’s.
They were my surpluses and Joe Hockey’s surpluses and Julie Bishop’s and Warren Truss’s and Malcolm Turnbull’s because we were all part of the last government that Australians knew was competent and trustworthy.
Unlike the current government which never makes an announcement that isn’t supposed to be the most important thing ever, what I’m proposing is not unprecedented and shouldn’t even be remarkable.
I’m offering what should be normal: careful, collegial, consultative, straightforward government that says what it means and does what it says.
That would be change for the better.
The next election, to which this budget is a mere prelude, should not be about who becomes prime minister.
It should be about who can do more for our country – because our country is more important than any of us in this parliament.
My colleagues and I have a Plan to build a strong and prosperous economy for a safe and secure Australia.
It’s not about us.
It’s about you, the Australian people.
We pledge ourselves to your service.

This story has been developing over the past few days.

Many Republicans are enraged over revelations in recent days that the Internal Revenue Service targeted conservative nonprofit groups with a campaign of audits and harassment. But of all the troubles now dogging the Obama administration—including the Benghazi fiasco and the Justice Department’s snooping on the Associated Press—the IRS episode, however alarming, is also the least surprising.

Well yes; there is a long history of the US government using the IRS to intimidate political opponents. FDR, Kennedy, LBJ, Nixon and Clinton all did it. Note that Nixon is the only Republican on that list.

Here is the WSJ on the latest developments.

President Obama fired acting IRS Commissioner Steven Miller on Wednesday, two days after claiming it was an “independent” agency. That was certainly a rapid re-education. But Mr. Miller shouldn’t be the only fall guy, because the 54-page report released Tuesday by the Treasury Inspector General of Tax Administration makes clear that the tax agency tried to quash the political speech of groups opposed to Democrats during a Presidential election.

Hopefully people will end up going to jail over this.

News reports state that Craig Thomson is resigning from the Labor Party and will contest Dobell as an independent. Strangely none seem to mention the obvious reason.

He gets paid for longer and retires with a more attractive resettlement allowance. Additionally, depending on how many votes he receives at the election, he will get a payment from the Australian Electoral Commission which he can just pocket (since he is no longer a member of the Labor Party).

As Thomson entered Parliament in 2007, he does not, however, receive the additional involuntary retirement benefit available to those MPs on the old Parliamentary Superannuation scheme.

The Remuneration Tribunal Determination 2006/18 provides the following:

[A member]

b)   first elected on or after 9 October 2004, who declare in writing to the Clerk of the relevant House of Parliament the intention to seek employment after leaving Parliament, and

(c)    who have retired involuntarily through:

(i)     electing not to stand for re-election following loss of party endorsement, for reasons other than misconduct

(ii)    defeat at an election (including defeat at an election where he or she has campaigned to be elected to represent a different electoral division or to the other House of Parliament).

The Resettlement Allowance payable to eligible former parliamentarians is equal to three months of the annual allowance on the date Parliament is prorogued before the election.

If a senator or Member qualifies for a Resettlement Allowance he or she will be paid an Additional Allowance of a further three months of the base parliamentary salary if he or she is:

(a)    a senator who has served more than three full years in the Parliament, or

(b)   a senator for a territory or a member who has served more than one full term in the Parliament.

To nominate he will pay a deposit to the Australian Electoral Commission of $1000 (for the lower house). He will then receive from the AEC a payment of 247.316 cents per vote (which is the rate until 30 June 2013 – it is reindexed every six months by the rate of inflation so I estimate it will rise to around 250 cents per vote).

Thomson therefore needs to get 400 votes to get his deposit back. In the 2010 election Thomson received 38,268 first preference votes thus obtaining $88,472 in public funding to the Labor Party (the rate at the 2010 election was 231.191 cents per vote.

Even if Thomson doesn’t do anything, his infamy and name recognition should ensure he picks up at least 10,000 votes.

That $1000 nomination fee is probably the safest investment decision Thomson has ever made. Now I wonder if he still has a HSU credit card in his wallet?

The Conversation asked me to write about the budget and corporate tax.

The other corporate tax policy that particularly caught my eye related to so-called “thin capitalisation”. This is also called profit shifting. What happens is that foreign subsidiaries operating in Australia are burdened by high levels of debt by their parent company and required to pay interest on that debt. This has the effect of reducing their liability for Australian corporate income tax.

The important issue here is whether this is primarily a tax avoidance mechanism (something that is already illegal the general anti-avoidance provisions of the Tax Act) or whether there is some economic logic that underlies the practice. I am of the view that the economic logic is two-fold. First it is a mechanism whereby foreign investment is facilitated.

It is important to remember that foreign investment is risky and debt provides some security to foreign investors that they would be in a position to recover some of their investment. Then we should consider that debt has good corporate governance characteristics – viable firms with high levels of debt are less likely to squander funds on frivolous expenditure.

All up there are very good reasons why foreign investors are likely to employ high levels of debt. It allows them to have greater control over their foreign operations while reducing the risks that they may face. Reducing taxation is an added bonus.

Increased economic activity is far more valuable to Australians than the marginal increase in taxation that multinational corporations may pay if this policy were implemented. So it sounds good, but will we be better off for it? I suspect not.

Please click through and read the whole thing.