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Oh God! Another Train Wreck

Scott Morrison might be trying to scare us with his latest warnings of a $1 trillion gross debt within a decade, or he might be trying to avoid being the fall guy for a failed economic plan. Either way, he is doomed.

Eerily reminiscent of some of Joe Hockey’s worst efforts, Morrison’s comments at the Bloomberg function in Sydney on Thursday were amateurish at best and just like Joe Hockey, he betrayed an appalling lack of macroeconomic sense. He suggested that if his budget savings were not passed by the senate, Australia may face a recession.

How absurd! If the senate passes the stalled budget saving bills and that action curbs the spending power of middle and low income workers, as it will, the losers will be small business and local suppliers and that will lead to a recession.

People stop spending when they have less money to manage. Morrison’s economic plan is encouraging people to stop spending. Morrison is actually helping to create a recession rather than avoid one.

The passing of those bills will lead to less public spending. Less public spending sends the wrong message to the private sector who know it will reduce their productive output when facing the inevitable lower sales volumes. That will result in higher unemployment, lower participation rates and negative growth.

The productive capacity of the nation rendered idle, increases.

Just who is advising Morrison? He then goes on to complain that too many people don’t pay tax, but made no mention of corporate tax avoidance. “It’s the taxed and the taxed-nots.” Does he not know that the “taxed-nots” are the corporate sector, to the conservative estimate of $50 billion annually?

scott_morrison_sadThe problem Morrison has right now is that he is out of his depth. When people are out of their depth they rely on others (so called experts) to explain things to them. Then the speech writers have to translate that into information the common folk understand. We should call it the “Joe Hockey Syndrome”.

Morrison’s speech to the Bloomberg function was a train wreck. It made no economic sense whatsoever. Recession! Future burden on our grandchildren? Too many people not paying tax? Just who is this man listening to? It was only a year ago he was telling us there was no revenue problem.

So what is the problem? Is it insufficient revenue, or excessive spending, or both? Actually it’s neither. It’s a balancing problem. We should be spending as much as is needed proportionate to the existing capacity of the nation. It’s not rocket science.

As Bill Mitchell explains, “… the desirable deficit outcome at any point in time (is) a function of the state of non-government spending and the utilisation of the productive capacity of the economy.”

Conservative governments are a captive of the household economy syndrome. Their bible tells them debt is bad. No amount of reasoning will dissuade them.

Worse still, they seem incapable of grasping that they don’t need to borrow at all. Why would a currency issuer need to borrow?

100_anniversary_titanic_sinking_by_esai8mellows-d4xbme8Either through ignorance or compliance with the wealthiest in the land and beyond, they cannot see past striving for a surplus. As if a surplus represented the Holy Grail.

That philosophy will cause a recession as sure as the Titanic hit an iceberg. If Morrison cannot see that, he should step down.

 

34 comments

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  1. Denis Hay

    It seems to me that no one is prepared to listen to Bill Mitchell. I have been sending Bill Mitchell’s website links and articles to the ALP, my local Federal member, the LNP and the ABC. Next week the ABC’s Q & A show is about growing inequality, but they have not invited Bill Mitchell on to their show. The ABC had no problem having Malcolm Roberts on Q & A last week who made a complete idiot of himself. It seems like there is a media blackout when it comes to discussing alternative monetary systems. I think more people need to contacting their local and Federal members of parliament to seriously consider Bill’s Modern Monetary Theory.

  2. ozfenric

    What Morrison and his side – and the conversation in general, it seems – fails to understand is that “people not paying tax” – i.e. being, in balance, dependent on State handouts – is a symptom of the issues, not the cause. I have no issue with the contention that people should be less dependent on welfare (although, it must be pointed out, there will always be a floor to this: retirees, stay-at-home mums and dads, the disabled and chronically ill all have good reasons to not be working). But welfare is not a supply and demand marketplace. Reducing the availability of welfare does nothing to reduce people’s dependence on it. The way to get people off welfare is to get more people into employment, and/or to raise the amount that people get paid. In this way you bring people out of the group that requires welfare into the group that are providing more to the State than they are getting. Later on, of course, the tide will turn, they will retire and again fall into the “net welfare recipient” group, but this will be on another Treasurer’s watch so Morrison won’t have to worry about them.

    Removing welfare entitlements in this situation is like trying to treat cancer by ceasing chemotherapy. After all, the chemo makes people sick, and less chemotherapy and less cancer go hand in hand, don’t they?

  3. Kronomex

    He was made Treasurer because he once used a calculator.

  4. Roscoe

    who is advising him? probably someone like 26yo Mitchell Price, who is a senior adviser to Coogee Liberal MP Bruce Notley-Smith. At 26 he can advise a 50+ yo man. is it any wonder the LNP have so many problems?
    Now if the motor industry wasn’t closed down there would be some 200,000 paying tax each week and making lots of purchaes, but now they will be collecting dole payments each week. What brilliant economic managers the LNP are

  5. keerti

    Kronomex…Trouble was when he was supposed to add 2+2 he didn’t understand the buttons and got 2/2 which is the sum of his abilities as treasurer!

  6. David

    The LNP have significantly increased commitments on Defence spending, with no real benefit to Australian Industry. If the Corporate sector could be corralled into paying a 10% tax on gross profits, the financial future of the Australian people may not be so bleak?

  7. Winston Smythe

    Again it’s about IDEOLOGY. He’s doesn’t want to offend the wealthy in any way.He would improve things if he got rid of Negative Gearing on existing Houses and put back Capital Gains Tax where it used to be. That would be sensible. conservatives IDEOLOGY say’s he can’t.Though if Alan Jones said do it! He would.

  8. stephentardrew

    John. John, John please help save me from the ignorance and irrationality of this magical mythical dolt. He doesn’t even get causation net-alone logic and consequential thinking.

    The Lord is my shepherd allows him to sprout any crap he wants as long as I go to my Fundamentalist Circus each week, give to the rich, and beat the hell out of the leaners and poor.

    Recession be damned it is more important to impoverish those who suffer already than to bring fairness into economics.

    There is no nice way to express the vile contempt I have for these cruel and heartless religious dogmatists. Going out with malice and forethought to harm your fellow citizens is immoral and, in their parlance, evil.

    No heaven for this blot on humanity.

  9. Harquebus

    True, it is ideology that is the problem and that ideology is called infinite growth. Any government, business or other entity that pursues it doomed.

    “Ignore if you must climate change, biodiversity collapse, the depletion of water, soil, minerals, oil; even if all these issues were miraculously to vanish, the mathematics of compound growth make continuity impossible…” — George Monbiot.

  10. DisablednDesperate

    Denis I’m doing the same thing but not getting anywhere. I think the ABC are scared. I would be. Gotta keep trying though. We need the populous to see the truth.

  11. Michael Taylor

    If we want the populace to see the truth, then the Murdoch media have to start writing it.

  12. kerri

    Who is Morrison listening to?
    Probably listening to his invisible friend in the sky.

  13. Gangey1959

    I am currently a member of the ”Great Hairy Untaxed” (aka unemployed) of which the ever loveable mr moronscum made much mention the other night. On the rare occasions I and my mates from centerlnk find employment we quite happily pay tax, and ever so enjoyably spend the proceeds of our labours. Everyone ”wins”. Then the contract finishes and I am back to anger management, but it was fun while it lasted, If scooter and his effwitted coleagues could get it through their thick heads that if we were all employed there would be more tax payed and therefore less strain on the public purse, more money in our superannuation accounts for later on, and more money circulating in the economy then the whole of Australia would be better off. THAT is where both the federal and state governments need to put in their efforts, and not in hiring foreign service corporations like G4S and Serco et al to take the cream and pay peanuts for the work, but get back to basics and start doing the sorts of things Australians are really good at. We don’t need fta’s with anyone, we need to be allowed to stand on our own multicultural feet and look after ourselves, and take the refugees in as well like we did after WW1 and 2 and Korea and Vietnam.
    Tell the chinese to piss off and buy somewhere else because we don’t need their money any more, and let ms hanson and ALL of her redneck right wing xenophobic cretinous hangers on, lnp and alp included that their opinions are not relevant so please keep them to themselves.
    BTW. Lets get this marriage equality thing run and won in Parliament THIS YEAR. Like NOW, since the kids are back in class. I don’t want them to waste another $160 million. (PLUS !!!!!)
    On that note, considering that Australia is a SECULAR State, is it possible for a Citizen to sue a member of Parliament if the said member votes for or against a Bill in the house or Senate based on their Religious views and beliefs ?
    @ Kronomex. He used the calculator to make funny words when he turned it upside down.

  14. nexusxyz

    Modern Monetary Theory is flawed. The only way to create and sustain ‘economic well-being’ is to make the economy more ‘competitive’ It is the only way to evolve existing industries, create new industries, create jobs and balance trade. Dicking around with the fiscal and monetary stance of the country without being competitive is no more then moving the deck-chairs on the Titanic. The LNP’s rediculous ‘innovation’ initiative will probably make the economy less competitive.

  15. silkworm

    There needs to be a political party that takes advice from economists like Bill Mitchell. Are there any out there, or do we have to start up a new one?

  16. townsvilleblog

    All ole’ Hillsong has to do is make the corporations pay a fair share of taxation on their huge incomes and hey presto1 at least a $6 Bn revenue boost.

  17. townsvilleblog

    Silkworm, we have to try to wrestle the ALP back from the entrenched right wing.

  18. Bacchus

    Rubbish nexusxyz – that stance relies on economic ‘modelling’ that just doesn’t work, relying on unrealistic assumptions and still needing to be ‘beaten into shape’ to attempt to fit what actually happens in the economy.

    The government could be ‘debt-free’ on Monday with the will of a government that understands how our system actually works!

    https://www.facebook.com/green.modernmoneytheoryandpractice/posts/1087824401300702

  19. Jack

    kerri
    Who is Morrison listening to?
    Probably listening to his invisible friend in the sky.

    He Listens to Alan Jones

  20. Nick Chugg

    You really have to admire the “special” mental functioning of those on the right. They scream for investment – corporations and businesses taking our LOANS to invest. The screech that everyone (the rich) should be able to claim tax deductions from negative gearing.

    I assume that Scotty Morriscum understands that negative gearing relies on people (businesses) taking every increasing LOANS, relationally to their income, to expand their portfolio.

    In both these examples, the neoconservative ideology is for people to increase their debt -LOAN MONEY – to eventually get a return on investment.

    “Conservative governments are a captive of the household economy syndrome. Their bible tells them debt is bad. No amount of reasoning will dissuade them.”.

    I seriously wonder how their poor little brains do not explode with the cognitive dissonance, the contradictory messages, and conflation?

    Do the media consultants, script writers, and politicians not notice the diametrically opposed messages and propaganda they are foisting? Certainly, the main stream media seems to be completely absent or complicit in not highlighting the contradictions, hypocrisy, and lies of LNP and their dogmatic, political ideology.

  21. silkworm

    @ozfenric

    “After all, the chemo makes people sick, and less chemotherapy and less cancer go hand in hand, don’t they?”

    This medical analogy is not appropriate for economics. Chemotherapy does in fact make people sick, by destroying the immune system, and about a quarter of cancer patients die from the chemo rather than from the cancer! One would be better to look for alternative treatments for cancer, such as sodium bicarbonate, vitamin C, laetrile, or cannabis oil.

  22. silkworm

    @townsvilleblog

    “… we have to try to wrestle the ALP back from the entrenched right wing.”

    How would you do that?

  23. Max Gross

    “Why would a currency issuer need to borrow?” Thank you! I’ve been wondering that for decades!

  24. king1394

    Taxing religious institutions would also bring in some revenue.
    Funny how the Budget emergency went away during the election but is back now

  25. bossa

    I seem to remember that clown Hockey advising people to get more into debt and spend spend spend to save the place. They are fools.

    @Max. They like things the way they are because it allows them to scare the hell out of everyone and then sell off assets to their donors. People are terrified of debt (ironically, Australians have the highest private debt in the world)

  26. Phil

    John Kelly – thank you, fascinating article, but you and all participating in this discussion, me too, are lamenting (in various ways) what is collectively seen as some form rank economic illiteracy. All of us are asking why is it so?

    Would you consider this John – what if treasury, at the behest of the minister, actually intends a recession – that this is not a form of economic ignorance but one of actual political intent?

    I know its easy to pillory Morrison, and I love doing it but it answers no questions and provides no way forward. What are his motives?

    What advantages would derive from an engineered recession – who would gain most? I strongly suspect there is in fact a powerful motive pushing this minister and it seems to me to be leading to a forced recession. We know from experience that every twist and turn in the economic cycle produces winners and losers.

  27. Rossleigh

    Scott tells us that too many people rely on money from the government their whole lives which is ironic because before he entered Parliament he worked for the Tourism Commission.
    Apparently he’s one of those dreadful people that’s rarely ever earned any money apart from what people pay in taxes!

  28. Rossleigh

    Oh, Phil. I suspect that they intend to cause a recession in order to justify the destruction of Medicare and various other ideological bits and pieces that they’ll need “extreme” circumstances in order to justify.

  29. bossa

    @ Denis Hay “It seems to me that no one is prepared to listen to Bill Mitchell.”

    Actually, he was quoted by Peter Martin on SMH last week, so maybe his message is starting to filter through. Sorry, I don’t have a link for you.

  30. Annie B

    Rossleigh ( August 27, 2016 at 7:02 pm ) ….

    I more than suspect it is just that …. they will create the ‘train wreck’ in order to justify the ‘salvage operations’ which will mean gawd knows what in … Medicare being first off the rank, pensions, new-start, hospitals, education and all those other nasty little pesky things the wealthy LNP don’t want to think about – so they’ll do their level best to trash them.

    They stuff themselves with 6 star dinners at tax payers expense, and smirk – “wonder what the poor people are eating tonight ” … an old sarcasm admittedly, but I’ll just bet they occasionally have a fleeting conscience, and turn it into cynicism to protect their precious incomes, pensions, perks and alleged ‘standing’ in the community. They are unbalanced ( in every respect ) and therefore will fall.

    Ye Gods !!! 😛

  31. totaram

    Phil: Clever guy! You have figured out what the game is. Every time there is a recession and the economy recovers, guess what happens? The richest 1% become even richer!! Just check out the figures from whatever source you trust. The richest 1% just love recessions. That is when they are the only people who are able to buy up assets really cheap, because they have the money or can get access to it (loans from the banks against existing assets). You only need to see what is going on in Greece, where everything belonging to the state(the people) is now being sold off to “pay off the debts”.

  32. Annie B

    totaram ……..

    You make very valid points there.

    And politics is ( and most always has been ) a ‘game’. … To see who wins, who plays it the best – but always with one view in mind – that they become richer, and the rest of us ? …. Phfftt …

    The neo-con rights simply don’t give a damn. … Most often the left side, does give a damn, somewhere along the line.

    But even they can be deliberately oblivious to real need in the community … especially if they want to protect their own initiatives, points scoring and …. money. !!

    Most politicans therefore, are all tarred with the same brush.

    Can only hope that the Labor party proves me wrong – – ultimately … this time around.

    ……..

  33. Pingback: Oh God! Another Train Wreck | THE VIEW FROM MY GARDEN

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