Public debate depends on who gets the platform in the mainstream media. Even publications that claim to understand and appeal to more rational types of readers are highly selective in who they speak to. I see this as a huge limitation in advancing alternative ideas that challenge the dominant narrative and the vested interests that support it. The problem is that when it comes to the economy, these vested interests don’t just capture the voices of our so-called conservatives. They also dominate and shape so-called progressive agendas, where green groups and movements, for example, are indistinguishable on macroeconomic issues, making it difficult to compete with ideas from abroad. The Guardian, for example, believes it presents a progressive view on the issue and goes “beyond” the rudeness of the tabloids. But it often gives a voice to writers who promote macroeconomic fiction and refuses to give room to those who challenge them. For example, today (September 26, 2022), it published an article – Australia faces an unsolvable public finances problem without radical tax reform – Written by a Satyajit Das who regularly gets an Op Ed column in The Guardian and appears regularly on Australian Public Radio. His analysis distorted the public debate. Selective platforming is a big problem for our media.
background reading
I’ve written these novels before (for example):
1. Intergenerational report – The past is catching up with the government, the game is over (July 7, 2021).
2. Rest day Friday – more generational report nonsense (March 6, 2015).
3. Australia – Fourth Intergenerational Mythology Report (March 5, 2015).
4. Fiscal deficit improves intergenerational equity (August 6, 2014).
5. Another generational report – another waste of time (February 2, 2010).
6. Democracy, Accountability, and More Generational Bullshit (22 May 2009).
fictional australian financial crisis
The theme of the Guardian article is that, with an ageing population, Australia can no longer “afford” the “vital government services and financial support to citizens” that we promised and at least delivered in our post-World War II “social contract”. It wasn’t until the neoliberal attacks of the 1980s began to weaken these things.
According to the author, the problem is:
…an aging population means fewer taxpayers and a higher need for public funding…lower taxes and higher spending on pensions, health care, and aged care, potentially costing about $40 billion a year (about 8 percent of the budget).
So Das is just repeating the standard generational narrative that governments will run out of money for older citizens unless they both raise taxes, cut spending elsewhere, and accumulate large “savings” to “pay” for these growing future needs.
As with all articles like this, we’re tempted to believe things and “worry” when there isn’t enough evidence that only vested interests are pushing:
Given concerns over debt levels and budget repair, government revenue must be better aligned with spending if Australians are to continue to receive expected benefits, cost-of-living relief and rising costs of spending to mitigate more frequent climate-change-induced weather events .
I have no concerns about public debt levels, except that the federal government should stop issuing debt altogether and stop the “corporate welfare” machine created by the public debt market.
When using terms like “budget fix”, which is one of those terms that critics and politicians go around with to give the impression that something isn’t working.
However, “budget” is not like a car that needs repairing after wear and tear.
Fiscal conditions simply reflect the state of the real economy and can only be understood in this context.
For example, in the event of a fiscal deficit, the relevant questions are whether employment is maximized and the quality and scope of government services and infrastructure top-notch.
If the answer is yes – then the deficit is appropriate relative to the spending and saving decisions and actions of the non-government sector.
If the answer is no – then the next question is whether, for example, employment exceeds the maximum, or whether there is too much investment in public infrastructure, which pushes nominal spending ahead of productive capacity.
If yes, then the fiscal deficit is too large relative to the spending and saving decisions and actions of the non-government sector and the government must either reduce its control over real resources (cutting spending) or make more room for its own spending by reducing Control of real resources by the non-government sector (through increased taxation).
If not, then the fiscal deficit is small relative to nongovernmental spending and saving decisions and actions, and the government must either increase control over real resources (increase spending) and/or increase nongovernmental spending and saving. Control of real resources by government departments (through tax cuts).
Actual fiscal results in dollar terms are meaningless on their own, and the idea that deficits need to be “fixed” is absurd.
The discussion in the article about the source of the tax increase is predictable.
Modern Monetary Theory (MMT) economists note:
1. Taxes serve a variety of purposes, including deterring certain activities (tobacco, alcohol, etc.), but most importantly, from a macroeconomic perspective, it helps to create real resource space for government spending so that such spending will not cause inflation.
Therefore, if the government sector wants to increase in size (control over real resources) and maintain full employment and price stability, then the overall taxation must be larger.
As the article suggests, the tax increase isn’t to fund additional government spending.
It doesn’t add real resource space.
2. Different taxes have an impact on equity and administrative simplification – so the government can ensure that it deprives those with more income more purchasing power – progressive tax structure.
To some extent, this would reduce the disposable income of high-income groups and reduce their “power” to influence political outcomes, such as through lobbying money.
This is not the “tax the rich” argument that progressives are tempted to advocate because they believe the rich should pay for public services when the government “can’t afford” them.
This narrative shows how the progressive side of politics can be grasped.
We want to tax the rich to reduce their power to no longer give the government any of their own currency.
3. Some taxes increase inequality among citizens.
In Australia, for example, high-income citizens can buy multiple properties and then arrange transactions to offset the “loss” (the difference between rent received and mortgage interest payments) against other income. Then, as the value of the property increases, they pocket capital gains.
This tax structure bias should be reformed immediately.
But the reforms are not about making government spending “affordable”.
Rather, it is about achieving greater wealth equality across the population.
4. So I agree with the author that major reforms to tax laws and structures are needed.
But none of these reforms will provide the government with more domestic currency.
How can it be sensible for a government to use its currency for existence and provide that currency to non-government sectors, and then think it is dependent on taxing that currency to allow it to use it?
It’s the kind of absurd reasoning that Das and other mainstream media rant about every day.
Because they got the platform!
So when commentators are making up stories like this, politicians have an excuse to say stupid things.
Today, The Melbourne Times published an article (26 September 2022) – Soaring interest rates create new $120 billion gap in budget – All fictional frameworks and languages stand out.
1. “Having punched a hole in the structural integrity of the federal budget” – what could this mean?
2. “The National Interest Act could exceed $33 billion—$7 billion more than projected in the March budget. That increase alone exceeds the cost of the National Air Force for a year”—so what?
The truth is that only new bond issuance can attract higher yields when yields rise.
What happens in the secondary bond market has nothing to do with the government – they pay the bond’s face value and the bond’s coupon rate (yield) determined at the time of issuance, not among the gamblers on the interest rate that applies after the bond begins trading.
Also, fiscal policy expands as central bank interest rates rise, leading to higher yields on new bonds — which is stimulative.
This calls into question the whole “fight inflation with higher rates” mantra – if inflation is demand-driven (which most of the time is not).
3. To quote the finance minister – “The October budget is the first, not the last, step in our long-term budget fix.”
See the term “budget fix” above about loading and why it doesn’t make sense.
4. Then there’s the “if this, then not that” argument, citing one of Australia’s worst economists – “this is why the level of government debt matters – it’s a lot of money that can’t be spent on services or infrastructure” “.
Going back to point 3 – in most cases there is no either or – this trade-off only makes sense when a country is at maximum capacity.
If there is free productive capacity, then the government can facilitate increased spending across the board.
5. Quote from the same economist – “The budget will need to consider ways to improve the bottom line to restore the surplus. If they can do that, the RBA may not have to raise interest rates that high.”
Whether a surplus or deficit is appropriate depends on external economic conditions and the spending and saving decisions of the domestic private sector (households and companies).
In general, persistent fiscal deficits are appropriate for most countries.
For countries with external deficits, fiscal deficits will always ensure that the domestic private sector is able to save net rather than constantly increasing its debt levels, which is not sustainable.
The mantra that fiscal surpluses are normal and better than fiscal deficits is absurd and reflects a lack of understanding of the interaction between the three sectors.
But the point is, the mainstream media chose not to provide a platform for any disparate viewpoints.
The reporter in question knew that the claims of those he quoted were highly controversial.
But he opted for unbalanced analysis.
So he chose to be part of an indoctrination machine, rather than providing information for the public to appreciate the debate.
in conclusion
Who gets the platform matters.
The media’s bias against fiction and propaganda promoted by mainstream economists and related commentators makes it difficult for the public to make rational assessments of things that inherently affect their own prosperity.
So “democracy” failed.
The real problem in an ageing society is productivity – which I detailed in the blog post I quoted above as background reading.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
