States heading for a debt problem

The state treasurers are meeting in Canberra today to discuss spending on infrastructure among other things. Robert Carling from The Centre for Independent Studies says that if the states want to be able to spend on infrastructure, they have to keep a tight rein on operating expenses for years to come as the debt of state governments has risen dramatically in the last years.

Self-sustaining leviathan

When Presidential hopeful Mitt Romney spoke off the cuff about American welfare recipients not paying tax he drew a lot of criticism, even though he was factually correct. Robert Carling looks at the situation in Australia.

Has Australia’s welfare state become so large that it can now sustain itself and grow through the ballot box? This is the key issue raised by recent controversies in the United States and the United Kingdom.

A deficit of stability and predictability

The Federal Government has been forced to re-write the Budget it released just months ago due to a slump in Australian mineral prices. Robert Carling says a stable tax regime is more important than whether the budget is a few billion in surplus or deficit.

Taming the banks, but at what cost?

As the world’s financial institutions regroup following the devastating global financial crisis economic policy is under the spotlight. Robert Carling believes many are seeking revenge when they insist on tight new regulations.

Economic history tells us to expect that major financial crises will be followed by lengthy periods of sub-par economic growth, or worse.

The performance of the global economy – and particularly the US and Europe – in the wake of the global financial crisis is consistent with the lessons of history. There is, thus, a certain inevitability about the pain they (and, to a lesser extent, other regions) are experiencing. It is also true, however, that economic policies can make the aftermath of a crisis more or less painful than it needs to be.

Are We All Keynesians Again?

The stimulus measures adopted in late 2008 and early 2009 are excessive and largely of the wrong kind. It would have been better to accelerate desirable structural changes, such as permanent tax reform, which improve incentives for individuals and businesses.

The unfolding global economic debacle has led many governments, including our own, to reach into their policy toolkits for fiscal stimulus measures. In doing so, they have revived fiscal policy as a counter-cyclical tool, which was so much in vogue until the early 1970s that Richard Nixon famously declared ‘We are all Keynesians now.’

Are we all Keynesians again?  At first sight, fiscal pump priming might appear to have a lot going for it in current conditions: inflation is receding; spare capacity is increasing, at least in the major developed economies; and the crisis in the banking system is weakening conventional monetary policy.