For those of you sensible enough not to read Crikey, I’m sorry to do this to you. If I was a stronger person I would also just stop reading neo-socialist commentary. But like a gawker at a car crash, I just can’t seem to look away.
Crikey’s main writer — Bernard Keane — has been telling us for months that expansionary fiscal policy works well, and that the ETS is good policy. I have occasionally sent him a quick e-mail pointing out some of his more egregious errors (not understanding how national accounts work, claiming that most economists prefer an ETS to a carbon tax) but he hasn’t responded or corrected them.
But today’s mistake deserves a special mention.
Flicking through the recently-released MYEFO (Commonwealth mini-budget) Keane claims that it “gives the lie to the absurd line from ETS opponents such as the Nationals that the CPRS is a giant tax.”
For Keane, the reason that the ETS isn’t a big tax is that the government is going to match the tax with higher level of government spending. In the world of neo-socialists, if you tax and spend then you haven’t really taxed. Wow.
To be clear, the MYEFO clearly shows the ETS as a Commonwealth tax (an admirable piece of honesty by the government) and it estimates revenue of $11.5 billion in 2012-13, and then rising to $16 billion in 2019-20. To put that in perspective, the ETS will be the forth largest Commonwealth tax, behind income tax ($130b), Company tax ($60b) and the GST ($47b). And these figures are based on the assumption that Australia goes for the easy emissions targets.
The reason that Keane says this tax isn’t a tax is that the government is also going to introduce some other policies, including some limited tax cuts (eg fuel tax will be reduced by $2-$3 billion), and a lot more spending (compensation payments, adjustment schemes, action fund).
Keane incorrectly says the scheme will cost taxpayers $5 billion over the first five years… but the truth is that it will cost taxpayers $58 billion over those five years, linked to $10 billion of fuel tax cuts and $53 billion of extra government spending. This is indeed a large tax increase (as the ETS opponents claim) matched with a large spending increase.
What Keane is trying to say is that the ETS will initially have a negative impact on the budget by about $5 billion over five years. Yes. That’s true because government spending will initially increase by more than revenue. This point is worth making, but they should be made honestly and not dressed up in dishonest neo-socialist jargon that says “if you tax and spend, that is revenue neutral”. No. It is not.
The problem with the neo-socialist mentality is that the apologists for government can honestly not see any difference between a tax cut and government spending. That is why they say that tax cuts “cost” us money, when of course tax cuts save us money. It is just semantics, but language often frames the debate.