From the Sunday Herald Sun:

TATTLETALES are dobbing in their neighbours, workmates and former lovers for being tax cheats. More than 152 people a day are informing on friends, business associates and workmates, delivering a windfall of millions of dollars to the Australian Taxation Office.

Well isn't this a flashback to the 1930's where Stalin's NKVD trained their agents specifically in the art of manipulating people to report on their family and friends. As Professor Robert Higgs has shown, crisis generally leads to rapid government expansion as people fall victim to the "siren song" that the politicians know how to sing all too well. As Margaret Atwood's poem "Siren Song" begins:

This is the one song everyone
would like to learn: the song
that is irresistible:
the song that forces men
to leap overboard in squadrons
even though they see the beached skulls.

Fear leads to the misconception, the confusion, that the protective arm of the government is the solution to our woes. The government inevitably expands and becomes more involved in everything to do with our lives. Finally, once the situation "returns to normal", the government may contract, but not to pre-crisis levels; it stays involved with the inevitable trajectory (if it's not stopped) being the creation of a total state.

Encouraging people to "dob in their mates" sets people against each other and will eventually result in an all against all. This divide and conquer mentality is exactly what happened during the creation of the Soviet state. To steal from Prof. Higgs again,

In the present regard, it works every time because the people falsely believe that those who sing it [the siren song] are their protectors, rather than their exploiters. Until people learn to disregard the state's siren song of beneficence and protection, they will continue to suffer and die as victims of the state's wars, foreign and domestic. People yearn for security, and they look to the state to provide it, but they are calling upon a wolf to guard the sheep.

Don't let yourself be blinded by fear or state propaganda: ignore the Siren Song!

Finally, Kevin Rudd has indicated that the First Home Buyers grant is coming to an end,

"It's had a real effect, we're still measuring its full effect, but I think it's very important that as a community we understand that deadlines are imposed for a particular purpose," he said.

"It's had strong useful results so far, but I've got to say, that all good things must come to an end." -- Source

The property industry is already complaining, with Stockland's managing director Matthew Quinn coming out and saying "...we think that the market, the first homebuyer market, does have another six months to go before all of that underlying demand is soaked up and it will result in a rush of buyers towards the end of June" [ibid].

I'm not sure exactly what he means by "underlying demand" but I can only assume he means that an artificial lowering of the price (through low interest rates, first home buyers grants) will increase demand. Well obviously; the lower the price of any product, ceteris paribus, the greater the quantities that buyers will be willing to purchase. Add to that the constant trickery that interest groups have using on home buyers, such as: "you've just been wasting money on rent for the last 5 years, wouldn't it be nice to own your own place instead"; "it's just another, safer, form of investment!; and "interest rates are so low, plus this homebuyers grant will only be around for a while, if we keep enjoying life and decide to buy in five years, who knows how high they're going to be!" and you get more people buying homes -- younger and younger -- at the top of the credit bubble.

The government has misled, even if only indirectly, millions of people into levels of debt that they can't possibly service and even if they can, a lifetime of debt repayments. A house is not an investment. It's a consumer good that you have to upkeep. It's also a liability that you have to deal with if you lose your job. Fair enough, there may be non-economic reasons for home ownership, but if you're doing it because "house prices always go up", then it's time to consider renting instead. The government never offers you money to do intelligent things with it. As Ronald Reagan once said, the nine words you should be most afraid of in this world are "I'm from the government and I'm here to help".

Good riddance to the first home buyers grant; it was nothing more than a subsidy to the housing industry (and those related to it, building etc) at the expense of the taxpayer. It never helped the economy, it merely diverted resources from more productive means. In fact, as I mentioned earlier, I would go the other way and say it has (together with artificially low rates set by the RBA) probably resulted in many, many young Australians having a debt burden that's going to weigh them down for years to come, destroying families and lives in its wake.

There is a growing consensus amongst economists and pundits alike that stimulus packages, job protection and other means of “insulating” the economy from “market failure” are in the interests of all Australians. The argument goes like this: the private sector has dropped off, it is afraid to invest, to spend, and it’s only appropriate that government picks up the slack, or the “idle capacity”, until the situation improves. This is the foundation of Keynesianism, and ignores the need to destroy unneeded capacity and the capital deployed there, as quickly as possible, as the surest means of sustainable recovery. The cure is individual adjustment of prices, costs, and wages to each other - the return of coordination. All of this can be brought about automatically only if the competitive forces of the market are given free play.

The Keynesians are correct in one sense: the current stimulus and budget will have short-term benefits in terms of measured GDP. But then again, so do natural disasters and I don’t think anyone would be advocating the need for another round of Victorian bush fires or Queensland flooding.

Economists and politicians will relentlessly cite carefully selected and “adjusted” data to stress the successes of their programs, but one thing they neglect to tell us is that the results will only be temporary. Not only that, but they come with an immeasurable (debt and malinvestment) cost to the economy in the long run. But in the words of the master himself, “in the long run we’re all dead”, so who cares? It is the political dream: being able to boost the statistics in the short term, to justify increases in government involvement, with complete disregard to what will happen in five, ten, twenty years down the road. This is the attractiveness of Keynes: whether the theory itself is correct or not is irrelevant!

Whilst socialist policies currently being implemented may cause GDP to rise (or fall less) in the short term, it is not the same thing as causing an increase in prosperity or wealth. GDP, a flawed (government) statisticians' tool, builds in a bias towards disguising the costs of government and over-counting its benefits. Government spending doesn’t “spur” economic growth; it doesn’t “fill the void” left by the private sector; it only diverts capital resources from more desirable to less desirable uses. This is yet another fallacy of Keynesianism - they chronically confuse "income" in terms of paper money with real income in goods and services. Of course it is possible to increase paper money income to any amount by debasing the currency. But real income can only be increased by working harder or more efficiently, saving more, investing more, and producing more. This is why we can't get too carried away or be too impressed by the economists and politicians citing the increase in dollar incomes, in dollar GDP, to show that we've never had it so good!

As pointed out in the Wall Street Journal "Review and Outlook" of March 6, 2009, “Recessions don't last forever, but bad policies can prolong the pain.”

Recovery and growth are impeded, not stimulated, by the threat of less competitive labour markets, regulatory uncertainty, the threat of increased protectionism, certain higher tax burdens in the future, especially on capital income, and the use of the tax system explicitly for purposes of redistribution of income.

As Adam Smith put it many years ago in a 1755 paper,

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about the natural course of things. All governments which thwart this natural course, which force things into another channel or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical.”

The cost in lost freedom as a result of current (socialist) government policies may be immeasurable. The cost to our economy will be enormous. We owe future generations better. We owe them a free and prosperous country. History and theory show us the way to achieve both, and it’s not through the fallacies of Keynes.

So, are we all Keynesians now?

Thankfully, not yet.

THE amount of tax paid by the average Australian has jumped by up to 40 per cent in just five years, according to new statistics -- Source.

Who would have guessed, taxes are increasing already! Just wait until the bill arrives for the Rudd National Broadband Network, stimulus packages and various other 'nation building' projects. Perhaps a return to the 1950s of 75% tax is on the cards in the near future?

Wow, would you look at the size of government soar!

Could we be on the way back up? I think so thanks to all of that Ruddness we're lucky enough to be getting! Stay tuned for an upcoming post on economic growth and government size.

The original post on 01/04/2009 was revised slightly and reposted on 09/04/2009

Mr. Rudd, along with his counterparts in the UK and US, are using this apparent “failure” of capitalism to further their socialist and power goals: a "New World" with the ultimate goal of increasing the size, power and control of the state. They are seeking to extend and expand the sphere of their operations, their interference in everyday life, leaving little room for anything to happen of its own accord, under the manifesto that Government Knows Better [1].

"Government debt paves the way for government control. Consider: Debt leads to taxation to pay interest. Taxation leads to more economic control over the people by the same government that ran up the debt in the first place. It's hardly extreme to conclude that escalating debt is part of a plan, such as a plan to establish a new world order." -- John F. McManus

The state has a poor investment track record, and its attempts to soften today's 'financial crisis' impact merely push malinvestment into the future, adding to today's debt burden in the process. Government's focus instead should be on the creative destruction of capital resident in over-capacity sectors of the economy.

The “false god of unrestrained financial markets” basis on which their respective propaganda machines are endeavouring to convince people to accept further intervention is unfounded in fact. We have not had “unfettered free markets” as they will have us believe. To see just how far we have strayed from a market-economy, or capitalism, one simply has to look at Karl Marx’s Communist Manifesto, which reveals their intentions [italics added].

1. Abolition of property in land and application of all rents of land to public purposes. – We currently have Eminent Domain laws in Australia, allowing government to seize land at will. This manifesto is not completely fulfilled but it’s hardly ‘free market’ – where individual property rights are of the utmost importance and there is no 'public' land.

2. A heavy progressive or graduated income tax. – Our tax system is one of the highest in the world. Not only that but there are countless ‘hidden’ taxes. A recent report by the Regulation Task Force estimated that the regulatory burden is effectively a 25% hidden tax-slug on all Australians [2].

3. Abolition of all rights of inheritance – While there is no direct inheritance tax in Australia, recipients must pay full capital gains tax on income and assets acquired from deceased estates.

4. Confiscation of the property of all emigrants and rebels – Not yet at least, albeit "hoon" laws come close.

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly – We have been operating with a central banking cartel, the Reserve Bank of Australia, since 1911 (formerly known as the Commonwealth Bank until 1959). It alone is allowed to produce legal tender, and central banks are the cause of many of the world's current woes.

6. Centralization of the means of communication and transport in the hands of the state – The Rudd government is rolling out a National Broadband Network and a National Internet Filter. Much of our road network along with the majority of our public transport is either state-owned or extremely regulated (e.g. taxis).

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan – The Government is seizing control of various industries through "bail outs” and other forms of market manipulation. Even before the crisis they effectively controlled production in many industries through subsidies and tariffs.

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture – Not yet, but how far away can it be?

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country – Not yet.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc – Our ‘private’ schools receive the same amount of state funding as our public schools. True private education doesn’t exist.

Australia scores seven out of a possible ten of Marx’s Communist Manifesto. If this is not proof enough that we have not had “unfettered free markets”, then let us look at the method used to justify or support policies without valid economic argument. Manipulation in the form of moralism is used to refute logic; against theory is emotional prejudice; and against argument is reference to ‘the will’ of the state.

The crisis we are suffering is not a failure of free markets. It is the failure of interventionism and of the state. Anti-capitalist policies led to this crisis: central banks around the world manipulating interest rates and money supply; the regulatory burden (which has been poorly drafted by lawmakers and poorly executed by inefficient watchdogs); and  excessive levels of taxation (and the distortions they cause to the real economy); to name a few.

The so called ‘greedy capitalist’ leaders of big enterprise, contrary to the free market, no longer cared whether or not they satisfied the needs of the consumer in the best and least expensive way. They worried only about keeping up “relations” with state officials, protecting their interests with regard to tariff rates, wage negotiations before arbitration boards, and in governing bodies of cartels. In return, they contributed to non-busi­ness concerns – election funds, public welfare institutions, lobbysts and the like. This is not capitalism. This is not the “unfettered free market” at work.

If the state continues to use price, wage, interest rate and other controls to thwart the market and stop it from acting as a regulator of production then crisis is inevitable. Our current crisis as we degear from a leverage burden some 20 times global GDP has little to do with a failure of the free market, and more to do with the heavy hand of government intervention.

"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings." - Ludwig von Mises, Human Action.

Only time will tell. It's going to be interesting period in history to say the least.

That's right folks, the government estimates that the new National Broadband Network (NBN) they're going to fly solo with will cost working-aged Australians (15-64) approximately $2,935 each. That's assuming the project is completed -- our government has a bad habit of either quitting mid-way (i.e. after an election) or having the project substantially increase in both duration and cost.

• Government rejects all five private sector bidders for the national broadband network, saying they do not provide value for money.
• National broadband "fibre-to-the-home" network now to be built over eight years by a company established by the Government.
• Network will give 90 per cent of homes, schools and businesses a connection of 100 megabits a second, 100 times faster than now.
• Those remaining will get a service of 12 megabits a second through wireless technologies.
• Will support 25,000 jobs a year for each year of construction, with 37 000 jobs in the peak year of construction.
• PM Kevin Rudd says infrastructure project is the biggest ever undertaken by an Australian government.
• Majority share of the company will be held by the Government, with private sector investment capped at 49 per cent.
• Up to $43 billion will be invested by the company in the project, including the $4.7 billion already allocated by the Government.
• Once the project has been up and running for five years, the Government will begin selling its stake in the company. -- Source
  

The government, in their wisdom, decided that the private sector couldn't provide 'value for money'. I suppose nothing would provide government with value though, those pesky private sector companies actually have to think about their customers and shareholders, while the government doesn't pay for anything themselves -- they simply take it from the taxpayers! How is the government creating these jobs? Everyone knows that the government doesn't produce anything, don't they? These 'jobs' are simply jobs that the private sector can no longer create (productive jobs I might add). They're jobs for something the people, individuals, aren't demanding: not only that, but they're jobs plus a layer of bureaucracy, in other words wasted capital.

All day the government has been stressing this is 'stimulus'; yet it's nothing more than fulfilling #6 on the Community Manifesto! We're moving further and further towards a socialist state and the noose around our necks has just been tightened again. If they really wanted Australian's to have fair internet, they would remove all of their regulations and controls on the industry; they would allow the market to function. But we all know Rudd doesn't have the people's interests at hand.

Then they have the galls to say they're going to start selling their stake -- that will surely end well! Why don't the government just skip this middle step (the NBN) and allow private competition with previous government monopolies (Tel$tra) to be free and unhampered!? Privatising this network, when the time comes, is hardly fair: the government has taken from taxpayers around the country to fund this project and is going to ask us to pay them, again, for the privilege of privatisation? Why is the government entitled to the revenue from this taxpayer funded project? It's ridiculous.

I'm not looking forward to being an Australian taxpayer when we eventually have to pay for all of this Ruddish. Expect either inflation (courtesy of the banking monopoly the government has: the RBA) or massive tax hikes or both in the future -- perhaps a return to the 1950s of 75% income tax is on the cards?

Is anyone surprised? Perth taxi drivers decided to protest a minor weakening of their state-created and enforced monopoly of the roads,

About 40 taxi drivers have a held a stop work meeting at Perth Airport to protest against the State Government's decision to extend a trial of peak period taxis.

The previous government instigated the year-long trial which allowed more cabs on the road at peak hour on week day mornings.

Last week the Government agreed to extend the trial for another year, but reduce the number of peak period plates allowed on the road each day by half.

A Spokesman for the Taxi Industry Forum, Stephen Satchell, says peak period plates do work, but they need to be specific to weekends and areas like Northbridge and Fremantle.

"Tourism is down, business is down, our economy is going down, and our Minister has put more taxis on," he said.

"It doesn't make sense." -- Source

You're right Mr. Satchell, it doesn't make sense. There is no reason at all why the current taxi drivers should have a monopoly on the Perth market, one that's protected by threat of force (by that I mean government guns/prison). All it does is distort the market with the end result being poor service for the consumer. Anyone who's had the displeasure of dealing with the Perth taxi monopoly on a Friday or Saturday night can sympathise with this argument.

We need to deregulate the industry, abolish 'taxi plates' and allow any entrepreneur who wants to compete for fares with the big boys his right to do so. These 'peak period plates' are the perfect example of government creating a 'solution' (I wonder how many taxpayer dollars were spent devising and now regulating them) to a government created 'problem'. It's perverse.

If you give people money to do something, of course their going to do it. From the ABC:

The Federal Government says strong uptake of its solar hot water rebate is proof that its economic stimulus package is working.

More than 6,000 Australians have applied for the $1,600 rebate since it was introduced last month.

The Environment Minister Peter Garrett says it is good news for jobs and small businesses.

"This marks a really, really positive day for Australian industry, for the solar hot water industry, for the retailers, for the installers, for the plumbers, for the tradies, this is going to drive economic activity through the sector," he said.

"It 's environmentally friendly, it stimulates the economy and it's stimulating local jobs and local manufacturing. That's the critical thing.

"So we have positive proof that the Government's decision in the economic stimulus package to provide a non-means tested rebate for solar hot water systems is paying us immediate dividends."

Absolutely. Everyone who has applied for or installed a solar panel is benefiting immensely, along with the solar industry and all of their employees. But this was not the way to go about doing it. Mr. Garrett is missing the bigger picture: who did you steal from to pay for these rebates? What industry is now suffering or was never created because you wanted to subsidise the solar energy industry? How about you stop subsidising electricity (excuse the wikipedia reference but I'm feeling lazy: the Australian government pays $9-10bn a year keeping the electricity price down) and then maybe people would actually choose for themselves where to get their electricity?

Stop complaining about people using too much power causing outages or killing our planet. If you allow the market to determine how much individuals are willing to pay for electricity (hint: scrap the subsidies/rebates etc), in other words let the price system work, we wouldn't have power outages. The electricity companies in Australia are just one of many government institutions (water, transport are others) that actually advertise telling people not to use their product! What kind of self-respecting business goes around telling people not to buy their product?!

This is just another state band-aid on a state-caused problem at the taxpayers' expense. Wake up and smell the bacon Mr. Garrett, quit wasting our money.

What's that, the first home buyers grant doesn't do anything except subsidise the real estate/construction industries? I never would have guessed...

The Reserve Bank's deputy governor says the boosted first home owner grant may have pushed up house prices at the lower end of the market.

The Federal Government has in some cases tripled the value of the grant, in a bid to stimulate the housing market.

But the RBA's Ric Battellino has warned it could lose its incentive value.

"The benefits of that policy can get eroded very quickly by being capitalised into house prices," he said.

"From all accounts the bottom end of the housing market has picked up a lot in recent times, and it doesn't take long for the average house price to rise by $20,000 and leave the home buyers no better off than they were before."-- Source

The government never cared about homebuyers. If they did, they would have allowed the housing industry to suffer the necessary downturn making houses more affordable for low income families. That aside, since when was it a 'right' to own a house? In most cases renting is a far more economical, flexible way to go. The incentives behind home ownership are usually non-financial and instead psychological in nature (if we want to get more cynical -- the government loves it because it makes it that much harder for people to leave).

The first homebuyers grant was(is) nothing more than another prop-up for the real estate and construction unions along with various other interest groups. Good riddance.