Alcopops tax grab added to Rudd's growing list of policy failures

The ALP's gratuitous tax grab that was disguised as an initiative to curb binge drinking among teenagers has been defeated in the Senate by the socially conservative Senator Steve Fielding of Family First and the Coalition.

In spite of all their emotive rhetoric about how teenage girls cannot help themselves with these sweet tasting, colourfully presented alcoholic beverages, one year on from when the measure was first introduced they failed to provide any evidence that it had an impact on binge drinking.

To make matters worse, the ALP chose to give the tax revenue back to the liquor industry for purely political reasons, as Senator Mathias Cormann explains:

While we opposed this tax increase as a bad tax, we also took the view that the money collected by the government so far (without legal foundation as it turns out now) should not be returned to the liquor industry.

In fact the liquor industry did not want it back.

We bent over backwards, over the past two days, giving the government every opportunity to validate the $300 million collected so far and to invest all of it in genuine and effective measures to fight alcohol abuse in the community.

I moved three separate motions, (one together with Greens Senator Bob Brown) to give the Government the opportunity to validate the $300 million in revenue collected so far.

Recklessly, the Government voted against every single one of them. The reason? Political. They wanted to put maximum pressure on Senator Fielding to pass the tax.

Emissions Trading Scheme fundamentally flawed

The government's proposed Emissions Trading Scheme (ETS) has become a major embarrassment for the Rudd Labor government. The government has been left in disarray because of internal divisions on the policy, and it is now the subject of three Senate inquiries. It has been very poorly designed and raises deep concerns from both the Coalition and Greens.

The ETS in its proposed form will have little or no impact on the nation's carbon emissions. Speaking of the Select Committee on Climate Change Policy, Andrew Robb, Shadow Minister for Infrastructure and COAG and Shadow Minister Assisting the Leader on Emissions Trading Design, said:

The Government's emissions trading scheme is deeply flawed – if implemented it would cost jobs, kill investment and not see any appreciable reduction in CO2 emissions.

This inquiry is an opportunity to look at additional complementary measures and alternatives to the Government's ETS.

This inquiry has been agreed to because everyone, including many in the Government's caucus think, that what the Government has come up with is so deeply flawed that we need to have an inquiry which will look more broadly at what can be done which won't cost thousands of jobs but can also do something significant about CO2 emissions.

The scheme has been slammed in a report commissioned by the Senate Select Committee on Fuel and Energy. Dr Fisher is critical of both what is known about the scheme and what remains unknown:

Although the public report on the Treasury modelling is voluminous there remain aspects of the modelling that are not transparent. To assist in this review the Chair of the Senate Select Committee wrote to the Treasurer requesting, ‘the government's complete documentation of the government's models together with the model codes and databases and any other model simulations undertaken relevant to the policy scenarios, but not publicly released’. To this reviewer’s knowledge no response was received. As a consequence, it has been necessary to undertake this review without access to a complete set of information about model documentation, databases, implementation and many of the underlying technical model parameters. Given the major long-term structural changes to the Australian economy implied by the introduction of an ETS and the fact that the development of the key model employed to determine the international effects on the Australian economy of the scheme was fully taxpayer funded, it seems reasonable that full model datasets, codes and comprehensive documentation be released.

...

As already stated this review regards the transparency surrounding the Treasury modelling process as unsatisfactory, notwithstanding the efforts of the Committee to gain access to models, documentation, codes and databases developed with public funding. This lack of transparency is regrettable given Treasury’s traditional advocacy of openness and competition when it comes to others.

The report also raises concerns about carbon leakage, where emission-intensive, trade-exposed industries relocate offshore. Carbon leakage not only threatens Australian jobs, but can potentially increase greenhouse gas emissions:

The most common description of carbon leakage concerns the relocation of energy intensive industries from countries with emissions constraints to countries with no such constraints. This could happen either via physical plant relocation or if firms in emission-constrained countries shrink while competitors in non-constrained countries expand. Global emissions might actually rise, compared to what otherwise would have occurred, if firms in the nonconstrained economy use more emission-intensive technologies.

Another channel by which leakage can occur is via global energy prices. Mitigation policies in carbon-constrained countries reduce demand for high carbon fossil fuels, leading to lower prices on world markets (other things equal). As a result, non-constrained countries would respond by increasing consumption above what it would otherwise be. Conversely, demand for cleaner fuels such as natural gas would increase in rich, participating countries, driving up the world price and reducing the reliance on such fuels in non-constrained countries.

Unfortunately, it appears that there was some political influence in the economic modelling that was carried out in the design of the scheme, as Senator Mathias Cormann, Chairman of the Senate Select Committee on Fuel and Energy, explained in a media release:

From evidence received late last year, the Committee already knew the Government had refused to ask Treasury to assess the most realistic scenarios when modelling the economic impact of its proposed CPRS.

Challenged about the scenarios chosen for modelling, a senior Treasury official told our Committee that “the scenarios that were modelled by Treasury were done at the direction of the government”.

That is code for don't blame us.

Lindsay Tanner's gutter politics

Lindsay Tanner, Minister for Finance and Deregulation, in the House of Representatives on November 12, 2008:

Why is this happening? Why do we suddenly get this pattern—an orchestrated set of attacks on Australia’s regulator? Most Australians support our regulators. Most Australians think it is important to have a strict set of rules and fair dinkum, impartial, tough umpires. But there are, sadly, some people in the community who do not. There are some people in the community who do not like regulators and who do not like tough rules. The sharks and the shonks and the spivs that inevitably populate the nether regions of the financial world do not like regulators. Unfortunately they have taken over the Liberal Party. The sharks and the shonks and the spivs have taken over the Liberal Party. There has always been a factional tension in the Liberal Party—not between the wets and the dries but between old money and fast money. And fast money has taken over.

Even before Malcolm Turnbull became leader of the opposition, Labor worked furiously to find something in his past to tarnish his reputation. The thinking was that he was a merchant banker, surely he must have been up to no good. What have they found? Absolutely nothing.

Rudd should expect no less for his personal attacks in Parliament

Kevin Rudd shouldn't shed any crocodile tears because of Malcolm Turnbull's article in The Australian slamming the Prime Minister's absurd ideological treatise on neoliberalism, given the number of denigratory remarks that Turnbull and the Liberal Party in general have tolerated from both him and Treasurer Wayne Swan in Parliament. Ever since Turnbull became Leader of the Opposition they have attacked him for his wealth and past career in the finance industry at every available opportunity.

The remarks play to voters' prejudices and not only were they totally uncalled for, they were simply wrong. The global financial crisis was not caused by greedy merchant bankers and neoliberalism. China ran up huge trade surpluses that were lent to the US and fuelled an asset bubble. Also, the US government intervened in the mortgage market, further inflating housing prices until the housing bubble burst.

Here is one appalling attack he made on February 5, 2009, in the House of Representatives, where he insults merchant bankers and outrageously suggests that Turnbull should apologise for the global financial crisis because of his profession:

Mr RUDD —I know those opposite do not wish to actually debate that which is real here, which is: how do you deal with providing the stimulus which the Australian economy needs because of the global economic crisis? We have a program put forward. It is costed. The assumptions have been backed by the Treasury, and we stand by those because they represent for us a credible strategy to see Australia through this crisis.

The alternative is not just sitting on the fence, not just carping from the sidelines, but an avalanche of politically opportunistic negativity from those opposite. But here is the ultimate irony for those opposite. There they are, representing the forces of neoliberalism around the world. There they are representing the forces of unrestrained greed. There they are, representing the forces of unrestrained markets, representing the forces also represented by unprincipled merchant bankers operating with under-regulated markets—their entire ideology, which has brought this crisis about—and yet they are unprepared to lift a political finger to support this government’s efforts to deal with the consequences of that crisis. This is the ultimate irony, the ultimate hypocrisy of those opposite: the unrestrained greed, unprincipled merchant bankers, under-regulated financial markets—at the absolute core of neoliberalism—causing this crisis worldwide, and there they stand back, smugly, seeking to take political advantage of this government’s attempts to deal with the consequences of that crisis for working people. Those opposite have contested whether in fact they are really neoliberals. Remember, as the Leader of the Liberal Party has said in response to this debate on unregulated financial markets: ‘Let us simply let the market run its course.’

Mr Hockey —Mr Speaker, I raise a point of order. I would just ask the Leader of the Labor Party to refer to the Leader of the Opposition by his proper title, please.

The SPEAKER —Order! Members should be referred to by their parliamentary titles.

Mr RUDD —The Leader of the Opposition has said on multiple occasions, ‘Let the market run its course.’ That is the very heart of the neoliberal agenda which has brought about this mayhem on markets worldwide, with impacts on working people, who now pay the price through the loss of jobs right across the world and in our country as well. The Leader of the Opposition reinforced that in the debate in the parliament on Tuesday when he began citing as his new authority on fiscal policy Professor Taylor from Stanford University in the United States, who is himself one of the archdeacons of neoliberalism. Remember what Professor Taylor said? He always asks himself each morning: ‘What would Milton do next?’—that is, what would Milton Friedman do next? And then you have not just these statements of ideology but also the action itself of ideology, which is to block this government’s efforts in the Senate to actually deal with the stimulus needs necessary to repair growth, growth which has been undermined by neoliberal wanton behaviour around the world which has brought this crisis about in the first place.

So there you have this extraordinary contradiction—their ideology wreaking havoc on the world economy and them refusing to support any course of action to deal with the consequences of their ideology’s spectacular failure. How about, I say to the Leader of the Opposition, you just stand up one day and say, ‘Maybe this neoliberalism, maybe this market fundamentalism—maybe we just got it wrong.’ How about a word of apology about all of those investment bankers around the world who creamed it, who scored tens and hundreds of millions of dollars out of this? How about just a word of apology which said you might have got it wrong? And how about a word of action to support a government’s efforts to clean up the wreckage after you? That is the moral challenge here, a moral challenge which has been failed by the Liberal Party corporately and by the Leader of the Opposition personally.

Wayne Swan is probably the worst in Parliament for playing the politics of envy:

Mr SWAN —I was making the point that the Liberal and National parties in this House are simply out of touch with the everyday lives of average Australians. The shadow Treasurer said only last week that Australians have never been richer. That is what he said only last week. Despite the fact that the stock market has halved in value in recent times, his view is that the champagne is still flowing. Of course, when you have the opposition led by a merchant banker and lawyer for merchant bankers, it is no wonder that they are so far out of touch.

More dumb policy from the Australian Laziness Party

You wouldn't expect any less from the ALP. Federal Treasurer Wayne Swan just proposed that executives should have their salaries capped because Pacific Brands gave its executives pay rises after laying off workers in their Australian operations. Take a wild guess what will happen. That's right—these talented workers will just take better offers from overseas. For those that don't move offshore, local companies will just provide generous perks such as luxury cars or private jets in their employment packages. It is pure fantasy to expect that executives will apply their full potential in companies that don't attempt circumvent such regulation.

One might argue that companies will be able to hire more workers using the money that would have otherwise went into executives' pay packets—this is not necessarily so. The CEO will have less incentive to make the company competitive in the marketplace and sales could very well fall. Don't expect consumers to embrace slogans such as "Buy Aussie made"—they are unlikely to take any notice, especially when they have a mortgage to pay and family to feed.

US President Barack Obama recently introduced a cap on executive pay, but he wasn't so stupid as to apply it across the board—it is merely a condition that has to be accepted by companies receiving corporate welfare from the US government. Barack Obama said:

We don't disparage wealth. We don't begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset — and rightfully so — are executives being rewarded for failure, especially when those rewards are subsidised by U.S. taxpayers.