I have been asked a number of times what the hell is wrong with Tony Abbott. The answer is simple: The same thing that is wrong with the Liberal Party. The Liberals are still largely governed by statist thinking and Keynesian economics. It is a party without a grasp of sound economic theory, any knowledge of the history of economic thought and thoroughly ignorant of economic history. James Guest, former Liberal MP, is a perfect and depressing example of this dangerous mixture of sanctimonious witlessness.
Five years ago James Guest did the public a service by openly displaying his staggering ignorance of these subjects in an article he wrote for Quadrant in which he attacked Steve Kates for rightly taking issue with the Labor Government’s reckless spending policy to counter the recession. (One can read Kates’ tepid response here). Continue reading Tony Abbott’s lousy economics and the menace of Keynesianism
It seems that the Tony Abbott administration has discovered its inner central planner by approving a “competitiveness agenda” (code for industry policy) that will use taxpayers’ money to fund those economic activities where Australia has the greatest advantage, leading one to wonder why they would need public funding if they are that strong. Picking winners always leads to even greater political meddling in the economy and, if implemented, Abbott’s proposal will be no different. His policy also envisages ‘cooperation’ between businesses, training colleges, universities and schools. Funny thing, though, is that Mussolini had a similar vision: he called it corporatism. Continue reading Tony Abbott finds his inner central planner causing Mises and Hayek to rollover in their graves
It was 1962 when Jack Kennedy stated that “it is a paradoxical that tax rates are too high and tax revenues too low”. In other words, high taxes were retarding investment and output, thus keeping the American standard of living lower than it would otherwise be. It was this belief that motivated the 1963 tax cuts. The result was a surge in investment. From 1959 to 1963 only 27.8 per cent of what is termed ‘investment’ went to business and 38.5 per cent to real estate. In 1967, thanks to the cuts, the proportion going to business had jumped to 58.6 per cent while the amount going to real estate had dropped to 11.2 per cent and the demand for labour jumped. In addition, revenue from the income tax rose from $48.7 billion in 1964 to $68.7 billion in 1968. (The Kennedy’s tax cuts were enormous and, as a proportion of national income, about twice as large as the Bush cuts).
But from whom did Kennedy obtain his wisdom on the value of tax cuts? Keynesians, that’s who. Prominent among these was Walter Heller who believed that tax cuts could increase tax receipts. As he himself said: Continue reading Austrian economics, economic growth and the Laffer curve