Tom Sargent: The European Monetary Union Now, the U.S. Then
13 Oct 2017 Leave a comment
in currency unions, international economics, monetary economics Tags: Euro, Tom Sargent
Facts About Taxes: Michael Keane
12 Oct 2017 Leave a comment
in applied price theory, fiscal policy, human capital, labour economics, labour supply, macroeconomics Tags: taxation and labour supply
Is Growth of Government Inevitable? | Sam Peltzman
12 Oct 2017 Leave a comment
in applied price theory, economic history, fiscal policy, macroeconomics, Public Choice, public economics, Sam Peltzman Tags: Director's Law, growth of government
Financial regulation and financial crisis | Sam Peltzman
11 Oct 2017 Leave a comment
in applied price theory, economics of regulation, financial economics, global financial crisis (GFC), macroeconomics, monetary economics, Sam Peltzman Tags: offsetting behaviour, unintended consequences
There is a hole in @NZLabour’s fiscal plan
06 Sep 2017 Leave a comment
in fiscal policy, politics - New Zealand Tags: 2017 New Zealand election
Monetary Policy: The Best Case Scenario
11 Aug 2017 Leave a comment
in business cycles, economics, inflation targeting, macroeconomics, monetarism, monetary economics Tags: monetary policy
Why is the reduction in GDP levels so small? @GreenpeaceNZ @Oxfamnz
30 Jul 2017 Leave a comment
in applied welfare economics, climate change, economic growth, energy economics, environmental economics, global warming
The global reduction in the level of GDP between now and 2060 is estimated to range between 0.6% and 4.4% if nothing is done. In the case of developing countries undergoing growth miracles, we are all talking about 6 months GDP growth! Russia and Canada will be overrun by tourists in the event of runaway climate change.
Source: The Economic Consequences of Climate Change The damages from selected climate change impacts to 2060 DOI:http://dx.doi.org/10.1787/9789264235410-5-en
Debt repayment does not rule out tax cuts
20 Jul 2017 Leave a comment
in budget deficits, politics - New Zealand, public economics
The case for a tax cut is a distinct issue from repaying the recent large budget deficits and balancing the budget over the business cycle.
Ministers of Finance should pay more attention to the concept of tax smoothing. Unless something special is happening, income tax rates should be similar from one year to another. We should keep tax rates fairly smooth by borrowing during recessions and emergencies.
Instead, the Government not indexing the income tax thresholds for inflation collected $2.1 billion in extra revenue since 2008 according to Parliamentary Library calculations. Raising the income tax rate thresholds is becoming more pressing. Income growth is starting to push many ordinary taxpayers uncomfortably close to the next threshold and a much higher marginal tax rate. For example, 30% rather than the 17.5% income tax rate many taxpayers face.
New Zealand is already left behind on company tax rates; ours is currently 28%. The Australian company tax rate may drop to 25%; the British company tax rate is going down to 17% by 2020.
Large public deficits have their place
Prudent public debt management dictates that governments run temporary budget deficits in recessions and other emergencies such as the Canterbury earthquake and repay that debt as better times return. Recessions and natural disasters are infrequent so this extra debt should be paid down at a measured speed, not a frantic pace at the expense of other tax policy goals.
An increase in the budget deficit smooths over these bad times and avoids taxes going up and down like a Jack-in-the-Box over the business cycle. Who raises taxes in a recession?
Beware of foul-weather fiscal conservatives
After the start of the recession in 2009, foul weather fiscal conservatives wanted to do just that. The same usual suspects who always advocate bigger government argued for higher taxes rather than running a larger budget deficit, which New Zealand did. Imagine the massive income tax rises required every recession and in the last recession in particular if the large budget deficits were not run?
The large public debt from the temporary budget deficits that smoothed over the last recession is no special or additional reason to postpone income tax cuts. A sound long-term fiscal strategy has tax rates at levels that make up on the deficits in bad times with surpluses in the good times. Slowly repaying debts accumulated in a recession is a routine part of prudent public debt management.
There is room for tax cuts
Every budget allocates about $1.5 billion for new policy proposals that can be adopted without the Treasury thinking that they might harm long-term fiscal stability.
New Zealand budget allows for up to $1.5 billion on new policies every year. If this new spending was justified despite the large public debt from the recent recession, some tax cuts are too. They could start with raising the income tax rate thresholds to make up for past inflation.
7. The New Deal and the Post War International Monetary System – Murray N Rothbard
16 Jul 2017 Leave a comment
in economic history, international economics, macroeconomics, monetary economics Tags: Austrian business cycle theory, monetary policy, regulatory capture
Utopia, you are standing in it! 
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