Australia's fiscal deficit has been a long time coming

Ross Gittins in Blame for budget woe widely shared makes the point that our structural deficit is the result of policies of the Howard, Rudd, Gillard and Abbott Governments:

With Hockey busily shifting all the blame for this daunting outlook onto Labor, it's worth examining its political antecedents. Since we've known we had a long-term ''fiscal gap'' problem at least since the first intergenerational report of 2002, the blame for making things worse must be shared not just by the former Labor government, but also by the Howard government and even the Abbott government.

The Howard government probably did most to add to the existing problem by the way it frittered away the proceeds of the first phase of the resources boom, which it treated as a permanent rather than temporary boost in tax collections.

Pick 2 out of 3: Cheap housing, low density housing, no urban sprawl

In When you buy a house, you shouldn't buy the neighbourhood with it Matt Cowgill looks at the rising cost of housing and makes the point:

I think we've tipped the scales too far in favour of those who want to restrict development. The consequence of this is that housing is more expensive than it otherwise would be. That's fine for people who already own their own home, but it hurts the young and the poor.

There's a trade-off at play here, one that can't be wished away or ignored. With a growing population, you can't restrict rising density in established suburbs, prevent sprawl on the urban fringes, and prevent housing from being unaffordable. Pick two out of the three. The urge to preserve historic neighbourhoods, the desire the conserve all the green bits around our cities, and the wish to maintain affordable housing are all noble impulses with which I sympathise. But, again, we can't have them all.

If you stop density from rising in the inner city, you push people further out to the fringes. If you try and stop this sprawl, prices will soar. People will spend longer living at home or in share houses than they’d like, and we'll suffer through more of those tiresome pieces in newspaper lifestyle supplements speculating about the deep cultural cause of this allegedly dysfunctional generation's protracted adolescence.

Could higher unemployment be helping corporate profits?

Paul Krugman in The Fear Economy writes:

The economic recovery has, as I said, been weak and inadequate, but all the burden of that weakness is being borne by workers. Corporate profits plunged during the financial crisis, but quickly bounced back, and they continued to soar. Indeed, at this point, after-tax profits are more than 60 percent higher than they were in 2007, before the recession began. We don’t know how much of this profit surge can be explained by the fear factor — the ability to squeeze workers who know that they have no place to go. But it must be at least part of the explanation. In fact, it’s possible (although by no means certain) that corporate interests are actually doing better in a somewhat depressed economy than they would if we had full employment.

What’s more, I don’t think it’s too much of a stretch to suggest that this reality helps explain why our political system has turned its backs on the unemployed. No, I don’t believe that there’s a secret cabal of C.E.O.’s plotting to keep the economy weak. But I do think that a major reason why reducing unemployment isn’t a political priority is that the economy may be lousy for workers, but corporate America is doing just fine. 

And

Weak labor markets are a main reason workers are losing ground, and the excessive power of corporations and the wealthy is a main reason we aren’t doing anything about jobs.

Too many Americans currently live in a climate of economic fear. There are many steps that we can take to end that state of affairs, but the most important is to put jobs back on the agenda.

Solving homelessness might be cheaper than doing nothing

Jenny Shank in Utah Is on Track to End Homelessness by 2015 With This One Simple Idea writes:

Utah has reduced its rate of chronic homelessness by 78 percent over the past eight years, moving 2000 people off the street and putting the state on track to eradicate homelessness altogether by 2015. How’d they do it? The state is giving away apartments, no strings attached. In 2005, Utah calculated the annual cost of E.R. visits and jail stays for an average homeless person was $16,670, while the cost of providing an apartment and social worker would be $11,000. Each participant works with a caseworker to become self-sufficient, but if they fail, they still get to keep their apartment.

Solve congestion with more roads, rather than more public transport?

Brian Lee Crowley in Sick of congestion? Build roads, not transit notes that cities that invest in roads rather than public transport have less congestion and lower travel times.

This relationship between density and travel times is another counterintuitive puzzler for those who believe cars and roads are the problem, rather than the solution to transit woes. How easy it is to assume that travel times must be shorter where cities are dense and people therefore have shorter distances to travel to work.

What the real world shows us, though, is that when urban population density is lower, and jobs widely dispersed rather than concentrated in a city centre, commuter traffic is more widely scattered on the road network, lowering commuting times. This is a real challenge for the advocates of heavy investment in subways and light rail, which are reliant on commuting patterns focused on a hub-and-spoke model bringing workers downtown along densely developed transit corridors.

I think things are more complicated than that. There are also environmental and social costs associated with greater urban sprawl. Lower population densities lower the economic efficiency of public transport, while higher population densities will by itself increase congestion. It's also much easier to build or expand a new road in environments were there's little or no urban development - imagine trying to build a six lane freeway in the middle of Manhatten.

Higher tax paying companies appear to create more jobs

Laura Clawson in Lower corporate taxes don't mean more jobs has this interesting graph:

It appears that companies, at least in the USA, that pay higher taxes are also more likely to create more jobs. Some might argue this might be because large companies pay more taxes and employ more people than smaller companies. However looking at the graph, the "tax-shirking job-shedders" had larger profits.

Clawson makes the point:

If corporations paid 35 percent of their $1.8 trillion in 2012 profits as taxes, that would have accounted for $630 billion in revenue. Instead, large corporations paid less than 13 percent in taxes, according to the Government Accountability Office, and total corporate taxes came to just $242 billion. If even half of that gap was filled, the American economic picture would look a lot brighter.

Australia's future isn't looking so rosy

David Llewellyn-Smith writes in Australian entitlement is in for a great shock that the Australian economy is bloated and uncompetitive and we have a reckoning on the way.

We have, in short, done absolutely nothing to prepare for what is coming. We have pretended it's not happening in the hope that something will come along.

None of this is new but I wish to make two points today. First, this week has shown that despite our denial, the adjustment is accelerating. Throughout the last three years, MacroBusiness has argued that we face a long and arduous period of below trend growth because of our multiple adjustments. And so it has proven to be.

Despite a brief spike in growth in 2011/12, the post-GFC period has been the lowest average growth period anyone can remember. We are now growing more slowly than the supposedly broken United States. This week's national accounts illustrated why very clearly. The terms of trade correction which is central to the adjustment is pulling down national income.

RIP Nelson Mandela

Mediocre people seek power through division. Great men like Mandela bring a nation together.

Annabel Crabb posted this wonderful Mandela quote on Twitter this morning:

Resentment is like drinking poison and then hoping it will kill your enemies.

Rest in peace Madiba. The world is a poorer place for your passing.

A week's meals for $17

Jack Monroe, the author of the A Girl Call Jack blog has achieved success developing really cheap meals. Check our her food and recipes archive. Daily Life had an article on her: Feeding your family for $17 a week.

Why you need to tip in America

Chelsea Welch on why you should leave a tip in American restaurants -Tips are not optional, they are how waiters get paid in America:

We make $3.50 an hour. Most of my paychecks are less than pocket change because I have to pay taxes on the tips I make.

After sharing my tips with hosts, bussers, and bartenders, I make less than $9 an hour on average, before taxes. I am expected to skip bathroom breaks if we are busy. I go hungry all day if I have several busy tables to work. I am expected to work until 1:30am and then come in again at 10:30am to open the restaurant.

I have worked 12-hour double shifts without a chance to even sit down. I am expected to portray a canned personality that has been found to be least offensive to the greatest amount of people. And I am expected to do all of this, every day, and receive change, or even nothing, in return. After all that, I can be fired for "embarrassing" someone, who directly insults his or her server on religious grounds.

In this economy, $3.50 an hour doesn't cut it. I can't pay half my bills. Like many, I would love to see a reasonable, non-tip-dependent wage system for service workers like they have in other countries. But the system being flawed is not an excuse for not paying for services rendered.

I need tips to pay my bills. All waiters do. We spend an hour or more of our time befriending you, making you laugh, getting to know you, and making your dining experience the best it can be. We work hard. We care. We deserve to be paid for that.

As an Australian the idea of regularly tipping is quite foreign. The American system stinks. It's something I have never understood when visiting the USA. However, the world is what it is. When visiting the USA we need to remember to tip, people's livelihoods depend on it.

Low carbohydrate diet for those with type 1 diabetes

Dr Norman Swan interviewed Dr Troy Stapleton on the benefits of a Low carbohydrate diet to manage type I diabetes:

This is the personal story of Dr Troy Stapleton, who developed type I diabetes at the age of 41. In the beginning of his disease he followed the standard dietary advice for diabetics to consume up to 250g of carbohydrates per day and then balance this with insulin injections. However, after extensive research he decided to go on a very low carbohydrate diet, which has improved his life quite dramatically.

It's an interesting interview. I would recommend people consult their doctor before acting on any of the information in this interview. I'm certainly not qualified to offer medical advice, or to make any recommendations.