Posted by: graemebird | February 19, 2009

Humphreys: One Irrational Paragraph At A Time

“Opponents of a carbon price correctly point out that all taxes have costs and that a carbon tax may lead to distorted decisions and capital destruction. However, if a carbon tax were linked to other tax cuts then the economic costs of one tax would be offset by the economic benefits from lower taxes elsewhere.”

But this is simply not true. Not only will the government thieves not cut income tax to compensate. But the carbon tax cuts will do massively more damage then what the income tax would mitigate. And the income tax can be cut without a carbon tax.

The carbon tax cannot be made up for by cuts to income tax because the carbon tax is a tax on reinvestment within the business.

Now one might think  at first blush that the harmful effects of a carbon tax could be made up for by a cut to company tax or payroll but this is not true either. Since the energy production companies will be disproportionately slugged, when it is just these companies that we desperately need capital formation in.  We need share price appreciation leading to new share issues in companies such as CARBON AUSTRALIA, LINC ENERGY, COUGAR ENERGY and many many others.

Humphreys, more out of stupidity and ignorance than malice, appears to be working to drive us straight at an energy-capital vortex.  A crisis that we will be hard put to climb out of. Since it takes capital to gather energy and we need energy to produce the capital it is possible to have a total collapse if an energy-capital vortex is reached. 

Humphreys believes that if he doesn’t learn about capital markets and capital theory he will not have to take the consequences of that theory seriously. He seems to think if he is ignorant of energy production issues and energy production technologies he is exempt from the consequences of these realities.

The crudeness of the understanding of Australian economists is just so striking. It is as if they have read Free To Choose maybe 10 times. Read up a bit on the theory of the firm. And then basically just absorbed all the Keynesian-101 gear through osmosis. 

Humphreys does not seem to believe that there is consequences to singling out the energy industry for an especially viscious tax at the first time in centuries where we face a potential interim energy crises. We haven’t really seen anything like this since medieval times when there were finally shortages of firewood in Europe. When you hit one of these periods you cannot hope to increase the output of energy from the current source any time soon. Yes yes of course down the track we will have the technology to drill far deeper oil.   We will have scoped out the deep sea stuff and the Antarctic stuff, and no doubt we can beat peak daily output again. But we really cannot hope to do that anytime soon with our current capital stock and our current oil-wells past their plateau and dropping off pretty quickly.

So our success in dealing with the next few decades comes with our ability to move to liquid-synthetics and nuclear. And carbon tax stands directly in the way of that.

This is really really serious. And these irrational carbon-tax advocates simply will not be reached on this matter. They refuse to engage reason. This goes for Cambria. Sinclair Davidson. Jason Soon. Humphreys and a string of other Quislings affecting to be on the side of liberty.

So NO the government won’t automatically cut taxes when it starts a new line of thieving…..

No we don’t need to have a carbon tax to cut other taxes….

No we don’t need to maintain revenue-neutrality…… 

And NO NO NO an income tax cut can never compensate for a new carbon tax. To think so is straight irrationality and proof that one does not understand capital markets and that one is  instead working on the basis of the static-equilibrium models of the theory of the firm. 

“Climate change is an important political issue in Australia. But if we are serious about tackling the challenges of climate change in an intelligent way, we need to get past the easy promises of just doing something and work out which policy approaches are the most beneficial and least expensive.”

So why doesn’t he do this? Why doesn’t he do this and then come out against the carbon tax?

It really appears that we are going to have to talk a lot more about capital formation in theory and in practice.


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