Stanford Unviersity’s Professor John Taylor says Kevin Rudd, like Barack Obama, is peddling snake oil:
TONY JONES: Well there was also some evidence here in Australia, admittedly inconclusive, that when the $10 billion cash payment bonuses came through just before Christmas, the big retail stores did get a jump in sales.
JOHN TAYLOR: .... I don’t know that study. But what I do know is what I’ve seen here over many years and it doesn’t have really any affect. Even if it has some effect, it’s very small. So, you can’t count on it to really jumpstart the economy. You know, go back to the United States again: we had a huge stimulus package last year. Cheques were paid out in May, June and July, August and consumption - in fact consumption has fallen since then… The decline kept going.
TONY JONES: ...Now, Malcolm Turnbull, the leader of the Opposition citing you says that what’s needed now are tax cuts. The Government says, “No, they take far too long to take effect on the economy.”
JOHN TAYLOR: I think it’s exactly the opposite. I think permanent tax cuts, then people can recognise that not only this year, this month, but next month, next year and for the foreseeable future, that their taxes bill will be lower. That’s gonna affect their expectations of income for a number of years, and it’s gonna get their consumption rising again by a much larger amount than the one-time payments will. ...
TONY JONES: Here in Australia, Prime Minister Kevin Rudd says the financial collapse is proof of the failures of what he calls “extreme capitalism”; that only intervention from governments, he says - social democratic governments - can now save capitalism. What do you say to that?
JOHN TAYLOR: Well, with all due respect, I think that’s exactly wrong; exactly backwards. I think that if you look in the United States and other countries where this particular crisis first began to be seen, in each case, you can see there’s government excesses. In the United States, very easy monetary policy got the housing boom going which caused a bust. If you look at other countries, some countries in Europe like Spain and Ireland, the same kind of story holds, then you see the initial reaction, which was a lot of government intervention. It prolonged the crisis and ultimately has made it worse. So my reading of this crisis is that it’s the government actions and interventions that caused it, prolonged it and made it worse.
