Ladies and Gentlemen... the Greens' would-be Finance Minister

Russel Norman, recently ruled out as Finance Minister in any Labour-Green coalition by Labour, tweets from the Finance Committee:

Sitting in Finance Cttee listening to Treasury officials describe tax as a 'burden'. Right wing political ideology runs deep in Treasury!
— Russel Norman (@RusselNorman) September 17, 2013

Tax is price we pay to live in a civilised society. If Treasury thinks it's a 'burden', perhaps they'd suggest abolition of public health.
— Russel Norman (@RusselNorman) September 17, 2013

Taxes are a bad, public services are a good. Saying the first doesn't mean denying the second.

More importantly, economists use the word 'burden' in a particular way. A few useful notes about Principles-level (maybe intermediate) economics for someone who thinks himself qualified to be finance minister:

• 'Burden' measures the total cost of a tax. The 'excess burden' is the amount by which the cost of a tax exceeds the amount collected. Treasury tends to reckon that excess burden is around 20%: it costs us about $1.20 to raise $1.00 in tax. The $1.00 raised is a transfer from the public to the government; the $0.20 is pure loss due to distortions in economic activity consequent to increases in our current mix of taxes.
• Tax incidence theory is important: it tells us who bears the burden of any particular tax. Suppose we wanted to add another 5% compulsory Kiwisaver contribution. The 'burden' of the tax would fall on both workers and on employers with the precise mix depending on how employers and employees change their labour demand and labour supply with changes in wages: it doesn't much matter whether we say that employers have to pay it or whether employees have to pay it. Regardless of statutory incidence, economic incidence - the burden - will remain the same. Meteria Turei understood this when she said that the accommodation supplement paid to tenants is largely a subsidy for landlords. Alas, public understanding of such things is imperfect, allowing for shenanigans where measures imposing burdens on one group are framed as costing somebody else instead.
• If a genie appeared able to provide public health services, for free, this would be a good thing, right? It's impossible, but it would be good. The services paid for by taxes are good, the taxes are bad. We need to be sure that the value delivered by services are greater than the burden imposed by the tax. At current measures of excess burden, a project must return at least $1.20 for every dollar in spending. 

Russel Norman suggests only "right wing" economists talk about tax burden. Here is a JSTOR search on "tax burden". There are 61 pages of search results with 100 results per page. Item number 177 on a date-sorted list is famous Right Wing Economist John Maynard Keynes discussing the Colwyn Report on Natinoal Debt and Taxation. Item 398 is rabid right-winger Nicholas Kaldor's call for wage subsidies to reduce unemployment (1936).

Burden is just the term used by economists to describe the cost of the tax and to help sort out the difference between statutory and economic incidence. Like "While X writes the cheque to IRD, the burden of the tax falls on Y and Z." That's it. It's the standard term used in the main texts to describe this thing. Richard Musgrave (centre, maybe centre-left) uses it. James Buchanan (right) uses it. Pick a random public finance text, you'll find "tax burden" or "excess burden" somewhere in it.

Update: egads, it gets worse. Lance Wiggs tries explaining that it's just a word we use. Russel Norman replies:

@lancewiggs Taxes do change behaviour. To call it a burden or distortionary does buy in to general equilibrium model w all its problems
— Russel Norman (@RusselNorman) September 18, 2013

Update 2: this is way too funny. A Twitter correspondent points me to two press releases by Russel Norman.

First:

"It's not fair to expect income-earning New Zealanders to carry a disproportionate share of the tax burden while some of New Zealand's wealthiest individuals pay none," said Green Party Co-Leader Russel Norman.

Second:

Unlike the National Government that has chosen to shift the tax burden on to the lowest paid New Zealanders, our tax changes would focus on those not currently paying their fair share.

Green Money

There is a time and place for non-traditional monetary policy mechanisms.

In a world in which deflationary pressures are strong and the Reserve Bank has hit the zero-bound on interest rates, then standard monetarist macroeconomics and the new monetarists would recommend doing other things increase inflationary expectations. Standard theory tends to expect problems in worlds combining nominal wage rigidity and deflation. And if the Reserve Bank can't accommodate with nominal interest rate cuts, then things like quantitative easing - or money-printing - start being recommended. If you're keen on the debates around this kind of macroeconomics, start reading Scott Sumner, Stephen Williamson, Nick Rowe, and the macroblogs. Nolan at TVHE more frequently covers this too; I generally try to stay out of macro.

So "printing money", per se, isn't utterly insane. It can be a pretty mainstream response to a very particular and fairly rare set of circumstances. Not all macroeconomists agree about it, but it's within the mainstream for the set of circumstances that held in some parts of the world over the last few years. But not today's New Zealand.

While we're currently below the bottom end of the RBNZ's target range, that is not going to last. If the RBNZ thought it would, they could and would lower interest rates further. But they're not doing it. Why? Construction pressures are pushing up in the non-tradeable sector. Further, the depreciation that would come consequent to any serious monetary push, whether from printing money or from big interest rate cuts, would push up import prices and then put more pressure on inflation rates. They're targeting 1-3% over the medium term and seem on track to be there. iPredict has medium term inflation looking to be under 2%, but over 1%.

And so the debates over the Greens' "let's print money to pay for the earthquake" policy have been a bit disappointing.

First off, the Greens have been spectacularly wrong when they've argued that their policy can't be all bad because so many other places are running quantitative easing. Imagine a doctor prescribing a pretty aggressive chemotherapy treatment for a patient who only has a cold. When everybody says he's nuts, the doc replies "Well, Jim over there's on chemo, and it seems to be helping him!" There's a time and a place for aggressive chemotherapy and for quantitative easing; NZ right now isn't it.

On the other side, there's been a bit of overstatement claiming that it can never be consistent with standard macro to print money. But I did enjoy The Civilian's caricature.

Finally, rather than admit that they were really wrong, the Greens instead pulled back from their policy by saying they couldn't see getting sufficient support for getting QE through - like it's everybody else's fault for thinking that doctors shouldn't jump for chemothearapy for colds.

I hate how economic models prescribing particular corrective interventions for particular sets of conditions get used to justify those policies in every other state of the world. Keynes said to run deficits during recessions; politics turned that into running deficits all the time. Market failure theory says we might want Pigovean taxes for costs people impose on others; politics turns that into excise taxes for costs people impose upon themselves. And then there's Russel Norman.

UPDATE: I totally do not want to be slamming Russel Norman if he's changed his mind about the merits of QE under the current circumstances rather than the political feasibility of QE under the current circumstances. Any politician who changes his views on the basis of the evidence should be lauded for the change rather than condemned for U-Turns.

@Davidxvx points me to Wednesday's ODT:

Dr Norman supported money printing as devaluing the currency, as the United States and Britain had done, saying at the time that "New Zealand can no longer afford to be a pacifist in a currency war".

Asked if he still supported the policy, he said the consensus position was that while the official cash rate remained close to zero (it is 2.5) there was not a clear role for quantitative easing.

"But were the OCR to drop close to zero then QE would come back into the agenda."

In that circumstance he believed the Reserve Bank Governor would look at quantitative easing - as he actually can now.

If the cited consensus is that among economists that you don't run QE when at NZ's current position, and that he's reversed because that's what professionals who work in the area think, then I offer enthusiastic applause.

But I think that Norman is misreading international monetary policy. QE may have had the effect of devaluing the US dollar, but its purpose was to raise inflation expectations and to avoid a liquidity trap. And even places like Switzerland, which has run some active exchange rate targeting, have done it not to boost exports or make manufacturers happy but rather because devaluation can be a way of escaping from a liquidity trap. Devaluing is something you can do to loosen monetary policy at the zero bound. And, again, New Zealand is nowhere near the zero bound.

I wish that the NZ Greens would take a more interesting monetary policy position, if a Green party is determined to have a position on monetary policy. Imagine Russel Norman commissioning a few reputable academic macroeconomists to look at whether NGDP targeting would make sense in a small open economy, then just adopting whatever came of it. I'm not convinced that NGDP targeting would be much better than our current regime, but it's defensible. It's something potentially backed by a growing group of respectable macroeconomists. It can't be dismissed as simple money-printing. And it would give nice talking points about using monetary policy more actively to support the economy during downturns than we might expect in an inflation-targeting regime.

The dollar is a price

Matt Nolan's bemoaned that nobody quite seems to understand that exchange rates are just a price. He would love this particular example.

The story here is bad enough: the Greens calling again for bans on foreigners buying houses in New Zealand. They say it isn't racist, but when pretty much every complaint is around Chinese buyers, I call it a dog whistle.* It's particularly galling when it's smart-growth style, Green-supported policies that have forced the property supply curve to be near-vertical and have made it possible for increased demand to be met primarily by price increases rather than by supply increases. And kudos to Prime Minister Key for batting this one down, despite its populist appeal.

But here's one vox pop understanding of exchange rates. It's always a bad idea to read the comments section of anything (except Worthwhile Canadian Initiative and maybe sometimes this blog). But here's Veda's view on exchange rates, hoisted from the 3 News comments:

The wannabe property speculators are in full swing on this thread... All those who benefit from rising prices keep pushing the emotional spin about racism...

The reality is that foreign countries are manipulating their currencies lower (which pushes our higher) using whatever brute force necessary (low interest rates and massive currency sell offs) and the result is favorable terms for buying NZ property (as our high dollar makes land in NZ cheap when earning money overseas). This is driving NZ property prices well beyond fundamentals (what working kiwis can afford) and precipitates more NZ money flowing offshore (as more and more rentals are now being held by overseas interests). [rest truncated]

Where to begin. It's likely that one country's currency would be bid up relative to others' if others pursue devaluation policies. We can argue about whether it consequently means that New Zealand should follow suit, and I can't see how we can do it in any substantial way while staying withing the Policy Targets Agreement's inflation bounds, but at least that first part isn't completely mad.

But the point of devaluing your currency is to make other countries' products relatively more expensive. You discourage imports and encourage exports by effectively dropping your country's real wages: people from your country can't afford as much when the value of the currency drops. Because real wages drop, nominal wage rigidity doesn't matter as much and employment goes up. At least in the first order. It also makes intermediate imported industrial inputs more expensive and messes up a bunch of other stuff, but we'll take that as read.**

So here's a pop quiz. If we devalued to the point where $1 NZ = $0.01 US, would it become:
a) more expensive, or;
b) less expensive
for somebody earning US dollars to buy a house in Auckland?

Hint: every dollar earned by the American would count for $100 NZD when bidding at auction.

Veda wants to devalue the New Zealand Dollar so that foreigners will have a harder time buying Auckland real estate. And, obviously, rental income being sent abroad to foreigners is entirely offset ex-ante by those foreigners buying New Zealand Dollars to purchase the property in the first place.

Why oh Why does every vote count with weight of one?

* Dogs can hear dog whistles while people can't. Kiwis who hate the Chinese hear the Greens' dog whistle; those who don't, don't notice.

** Devaluation that's consequent to proper application of inflation-targeting policies I don't have a problem with. Monetary easing to keep inflation from being too low will have the consequence of devaluing the currency, but the devaluation isn't the point of the policy. And maybe devaluation is best policy if you've a massive foreign currency debt you can't otherwise repay. Otherwise, read Nolan, linked above.

Solving for equilibria

The Greens think that poor people can't solve for the equilibrium. Voluntary labeling of healthy foods has been proposed, with one option being "traffic light labeling". Here's Mojo Mathers:

If you are a food manufacturer of a particular product and look at the criteria and find out that your product will get a zero for health (the lowest score possible proposed in the report), would you still say “yes! Sign me up, that will help sales”?

No, you wouldn’t.

So a voluntary scheme will just end up on the healthy foods, and consumers who don’t currently read the back of labels will still not know which foods they should think twice about before purchasing."

This part of the reasoning is exactly right. Under a voluntary disclosure regime, the best label first. The first runner-up labels second to avoid being pooled with the second and third categories. In the end, everyone labels except those who would receive the worst ranking.

But we tend to expect that everyone can solve this kind of model: that the absence of a "yellow light" or "green light" label conveys as much information as the presence of a "red light" label. I suppose it's an empirical question. I prefer voluntary regimes where organic, GMO-free, dolphin-safe, or other standards-meeting manufacturers can label their products as such and customers can infer what they like from the absence of a label - and especially where some mandatory labels can wind up doing harm.

Equilibrium solution the second: the inefficient dining decision. Matt Nolan finds himself at a family dinner where, nobody wanting to be the only one to order a large dessert and nobody consequently being first-mover, everyone winds up in a sad coordination failure. Knowing the risks of such sad equilibria, and knowing that others usually feel the weight of social convention and social pressure more keenly than I do, I try to take on these first-mover costs myself by ordering the dessert and the drink. It's efficient that I do so, and I get to feel good that I relieve others of the burden of feeling bad about being the first one to order. I love the happy confluence of my interest and the social good in these kinds of cases.

Previously: Efficiency over Etiquette

A well-regulated fracking

New Zealand's Parliamentary Commissioner for the Environment confirms that fracking can safely be undertaken in New Zealand. Her next report will check whether fracking as it currently is undertaken in New Zealand is consistent with international best practice.

There are real risks from badly managed natural gas extraction. Those can either be mitigated by well designed regulation mandating cost-effective best practice, or through use of a liability regime mandating that an extracting company post a bond (or demonstrate insurance) sufficient to compensate against worst-case water contamination. The latter being pretty unlikely to happen here any time soon, regulation seems the more effective way of ensuring against the socialisation of downside risk. 

Here's Rosemary Quinn, Head of Petroleum Geosciences at GNS:

“This is a timely and balanced report that sets out the concerns in New Zealand about possible environmental impacts of hydraulic fracturing in the oil and gas industry. Dr Wright has put fracking into context as a possible part of the life cycle of planning, drilling, operating and abandoning a well. She concludes that she has not seen anything that is a high and urgent concern that would warrant calling for a moratorium on hydraulic fracturing in New Zealand. The report rightly focuses on the need for effective regulation and enforcement in order to ensure the safe operation of hydraulic fracturing in New Zealand.”

The Greens continue to call for a moratorium on fracking until it can be proven safe. I'm not sure that there is any level of regulation that they would deem consistent with fracking being proven safe. Here's the Green Party press release.

Mr Hughes urged the Government and councils to take a safety-first approach and put a halt on fracking until we have strong regulations in place to ensure the health of people and the environment.

"The fact that the PCE cannot not guarantee that world best practice is being implemented in New Zealand and has pointed out many potential gaps in regulation is in itself a compelling case to implement a moratorium on fracking.

"The PCE has identified numerous ways in which fracking can cause environmental harm, and said, "the potential for important aquifers to be contaminated as a result of fracking is very real.'

Gareth Hughes' tweet here was mildly amusing:

PCE report says Frackers do not have a social license to operate, regulation fragmented & light-handed & water contamination risk very real
— Gareth Hughes (@GarethMP) November 27, 2012

The PCE report says that industry needs to do more to earn a social license to frack - it has to engage and consult with the public to tell them what they're doing. Here's the report:

In New Zealand, it appears that fracking has not yet earned its 'social licence'. Concerns about fracking are many and wide-ranging. They include the potential for contamination of important aquifers, triggering earthquakes, whether regulators have the capacity to deal adequately with concerns, as well as the impact on climate change. The concerns are not just environmental; some are questioning to whom and where the economic benefit will accrue. Increasing public understanding of the technology should help address some concerns. There may well be some changes in public engagement that could help – for example, combining regional council and district council hearings on applications for resource consents. But ultimately what is needed is trust – trust
that government oversight is occurring, and that regulation is not just adequate but enforced, and seen to be so.

One of the reasons that industry has to work hard to increase public understanding of the technology is the scaremongering campaign run by the Greens; they then fault industry for not having sufficiently assuaged the fears that the Greens helped stoke. PCE hasn't endorsed the regulations we do have, but sees no need to put in any interim moratorium.

It will be interesting to see what the Greens do when the Second Report comes out. If tightened regulations are recommended as sufficient, will the Greens support those recommendations, or will they stick to the more Gaia-based policy line?

The benefits of solar water heating

The parliamentary commissioner for the environment, Jan Wright, had a perfectly sensible article in yesterday’s Herald on the value of solar water heating. In a nutshell, her point is that a large chunk of the economic cost of producing electricity including the environmental cost comes from the need to build and use peaking plant to satisfy peak demand, typically in the winter months. Solar water heating is at its most effective in the summer, and so does little to reduce the demand for peaking plant. Notice that this is not saying that there is no value to solar water heating in the summer (not all of the cost of electricity is the cost of building peaking plant), nor that solar water heating couldn’t help reduce demand during peak periods to some extent. The commissioner was merely pointing out that the benefits of solar heating will not be as high as one might think from a naïve calculation of how much overall reduction in electricity usage you can get from solar.

Russel Norman then posted on facebook a letter he received from a constituent extolling the virtues of solar heating. (HT James Meanwell.) The essence of this letter is that the correspondent installed solar heating, paid for in part by a government subsidy, and this in combination with a wetback heater and other energy saving devices is contributing to very low power bills in his/her 400 square metre house. The correspondent then says:

My reason for writing is to tell you that Jan Wright has got it wrong when she says that solar water heating has little impact on domestic power savings. I have no financial or any other interest in the solar industry for that matter but I’m at a loss to know where she is coming from with her comments deriding solar water heating. Based on my own experience within our own house set-up, I believe her comments are without foundation and harmful to what should be our goal of greater energy efficiency.

Now, in a normal market, an anecdote of this kind conveys useful information: if some capital equipment saves you more money than it costs to install, there is clear evidence of some economic benefit. But we can’t conclude anything from this anecdote. First, by his or her own admission, solar is not the only electricity saving measure—the wetback in particular is probably much more effective in the winter months. Second, there is no question about solar heating reducing the cost of producing electricity; the interesting question is whether the savings outweigh the capital cost of the solar panels and installation. If that is paid for in part by the government, we know nothing about the overall value. But the main problem is that the letter doesn’t engage with the commissioner’s issue about managing peak load at all. And this points to the final reason that the individual savings are not a good measure of the social benefit.

Specifically, the wholesale electricity market in New Zealand is an energy-only market. That is, generators get paid only for the electricity they sell. The cost of constructing peaking plant therefore has to be covered by the price that electricity is sold for on those rare occasions when peaking plant is used. That is why the wholesale price has to rise in the winter, particularly in dry years. Retail customers, on the other hand, are typically only on fixed-price contracts in which the retailer company charges a prices that will on average cover the costs of purchasing power at the wholesale market. That is, customers face a price in excess of marginal cost during off-peak times and a price below marginal cost in peak periods. Any time customers finds a means of reducing consumption during off peak times, they are simply creating a need to increase the overall average price. That is, the savings to them are mostly just a transfer from other consumers, not a net gain in economic efficiency.

Green politics can be about a genuine attempt to address environmental externalities, but there is always a risk that they can end up as middle-class capture. It is surprising, therefore, to see Russel Norman publishing this letter from the owner of a 400 square house, which appears to be a poster child for the latter interpretation!

Accommodation incidence

Poor people in New Zealand are eligible for a subsidy towards accommodation expenses: the Accommodation Supplement.

The Greens' Metiria Turei calls the supplement a "landlord subsidy" and points to it as part of the general problem of housing affordability: it pushes up the price of housing.

In the current state of the world, she's mostly right. Given a near-vertical supply curve for housing, because land use policy in New Zealand is a complete mess, anything that subsidizes demand mostly gets capitalized into land prices. So it is a subsidy to landlords, mostly via capital gains. 

If developers were allowed to build new housing in response to demand, either by increasing density or by building out, the incidence of the subsidy would be entirely different. 

In the graphs above, we map out supply and demand for rental accommodation among low-income cohorts. 

D represents their demand curve. It slopes down for the usual reasons: when housing is expensive, people demand less of it. Think less of the grosser forms of substitution, like homelessness, but rather of the intensity of rental use: families doubling up in accommodation units and many kids sharing bedrooms. When housing is expensive, people double up; when it's cheap, we have more space per renter. D+A gives demand when low-income renters have access to the accommodation supplement: the vertical distance between D and D+A is the level of the subsidy.

S is the supply curve: the price at which developers bring new low-income units onto the market. It slopes up as well. But, the slope differs between the graph at left and the one at right. On the left, supply is relatively inelastic. And that's the current state of the world in New Zealand. It is illegal to provide low income housing, or any kind of housing, cheaply. Councils restrict the supply of land such that its price is bid up. And, they make it illegal to put self-contained flats into existing homes: one of the quickest and least expensive ways of expanding the supply of more affordable units. And in that state of the world, the accommodation supplement does little to expand access to accommodation; rather, it mostly confers rents upon existing landlords. The quantity of housing shifts outwards from Q to Q', but most of the supplement is taken by landlords. It's then capitalised into land prices, helping to further push up the price of land that's made scarce by regulation.

In the happier state of the world, that pictured in the graph on the right, developers are able to bring new supply onto the market when demand for it exceeds the cost of providing it. The regulatory barriers are eased and the supply curve is consequently more elastic. In that state of the world, the accommodation supplement results in a greater supply of housing for lower-income tenants, with less of it turned into a transfer to landlords. The government is spending more in total on the accommodation supplement, but is also getting a lot more housing for its spending; it could achieve better accommodation outcomes under this regime even with moderate reductions in the supplement paid. That's because the spending mostly turns into new housing instead of into transfers to rentiers.

To keep the graphs simpler, I only rotated the supply curve. More realistically, the supply curve would have been pushed out, resulting in lower ex ante prices and higher ex ante quantities; there's less need for an accommodation supplement where regulatory inflation of land costs effectively bans developers from building low cost housing.

Stephen Franks illustrates the current political equilibrium:

For most of New Zealand's wonderful years of egalitarianism you could buy land for your house for around one year's average earnings, and build your house for about two and a half year's earnings. After taxes and living expenses you could expect to get rid of most of your mortgage over the next 10 to 15 years.

Then the baby boomers inherited political power. Already set for housing they don't need to be grateful to developers. They can despise subdividers. They'll rally to block densification, and 'sprawl' and highrises and infill units and anything that might offend their 1970s aesthetic sensitivities or glorious views. They feel the virtue in sending others to commute in trains from apartments on 'hubs' irrespective of the surveys that show fewer than 5% want to live like that.

The more scarce is housing the better off the boomers are. If you are already on the property escalator of course you will demand 'protection' of 'heritage' building and suburbs. It guarantees your overinvestment in housing. Artificial scarcity will not be exposed for the selfishness it is. Bankers of course agree. Otherwise they might find they've lent more than houses are worth, as they have in the rest of the world.

Zone more land to allow higher density use, allow more subdivision on the edges of town, and implement congestion charging so negative sprawl externalities are handled adequately. Current sets of land use restrictions build massive fragility into our systems so that private owners simply cannot respond to sudden changes in housing supply.

Role reversals: Greens for Austerity

When it comes to funding the Christchurch rebuild, the Greens are our austerity party and I'm looking mildly Keynesian. Strange world.

My read of public finance theory, a read that seems supported on both the left and right of the mainstream economic spectrum, is that you finance things like earthquakes mostly through debt. Even if you're not looking at reasonable threats of recession, you want to do it with debt. If the threat of recession is stronger, debt's even better. As reminder, here's Krugman:

And a natural disaster, like a war, is a temporary event; it should be met largely through higher taxes and lower spending in the future rather than right away, which is another way of saying that it should be paid for in large part by a temporary increase in the deficit.

This isn’t some novel idea, by the way — it’s the standard theory of public finance during war, going all the way back to Ricardo. And the logic of wartime finance applies equally to natural disasters.

The Greens disagree.

The Government has put earthquake recovery costs "on the credit card" rather than implementing a nationwide $1 billion levy, Green Party co-leader Russel Norman says.

In the final act of the party's annual conference at Silverstream, near Wellington, yesterday, Norman focused on the environment and the economy.

Soon after the February 2011 Christchurch earthquake last year, the Greens proposed a quake levy that it calculated at the time would raise $457 million a year, which would be tagged for disaster relief and reconstruction.

Norman said yesterday a levy set at a higher rate than originally proposed would have raised more than twice that – $1b.

That plan would have seen a levy of 1.5 per cent applied to an individual's income between $48,001 and $70,000, 3 per cent on income greater than $70,001, and the corporate tax rate bumped back up to 30 per cent from the 28 per cent it was lowered to this year.

Business would have contributed an additional $340m to the levy under that scenario.

"This is one of the best ways to get in behind Cantabrians at their time of greatest need. An earthquake levy is our way to say, as a nation, that we're all in this together," Norman said.

"National chose to put the earthquake on the credit card and leave the cost for another generation to pay off."

I love future generations as much as the next parent of young kids, but infrastructure around the Christchurch rebuild ought to last until my grandkids are in adulthood. Why would we want to bear all of the burden of it out of current income? As for credit cards, how many of them currently charge a low low 3.3% nominal interest rate for 10-year debt?

Austerity has its place. The structural deficit needs addressing - especially in the medium to longer term where superannuation costs loom large. The Greens propose a few other tax increases to plug the gap but the case for capital gains taxes seems weak; spending cuts seem more effective for achieving longer term fiscal balance.

Paul Walker also has a few reasonable concerns about the Greens ability to pick winners in enviro-industrial policy.