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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

economic ideology « Previous | |Next »
January 17, 2014

Gary Humphries, a former ACT Liberal Senator, runs a cute party political line based on the rhetoric of household economics. He says:

There is now a fairly predictable rhythm in Australian politics: Labor governments pump up deficit spending and debt, Coalition governments pay down debt and foster surpluses. There have been few departures from this pattern, at federal or state level, in the past two decades.

It's an old political narrative this one, and it's the well worn one of "living within your means" and "needing to tighten our belts" of fiscal conservatism and fiscal restraint. The subtext of the narrative is that, because of The Deficit that is coming to strangle our grandchildren in their beds, sacrifices have to be made.

RoeweD CommissionofAudit.jpg David Rowe

Humphries makes his case thus:

Labor was a spending junkie, even more addicted to spending at the end of its life than at the beginning. It comprehensively failed every restraint-based ambition it set itself; for example, despite solemnly committing in its final budget to limit real spending growth to 2 per cent, it actually increased spending by 8.6 per cent, one of the biggest annual splurges since the Whitlam government.Its most diabolical legacy to the Liberal Party, however, is not runaway deficits. It has complicated the task of attaining surpluses by embedding a string of commitments that will be eye-wateringly costly to deliver in full: the national disability scheme, the national broadband network and school funding reforms in particular.

The Abbott government, says, Humphries, is attacking this roadblock with vigour. Instead of relying heavily on the lazy device of levying efficiency dividends, it has begun to identify and defund programs and agencies it simply does not believe, on first principles, are affordable any longer.

There is no need for me to deconstruct this black and white narrative--eg., a mining boom coinciding with the Howard government achieving the rare trifecta of restoring surpluses, boosting growth and paying off debt; a global financial crisis coinciding with the Rudd Labor government; or the reduced government revenue due to the end of the mining boom and a recession in the post GFC global economy. None of this is mentioned by Humphries. It would complicate his assumptions underpinning his household economics ideology.

There is no need because Humphries undercuts his own narrative:

there are practical and political limits to how far the Coalition can travel down this road[ of cutting and pruning government expenditure]. Although there are some areas of government where excess and featherbedding are still evident, in others bureaucratic capacity has withered significantly as a result of Labor's cuts, with implications for the delivery of the government of the day's agenda.

Labor, under Gillard and Swan, had been cutting and pruning not just being a spending junkie.

Humphries also undercuts his own narrative by implying the Coalition is spending (ie., income tax cuts and increasing middle class welfare) and not just cutting and pruning beyond the lazy device of levying efficiency dividends. He says:

I believe the gap between what we expect to pay for as a nation and what we can afford will be the unbridgeable gap of this generation. And that must lead to consideration of expanding the tax base....this [Coalition] government will need to approach the same issue sooner or later. The obvious candidate is increasing the goods and services tax to 15 per cent, but the execution of this must be light years from the style of recent attempts.

So we scape the mining tax and the carbon "tax" and raise the GST to pay for the Coalition's spending for its own conservative base.

Humphries' black and white narrative has been effectively undercut and dumped. What we have is political rhetoric that is devoid of any genuine economic analysis; or an understanding that an analysis of the economics of an nation state's economy in a global world s quite different from the ideology of household economics.

| Posted by Gary Sauer-Thompson at 10:50 AM | | Comments (3)
Comments

Comments

the federal budget is in structural deficit and that has its roots in Howard + Costello using the revenue streams from the mining boom for personal tax cuts and middle class welfare.

We are now post mining boom and the government revenue from taxes is no longer enough to pay for the expenditure.

I think that we need to start thinking in terms of politics-as-freak-show with those members of the Coalition and allies who are building the business-friendly environment'; one that requires a certain amount of sacrifice among the people.

For this mob, who reckon The Market will sort things out, a certain amount of sacrifice is always required...

The Coalition certainly has a wing nut corner in their global warning denialism.