Last time, I spoke about Labor spinning its line on how it is running a “temporary” deficit and expecting us to swallow it. Today, I’m looking at how we are spending this mountain of debt, or to put it another way, what we are getting for maxing out the credit card.
Prior to this budget, we had two stimulus packages – when K-Rudd sent out around 22bn in cash to every man and his dog. By dogs I really do mean dogs as people who left estates to animals in the last year got the cash. Not to mention foreigners who have worked here and bothered to do a tax return. And blokes in prison (they were paid in cigarettes). Oh yeah and also a lazy 14bn on well – painting schools.
That’s about 35bn on basically crap.
I’m not saying that the stimulus didn’t work or cushion the economy a little, but there was evidence that a lot of this cash was saved or used to retire debt which is exactly what you would expect normal people to do when they face uncertainty about their jobs and futures. Of course some of it would have been spent, or rather pissed up against a wall to put it bluntly.
To me this is just like a big night on the cans. Sure it’s fun at the time - you have a few laughs maybe even get lucky. But what do you have to show for it the next day? Nothing really, apart from a bloody big hangover. So right away we have dropped 35bn and have nothing to show for it apart from everyone being digital TV ready and nice shiny school assembly halls all over the country. Now that’s what I call nation building.
Thankfully, the largesse continued in this week’s budget with a 22bn “Nation Building Centerpiece” (see The Hollowmen Series 1, Episode 4 for an incredible example of life imitating art). Naturally, it has its own ridiculously slick, self-indulgent interactive website complete with long and pointless videos of various ministers explaining how they are generously spending money we don’t have. At least this is something that we can point to when we wonder where all the money went.
It’s no wonder K-Rudd wants us all to have fiber-optic broadband in our homes.
Like I mentioned in Part 1, I don’t pretend for a second that I understand the nuances of macro-economic theory but I would have thought reducing the cost of doing business, like say a temporary payroll tax reduction or easing the administrative burden on small business, would be a better way of keeping punters in jobs.
Moving onto the budget itself, I was struck by its inherent internal inconsistency. Whilst a 58bn deficit is certainly stimulatory and right for the times, at the same time we were told that we had to make tough choices i.e. reduce spending which is of course has the opposite effect. No doubt this is a difficult balancing act but what is missing are any sort of coherent arguments or explanation apart from grand sweeping statements about “nation building” and “taking hard decisions”.
It’s a measure of the hubris of this government that we are all expected to swallow everything they dish up as though they are the only ones in possession of all knowledge in this country. This includes going so far as to leave open the possibility of an early election if anyone dare oppose any budgetary measure.
On the specific issue of the private health rebate being means-tested, the very same tax payers received a tax-cut. Apart from the stupidity of potentially putting extra pressure on the already stressed public health system, why break one election promise ahead of another? Surely deferring or reducing tax-cuts - a “hard choice” that was talked about prior to the budget - is medicine that the electorate would be happier to swallow in the name of everyone pulling together in this difficult time.
A second large measure was the increase in the aged pension (can’t really argue with that) but at the same time it was made less tax effective to save for your own retirement through changes to concessional and co-contribution super arrangements. Yep that makes heaps of sense with an aging population and decreasing birth-rates. This budget definitely addresses structural problems in the government’s finances and is not at all self-serving and short-sighted.
This brings me to my final point – just what is Labor’s pathway to getting us back in the black? Well listening to them it’s pretty clear they simply don’t have one. Just saying that you have a pathway doesn’t mean one exists (or that you know what you are doing). Maybe K-Rudd and Swanny have been reading ‘The Secret’. Ironically though, it does actually have precedence: it’s the classic Homer Simpson problem solving technique (Homer Goes to College, episode [1F02]).
Nerd: What are you going to do, Mr. Simpson?
Homer: Actually, I've been working on a plan. During the exam, I'll hide under some coats, and hope that somehow everything will work out.
I don’t think it gets anymore Zen then that.
Thursday, May 21, 2009
Sunday, May 17, 2009
Zen and the Art of Budgetary Malfeasance (Part 1)
This week the federal government handed down its 2009/10 budget which was “forged in the fire of the most challenging global economic conditions since the Great Depression” as our Treasurer so eloquently put it. This fact that this was probably the hardest (and most important) budget in my lifetime is hard to dispute. For the majority of us, this is the first time in living memory we are seeing a coordinated global slowdown of such magnitude. To put it another way, the world economy has completely tanked, making the decisions and policies our leaders make right now all the more critical.
As an aside, it sounds to me like Swanny and his boss K-Rudd are just showing off their inner geeks with this blatant Lord of the Rings reference (I’m not disputing my own not-so-inner geek for noticing it). But I digress.
Let me first say that I agree that we need to be in debt and running a deficit at this time – if the Libs were in charge we would be talking about numbers in the same ballpark. However the key thing for us random punters out here in Middle Australia is 1) How we are spending this debt (including the stimulus packages) and 2) How the hell we are going to get out of it. But more on that in Part 2. For now let’s look at this so called “temporary deficit” and specifically how this government has been trying to sell itself as responsible stewards of the Australian economy.
In the weeks leading up to last Tuesday, our expectations were deftly managed by the government’s spin team. We were told that “hard” decisions had to be made and that we all needed “to do our share” in this time of crisis. Everyone expected a large headline number – but when the 58bn deficit was finally leaked it was almost too large to get your head around, especially considering the starting point. Kind of our very own Dr. Evil moment, but in reverse.
For me though, putting the specifics to one side, the most ridiculous part of the rhetoric coming from the government was the fact that every time the word “deficit” was uttered the word “temporary” had to be used before it. It was pretty clear that Big Kev and his cronies had sent round a strongly worded memo to everyone, just like a few months ago when no-one was allowed to utter the r-word (recession). To paraphrase Kylie, what kind of fools do you take us for? Ever since the GFC started back in September 08, Labor has been at great pains to say that they are being up-front and honest with the Australian people but they have been anything but. Guys – seriously - stop taking the piss. If it looks like a turd and smells like a turd, it’s a turd – don’t try to tell me it’s a sausage roll.
Moving on, the budget papers predict that we will be out of deficit by around 2016/17. That is two elections away by the way. It’s based on Australia springing out of the current recession at growth rates of around 4.25% in just two years time. Now I’m certainly no economist (though I have been known to make stuff up, I don’t pretend to believe in it for a second) but I’m not alone in thinking this is at best rather optimistic and at worse, well bullshit. This is not a temporary deficit. Again, Labor is taking us for a bunch of idiots. Sure, over a long enough time-frame, everything is temporary, which is certainly a very Zen way of looking at things. Sadly I sincerely doubt that Labor is trying to introduce Buddhist teachings into its fiscal policy…except for tolerance perhaps.
Back to this “temporary” deficit. Government debt is projected to peak at 188bn in three years. This is before paying for self-indulgent rubbish like Rudd-Net and Rudd-Bank. Not to mention the interest bill for all this debt which our kids will be paying off.
The other incredibly optimistic part about the budget is that it assumes the current government can cap spending increases to 2% over time. Based on Labor’s track record this is again, pure bullshit. Did I mention that there were two elections between now and when we will allegedly be back in surplus? Labor is splashing it around today 18 months out from an election. Imagine the promises we will see during the next election campaign when K-Rudd is out there making sure that he gets to keep his job as King of Australia. There is no way on God’s green earth that Labor government spending can and will be capped and that this is the end of the big splurge. I mean Big Kev already wants to be in the broadband business (ironically without a business plan). What’s next – Rudd-Air? Rudd-NN? I think we can safely say that this is not the end of the Labor gravy-train.
Hopefully the only thing temporary about this deficit is the government that introduced it.
As an aside, it sounds to me like Swanny and his boss K-Rudd are just showing off their inner geeks with this blatant Lord of the Rings reference (I’m not disputing my own not-so-inner geek for noticing it). But I digress.
Let me first say that I agree that we need to be in debt and running a deficit at this time – if the Libs were in charge we would be talking about numbers in the same ballpark. However the key thing for us random punters out here in Middle Australia is 1) How we are spending this debt (including the stimulus packages) and 2) How the hell we are going to get out of it. But more on that in Part 2. For now let’s look at this so called “temporary deficit” and specifically how this government has been trying to sell itself as responsible stewards of the Australian economy.
In the weeks leading up to last Tuesday, our expectations were deftly managed by the government’s spin team. We were told that “hard” decisions had to be made and that we all needed “to do our share” in this time of crisis. Everyone expected a large headline number – but when the 58bn deficit was finally leaked it was almost too large to get your head around, especially considering the starting point. Kind of our very own Dr. Evil moment, but in reverse.
For me though, putting the specifics to one side, the most ridiculous part of the rhetoric coming from the government was the fact that every time the word “deficit” was uttered the word “temporary” had to be used before it. It was pretty clear that Big Kev and his cronies had sent round a strongly worded memo to everyone, just like a few months ago when no-one was allowed to utter the r-word (recession). To paraphrase Kylie, what kind of fools do you take us for? Ever since the GFC started back in September 08, Labor has been at great pains to say that they are being up-front and honest with the Australian people but they have been anything but. Guys – seriously - stop taking the piss. If it looks like a turd and smells like a turd, it’s a turd – don’t try to tell me it’s a sausage roll.
Moving on, the budget papers predict that we will be out of deficit by around 2016/17. That is two elections away by the way. It’s based on Australia springing out of the current recession at growth rates of around 4.25% in just two years time. Now I’m certainly no economist (though I have been known to make stuff up, I don’t pretend to believe in it for a second) but I’m not alone in thinking this is at best rather optimistic and at worse, well bullshit. This is not a temporary deficit. Again, Labor is taking us for a bunch of idiots. Sure, over a long enough time-frame, everything is temporary, which is certainly a very Zen way of looking at things. Sadly I sincerely doubt that Labor is trying to introduce Buddhist teachings into its fiscal policy…except for tolerance perhaps.
Back to this “temporary” deficit. Government debt is projected to peak at 188bn in three years. This is before paying for self-indulgent rubbish like Rudd-Net and Rudd-Bank. Not to mention the interest bill for all this debt which our kids will be paying off.
The other incredibly optimistic part about the budget is that it assumes the current government can cap spending increases to 2% over time. Based on Labor’s track record this is again, pure bullshit. Did I mention that there were two elections between now and when we will allegedly be back in surplus? Labor is splashing it around today 18 months out from an election. Imagine the promises we will see during the next election campaign when K-Rudd is out there making sure that he gets to keep his job as King of Australia. There is no way on God’s green earth that Labor government spending can and will be capped and that this is the end of the big splurge. I mean Big Kev already wants to be in the broadband business (ironically without a business plan). What’s next – Rudd-Air? Rudd-NN? I think we can safely say that this is not the end of the Labor gravy-train.
Hopefully the only thing temporary about this deficit is the government that introduced it.
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