The Liberals are budgeting for recovery on a wing and a prayer
After weeks of leaks and announcements, the outline of tomorrow night’s federal budget is now clear. Treasurer Josh Frydenberg said a fortnight ago that there would be no attempt to return the budget to surplus in the four years covered by the forward estimates, and today The Australian reports that the deficit in 2020–21 will top $210 billion, while the statutory “debt ceiling” will be raised to $1.1 trillion – a level equivalent to 55 per cent of GDP. That makes a joke of the Coalition’s warnings about Labor’s “debt and deficit disaster” in the aftermath of the global financial crisis (as shadow treasurer Jim Chalmers told Insiders yesterday, debt was then a fifth of its current level). Today, the government announced $7.5 billion in infrastructure spending – although it is hard to tell how much of that is new money – and yesterday there was $1.2 billion to fund 100,000 new apprentices or trainees. Guardian Australia has wrapped up a string of other expected initiatives, from manufacturing to the NBN. Most ominously, of all the measures announced, this morning’s AFR indicates that the legislated stage-two and stage-three tax cuts will be brought forward from their start dates of 2022 and 2024. The Liberal Party, like the Republican Party in the United States, has adopted tax cuts as an article of faith. As in America, when this philosophy is combined with increased spending – particularly on defence – the predictable result is ballooning debt and deficit.
Frydenberg has harked back fondly to Reaganomics, but the myth of conservative fiscal rectitude is laid bare in the caustic bestseller It Was All A Lie: How the Republican Party became Donald Trump by Stuart Stevens, a political consultant to the GOP for decades. Stevens writes that former president George H.W. Bush’s contemporaneous description of Reagan’s policies as “voodoo economics” summed up the “utterly nutty idea that it was possible to cut taxes and increase spending without adding to the deficit”. Under Reagan, the national debt tripled from US$934 billion to US$2.7 trillion, and TheNew York Times diagnosed the problem two years into the Reagan presidency. Reagan’s tax cuts were more than an economic tool, the Times wrote: “it is something spiritual”. Stevens writes that the Reagan administration believed “they had a moral duty to cut taxes, particularly for the wealthy, who were the most deserving because they were, well, wealthy, and had proved themselves superior to those of lesser means”.
Giving the lie to years of campaigning against the Democrats on “out of control federal spending”, Stevens cites a landmark 2012 analysis in The Atlantic showing that Republican presidents contributed far more to federal debt levels than Democrats in the postwar era. The trend has continued under Trump, who, instead of paying off the national debt within eight years as he promised to do during the 2016 campaign, lifted it from US$20 trillion to US$22 trillion in his first two years after ushering in massive tax cuts in 2017. Before the pandemic, in other words, the Trump presidency had already shattered the myth that the Republicans were ever serious about deficit reduction.
On the flipside, Republicans are serious about cutting welfare. Stevens writes that in the language war waged by the GOP: “‘Welfare’ is what the poor get because they are, well, poor, and being poor is a choice because in America anyone can succeed.”
Sound familiar? From Tony Abbott to Malcolm Turnbull to Scott Morrison (and Josh Frydenberg), the Liberal Party is heading down the same road: taxpayer largesse for the “deserving” well-off, austerity for the “undeserving” poor. The party’s sympathies are for the top dog, not the underdog. Not only is it unfair, it’s bad policy. As Labor backbencher Peter Khalil told Sky News: “Debt has almost tripled under their watch over the past seven years, pre-pandemic. And also, they’ve almost doubled the deficit, pre-pandemic. So this myth about them being good economic managers is just that – a myth. It’s not true on all of the statistical records and the objective facts, and when you’re talking about putting money into the hands of people, the third stage goes to the richest or the highest earners. The richest people in the community who on the evidence – and you can check the economic evidence – they’re less likely to spend that money in the community.”
Having said that, it is hard to see how Labor can go on to vote for the stage-three tax cuts, as the government seems bent on forcing them to do. The bill bringing the tax cuts forward will be put to parliament with stage two and stage three together in a job lot, take it or leave it. Labor will have nowhere to hide.
“We should make more effort to increase contact, communication and coordination, and increase mutual understanding and trust in the process of solving problems and narrowing divergences, instead of resorting to confrontation and abusing language based on assumptions and hypothesis.”
Centre Alliance’s Stirling Griff responds to a joint statement by fellow South Australian senators Sarah Hanson-Young of the Greens and independent Rex Patrick, urging him not to support the Morrison government’s contentious Job-Ready Graduates Bill.
Helen Garner’s lockdown diaries
Helen Garner is one of Australia’s most celebrated authors, and
today on 7am she talks to host Ruby Jones about the diary she kept during lockdown in Melbourne, and what she experienced during her months of isolation.
The expected start date of the European Union’s mooted “carbon border adjustment mechanism”, which could penalise Australian exporters and splinter the world into high-carbon and low-carbon trading blocs.
“Australia needs to fundamentally change the culture of its aged-care system. Over the past few decades the sector has become a ‘market’. As for-profit providers moved in, residential facilities got bigger. Regulation has not kept pace with the increasingly privatised market. Government focus has been on constraining costs rather than ensuring quality … The result is the shameful mess we have today: a top-down, provider-centric aged-care system that is underfunded, poorly regulated, and failing older Australians.”
“In an age where science has become deeply politicised and the role of experts has been fundamentally challenged by those in power, it has become much harder to have esoteric debates about theory. Yet here we are, in the middle of the biggest economic crisis in modern history, having a relatively polite debate about the theoretical definition of money: where it comes from and what we can do with it. Who’d have thought?”
“Susan Ryan was much more than a leading figure for women. And she was more than just Labor’s first woman cabinet minister and thus the model for all those who have followed her. Ryan, who died last week aged 77, was an exceptional politician in her own right. If things had played out a bit differently, she might well have preceded Julia Gillard to become our first female prime minister.”
“You may have thought, after the recent public health disaster in Victoria, the media advisers of the Andrews government would have realised you cannot spin away the realities of a pandemic. But apparently not.”
Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is the author of Body Count: How Climate Change Is Killing Us, Inside the Greens and Born To Rule: The Unauthorised Biography of Malcolm Turnbull.
After weeks of leaks and announcements, the outline of tomorrow night’s federal budget is now clear. Treasurer Josh Frydenberg said a fortnight ago that there would be no attempt to return the budget to surplus in the four years covered by the forward estimates, and today The Australian reports that the deficit in 2020–21 will top $210 billion, while the statutory “debt ceiling” will be raised to $1.1 trillion – a level equivalent to 55 per cent of GDP. That makes a joke of the Coalition’s warnings about Labor’s “debt and deficit disaster” in the aftermath of the global financial crisis (as shadow treasurer Jim Chalmers told Insiders yesterday, debt was then a fifth of its current level)....
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