The proposition that the Howard Government is responsible for the current deficit annoys the hell out of me. As I understand the argument, Howard and Costello irresponsibly granted tax cuts in a boom time with no regard for the fact that future governments might want the extra revenue.
What’s really at the base of the argument is the view that a cut to income tax is an indulgence to the population as distinct from an acknowledgment that government should only collect what it needs. In the world of The Australia Institute’s Matt Grudnoff, tax cuts, once granted, are permanent and therefore wrong. No chance that a subsequent government, faced with different circumstances, might raise taxes to deal with an emergent crisis.
Similarly, there is no allowance made for the fact that the Gillard Government has embarked on major spending which could hardly have been contemplated in the Howard era. I’m thinking of Building the Education Revolution and Gonski and the NDIS.
It also puts at nothing the stimulus effect of those tax cuts. It was reasonable to spend tax dollars after the GFC as an economic stimulus measure, but completely illegitimate to leave money in the hands of those who owned it so that they could spend it in the economy. If the tax cuts had not been delivered in the Howard era, how much more would have to have been spent on stimulus to get the same result? How much more company tax was paid as a result of companies becoming more profitable due to lower pressure to raise incomes?
Last year, as part of the ridiculous Carbon Tax compensation scheme, the Labor Party was happy to put up taxes on higher income earners. If they had thought it necessary or desirable, they could have gone further. They didn’t, of course, because they are craven and they would have hurt too many of their own supporters.
Peter Costello is unjustly proud of the Future Fund. In Australia the Common Good was been deprived over 25 years of the ownership of Telstra, the Commonwealth Bank, various airports and other goodies.
The funds raised from the privatisation sales were used to balance the budget, provide re-election hand outs, and to build the wrong sort of fund. The $60 billion in the Future Fund would hardly buy back half of the Which Bank let alone all the other assets that were privatised.
How much extra have the citizenry paid to use the services that were once provided at reasonable cost by the Common Good assets sold?
I have done an exercise on NSW power generating costs. Over the past 15 years the generating cost of NSW coal fired power has increased by 1.6% per annum.
How fast has the cost of electricity to consumers increased under the “competitive” marketing system? The explanation ‘poles and wires’ is baloney. Replacement and extension of such items should be charged out over their life.
Only a Future Fund that owns overseas assets, or “buys back the farm” makes sense; one that replaces the capital assets being exported as coal and iron ore and one which will provide an income for Australia when those resources are exhausted.
The old and wealthy have done well (including me), but I see how poorly the outlook is for my grandchildren and most of that is due to the neo-liberals’ behaviour, on both sides of Australian politics, since the mid seventies.
Comment by John A T — May 15, 2013 @ 9:48 am
John A T old chap, you seem to have forgotten that it was your much loved Labor lot who sold the Commonwealth Bank.
It looks like you have the Lefty disease of not letting the facts get in the way of a good rant.
Comment by Hasbeen — May 15, 2013 @ 9:55 am
The problem with this fatuous fallacious argument, is it denies historical fact.
From 2004 the Howard Govt used the rivers of gold from mining boom mark one, to write entitlement cheques for people, who simply had never ever been granted said entitlements before.
It was nothing more, I believe, than a blatant naked vote buying exercise, with absolutely no noble aspirations or sentiments.
If the additional 65 billions per, had been invested in an income earning sovereign fund?
We may well be not now, almost totally reliant on foreigners to develop our offshore resource assets, which would’ve allowed us to reap all of the benefits, from the billions they earn and will earn.
The very short sighted and patently premature fire sale of the CBA and Telstra, ripped around 14 billions per from consolidated revenue.
Given the intervening decade plus, that’s more than 140 billions forgone!
{A competent manager worthy of that title, never ever sells off income earning assets at virtual fire sale prices, but particularly, when there were others running at a loss and occupying valuable urban land!?]
All overseen by a PM, his own treasurer described as, an economic illiterate! Quote unquote.
Howard introduced the (never ever) GST, against the expressed wishes of 87% of the polled community.
[The more rational choice, would have been the transactions tax he rejected, arguably on purely philosophical grounds?]
The reason claimed, was that 95% of corporate Australia, had moved head office offshore, and taken their former company tax liabilities/revenue payments with them.
This more or less destroys Nick’s patently spurious argument, that we need to give tax breaks to corporate Australia, to boost our economy.
Clearly, tax breaks for corporate Australia, boosts almost any other economy except ours?
i.e., the host countries and tax havens?
Moreover, tax avoidance is rife and practised on a formerly unprecedented scale!
Hence the current deficit, coming on top of the structural deficit created, by giving entitlements or welfare for the rich, to folks who’d never ever had Govt largesse before.
That said, we can and should reform our tax system to lower corporate costs, to the point where we become the world’s most attractive destination for high tech industries.
To that end, we also need to jettison the moronic mindset, which says, the Govt has no business in business.
A mantra that should be restated as, “morons or the clinically incompetent and corporate psychopaths, have no business in business”.
After all, the shareholders or owners rarely if ever, run those enterprises they own, unless it’s a cooperative!
With a more rational Govt giving itself permission to get back into business, we can once again get into the energy business.
And then reap the harvest of social and economic benefits, no privatisation model can match!
And start to roll out carbon free, cheaper than coal thorium power plants, as the icing on the cake the brings the high tech industries queuing on our doorstep.
Current coal fired power operators can compete, if they i.e., include closed cycle algae production; to one, clean their smoke stacks of most of the carbon, and two, given our coal fired power plants current create half of our emission; use the oil and additional profits, this new endlessly sustainable production creates for them, to enable them to more than compete for power market share.
All while grabbing a major market share of local transport fuel supplies.
Given they currently produce half the nations carbon emission, all that emission converted to oil, (Fatty acid hydrocarbons) through the agency of large scale algae production, equates to our total current transport fuel needs!
I’ve seen estimates, which would allow this fuel type to be marketed at significant profit, for just 45 cents a litre!
Some algae produce up to 60% oil, and under optimised closed cycle conditions, quite literally double that bodyweight and oil production capacity every 24 hours.
One type produces a naturally occurring Bio-diesel.
Another, ready to use jet fuel!
We need to stop paying lip service to free market enterprise, and do what must be done, to fully prosper it, rather than, completely uncompetitive, captive market monopolies.
But especially, in our own back yard.
Incidentally Nick, if you care to to post an email addy, I’ll be happy to forward a more comprehensive tax reform plan, (mine) that really will prosper onshore corporate Australia, and indeed, give the rest compelling reasons to return!
If management teaches us just one thing Nick, it teaches that there is always a better way!
And that better way is to turbo charge and grow a much larger economy.
A much larger economy, will allow us to roll-out overdue nation building infrastructure; and, become much more independent in our defence needs and posture.
More generous as an international aid donor, and much more generous, with our own home grown needy.
100,000 homeless and indigenous populations living in third world conditions, in this veritable land of plenty, arguably means more than just, man of steel Howard and, I believe, a smug narcissistic Costello, need to hang their heads, but many other govts of all political persuasion as well!?
Without bias, Alan B. Goulding.
Comment by Alan B. Goulding — May 15, 2013 @ 11:13 am
Correction, the CBA was sold by Multimillionaire, pig farmer Keating, the world’s so called, smartest treasurer and self taught economist.
Apologies. Alan B. Goulding
Comment by Alan B. Goulding — May 15, 2013 @ 11:19 am
Hasbeen,
I was well aware of Hawke and Keating initiating privatisation sales. Possibly I should have written 30 years instead of 25. Hawke and Keating both followed neo-liberal economic policies which have been shown to be disastrous. Read J. R. Saul’s book, “The Collapse of Globalism” or the collected articles of Alex Carey, “Taking the Risk out of Democracy.”
H. and K. did not understand the direction of the policies introduced by Nixon and fostered by Reagan and Thatcher. Reagan’s trickle down really meant flood up. If you search the web re wealth distribution in the USA you will find a disturbing situation.
One other statistic I noticed recently is that about the top 450 people in the world, in wealth, own more than the bottom three billion.
Comment by John A T — May 15, 2013 @ 1:25 pm
John A T.
The disproportion of wealth distribution, or too much of our finite wealth concentrating in too few hands, is arguably the principle cause of the Great depression and the GFC.
In recent years, we also became more and more reliant on record personal debt, to manage often increasingly lean budgets.
Prohibitive interest rates, just compounded the problem, as did, kick the debt can down the road, derivatives.
As will interest rate increases, when the largest economies eventually recover.
That recovery will be brought forward, and total economic harm minimised, if those principally responsible for the economic crisis, the aforementioned extremely wealthy, are obliged to take very large financial hair cuts.
Simply put, we cannot preserve wealth and unearned privilege; and our respective economies simultaneously.
Nor can we continue to socialize losses and privatise profits, or ask those who played absolutely no part in the global crisis, to be the only ones truly paying for it, through the loss of homes, incomes and very modest retirement savings/nest eggs!
All while the aforementioned 450 obscenely rich, just get richer and richer.
If it were them losing all their entire wealth, homes and retirement incomes, and reduced to living in tents and social security?
The roar of outrage and disapproval, would shake! the entire globe!
Contrast the current economic outcomes of thoroughly disgraced trickle down theory, and the post war period of unprecedented prosperity, that was created by post war Keynesian policies or trickle up economics, or wealth redistribution.
Unprecedented prosperity, that has since been dismantled by extreme capitalism, excessive exploitation, and the trickle down theories of Regan, Thatcher and the economic school of Chicago; and the consequent resultant, endlessly widening gap between the haves and have nots.
In real terms and just to prove the point; reportedly, the basic wage in the world’s largest and formerly most successful economy, has not moved up in real terms, in thirty years!
What trickle down has done, is to create a smaller, in comparative terms, economic pie, and then again in comparative terms, carved off larger portions for those already overfed gluttons, who can never ever get enough wealth or rather, the power and control, it gives them!?
Arguably the real goal of the money hungry?
We do need to finally reject the economic mantras and policy paradigms, that have placed us where we are today!
And instead, adopt those very same fairer more equitable Keynesian economic principles, that first took us out of the Great Depression, and then created a sustained post war period of unprecedented prosperity.
The wealthy have nothing to actually fear, given a much larger economic pie, will see their share or portion also increase, and at a much faster rate, if we but up the discretionary spending power of the masses and our most underprivileged.
Economic growth took nearly a billion people in China, just thirty short years, from endemic poverty, and incomes that averaged just a $1.25 a day!
And raised more than three quarters of them, into comparative and snowballing wealth, and a new prosperous domestic economy, that will support them through the current global economic downturn!
Contrast that with the rust belt of mid western America, and the virtual Great depression currently gripping/destroying that area, and indeed, the hopes, dreams and aspirations of its inhabitants, many of who now live in tent cities and depend on soup kitchens!
Do you think Warren Buffet, the Oracle of Omaha, or Bill Gates, would sit still for that or cop it sweet, the way Joe average is simply expected to, by the aforementioned ultra rich!
It really is time for a change, and leaders with the testicular fortitude, to introduce visionary reform and change!
More of the same old, same old economic paradigms or THEORIES, will just get us more of what we have already got!
Alan B. Goulding.
Comment by Alan B. Goulding — May 15, 2013 @ 2:56 pm
We sold off 4 state banks and the Commonwealth that used to help keep our taxes lower.Why would you sell a bank that can create from nothing loans 10 times the amount of deposits you currently have in your bank? This is known as the fractional reserve system of banking.ie secret banking business.
We as a country no longer have monetary sovereignty and thus as China seeks resources else where,we will have to go into more debt just to have enough money for our country to function.
Under this system,the more growth we have,the more debt we incur unless we once again start creating the money to equal growth + inflation.
Comment by Ross — May 16, 2013 @ 6:33 pm