John Quiggin wrote an interesting op/ed in the Fin Review today, which I imagine will eventually surface on his blog.
Quiggin picked up on recent remarks by Lindsay Tanner about discipline in the budget process. “Efficiency dividends” are much in the air at the moment, and Tanner appeared to be arguing that the cause of fiscal probity required a razor to be applied to public sector spending, with the goal of eventually returning the budget to surplus.
While Quiggin agreed that the latter goal was desirable, he suggested that “waste” wasn’t a high proportion of commonwealth spending, and argued that it made more sense to scale back the next round of tax cuts. The scheduled tax cuts are highly regressive, and give little or nothing to low and middle income earners. Nor is bracket creep a huge concern at the moment, and the rivers of revenue to be distributed have receded rapidly.
The government seems to be scaling back, or delaying a number of its commitments. While pension increases are apparently electorally sacrosanct, measures like maternity leave are on hold. Julia Gillard’s response to the Bradley review is a good example of this process at work. The government has accepted most of the review’s recommendations, but pushed out the implementation dates for those requiring large additional expenditure. The higher education sector is being told to hold its horses.
There’s something like a replay of the perennial tax cuts vs. services conundrum going on here. But it’s got an interesting new inflection when the quantum of money available is much reduced – focusing in on the economic benefits of spending against permanent tax increases for the upper middle and high end of the income spectrum. I’m inclined to think that there’s some residual defensiveness about the “economic conservative” label at work here. What, one might ask Kevin Rudd, would a social democrat do?
NOW Tanner wants to talk about fiscal responsibility? $42B too late.
Well, in a way, I agree, Craig Mc. If we’re in the business of stimulating the economy, pumping more in rather than taking it out makes sense.
I think Quiggin’s argument about bang for buck with tax cuts also makes sense.
Oh please, Craig Mc, not that boring old Liberal scare nonsense.
As Tanner rightly said, the debt is the equivalent of “a person on $100,000 a year borrowing $5000″. Under the circumstances a very worthy spend that the Libs would have matched anyway apart from redirecting it towards people who did very nicely in the boom period and less likely to need it anyway.
I would be rather surprised if the tax cuts for the higher income brackets haven’t already been removed from the new budget. I think there will still be extra efficiency dividends though requested though. Surely with the downturn there would be some government departments with less work to do? And others like centrelink that would need more resources.
Bracket creep is never a huge concern and governments like to frame it as giving a tax cut rather than “not taking more”. I’d rather the tax brackets were indexed – if governments need to raise more money through income tax then they should have to justify it – it shouldn’t be the default position every year.
For people in Melbourne, there’s a pub tax reform seminar coming up shortly. I saw the article in the dead tree version so I’ll try and find it online and post a link. AFAIK it’s being held from 6 8 on a weekday so if you’re working then maybe you can attend. I’ll follow up soon… (People who like to weigh in with the cynical it’s all a publicity stunt angle, yes, I know, but equally it would look good if a few of us fronted up with our 2c worth and looked, you know, engaged…)
“Dead tree version” = The AGE
Yes here we are.
Link may not work – it didn’t before, but no time to check, sorry..
Social-democrats could do worse than follow tried-and-true tradition. That is they behead a few aristocratic toffs and then take back some of the ill-gotten gains or all the child-molesting churches. No representation without taxation and vive l’revolucione!
It’s reassuring to see the left yet again live up to its well-earned cliché of running up stupid levels of government debt. Well, it would be if I wasn’t one of the suckers who’ll have to pay it back.
Again. Oh – and again. Oh, that’s right – and again.
CraigMc, what did Turnbull say he would do…..oh, thats right run up debt :-p
I would be interested to see which areas of the economy are performing (relatively) strongly and why that is the case. Any takers?
If, as Kevin Rudd appears to believe, the economic crisis can be fixed by increasing aggregate demand, then %52 billion is small beer for the task. It is about 5% of GDP spread over a few years.
The lost output the Greet recession is and will cause is much greater than that.
Why not do the obvious? Massively increase real wages. Oh, that might cut profits of individual companies. And profit is sacrosanct in our society, isn’t it?
There’s the dilemma for capital. How to increase demand without increasing costs? Social democracy’s answer? Screw wages and watch jobs disappear but pretend to be doing something.
So what do we end up with? The capitalist state overseeing the cleaning out of the Aegean stables (or creative destruction as some economists call it.) And fertilise the withering tree with a few bits of poodle poo worth $52 bn.
Oops. I meant the Great Recession! And $52 bn. I must get sub-editor.
“It’s reassuring to see the left yet again live up to its well-earned cliché of running up stupid levels of government debt. Well, it would be if I wasn’t one of the suckers who’ll have to pay it back.”…from post 8.
Look very closely @12….”It is about 5% of GDP spread over a few years”, Craig Mc.
Just by saying a thing over and over, with cliche upon cliche, does not make it correct. It is a small amount of debt that should not be difficult to pay back. And “the left” will be there to help you with the payment, you poor dear soul. You may not believe it, but we all pay taxes regardless of our political colour.
Gee and I thought Costello did the same after 9/11
Guess Liberal debt is pure white and doesn’t smell.
Thats what I find disturbing about the Rudd [Obama] haters, they would rather sit back, get some high income tax cuts whilst and watch everyone lose their jobs.
Their willingness to sacrifice a country for the sake of their personal pleasures and revenge defines the personal character of a neo liberal.
Actually, I’d rather see payroll and company taxes cut. That might actually persuade an employer to keep employing people.
If Rudd has one serious tax reform in him he’ll find a way to replace payroll tax.
Exactly right, Craig Mc. Payroll tax is simply immoral. But clearly Rudd is not proposed ‘stupid’ levels of debt.
Thomas Paine, what are you talking about re: Costello? There was one year of deficit, I think, that amounted to about $1 billion. It was more or less a rounding error.
BBB