Jacques Chester, I suspect, has pinged what’s going on with all this:

It’s a lawyerly way of arguing. Pick an argument, any argument, that might be plausible, and throw it at the judge. You never know, it might stick.

There are certainly some straws blowing in the wind over the past few days, which in the way of these things, either represent columnists in The Australian flying kites for the opposition to grasp, or reciting lines fed to them by the Coalition. The always all over the place Malcolm Colless, whose stream of consciousness writing is valuable precisely because the multiplicity of disconnected thought bubbles probably do act as a barometer of right wing thinking, opines:

With a solid financial background under his belt, Turnbull must not fall for the politically correct line that opposing government policy makes the Opposition guilty of economic vandalism. He needs to counter this with firm leadership and conviction.

There’s also a bit of blah in there about the fiscal stimulus package not representing “macro-economic reform”, whatever that might mean. However, the dots can be joined by reading Michael Sutchbury in the same paper:

KEVIN Rudd and Wayne Swan’s emergency fiscal stimulus is unlikely to end up being a good investment of $10.4 billion of taxpayers’ money.

The great bulk of the “economic security strategy” package won’t improve Australia’s economic security because that would require supply-side measures to improve productivity.

This, obviously, ignores the fact that infrastructure spends take a very long time to stimulate demand, and the package is all about short term stimulus in order to forfend a recession. Supply side interventions were, of course, very thin on the ground under Howard and Costello, and improving the skills base and economic infrastructure (both soft and hard) is a medium term rather than a short term project. But what’s important about all this is that it neatly articulates with the anti-deficit argument that the Liberals are starting to run.

Former treasurer Peter Costello also criticised Labor’s move to drive the budget surplus into a potential deficit, as financial analysts predicted tax revenue generation would slow as the economy grinds down.

Mr Costello, who engineered a strategy to allow the budget windfall from the revenue boom to build, said it was better economic policy to operate a surplus.

“When the economy is growing the budget should be in surplus,” Mr Costello told The Australian yesterday.

Costello has apparently forgotten that he once understood that counter-cyclical fiscal policy implied being comfortable with deficit budgeting during turbulent economic conditions, and that the whole point of a fiscal stimulus at this stage is to boost economic growth, which is in danger of slowing to a halt.

Mr Turnbull urged the Government not to squander the savings of “a decade of responsible financial management”.

There are more than a few echoes of the Keating legacy in all this.

First, the “defend the last government’s legacy” line – initiated by Keating himself – which was rapidly transformed through its appropriation by pundits such as Paul Kelly into some sort of conventional wisdom: that the Labor party cruelled its chances of escaping opposition early by allegedly trashing Keating’s legacy. The holes in that argument as a political story should be too gaping to need spelling out. But it’s been seized on – at the instigation of another former PM, John Howard – as an iron law for the Liberals in opposition. Never walk away from John Howard. So we get all sorts of bizarre positions all unified by a desire to preserve the “Howard legacy” – in this case a preciousness about the surplus that was in fact created as much by serendipitous movements in commodity prices and an addiction to bracket creep coupled with election winning handouts as by “responsible financial management”.

Secondly, we have some resonances of Keating’s “recession we had to have” position lurking around. It’s as though, at some level, Liberals and pundits expect Labor to bring on another recession to further the cause of reform. Bizarre. The praise for the Keating government’s One Nation stimulus package from the opposition benches seems to completely elide the fact that it was too late and too slow. And the argument about the Treasury numbers – which is as much about attempting to give the political line that “Rudd is wasting the surplus” legs as any real desire for accountability – ignores the fact that the formulation of growth projections is a time consuming and deeply bureaucratic exercise. Ken Henry’s much more likely to have relied on his best reading of the circumstances than set Treasury minions to work on a full scale forecasting exercise. If we waited for that, in the current climate, it would almost certainly not be worth the paper it was written on by the time it arrived.

Nicholas Gruen puts the politics of all this into perspective neatly:

But back in Australia wouldn’t the Opposition give the government hell if it took the Coalition’s string of surpluses and started running deficits? Too right it would, just as the ALP would with roles reversed. But, if another fiscal stimulus proves necessary the government will have to decide. Politically they’ll need to choose between a faltering economy, rising business failures and unemployment – or giving their opponents some ammunition that they’ll use. Economically, one way spells misery, the other hope and a better chance of success.

I’ll bet some of the Government’s political advisers counselled against the bold approach the Government took last week. “Couldn’t we keep more of the surplus?; Have two bob each way?” Now they’re eating their words. Using the economic textbook to manage the economy decisively is a political winner.

I’m only an economist. But if I were a Government politician I know which path I’d choose. If the economy falters I’d fight recession. I’d take some nasty hits from the Opposition rather than die the death of a thousand cuts while I waited for recovery to come in its own good time.

That takes me to my third instance of Keating’s least impressive legacies. The opposition appears to be banking on their “Labor = deficits” line being available for revival, under the illusion that it was some sort of killer blow to post-Keating Labor rather than shadow boxing. People were always (and rightly) much more concerned with crippling interest rates and job losses rather than some arcane argument about fiscal policy. In a way, it was also an artefact of Keating’s wonkery – mistaking political narratives for political and social facts. I’m 100% certain that Australian electors today would rather have a government staving off recession than being able to sit around patting Peter Costello on the back for his record of surpluses.

Ps: Incidentally I’m inclined to completely ignore the “what did Kevin Rudd say about what Ken Henry said about what Glenn Stevens said” furore – total beatup in my view. Although, I’m surprised that the omniscient Malcolm Turnbull didn’t use his own purported financial expertise to spot the problem which is the occasion for the said furore. But I suppose his credit claiming for the bank deposit guarentee is so last week’s media cycle.