Budge it on Budget


You may remember a year or so ago, enormous pressure on the Australian government, by the Opposition, with the full support of a baying pack of reporters, to “get the budget into surplus”. Failure to do this, it was said, no matter the economic circumstances, would brand the government as hopeless economic managers, spendthrifts, in contrast to the wise money managers of the Liberal Party. A failure to slash everything in sight (but certainly not increase revenue, any hint of which, like a super profit tax on miners, being blocked by Opposition, and howled down by the Media). It was clear the campaign of denigration would carry on and on.

OK, said the government, you want a surplus, we’ll give you a surplus, somehow. If we are not permitted to tax the rich a little more then we need to slash programs, and, as economic conditions worsen overseas, slash some more. Outrage from Coalition, media, interest groups. How dare you cut this, that, the other program? What’s wrong with you? The Coalition never specified an actual program it would cut, merely said it would cut “waste”, and the media accepted this unquestioningly.

Meantime, as the damage austerity programs were doing elsewhere in world became more obvious, economists began saying to the government, hey, you don’t need a surplus, really, a surplus is surplus to requirements, take it easy, go for a reduced deficit by all means, but a “surplus” is not only meaningless but would be economically damaging. Immediately media joined in, yes, what are you aiming for a surplus for? Just a “political” move, not an economic one. Silly incompetent government chasing a surplus, what useless economic managers they are. But, a mere hint from the government that, yes indeed, surplus chasing was as irrational as UFO chasing, an instant chorus from media and Opposition, see, we knew you couldn’t get a surplus you hopeless economic managers.

Finally, faced with the inescapable reality of world economic doldrums, falling resource prices, and coalition premiers sacking thousands of workers, government says, you know, you are right, chasing a surplus was an albatross around our budget necks. All the economists agree, silly to go on with it. Maybe next year if things improve. Okay? Immediate baying for blood from Coalition and media. Broken promise. Bad economic managers. Hopeless government. Can’t even get a surplus. Throw them out.

And so it goes.

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7 comments on “Budge it on Budget

  1. David Donovan says:

    Hi mate, I would like to put this up on IA. May I please?



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  2. Melon Man, I think the immediate problem is more that the government’s revenue forecasts were always over-optimistic – the other side of the political coin, you might say – than that everyone else is a braying crowd.

    It’s true Gillard and Swan allowed other people, including the opposition, to paint them into a corner. But that seems to be their recurrent policy.

    I’m not making a partisan point. I think the realities of the hung parliament are horrendous and would sap political courage from anyone whose primary interest lay in retaining power.

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  3. Eric Snyder says:

    In our corner of the world, simply spending less than revenue should be the goal of gov’t spending. It certainly is for every properly managed family; doesn’t require any degree in economics.

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    • David Horton says:

      Er, no Eric, a country’s budget is nothing like a family budget, this is a common myth on the Right. It is not for many reasons, not least because cutting expenditure causes job losses which in turn cuts revenue, followed by more cutting, spiralling down. The sort of thing happening in Europe now under “austerity”. That is, unlike in a family, “income” isn’t a fixed entity, but depends on expenditure. Also “income” can be changed by policy, just as expenditure can. What I am writing about here is the refusal of conservatives like your Mr Boehner to allow increase in revenue by getting rich to pay a fair share.

      This is not to say there doesn’t need to be a rough correlation between expenditure and income.

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      • Eric Snyder says:

        Well, I do agree that a national budget isn’t exactly like a family budget but I am of the conviction that it is more similar than generally considered by those on the left. Cutting gov’t expenditures pushes more people into the work force out of public sector jobs. Once in the labor market, they begin to actually create and contribute rather than simply “absorb” as the case of a tremendous of gov’t workers (at least in the US).

        I disagree that the European problems are “austerity” based. Austerity was a result of unreasonable gov’t expenditures that greatly exceeded revenue. Similarly, the real estate bust in the US was not a result of a collapsing market but rather a result of gov’t being involved in loans that fueled exorbitant price increases and greed on behalf of the lenders and the borrowers.

        I think there is much more than a “rough” correlation between expenditure and income. There is a serious correlation. And, if you violate that correlation long enough, you’re left with only 2 choices: borrowing or bankruptcy. Of course, here is a grand difference between gov’t and a household, the gov’t can print money. The household would rightly be arrested for doing that!

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        • David Horton says:

          Eric I am always puzzled by 1. The idea that there are “real” jobs in private industry on the one hand, and unreal public service (of various kinds) jobs on the other, and that the latter are just rubbish, and 2 that cutting the latter will magically lead to an increase in the former, and this is a good thing.

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          • Eric Snyder says:

            You’re putting words in my mouth. There is a need for gov’t workers doing needed jobs; defense, court clerks, police, etc. The video game players, the studiers of the effects of cocaine on Japanese quail, researchers training Japanese prostitutes to drink responsibly, and Fannie Mae are a few of the more ridiculous expenditures made by our gov’t.

            I don’t think there’s any magic when people have to either find work or create work to feed themselves and their families. Necessity truly is the mother of invention and food, clothing and shelter are necessities IF they aren’t provided by gov’t.

            When people create and produce, they are doing what they are supposed to do and it is a good thing.

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