Target the have-nots: Liberals up to the same old tricks

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A retired bank CEO with $10 million in his super pays zero tax each year. Nada. Zip. He wouldn’t even pay the Medicare levy. But I suspect that when Treasurer Scott Morrison talks about the “taxed and the taxed nots’ he wasn’t thinking about rich retired leaners. He probably wasn’t even talking about the fact that Chevron, who made $1.7 billion selling our oil and gas, paid no tax either.

Having lost the public debate about the need to give $50 billion in tax cuts to big business, it didn’t take Morrison long to dust off his predecessor’s playbook on attacking the poor. Given how badly Joe Hockey performed some might think that aping his approach was a strange choice for Morrison, but, as Hockey’s posting to Washington shows, the modern conservative party rewards rhetoric over results.

There’s less than a decade to get debt under control or risk our future generations, according to Scott Morrison. Courtesy ABC News 24.

The modern role of Treasurer isn’t to reduce unemployment, but to blame the unemployed. Since 2013 the number of Australians unemployed has risen to 725,500, and the youth unemployment rate has hit 13.2 per cent. And that’s before the car industry shuts down next year. Despite the fact that it was the Coalition that was happy to see the car industry leave, the Coalition is proposing to cut the meagre unemployment benefit of $263.80 per week that the displaced manufacturing workers will receive by $4.40 per week. That should create a few jobs for them.

If Mr Turnbull was serious about boosting growth, creating jobs and boosting productivity he would take advantage of record low interest rates and invest heavily in the new infrastructure that the 40 million Australians we will soon have will need.
http://www.abc.net.au/7.30/content/2016/s4526932.htm
I suspect when Treasurer Scott Morrison talks about the “taxed and the taxed nots”, he isn’t thinking about rich, …
1472265254554The nation’s capital is expected to house almost 600,000 people by 2047, up from about 400,000 today yet the Canberra Liberals oppose building light rail to move them all around. Sydney, Melbourne and Brisbane will, between them, gain an extra 6.6 million residents over the same period. Building the trains, trams, renewable power and hospitals they will all need would create jobs now and avoid congestion then. Locking in record low interest rates for 30 years makes building them now a bargain. But it seems the “great economic managers” in the Coalition would rather make pariahs of the poor than construct the cities we will need.

That said, it’s unfair to suggest that the Coalition can never think long-term as they are preparing to spend $5 billion via the so called Northern Australia Infrastructure Fund on dams and roads in remote parts of Northern Australia. Sure, our existing cities might be straining under the weight of population growth and decades of under-investment, but fixing such problems isn’t nearly far sighted enough for this government. They are taking on the task of building new roads to our invisible cities. There are even hopes the Ord River irrigation scheme might finally flourish. Fourth time lucky?

Follow the money – The Pea & Thimble Trick

While it’s not clear why planning for a potential growth spurt in the Kimberly should take priority over the existing cities coping with a flood of new residents, it is clear that the workers to build such dams and roads and in the North are currently looking for work in regional NSW and Victoria. In what might be a cunning plan to help the airlines, the workers employed through Northern investment will likely be flying away from friends and families to their new jobs in the outback.

The fact that governments can find billions to speed up the transport of cattle through the NT but “can’t afford” to connect remote schools to fast internet access sums up the problems with our public debate: Moving cattle more quickly is an “investment” in infrastructure, while moving information more quickly is a “cost” of education.

Of course, Northern Australia does need investment, but how could anyone who watched the expose on Darwin’s Don Dale Detention Centre conclude that the thing that the NT needs most is better beef roads? How could anyone who looks at the NT’s education statistics think that it is the building of a dam that might close the gap between indigenous and non-indigenous education outcomes?

But far from answering such questions, the loudest voices in Australian public debate do not even allow them to be asked. While elite private schools need taxpayer subsidised swimming pools to turn out “well rounded citizens”, remote NT schools don’t even “need” to be able to download video. While budgetary circumstances “demand” we cut the incomes of the unemployed, it seems we might need to spend more money on elite athletes if we are to hold our heads high on the world stage.Super defecit

The stories we tell ourselves shape the goals we set for ourselves. The Treasurer wants to lower our expectations with scary stories about debt and deficits rather than to raise our hopes by reminding us that we live in one of the richest countries in the world. He knows that scared people settle for less than confident people.

The state of our budget is no mystery, and nor is a solution complicated. Peter Costello and John Howard made permanent structural changes to the budget’s ability to collect revenue such that now, even if the economy grows strongly, it doesn’t collect enough revenue to cover the cost of the health and education services we want, let alone cover the massive infrastructure investment our rapidly growing population needs.

This isn’t an accident. Howard and Costello knew that the rapidly growing cost of their tax concessions for superannuation and capital gains would eventually make their friends rich and the public purse poor. But they also knew that, as long as the public felt scared enough, when the cost of their mid-boom tax cuts became too much for future budgets to bear that it would be easier for subsequent governments to cut welfare spending on the poor than to reverse their tax cuts for the rich.

So, here we are. Nearly 10 years since Howard lost office still grappling with how to fix the problems he caused. Just as Howard and Costello expected, today’s Coalition MPs prefer to cut spending on health, education and welfare than rein the enormous cost of tax concessions for superannuation. Funny that.
Buffett rule
The budget has leaks to plug, but we won’t fix them, or spur job creation, if we keep pretending that the tens of billions of dollars in in tax concessions that are leaking from the budget bucket will “trickle down” and boost economic activity in regional Australia. And we need to stop pretending that the best way help those who lose their jobs through free trade agreements is to cut the unemployment benefit.

Once we stop the lies about what won’t work, we need to target things that might work. We need to target the expensive loopholes that create no jobs and lots of inequality. We need to target infrastructure spending where Australia needs it most, not where the National Party want it most. And we need to target the creation of growth in the industries and regions that need it, not simply hope that a rising tide caused by a leaky tax system will lift all boats.

It’s not the budget that needs repair, it’s the way we think and talk about it. History and international experience tells us that economic benefits do not “trickle down” to the people that need them. But history does show that if we target our resources well, we can solve big problems.

Richard Denniss is the chief economist for The Australia Institute.

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