Four years ago, the Liberal government assured us that hard budgetary cuts were required to tame a “debt and deficit disaster“. Since then, that same government has increased our net debt by more than 55%, or $129 billion. When tonight’s budget is released, Treasurer Scott Morrison is expected to find money for tax cuts, both for personal incomes and to fund the corporate tax cuts for the big businesses which have yet to pass through the Senate, while the budget remains in deficit. The Medicare levy increase which was to fund the NDIS has been scrapped. If our national debt is such a crisis, then how can we afford such cuts to revenue?
Conservatives the world over have found success through a reputation for responsible economic management. US Republican Speaker Paul Ryan forged a reputation as a proud fiscal wonk, urging difficult choices and cuts to spending in order to tackle America’s debt. Yet once his party swept into office, he enthusiastically supported President Trump’s trillion dollar tax cuts, blowing a hole in the deficit and condemning government debts to grow even further. In the Eurozone, severe cuts to public services have been justified by a demand for austerity in the face of rising national debts, yet this has been accompanied by cuts to corporate taxes. Across the globe, this concern for national debts only ever seems to translate to cuts to public services, not any other budgetary options. This is not by coincidence, but by design.
The fear of debt is a powerful motivator for citizens, with numbers beyond their comprehension and an implicit intergenerational unfairness. This fear has been captured and amplified by conservative politicians in service of their ideology. Paul Ryan is a follower of Ayn Rand, and her sociopathic vision of society run by and for business. He doesn’t actually care about reducing the national debt, as his actions have shown. He cares about reducing the role of government and increasing that of private enterprise.
For those who want to eliminate public services, the idea that the government is spending too much is a potent one. Cuts to any and every program can be justified if we run the risk of credit default. But these cuts do tend to decrease government spending (even if they can sometimes be outsourced directly to the private sector instead), which risks ruining the narrative. If the government has enough money, then the plebs might demand it be spent on public services, which remain resolutely popular. So as cuts are made to services, they must also be made to government revenues through tax cuts, concessions and business handouts to make sure that the budget is in a permanent state of crisis.
Though our government has no ideologues of the Paul Ryan level, the paucity of ideas developed within our Liberal Party meant that eventually these American strategies would be employed here. Our conservatives may be egotistical morons, but they can see how well the politics of austerity have worked to cut public services and to justify tax cuts to their corporate mates, both in the US and Europe. So with more money found within the budget, it must be cut from revenues lest it risk ruining the crisis narrative.
With an election looming and polling remaining in favour of the opposition, the Liberal Party have flagged a specified maximum tax to GDP ratio of 23.9%. This would tie the hands of any incoming government, ensuring deficits and running up Australia’s debts to the higher levels seen in other developed countries. It is a very savvy political move which could enshrine the debt austerity narrative for a generation as our population ages and requires more spending on health and pensions.
While I expect this obfuscation from the conservative side of politics, the Labor Party’s response demonstrates again how they have been swept away by the narratives of neoliberalism. Shadow Treasurer Chris Bowen could have used the money which has been found in the budget to support an increase in the criminally low Newstart benefit, as his party members have been agitating for. With more money flowing into the economy from those who spend every cent they get, growth and inflation would increase, improving the budget position as a side effect of good policy, not a goal. But instead, Labor has bought into the debt austerity narrative, demanding that the government be more fiscally conservative and ensure bigger surpluses, sooner.
The national budget is not like a household budget. A government which prints its own currency and can set its own taxes upon its own economy cannot be run the same way as a household with simple income and expenses. This is not to say that debt is entirely unimportant, but simply that there are far more policy options available than simply running surpluses in order to reduce debts. Between the end of WW2 and the end of the Callaghan Labour government in 1979, British public debt dropped from 250% of GDP to less than 50% through growth and inflation, despite running deficits in most years.
Austerity is a choice, not an economic necessity.