above:
Australian Labor Treasurer Wayne Swan made the right call on the
surplus
The Federal Labor
Government's reversal on the Federal Budget
Surplus was considered a failure by some, but grassroots Labor activist,
Tristan Ewins argues that Wayne Swan has made the right call on this one:
Although unfair attacks on sole parents, the disabled and others need to be
re-thought in the new context. Labor needs a bold social wage reform package,
funded broadly by progressively extracting a fairer contribution from the top
15 per cent.
nb: our Facebook group can be found here: http://www.facebook.com/#!/groups/58243419565/
Tristan
Ewins
December 27th 2012The headlines of the Melbourne Herald-Sun on December 21st proclaimed “Julia Clean Bowled – Third Broken Promise as $1 billion surplus axed.” Other headlines further into the paper announced: “Swan comes clean on deficit” and “Budget blows credibility of Gillard, Swan.”
To
be fair, within the pages of the Herald-Sun there was some deeper and more
balanced analysis – admitting the objective necessity of abandoning the surplus
at this particular conjuncture. But
clearly the editors of the publication were aiming to influence via first
impressions: via the power of headlines; and the likelihood that many readers
would not actually read through all the material.
So
what of the reality, then?
With
a world economy in crisis, even affecting Chinese growth – Australia has been
hit; and so too have Australian tax revenues – including the GST and Company
tax. Notably business is actually
supporting Labor with regard postponing the surplus – well aware of the
“multiplier effect” stimulus has upon the economy, and thus upon consumer and
investor confidence. Tony Abbott is
decrying Labor as “spending like a drunken sailor” – but this is nothing more
than a play upon people’s misassumptions and prejudices. In reality Labor has held tax revenues down
as a proportion of GDP, and has ‘robbed Peter to pay Paul’ – hitting Single
mothers and many disability pensioners to provide some ‘fiscal room’ for Gonski
and the National Disability Insurance Scheme. (NDIS)
For
his part, also, Abbott has to explain how he will deliver his Paid Parental
Leave for the upper middle class, while withdrawing the minerals resource rent tax, as well as
the carbon tax, and restoring upper middle-class welfare in the form of a
broad-based Private Health Insurance Rebate.
And Liberal support for the NDIS is compromised by hysterical and
deceptive panic-mongering about its price-tag; projecting into the future –
without explaining the context of inflation – to provide a distorted impression
of its ultimate cost. Lastly: Abbott’s agenda of cutting expenditure at this
particular conjuncture would be deflationary and contractionary – a criticism of
him which Labor and the corporates seem to have in
common.
At the same time Liberal State governments are
imposing austerity in their irrational drive for a ‘surplus at any cost’. Again, this is about retaining the political
advantage on “perceived economic competence”.
Having consistently distorted the question of economic management as
approximating the management of a household budget, at all levels the
Conservatives cannot confess the truth without undermining their political
position. Thus in Victoria Ballieu has
gutted TAFE expenditure to achieve a surplus: when in fact stimulus is required;
as is investment on infrastructure, education and training to overcome capacity
constraints. User pays mechanisms – for
instance increased public transport charges and increased costs for license renewal – are also being imposed to bridge ‘the fiscal gap’ from falling
GST revenue. While the Liberals like to
avoid the word ‘tax’ – the effect of these measures approximate regressive, flat
taxation.
But
what should be done?
Budgets
need to be balanced – but not always: only over the course of the economic
cycle. And this need not imply ‘small government’ during periods of growth
either: so long as the ‘inflation genie’ is contained some way or another –
preferably progressively via taxation on the wealthy and upon conspicuous
consumption. (also inflation shouldn't be
raised as an excuse for distributive injustice and exploitation) During
times of relative stagnation (ie: right now!)
– and in some parts of the world outright Depression – the time is still
right to bring forward big infrastructure programs for quality of life and to
overcome capacity constraints. Again:
this has a ‘multiplier effect’ on growth and confidence.
At
a state level the Liberal State Governments also need to face reality. Without investment in education, health and
infrastructure the economy will wither – and human beings will suffer. The Conservative State Governments have
argued meekly for an increased GST to overcome the ‘fiscal gap’ – but surely
they perceive the bind Labor is in: restrained by the same ‘small government and
surplus at any cost’ mentality which the Conservatives themselves have
nurtured. If the State Governments are
to acquire the funds they need it is imperative that they come out consistently,
openly, clearly and loudly in favour of increased taxes, and against the lie
that surpluses are always
appropriate. No matter how politically
unpalatable it may seem, a bipartisan consensus is necessary right now, here
- in the national interest.
And
in other words the Conservative State Governments need to publicly refute the
position taken so far on this theme by the Abbott Federal Opposition. Only by doing can they provide Federal Labor
the “political breathing room” to do what is necessary to restore State
Government finances. To avoid
embarrassment, Abbott himself could finally be responsible: taking the lead in
conceding that we still live in precarious economic times; and hence action on
the tax/stimulus/services/infrastructure front is necessary.
Finally:
both Labor and the States need agree to progressive taxation reform – which is
fair both to most working class families and to the disadvantaged. Increasing a flat, regressive GST is not
acceptable. Yet if these conditions are
met – then ‘the ball will be in Federal Labor’s court’ – to reform tax, maintain
and expand infrastructure and services, and provide economic stimulus in
uncertain times.
But
even this compromise should not be enough for a reforming Labor Government. Gonski and the NDIS need to be “locked in”
(with a price tag of about $14 billion) – and without ‘robbing Peter to Pay
Paul’ again with regards critical social programs – or else reducing ourselves
to empty, token and distant promises. To ‘deliver the goods’ for 2013 there is a
need to raise tax as a proportion of GDP.
As
against the popular assumption any tax reform would comprise ‘electoral poison’
there is the contrary argument that improved infrastructure and services – paid
for via the progressive targeting of the top 15% wealth and income demographic –
could appeal to a broad class base of support.
Such an emphasis would be
electorally viable on the basis of the economic interests of most Australians;
but broad-based enough to bring in meaningful
revenue.
Specific
measures could include removing superannuation concessions for the top 5 per
cent income demographic – bringing in over $10 billion. Meanwhile reverting to 75% dividend
imputation (tax concessions on investments) could bring in over $5 billion while
affecting mainly the wealthy: and with other (small) investors compensated via
tax and social wage reform elsewhere.
Should an incremental approach work, here, Dividend Imputation could
later be reduced to 50% - bringing in over $10 billion. (in today’s terms)
Company Tax cuts could – and should – be put on hold indefinitely (business
needs to contribute to the training and infrastructure it benefits from); and
income tax reform could also target the top 15% income demographic. A minimum Company Tax rate could be imposed;
land tax imposed on properties valued over $1 million; and further taxes imposed upon economic rent in
oligopolistic sectors such as mining and banking. Finally the Medicare Levy could be reformed
to broaden its scope, apply a more progressive and graduated structure, and
provide a desperately-needed boost to Aged Care – caring for the most
vulnerable, and removing regressive user-pays charges that hit working class
families hard.
The aim would be to free about $25 billion of new money for socially
necessary programs – including desperately-necessary funding for the States -
while at the same time providing economic stimulus. To put this in perspective, this would
comprise about 1.5 per cent of a $1.6
Trillion economy) Further funds could be
freed via even better targeting of programs such as the Private Health Insurance
Rebate.
The programs that would emerge from such measures there must strike a
balance between providing for the most vulnerable (the aged, the disabled,
single parents, the poor); and in providing broad-based improvements of infrastructure, welfare and services that
favour the “mainstream” – ie: the great majority of citizens, workers,
families.
But time is running out for Labor. Vague and unrealized promises for the
future will not be sufficient for the revival of Labor’s fortunes in 2013. Labor
needs to ‘deliver the goods’ with infrastructure, services and social welfare
programs well before the approaching 2013 election. And in doing so it could also do worse than
to nail down the Conservatives’ economic irresponsibility in opposing stimulus
and crucial social investment with their deceptive ploys on the theme of
economic responsibility.
A Labor government which remains authentically on-message;
succinctly explaining such themes as stimulus, economic multiplier effects,
capacity constraints, and the economic role of infrastructure, education and
training – could outflank the Conservatives with their claims to economic
responsibility and competence. They
could break the myth of Conservative economic credentials and
competence.
Julia Gillard herself proclaimed at one point that Labor is a cause: and not a ‘brand’. Yet if the Labor cause is
authentic, constantly “robbing Peter to pay Paul’, with “one step forward, two
steps back” should not be acceptable. And neither should incessant mutual
attacks upon character be considered a substitute for policy substance.
Labor needs to reconsider its
recent attacks on single parents and disability pensioners. It needs new
initiatives provided without unfair austerity elsewhere. We need to overcome
infrastructure backlogs progressively; without inefficient, Ideological and
perhaps even corrupt Public Private Partnerships. A public fast-rail line along the east coast
could revolutionize transport logistics for business, and provide opportunities
for citizens. And we need to implement the NDIS and Gonski; but also provide for
other crucial yet less-politically convenient causes such as reform of
Newstart. We need big new initiatives in
Aged Care and mental health – because the most vulnerable of all cannot afford to wait.
Crucial to these initiatives could be the concept of ‘collective
consumption’. That is: If we do not pay
for health, aged care, infrastructure and education progressively (and
relatively cheaply) as taxpayers – we will instead pay more for these
regressively as private consumers.
Swan and Gillard have done the right thing – and the responsible thing - in abandoning the surplus for the time being. While it may have seemed politically prudential at one point, to follow through now would undermine the economy, and also Labor’s credentials. Now Labor needs to turn the economic debate around – so it is possible to conduct that debate on its own terms. Yet even if Labor does all this, victory in 2013 is not assured. Best, then, to lock a big reform agenda in: reforms in tax, social services, infrastructure and welfare that will put the Conservatives on the defensive; reforms they will not dare to wind back.
$25 billion in new social expenditure – and more accommodated through
socially progressive savings elsewhere – could provide the vital ‘Labor
war-chest’ – to provide much ahead of the 2013 election – and to promise even
more in its wake. Yet even this is
relatively modest in the big picture of a $1.6 Trillion economy. That sense of
perspective is so often missing in
Conservative critiques of Labor programs which (just like Conservative
initiatives) necessarily go into the hundreds of millions or even billions. Even on the Labor Left - which is largely
acquiescent on the issue of 'small government' these days - learning to think on
this scale is necessary in coming to grips with a genuine reform
agenda.
The bottom line is that an end be put to Labor’s decades-long retreat: that by appealing to and providing for both the disadvantaged and vulnerable – and to the ‘mainstream’ of working Australia – we can consolidate an electoral bloc, and begin anew ‘the steady march forward of Labor’.