Abbott in a ‘Breach of Trust’ on the Budget

 

Above:  Shorten in the Red Tie, Abbott in the Blue Tie -

But what's the substance come Budget-time?

 

Tristan Ewins

Tony Abbott is coming under increasing pressure with regard his proposed tax measures as well as his overall agenda of austerity.    The Sydney Morning Herald observed the following proposals under consideration by Abbott for the 2014-15 Federal Budget.  (Some comprised very probable items for the May Budget - following the “Commission of Audit’; others might be considered ‘longer term aspirations’ for the sake of an Ideological commitment to ‘small government’.  Some may even be rejected as ‘too hard-line’ to be ‘electorally viable’)

·         Firstly there is Abbott’s ‘debt levy’ impacting on those on incomes over $80,000

 

·          Attacks on universal health-care, with  extra upfront payments for those visiting a GP, or a Hospital emergency department

 

·         Cuts in the Aged and Disability Pensions, and also to Newstart – a more austere formula for pensioners; but also cuts in eligibility;  (Also there is talk of ‘slowing’ NDIS implementation - a cut by another name)

 

·         Phasing in 70 as the age of retirement, with the family home included in an assets test – even where such assets are way below average property values….

 

·         Big increases in university fees – but also reductions in repayment thresholds – so poorer graduates are put under extreme financial strain even where there is not a proportionate financial benefit stemming from their education

 

·         Massive cuts in the minimum wage; moving towards a permanent stratum of ‘working poor’; a divided Australia similar to the United States -  where middle class lifestyles rest partly on intensifying exploitation or the poor and vulnerable

 

·         Forcing the young unemployed (25 and under) from the austere ‘Newstart’ and onto the even more austere “Youth Allowance”.  (approx $207/week for those living away from home)  (Even more severe changes appear to have been dropped: changes which would have forced young unemployed to move house to find work – even where ‘live at home’ was the only way of ‘making ends meet’ for the barest necessities)  (‘The Age’, May 4^th, p 13)

 

·         Road tolls (effectively flat ‘user pays’ mechanism) – In my opinion probably leading to further extensive privatisation of transport infrastructure (rail, road etc)

 

·         Privatisation of what few federal assets remain:  “Snowy-Hydro, the Australian Submarine Corporation, Defence Housing, Australian Rail Track Corporation, Australia Post, Medibank, the Royal Mint and the National Broadband Network.”  (Where infrastructure and central government functions are concerned these will likely be leased back to the Australian people – but at enormous financial cost – revealing the privatisation agenda as essentially Ideological – with the public fleeced in the final analysis)

 

·         Industry Assistance cut in areas like the auto industry.  (We already know this may ‘flow on’ with a cost of around 50,000 Jobs)

(Read more: http://www.smh.com.au/federal-politics/political-news/pensioners-health-family-payments-face-cuts-under-abbott-governments-commission-of-audit-report-20140501-zr2j3.html#ixzz30iDeWA00  )

Importantly: Howard era tax cuts went well into the tens of billions.  ‘The Australian’ observed how in the dying days of the Howard/Costello government $34 billion in tax cuts were promised – and then matched by Rudd Labor.   Even the usually-biased ‘Australian’ noted the impact this had upon the Federal deficit. 

‘The Australian’ also noted more recently how  the final 2013-14 Labor Federal Budget  “would [have been]  in surplus by at least $25 billion, with an estimated $40 billion in extra revenue, if income tax cuts introduced between 2005-2008 had not been put into place.”

(Wayne Swan would have made his budget surplus by a country mile were it not for his own insistence on ‘small government’)   

The consequence of these unsustainable tax cuts was a Labor Government that largely ‘trod water’ when it came to overall progressive reform of welfare and of the social wage.   Restructuring of income tax, improvements in pensions, and subsidies for disadvantaged workers (eg: in aged care) – were important exceptions.  And Rudd Labor deserves credit for its response to the Global Financial Crisis; with its timely investment in infrastructure.  Yet there were also attacks – such as cuts to Sole Parent pensions.  And implementation of Gonski and the NDIS were committed to ‘into the future’ at a time when Labor seemed bound to lose office in any case.  Labor did ‘put Abbott on the spot’ – pressuring him to commit to these popular polices.  But now it appears Abbott never had any intention of keeping his promises.

Peter Martin in ‘The Age’ explains that ‘Net Debt’ is now set to peak at 16 per cent of GDP or about $280 billion.  The consequence of this is that 2.2 per cent of GDP must be devoted to servicing that debt : or about $9 billion a year.   (The Age, May 4^th, pp 29-29) 

To clarify, according to the Federal Parliamentary Library:  

“net debt is the sum of all liabilities (gross debt) of an organisation, less their respective financial assets (cash and other liquid assets).”

To get this in perspective Australian Gross Domestic Product is now worth over  US $1.5 TRILLION; and by comparison Japanese ‘general government debt’  is over 200% of GDP; and US ‘general government debt’ at over 100% GDP.   

There are a number of factors worth considering amidst the panic and deception surrounding the issue of government debt:

a)       Lower gross debt under Howard/Costello needs to be considered alongside greatly reduced government income and income bearing assets – the cost of unsustainable tax cuts, upper middle class welfare, and privatisations

 

b)      We need to consider our capacity to SERVICE the debt; and the ‘trade off’ from public debt compared with greater productivity which would flow from public investment in infrastructure, education and the like. 

 

c)      The Liberals attempt to compare the Federal Budget with household budgets. And yet those families who can still afford it (since the Howard era housing bubble) need to make long term investments in the family home; servicing and repaying debt in a sustainable fashion over decades.  Families ‘having a roof over their heads’ is a fairly un-negotiable need.  By comparison, if governments fail to invest over the long term in infrastructure and education – the cost to the economy (and to real people) is greater than had those governments ‘opted out’ in order to cut debt.  And if the private sector is brought in ‘to pick up the slack’ – the cost to the Australian people as private consumers is greater than had they ‘collectively consumed’ infrastructure and services via progressive tax.   To clarify: there are additional private sector costs such as profit margins, marketing, executive salaries and a higher cost of borrowing

 

d)      Finally: issuing government bonds over the long term is arguably a fairer way of financing major public infrastructure – as the cost can be staggered over several generations  with those who will benefit in the future paying their fair share.

All these facts combined also reveal the falsehood of our supposed ‘economic crisis’ and insincere cries that we must cut radically in order to ‘live within our means.’   

But there ARE alternatives.

If the regressive subsidies for wealthy retirees via the Superannuation Concessions regime are taken into account; and if unsustainable tax cuts flowing largely to the wealthy and the upper middle class are considered;  it becomes clear that Australia has the means to provide for the Aged and the disabled without vicious austerity. That is: without attempts to whip up resentment against vulnerable welfare recipients. 

GetUp! has observed that over $15 billion in superannuation concessions go to the “richest ten per cent”;  and arguably even more if we consider the upper middle class.  

And according to the Sydney Morning Herald the overall  “Commonwealth bill for [superannuation] concessions is projected to rise at a staggering 12 per cent annually to be $50.7 billion in 2016-17.  “

On the basis of the figures already considered: progressively raising government revenue to pre-Howard levels (as a proportion of GDP); and winding back regressive superannuation concessions alone could claw back well over $50 billion.   From those measures alone, the Federal government could meet increasing demands in future decades on health, welfare and aged care .   It could also meet the cost of providing key infrastructure and social services publicly – without the extra (regressively structured) costs on private consumers that flow from privatization.  

There are several areas of urgent need which will certainly be neglected should the Abbott administration continue to ruthlessly pursue its Ideological ‘small government’ agenda:

·         Roads, rail (including Fast Rail), and other public transport

 

·         Better funded State schools; greater Tertiary educational opportunity; make HECS fairer by raising rather than lowering the repayment threshold

 

·         Better resourced public hospitals, universal health care with comprehensive Medicare dental and improved mental health facilities and services

 

·         National Disability Insurance, and National Aged Care Insurance

 

·         A National Broadband Network ‘to last the long term’ instead of a ‘second best’ option

 

·         Pensions maintained without cutting payments and eligibility for vulnerable Australians; and without regressive assets tests that include ‘the family home’ even when it is roughly equal to or lower than average property values

 

·         Free burials or cremations to save families unfair costs and stress when they are grieving for their loved ones

 

·         massive investment in public housing to increase supply – finally correcting the Howard-era bubble and making housing accessible and affordable for more Australians again

 

·         Continue to invest in renewable energy for Australia’s future – and for the planet;  the Clean Energy Finance Corporation is not a ‘drag on the Budget’ anyway – and reported a profit of 7 per cent

·         Invest in pure and applied scientific research; for example into a cure for dementia

Abbott has broken faith with the Australian people.   And unlike with Julia Gillard, he has broken that faith without the Greens ‘holding him over a barrel’ lest he lose Government.  Just as Gillard was hounded until the very end on her carbon tax promise – Labor needs to ensure Abbott – and the Australian people – never forget this broken promise.

The Government’s plans to raise taxation slightly for the upper middle class and the wealthy while ‘coming down like a ton of bricks’ against welfare recipients is also offensive. 

Oscar Wilde once said: “To recommend thrift to the poor is both grotesque and insulting. It is like advising a man who is starving to eat less.” 

He could just as well have been speaking to Abbott, Hockey or Cormann. 

A wealthy taxpayer might barely notice a marginal increase in tax.  But for the poor and vulnerable the impact of welfare austerity would be crushing.

But Shorten’s response to the Government’s plans is also very disappointing.

He has been quoted as arguing:

“Increasing taxes on working class and middle class Australians is a terrible mistake and people will not forgive Mr Abbott for breaking this very big promise to increase taxes.”

Again: Abbott must be held accountable for the breach of trust. 

But Shorten’s apparent opposition to any increase of tax on the middle class is also deeply concerning.  Yes, removing superannuation concessions from the most wealthy could save  over $15 billion.  But a more ambitious program of welfare, infrastructure and social wage expansion would necessitate a broader base.   And over the longer term even ‘treading water’ on welfare and social wage provision would require a proportionate increase in tax.   The ‘good news’, however, is that tax increases on the middle class don’t have to be too severe – because of that broader base.

Labor should never have abandoned its support for a retirement age of 65. Arguably for retirees there are ‘quality of life’ issues that go beyond the drive to extract more revenue and press ever-growing consumption.   Under these circumstances the middle class would have to shoulder part of the responsibility for making Australia a truly ‘Good Society’.   If Shorten does not take account of this the Greens most likely will.  And Labor will progressively ‘lose ground’ to the Greens ‘on their Left Flank’; while floundering in its attempts to inspire a rush in membership levels and activity.

All said, though, it is the austerity rather than the tax measures which are the most concerning aspect of the Conservative agenda in Australia.  The tax measures on their own could provide a ‘silver lining’.  Some debt is arguably necessary to spread the cost of infrastructure over generations.  But cutting debt servicing costs in half could be workable, and arguably see all that money  saved (approx. $4.5 billion) redirected every year toward the most vulnerable and needy.  For instance: for those in need of Aged Care.

With Hockey’s priorities, reduced debt servicing costs would likely be passed onto corporations, the wealthy and the upper middle class rather than the poor and vulnerable.  But if there are those in the Government who would rather aspire towards ‘Catholic social welfare Centrism’ – then this would be a crucial issue on which to take an uncompromising stand.  (both on social welfare; and in opposition to US-style exploitation of the working poor)   (And the same would apply to others identifying as 'compassionate Christians; though Catholic representation in the Government is very significant)

Abbott Government in Crisis as the End of Year approaches

above:  Hockey 'softening us up' for savage austerity next year;  Massive job losses follow in the auto-industry because of Liberals' Ideological agenda....

 

Tristan Ewins

As the year draws to an end the new Abbott Conservative government is in something of a crisis, perhaps ameliorated only by the favourable treatment it continues to receive in the Murdoch press.  The forced backflip on Christopher Pyne’s planned dumping of the ‘Gonski-derived’ education reforms suggested a government which was breaching its trust with the public even at this early stage.  That the Conservatives maintain the fiction that education standards are purely about teacher quality, and has nothing to do with resources – is simply a smokescreen for a class-driven agenda.   This is also evident in the Coalition’s decision to cut superannuation subsidies for low-income workers – and to shift those resources instead towards superannuation concessions for the wealthy.

More recently, General Motors Holden has made clear its intention to leave the country.  The result will be a loss of economies of scale in the components industry, with the probable consequence that what remains of the auto industry will also cease to be viable.  There is a possible ‘multiplier effect’  here: with job losses in components and small businesses (combined with core auto-industry job losses) adding up to approximately 50,000 jobs gone  (a conservative estimate ), and maybe as many as 90,000.   In this context, government investment of $150 million a year seems reasonable compared with the cost of losing the industry. 

Abbott and Hockey have made themselves clear that they (supposedly) oppose ‘corporate welfare’. But the meaning of ‘corporate welfare’ is up for interpretation.  Arguably cuts in corporate taxation, as well as wage restraint, and ‘user pays’ mechanisms for students all amount to a subsidy for corporations with regard the infrastructure, labour and services they benefit from.   But there is little objection from the Abbott government with regard this trajectory.

By comparison the ‘corporate welfare’ Abbott refers to has been characterised by Labor shadow-minister Kim Carr as an ‘investment’.  Perhaps the truth with regard the auto-industry was somewhere in the middle.   There was an effective subsidy – but the government and the people received much more in return than what they lost.  Again: because of a positive economic multiplier effect flowing on to communities, businesses, government, citizens – from relatively high wage manufacturing jobs, and the strategically important capacities involved.  

Abbott will try and shift the blame to Labor now.  Already we are hearing about Labor’s ‘reckless spending’ as a trigger for savage cuts.  But it is Abbott and Hockey who have chased the auto-industry out of town; and they must take responsibility for the falling employment and the falling revenue which follows.   

All that said: it is not as if they didn’t have options.  The floating dollar could have been temporarily suspended – and maybe pegged at 75 cents US – to bolster struggling industries – also including tourism for instance. But this was ruled out for frankly ideological reasons.  And there are plenty of revenue options to plug the structural deficit without savage cuts.  Hockey’s admonition that ‘no jobs were ever created by raising taxes’ is ridiculous.  Contrary to neo-liberal ‘common sense’ public sector jobs in health, education, welfare, public works/infrastructure – ARE ‘real jobs’.  And for instance funding cuts to Centre-Link will result in waiting periods for clients of over one hour for advice and service.   Probably the ‘welfare bogey’ will receive special attention now – as the government seeks to vilify the most poor and vulnerable in order to pay for its ‘big ticket’ policies like Parental Leave, and Corporate tax cuts.

It’s also interesting how amidst all this the Conservatives are considering raising the GST.  Perhaps they realise that things cannot go on as they are – because of a huge infrastructure deficit – that will hurt business and not only workers and consumers.  And yet they have an Ideological opposition to progressive taxation.  Again: for all their talk of Labor and ‘class warfare’, it is the Conservatives who have the class agenda.

Meanwhile Qantas is also on the brink.  Qantas is important not only because it is ‘iconic’, but for the practical reason of having reserve air lift capacity. 

Unfortunately the ideological climate is not supportive of nationalisation.    But arguably the Holden brand could be re-acquired, and workers convinced to take a partial stake in a revivified Holden by degrees (paid for through a wage-restraint deal), re-orientating towards the production of smaller, cheaper, energy efficient vehicles.  The result would be a joint co-operative/public enterprise.   With the support of the federal government, theoretically at least Holden could play a trail-blazing role in developing energy efficient, environmentally friendly transport.  But we have an Abbott government, and frankly even under Shorten Labor such a scenario would likely remain ‘purely theoretical’.

But there are also other reasons behind the Abbott Conservative government’s attempts to ‘soften us up’ for savage cuts next year.   To begin with the Howard era tax cuts had locked in a structural deficit; and the situation has been made even worse by the current government’s decision to slash the mining tax, and to significantly cut back Company Tax.  Then there are instances of ‘middle class’ and even ‘upper middle class’ welfare; with the elimination of private health insurance means tests for upper income earners for instance. Also notable, here, is Abbott’s plans for Parental Leave on full pay for the wealthy; potentially paid for through cuts to the National Disability Insurance Scheme. Finally – both Labor and the Liberals refuse to touch superannuation concessions for the wealthy – whose removal (for the top 5% alone!) would rein in at least $10 billion (Richard Denniss’s figure). And depending on the scope of measures (eg: perhaps removing concessions from the top 15%) taken – perhaps even $20 billion.  (a rough estimate)

Also interesting amidst all this is a shift in the media (especially the Herald-Sun) and the rhetoric of the Napthine Conservative government in Victoria – to ‘get tough’ on East-West link protestors and ‘make them pay’.   There is a real danger, here, of a gradual reversion to the kind of draconian laws that were common many years ago under the government of Joh Bjelke-Petersen in Queensland.  If governments escalate civil conflicts by violently repressing relatively peaceful civil and low intensity disobedience actions – eg: pickets, sit-ins etc – then  Australia’s relatively liberal political culture could be sacrificed, leading to a culture of fear and intolerance – cultivated by the monopoly mass media.   For the Conservatives especially – there is a choice between liberal conservatism – or outright reaction.  Politically liberal conservatives especially should be raising concerns about this escalation of intolerance and repression.

And yet there are objections to Victorian Labor’s strategy of paying for transport infrastructure through privatising the Port of Melbourne as well.   Years ago such plans would have provoked protest and hostility on the Labor Left.  Today there is barely a whimper.  As usual with privatisations of this kind the competition that flows in reality will be minimal – even assuming two major ports in to the future.  Consumers could also have to pay over the long term, and it would make more sense for Labor to borrow in order to fund its public works agenda.  Yet this is also ‘ideologically difficult’.

As the New Year approaches, though: at least amidst all this it is cause for hope. Hope that Abbott’s administration  could well turn out to be a one-term government.   To make that a reality, however, what we need now is a Federal Labor Opposition which stands up on tax reform , distributive justice, infrastructure and services, civil rights.