Honestly, Labor-bashers, Face the Facts!

This reader’s letter to the Canberra Times really got my goat. OK, so I’m a Laborite and so my hackles rise whenever I read criticisms of my party. But what really gets me is the blatant misrepresentation of facts and figures to suit the LNP’s political agenda. And what really, really gets my back up are the LIES, LIES AND MORE LIES peddled by the Abbott Government, its lackeys and supporters among the MSMs. This one is typical — given pride of headline space by the Canberra Times in its Comments section, despite it being clearly just parroting LNP spin. So I fired off a riposte. As it may or may not see the light of day in the CT, here it is in my own blog (three cheers for the coming of the  Internet Age).

Dear Letters Editor,

I feel I must respond to N. Bailey (Letters, June 2), in which he/she lays full blame on Labor and former Treasurer Wayne Swan for ‘wastage of taxpayers’ money’ that led to the ‘chaotic budget state inherited by the Abbott government’. Bailey’s letter is simply echoing the Coalition government’s ‘budget crisis’ spin which contains a lot of misrepresentation of facts and false assumptions.

I point out these facts: (1) the figure of $600bn is a a figure based on Treasury projections spanning the years to 2023/24, and the Coalition’s own pessimistic assumptions and recent spending decisions (e.g. PPL, new jet fighters). It is not as if Labor had left that amount as actual debt (incidentally, if Treasurer Joe Hockey was so perturbed by the debt level, why did he seek to increase the debt ceiling to $500bn?). (2) $600bn (the exact figure is $667bn) does not represent just gross national debt, but also debts incurred by state and local governments (which comes to roughly $282bn). (3) Half of the $667bn are in the form of Commonwealth Government Securities – treasury bonds bought by foreign investors – which provides the cash flow for big spending such as future superannuation payments for public servants and defence personnel, and for infrastructure programmes (NBN, for example) — note that these extend over a long term. (4) Actual net national debt is only a tenth of the $600+ billion. Labor left with a deficit of $30.1bn — if it is now much more, it is the Coalition government’s doing.

While it is true that Labor under Rudd/Gillard increased spending, this was chiefly to provide the needed stimulus through cash grants for low-income groups and infrastructure projects that saved the Australian economy from the GFC. Labor spending reached a peak of $54bn during 2008-09, but by end of its term of office, the deficit had gone down to $18.8bn, or 1.2% of GDP (the average for OECD countries was 4.9%). In terms of wasteful spending, the only years that an International Monetary Fund study found to be the most profligate (IMF Working Paper 13/5, January 2013) were during the Howard years. All that surplus from sale of public assets gone, giving out middle-class benefits and other non-productive goodies in the months leading to the 2007 election. If Howard had left the surplus intact, the incoming Rudd government would not have needed to spend quite so heavily to soften the impact of the GFC on the economy .

As the Nobel Laureate economist Joseph Stiglitz remarked: “For an American, there is a certain amusement in Australian worries about the deficit and debt: their deficit as a percentage of GDP is less than half that of the US; their gross national debt is less than a third” (http://www.project-syndicate.org/commentary/the-crisis-down-under#4gzrISdmXj3TScB9.99). Add to that the fact that Australia under Wayne Swan’s fiscal stewardship became one of only 10 nations in the world to get a AAA rating from three major global credit agencies, and Wayne Swan himself named Best Finance Minister of the Year by the esteemed financial magazine Euromoney for successfully steering the country through the GFC, The only other Australian Treasurer to have that distinction is —wait for it, N. Bailey — Paul Keating (need I say, also under Labor government?).

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We would all benefit to heed the counsel on this Banksy graffito – no matter what side of politics we stick to:

2 thoughts on “Honestly, Labor-bashers, Face the Facts!

  1. Yep, pretty good summation. Much of the perception problems arise from the mendacity spun by both the LNP and ‘economic experts’ of the MSM that government deficits are ‘debt’ in the same manner as household or business debt. This is patently untrue. Governments which issue fiat currency such as Australia, the US, the UK etc… are technically never revenue constrained nor can they go ‘broke’ in the same manner that a business can. Nor does it need to borrow to finance its spending.
    The sooner people wake up to this fact, the sooner we can be rid of this Neo-lib confidence trick of supply side economics and its premise of the ‘trickle down effect’.

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  2. Thank you, Edward Eastwood. It is so frustrating seeing people allowing themselves to be so misled by political spin. The popular belief that a country’s budget is like managing the family budget is an example. As most people with any sensible economic nous like yourself know, it is not like a household budget. One could perhaps give a kind of analogy with mortgage debt, where a person borrows to buy a house. But that debt is related to one’s income and ability to pay. No mortgagee aside from the uber-wealthy would seek to pay the house mortgage off within 3-5 years (as the current Government seems to want to do) without giving up the basic necessities of life — food, education, medicines and health services — and providing for members of the household. The average person carries that debt for 20-25 years, but ultimately it gets paid off, as long as income (productivity) is maintained, and sensible financial management is in place. And what’s more, the house, while money was borrowed for it, is in fact an asset in the long run. (Same with government spending, or rather, investing, on people’hs health, education, social safety net – the nation amasses an asset (human resources) in the form of a healthy, well-educated, skilled and happy population.

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