4 October 2003

What we need is a healthy debt

This is because Australian budgetary policy is in a political straitjacket.

Here the old saying that the only things certain in life are death and taxes has a modern parallel: the certainties of modern Australian political life are that no one dares speak of 'debt or taxes'.

The guiding principles of Australian political economics are that all government debt is evil and you can only talk about taxes when you are promising to cut them.

This has produced a totally skewed definition of economic responsibility in Australia to which no serious economist would ever subscribe: that government borrowing is always a bad thing and lower taxation is an economic imperative.

These arbitrary political constraints have been called the 'democratic deficit' - the gap between what politics will allow and what the community needs. A prohibition on government borrowing but ever lower taxes would mean that the funds for the things communities need which can only be provided by governments would compete for a share of an ever shrinking pool of funds. Of course, this isn't really how it works because governments increase taxation by stealth.

But this political straitjacket has meant that governments - federal and state - are only prepared to pay for things that can be paid for from the annual budget. And when major new demands come along, such as the resources needed for more spending on defence and counter-terrorism or the need for an election-year cut in personal taxes, other things gets squeezed.

Public anger about a more expensive and less accessible health system, about schools that can't cope, about water supply and electricity systems that break down and transport systems that are overtaxed and more expensive will force political responses.

Tax cuts are not the answer. And mean and tricky doesn't matter. What's important now is a debate about how to tackle a growing national crisis. And it's time to allow (government) debt to become a respectable four-letter word again.

Here's a splendid opportunity for the Labor opposition to prove what stern stuff it is made of and how policy-driven it is. They could start a national debate on whether endless tax cuts (also known as tax expenditures in favour of the wealthy) are the sole possible definition of the public good.

Simon Crean could make his point even more drmatic by flying to the press conference where he launches this debate by winged pig.

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