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Morrison’s Dilemma

Within a comparatively short space of time, we are starting to see our new Treasurer’s ‘modus operandi’ toward economic reform.

Scott Morrison’s recent claim that eight out of ten income tax payers fund our total welfare payments, is a poor attempt at shock therapy, not well thought through and in that horrible world of political comparisons, a dumb way to get the community onside.

It would seem Scott Morrison only knows one way to approach a difficult problem and that is to fire off a broadside, see what it achieves and then begin the tough work of negotiation and compromise. On this occasion, using the old Joe Hockey style of placing his foot in his mouth, Morrison’s comment was not a good way to start.

Selecting individual elements of revenue raising to match a particular expense item is a lazy way to signal target areas where spending cuts might be on the agenda and is, in the overall analysis, quite useless. In this case Morrison uses the 2015-16 budget to compare spending estimates on welfare of $154 billion with personal income tax revenue estimates of $194 billion to fuel his broadside.

One would think any secondary school student could do something similar; cherry picking and coming up with what are totally useless comparisons.  One could use the company and resource rent revenue estimates of $71.2 billion and compare that with the estimated spending of $69.4 billion on health. But what relevance does that have?

It seems pretty clear from Morrison’s statement that he wants to find savings in welfare expenditure. Depicting the poor, long suffering taxpayer from Middle-Income Street, in Plain Town, as the one shouldering the welfare burden, might appeal to the lowest common denominator, but it ignores the reality.

All government revenues go into the Consolidated Revenue Fund. In some cases, specific revenues are raised for specific purposes such as the fuel excise being used for only for roads. But this is rare. Income tax revenues have no such specific purpose and to relate them directly to welfare payments, as if to say this is where your money is going, is wrong.

But what is Morrison really up to? He has earlier told us that we don’t have a revenue problem, only a spending problem. He bases this on the increasing ratio of spending to GDP compared with a  lower ratio of revenue to GDP. In doing so he is ignoring 50% of the problem. A higher revenue ratio would also reduce the spending ratio.

henryIf we accept former Treasury Secretary Ken Henry’s assessment that both revenue and spending should, over a given cycle, be 25% of GDP then it is clear both areas need to be addressed. Attacking spending in isolation will lead to a contraction in the cycle which, by a strange coincidence, is exactly what we are experiencing now.

But Liberal ideology limits Morrison’s choices. Raising taxes is anathema to their sense of justice and fair play. They would rather lower taxes, particularly for their corporate friends. They would rather strangle Union power, limit wage growth and cut back on welfare. It is the opposite of what they should be doing.

Higher wages means higher tax revenue, greater demand for goods and services, higher GDP which translates to a higher living standard for all. The one exception is that company margins are lower. So what? Additional demand compensates for that. The present Liberal ideology is framed with blinkers on, unable to see the bigger picture.

jobsThis is Scott Morrison’s dilemma. For as long as he maintains this blinkered approach to growing our economy, he will fail to capitalise on the power of demand side economics. And he will continue to preside over a seriously under-utilised workforce and lower than could be realised revenues.

Under Morrison’s management, deficit spending is destined to become the norm, not that there is anything wrong with that, provided it translates to higher employment. At the moment it is not.

 

23 comments

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  1. keerti

    When I first saw the title of this on my email, I read it as moron! I had to read it a second time before I realised that I was reading corrrectly!

  2. Sir ScotchMistery

    When I saw the heading I thought, “hmmm, Morrison has a dilemma”?

    I thought he was the dilemma. Morrison being moved to the treasury never made any more sense than Hockey being there since neither of them actually understand economics at this level. In fact it’s fair to say that nobody on either side of the house understands economics at this level. They depend on the likes of Ken Henry to interpret for them.

    The actual situation is, fair minded men and women of Australia, is that Morrison doesn’t so much “have” a dilemma, as to be one. Ours.

  3. i have a nugget of pure green

    in one way we do have a spending problem. We pay far too much for politicians of such low calibre.

  4. Möbius Ecko

    He is also engaging in another Hockey failure, and that is putting the burden on States to fix this Federal government’s economic stuff ups.

    He is framing his economic argument for the States in such a way as to blame them when it goes to shit at the next budget, If Turnbull allows this government to flunk another one that is. If the polls stay positive for Turnbull then he’s certain to call an early election before the next budget comes out.

  5. Bronte ALLAN

    Not another so-called “Treasurer”, who does not understand the precarious position most of our low paid/pensioners etc are in! IF this inept mob of flat earth, right wing, lying, tea party, conservatives were to get some “balls” & ENFORCE ALL companies/industries etc here in Australia to pay the taxes they should be paying, instead of all the bottom of the harbor/overseas tax havens/family trusts etc, they all seem to use at present, then the government coffers would be very much in the black! It is high time that ALL parties in power were “obliged” to select persons to Cabinet posts who at least have some experience in the portfolio they get! But, as usual, it seems it is always “jobs for the boys/(few) girls”! Not bloody good enough though is it? And then the obscene salaries they ALL get–our PM gets vastly more than the President of the United States gets, & the rest of our pollies get considerably more than their overseas counterparts! Money hungry BASTARDS, who obviously could not care about the very people who elect them to these obscenely highly paid positions!

  6. diannaart

    Excellent article demonstrating how little thought goes into such as Morrison’s ideas.

    “Work, save, invest” prattles Morrison; provided a person has a job which pays a decent return for effort – exclude all service industry people for a start, assume housing prices do actually drop towards the vicinity of possibility for the average earner.

    They still don’t get it. Abbott was hated as much for his message as for himself. As many have said “can’t polish a turd” – no amount of changing faces will make this government’s budget any more palatable than when it was first presented in 2013.

  7. Royce Arriso

    So much that Morrison says betrays a fundamental ignorance of macro-economics in our fiat currency system. Ignorance? Isn’t that the cue word for NeilofSydney? “When Gillard left office, the national debt was….”etc etc groan bore fart

  8. mars08

    @Royce Arriso…. So much that Morrison says betrays the fundamental ignorance of his intended audience…

  9. paul walter

    Yep, tatty populist politics. Refugees has been pushed to the limit and it is too soon to revist aboriginies, so that leaves welfare beneficiaries, something that can give the shock jocks and commercial teev something to work on prior to the approaching election, bearing a little false witness; blaming the victims.

    But Scott. What if god is watching? You may fool the rest, even yourself but who will know what is within your most hidden and dark heart of hearts.

  10. David

    Sir Scotch (cheers)…re Morrison’s credentials. Only a dill would argue otherwise. Thought you were a tad severe with the tough love though on the Labor side of the coin. I have always had a huge amount of respect for Andrew Leigh, Labor Member for Fraser with his background in economics. Unfortunately Andrew arrived in Parliament at the wrong time 2010. Mr Swan had the Treasurers portfolio firmly in his grasp and Chris Bowen was climbing the ranks, so he waits in the wings as Shadow Assistant Treasurer..

    Here is his list of credentials etc as per Wikipedia, impressive enough for me and just may sneak into the highly knowledgeable category 🙂

    Always enjoy the chats Sir.

    https://en.wikipedia.org/wiki/Andrew_Leigh

    Also

    http://www.smh.com.au/national/trading-in-the-lectern-for-a-bully-pulpit-20101001-160xy.html

  11. stephentardrew

    People one there is no strong voice for working class people, the low income poor and marginalised. It is not that they are good saleswomen and women they lack a credible opposition who can challenge neo-conservatism front on. Labor and Shorten are the greatest gift the L-NP ever had. They still refuse to see that Shorten is a wet rag and the rest of the party incapable of formulation o cohesive and unified front against the real enemy unbridled capitalism and corporate greed. They are all drinking from the same corporate money trough. That they do not make a forceful moral stand against Dutton, Morrison and the like is astounding.

    Many of us predicted this years ago while we waited and waited in hope for Labor to present a credible plan. Well they did not and seem incapable of operating as a dogged opposition. So the whole country suffers through their incompetence.

    The hoped Abbott would self immolate however they had no plan for Turnbull which is glaringly obvious as they again live in hope. The L-NP would never rest a moment while in opposition however Labor is invisible to the public. If you or I ran an organisation like this we would be sacked.

  12. Sen Nearly Ile

    Only 4 pensioners in my extended family, all but one have have full pension cards:
    a freehold home and tax free top ups in black market building no money worries
    a freehold home and tax free super’ worried in share losses and converted to bank is set till age 80 but needs to be careful
    a freehold home and some kind of trust investment/inheritance – he has a health card and 4 racehorses in training? no worries, fishing boats, golf, overseas holidays, wine women and song
    non-smoker non-drinker grandfathered rent of $32 per week for a two bedroom government flat(if she shifts to a single accommodation her rent rises by a factor of 5+) with investments the excess that she gives to the grand son she brought up at the rate of $10 000 a time.
    a freehold home with tax free super.
    These are all abbuttians, have pension supported health issues but support medicare co payments, cuts to welfare and abolition of penalty rates. They are stoic in their avoidance of any ‘discussion’ except the millionaire who is openly a misogynist but is a great supporter of female jockeys, a racist until a blackman runs a country’s economy, but Aborigine’s do not have the genes to lead. He is a tea party supporter and vocal in his support of LNP values. He does not trust turnball and I feel he secretly thinks to let turnball win them a second term then dump him. I try to argue my point of view but he is too experienced and articulate for my dumb bleeding heart arguments.
    Sadly stephenardrew you are spot on shorten has no beaconsfield and the women have gone underground.albo shoulders on.

  13. gangey1959

    When is Australia going to have a treasurer who can count, and who understands that generating income is a better way of balancing the books than reducing spending ?
    Our new ‘gatherer and sharer’ scotty moronson has the same inabilities with money and numbers as his predecessor.

    PS. Don’t wake NoS up. He is still trying to find a comfortable seat in the back-benches whilst still holding hands with jojo in case they get separated and he can’t find the loo.

  14. Loz

    Let us hope that they do not call an early election as they may win on the popularity of Turnbull. Surely the Australian people can see that this is just another Abbott government under the disguise of a seemingly ‘nice’ man. We mustn’t be fooled twice or we will bear the awful consequences.

  15. kizhmet

    Morrison is far more dangerous than Hockey. While ideology rules the roost and tea-party politics prevails we can forget about budgets that actually make cents/sense. Pun intended.

    Turnbull’s cabinet clearly indicates everything that needs to be said. Policies have not changed. Australia beware.

  16. David

    @kizhmet…I share your concerns, along with the realisation the great majority of Australians are politically illiterate. That was confirmed with the latest polling numbers. Turnbull has this huge lead in the popularity stakes and now the party numbers are swinging big time in the Coalitions favour. Yet nothing has changed, same old same old Worse the disregard for the well being of a fellow human being by the Govt in the form of Asylum Seeker Abyan. Her plight was all over the media, both MSM and Social, boy practically ignored as the Coalition popularity soared.

    If the ALP persist in this absurd notion Shorten will lead them to the next election, they are marching to defeat, a big defeat.
    His supporters insist we are stuck with him until the next election, bullshite. Some heavy leaning and convincing in the backrooms, places and actions he is familiar with, how do we think he became leader?, will convince him to stand down.
    Majority of the rank and file and I suspect majority of Labor supporters generally prefer Anthony Albanese as do 40% (probably helluva lot more) of the caucus.
    Longer they leave him as leader, the more the snake oil sales man Turnbull will lick his lips in anticipation of another full term. I hope Albo is working hard behind the scenes, he appears to be Labors only hope. The snake oil is blinding the nation.

    I look forward to Shorten supporters providing answers to his failure to convince the nation of who he is and what he stands for.

  17. Harry C

    Ideology will always triumph over operational fact with the Liberals. (or basic accounting for this particular matter)

    Morrison will always be happy to pick and choose how it looks like some portion of tax paying public is ‘paying’ for welfare which is a non-discretionary send on the governments books anyway.

    Using this axiom of logic perhaps he will look at the interest bearing treasury bonds which are also spent dollar for dollar which are mostly bought by multinationals, hedge funds and insurance companies. (the other side of the coin is corporate welfare and it costs more).

    Without changing the existing mechanics in any way + JUST looking at the accounting… where is his criticism of the other form of welfare for the top end of town its imbalancing the government ‘books’ more than people on welfare.

  18. Trevr

    Ex Tourism Australia Head honcho Morrison becomes Australia’s sinister Minister for Terror. Counselled from his admission to Parliament to “choose” carefully a point of “difference”, Morrison chose to kick the victims to show off his Evangelical Abilities as a newly minted Lying Christian MP in the Ethics and Morals free Conservative Tory Party borne from the Howard Ashes of the “Menzian” myth, known as the LNP. Now Morrison, The Sinister Minister sits as Treasurer with the same “point of difference” of kick the victim operational Christian Hypocrisy, as Malcolm struts the boards as a richer Abbott in charge of the single most SUBHUMAN Australian Government since the last Tory rule. Malcolm uses the complicit Australian media as a salve of I’m not Abbott while he rules Abbott’s IPA policies of division and disenfranchise to satisfy his desire to be “PM of anything”. The Australian electorate, gutted by Abbott, sits silent in Turnbull’s gloss as the trap is enacted to succeed where Abbott failed. The electorate goes back to sleep, slumbering in Turnbull’s crafted eloquence and spin. And Labor offers Shorten, a machine man who knows not how to lead, just counts the numbers! Hoping like hell that his star will rise as PM.

  19. David

    @Trevr…very pertinent sentence….’Labor offers Shorten, a machine man who knows not how to lead, just counts the numbers! Hoping like hell that his star will rise as PM.’

  20. bossa

    Morrison’s (continuing) misrepresentation of the facts is solely designed to undermine the social democratic state to the benefit of the plutocratic class he represents. And this from a “so-called” believer in the teachings Christ?

    In a sovereign fiat currency based system TAX is only useful as a regulating tool, like interest rates – it has no value as income for the government. The government doesn’t need income as it can “print” its own money.

  21. Pingback: Morrison’s Dilemma | THE VIEW FROM MY GARDEN

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