Hockey on the Ropes
Have you noticed that Joe Hockey has been doing the rounds of radio, television and print lately, moaning and groaning about his problems with the senate? It appears the penny has finally dropped and he wasn’t wearing steel plated boots. Ouch!
Back in December 2013 and again in February 2014, I wrote that it was unlikely that Joe Hockey would ever deliver a surplus budget. Finally, it seems, he agrees.
“If we can’t continue to reduce government expenditure we’ll never get back to surplus, we’ll never be able to pay our bills, we’ll never be able to live within our means,” the Treasurer told 3AW from Canberra.
The first bit was right. As for never paying our bills and never being able to live within our means, well, that’s just childish. There will never be a time when we, as a monopoly currency issuer, could not pay our bills.
The deficits will continue to rise, however, and sit around $50 billion a year as revenue continues to fall. The budget savings held up in the senate are a trickle compared with what is needed. They total an average of $7 billion a year over the forward estimates.
“And sooner or later we will run out of other peoples’ money,” he told Neil Mitchell in the same interview. Well, if he continues to think that we won’t be able to pay our bills and that we will run out of money, he should be replaced. It suggests he doesn’t know how we pay our bills.
He also made the rather extraordinary claim that it was, “fundamentally unfair for us to have a lifestyle today that our children will never have”. What rubbish! Just whose children is he referring to? I suspect that when Joe Hockey’s children inherit his family fortune, they will have a much better lifestyle than he does today.
But for the children of the rest of us, well, that depends on how much debt they accumulate; private debt that is, not public debt. At the moment, private debt is the big worry. It is at record levels and threatens to undermine any chance of enhancing our way of life.
It was Peter Costello’s much lauded surpluses that drove us toward record levels of private debt.
Joe isn’t bad at making emotive styled comments in public as if trying to tug at our heart strings. But if he is so determined to rein in spending, he has been told time several times he should focus on tax expenditures like superannuation concessions, private health insurance rebates, mining subsidies and the like. This is where the big savings can be made.
So given the facts, his concern for our children must be taken with a grain of salt.
Interestingly though, on the savings issue, the government is now pleading with Labor to help them through this difficult time. Labor have said they are more than willing to help if the focus is shifted toward tax expenditures. Why doesn’t the Treasurer engage with them?
Dr Jim Chalmers, Labor opposition spokesperson for trade and investment said, “We’re all up for a proper conversation about fiscal responsibility, but we’re not up for a conversation that asks the most vulnerable people in Australia to carry the heaviest load.”
Hockey has a simple choice here. Had he chosen the right one on budget night last May, he might well have been a leadership contender today. But he didn’t, and he isn’t. He chose to protect the big end of town at the expense of the most vulnerable.
Just like his boss, all his problems have been of his own making.
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34 comments
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DanDark -
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ozfenric -
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deanyz1 -
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Rod -
Lee -
Kaye Lee -
May -
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John Kelly -
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Ross -
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Rod -
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May -
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deanyz1 -
Jexpat -
MMT
Return to home pageWhat can I say about Ol’ Smokin’ Joe that I havnt already
Only that when he is KO and hits the deck never to rise again
I will be smokin’ a cigar and playing his favourite song
This is the best day of my life….
Joe Hockey needs reminding that we all start life as leaners and we exit life the same way.
John Kelly, if you ever read this – when will you and politicians etc., ever learn that money is not a resource? I can go to our supermarket today and not find 100 high quality items of smallgoods etc., which are no longer made, hence can’t be bought.So much of what is available anywhere, at any price, has lost quality and only gained marketing spiel, eye candy and extra packaging. When will a touch of realty enter the dialogue of the learned and eloquent (and not so ……) so that some viable concepts can be discussed?
Kasch2014, not sure I follow you. Can you explain your position further?
Hockey is a liar and a useless Treasurer and the sooner he goes the better it is for Australia. Oh and he must take the useless Prime Minister with him.
Hockey continues to grasp at the shock doctrine straw.
It will be his undoing.
Good article John. Joe is out of his depth, pushing IPA scare propaganda and hoping that the fact that he is dead wrong won’t be noticed.
Joe and his party need a good economics adviser not a director of spin.
“If we can’t continue to reduce government expenditure we’ll never get back to surplus…” Tommyrot. Absolute bunkum. There are plenty of things that could be done that would bring Australia’s budget back to surplus and well beyond. Kaye Lee has listed a good dozen of them recently. The problem is, they all involve increasing the government’s tax take, through the removal of concessions or the raising of tax rates or the imposition of new levies. Most of them seem eminently reasonable but the Coalition simply will not countenance raising tax rates.
Economists have been consistently saying, for years now, that Australia’s problem is a revenue problem, not an expenditure one. If you’re not willing to raise taxes, and revenues are down for any number of reasons, the only way out is indeed to cut services, but here we get to the point where people wonder what we have a government *for*, if not to levy taxes and use them on providing services.
To reduce government expenditure enough to cover revenue shortfalls, I suspect, would be practically unachievable. Hockey is using this as a smokescreen to hide the fact that he wants to raise more revenue, just from the ‘little people’ – i.e. the ones that don’t donate to the Liberal party.
Hockey knows he is wrong and all the stuff about our children is bullshit. But that neo-liberal propaganda is the only way he can scare some people into accepting the “spending cuts we have to have”. The Murdoch press has also ramped up the rhetoric about the “fiscal denialism” of the opposition, following on from Rupert’s tweets about “future prosperity” (mostly his, I would imagine).
It is really very difficult to convince people that the nation is not like a household. That framing can only be broken by repeated assaults, and I’m happy to see that more and more articles like this one are appearing. Good work!
When you talk about the private insurance rebate, do you want them to scrap it for everyone? I struggle to pay for private now. “I’ve used the cover for bilateral knee replacements, which would never have occurred in the public system – at least until I was in a wheelchair. I have used it for other operations as I age. It is not only the rich who have private insurance and rely on the rebate.
I agree if it is means-tested. Oh, and Hockey only keeps repeating lies about the budget and economy to scare the people who wouldn’t know better. But you knew that…
Means testing sets up a slippery slope, but more importantly, it changes the nature of a program from a broadly based one that everyone’s entitled to, into a welfare benefit that’s more easily attacked.
If the government was serious about efficiencies, then the proven way to proceed is by phasing out private cover for basic benefits and phasing in a single payer system.
John Kelly you need to educate the other journalists at AIMN so they don’t buy into the Neoliberal BS about debt and deficit and the need to balance the budget.
No articles saying where the LNP can look to increase the tax revenue etc.
instead they should be saying, taxation does not fund government spending and these suggestions are to redistribute the tax burden.
“There are plenty of things that could be done that would bring Australia’s budget back to surplus and well beyond. ”
Ozfenric, it is not in our best interests to bring the federal budget into surplus. It doesn’t operate like a household budget. When the federal budget is in surplus, private sector savings are down and debts increasing. It is not sustainable and if you review our history, budget surpluses are usually followed by recession.
Rod,
There have been countless articles about redistributing the tax burden. Are the semantics that important?
Help me out here, if taxes are not used for government spending… to what purpose are our taxes therefore used?
Rod, I don’t think anyone writing for the AIM network is fooled by the debt and deficit spin put out by the Coalition. Nor do we believe in the need to get back into surplus. However, the coalition will not listen to that argument, so in the meantime, we argue on their level, i.e. finding savings through tax expenditures. That is their Achilles Heel. While doing this, we are continuing to hammer home the facts about monopoly issuers, the fallacy of debt, the role of the RBA as our Central Bank and the importance deficit spending is to a growth-centred economy.
May, hang on to your hat. This is going to be a bit of a shock for you. Taxes are another macroeconomic tool, along with Commonwealth government securities (Treasury bonds), to withdraw money from circulation. All funding is ex nihilo (created out of thin air) by the RBA (The Reserve Bank). Taxation and spending are like two parallel streams that never meet. But each works to achieve a common purpose, that is, to maintain a constant flow of just the right amount of water/money needed to sustain life. The RBA spend it and taxation draws some of it back in to maintain the correct balance to control inflation. If your next question is: what happens to the taxes they draw back in? You had better be sitting before I tell you……………………………They destroy it!
John,
I pointed Dr Jim Chalmers (my local member) to your article in January – How to sell the Economy. Maybe he is listening after all.
Rod,
It wouldn’t take much to start an economic awareness tsunami. It is after all something that concerns us all.
Warwick Smith has a Guardian Australia article up at the moment on just what John Kelly has been arguing, last time I looked it had 296 comments so it is out there. But reading the comments a lot more is needed.
Steven Hail manfully tried to shed some light light on the fog of ignorance, with mixed success, but at least some of the commentariat are economically aware.
Hockey’s outburst today re submarines and why there shouldn’t be an open tender, highlights the lies and dishonesty prevailing in this Govt, More so as its back to the same old same old show. Abbott tells backbencher one thing, does or has already done ( read submarines built in Japan) another. Hockey sends mixed message. Muddys the water even further.
More here….
http://www.skynews.com.au/news/politics/national/2015/02/12/labor-slams-submarine-process-a–shambles-.html
John, Kaye Lee: Of course the coalition won’t listen to those arguments and it is really pointless trying to argue with them. Even if some LNP members believe Modern Monetary Theory they could never admit it, they would be howled out of the party.
I don’t think your articles are for the LNP but are to educate the voting public and show the complete lack of economic understanding that exists in the political class.
Bill Mitchell says we have to change the language, he believes that semantics are important.
See Framing Modern Monetary Theory https://www.youtube.com/watch?feature=player_embedded&v=8ZpmJdetQMo
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Ross
I read Warwick Smith’s article and all the comments, I thought it was amusing that even after he linked to his video nobody seemed to recognise that his comments were from a Professor of Economics.
Steven Hail is not the mouth on a stick bank economist you see on the nightly TV news.
Hi John,
Thank you 🙂 Hats mess with my hair lol.
I am a long time regular reader here. I like to think of this place as a safe haven. A community, a place where I know one of your many contributors will articulated the many issues (ignored by the media), emotions that many of us feel, sense and see, and understand exactly what is actually at stake.
I noticed MMT is being talked about a lot more lately. New media, alternative media published on youtube, social media (twitter/facebook). And just today articles published on The Drum and The Guardian [as Ross pointed out] (admits to scrolling past the graphs on the drum and focusing on the content) and previously touched by crikey. What these articles emphasise is exactly what Lee posted, your own articles and so many other commenters (sighs speaking to the choir) “When the federal budget is in surplus, private sector savings are down and debts increasing”.
I even book marked Steven Hail’s youtube lecture to watch at a later point, which I happened to finally watch a day or so ago. I do enjoy listening to Steven Keen though.There is much of MMT that goes over my head, though I do understand ‘government surplus leads to private sector savings decreasing and their private debts increasing’.
The problem is the media and political parties (as Steven Hail pointed out) stick to their status-quo message. Nothing but the status quo. Their version of capitalism, how the economy works, and how government operates; which is far from reality.
We scream at our TV’s or radios when ALP or journalists idly sit by and don’t attack what Liberals say, their lies, myths, mixed messaging and contradictions.
Why does no one comes back when liberals and their supporters (I’m looking at Alan Jones) say “where is the money going to come from?” “How are we going to pay for it?” and say something like..How did the government fund the snowy river project, dams, national highways, telecom. etc? Start listing all the national government projects, explain how they were funded.
Government securities and treasury bonds means nothing unless it’s explained in detail how it’s used or why its used. Back to basics with visuals, historical examples. Yes back to basics. This website no doubt is tracking a lot of newbies, who have been subjected to standard media, status-quo parroting government spin, twists. (ugh I am venting) But yeah back to basics with examples that people can visualise. I also figure the more this is written about (with good examples) the more it will finally sink in with a clearer understanding for us newbies to MMT 🙂
I guess that kasch2014 can’t explain further. That’s the problem with cut and past. If one doesn’t understand in the first place – as I don’t – how can s/he explain the detail?
oooh… just found Warren Mosler’s Seven Deadly Innocent Frauds of Economic Policy online. This provides some good explanations for those new to MMT.
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Thank you Lee
“And sooner or later we will run out of other peoples’ money,” he told Neil Mitchell in the same interview. Well, if he continues to think that we won’t be able to pay our bills and that we will run out of money, he should be replaced. It suggests he doesn’t know how we pay our bills.
It is this elegant simplicity that makes me love reading your articles John Kelly!
Tony and Joe thrash about
Like drowning clowns
In a sea of doubt
The heat is on
The end is nigh
Their time has gone
The lies won’t fly
Tony and Joe lay the blame
Like schoolboy bullies
Avoiding the cane
There’s no reset
Just arse saving
There’s no regret
Hopes are fading
Tony and Joe lie more often
Like undertakers
nailing their coffin
Tony and Joe
The die is cast
It’s time to go
Use by has passed
Good one, Graeme Henchel
I’ll write that down with my Ctrl+C
If they can’t work their shit out
They can work it out with a pencil
Let’s put this bluntly:
Trying to sell certain ridiculous aspects of MMT on every economic thread is like a bunch of Mormons walking around, looking for doors to knock on.
It’s counterproductive- and even the Mormons themselves have come to that conclusion.
“The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify,
for those brought up as most of us have been, into every corner of our minds.”
John Maynard Keynes