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May 20th 2014 print

Peter Smith

Joe Hockey’s Lead Balloon

You don't need the help of pollsters to determine that the budget has inflicted grave damage on the Abbott government. Broken promises are one reason, but greater factors in this self-inflicted damage are more simple: chaotic logic, clashing objectives and ill-defined problems

hockeyThe latest Newspoll shows support for the government and Tony Abbott plummeting. It would be a mistake to think this is a passing fancy. Voters are not going to warm to this budget and what it stands for. This is not because it is tough but because parts of it are unfair and inconsistent. It is the product of yet another political episode of shoddy thinking.

When Stephen Conroy conjured up the NBN there was no thoroughgoing investigation to identify precisely the problem it was designed to solve and assess whether it was doable, never mind whether it offered the most cost-effective solution? The process redefined shoddiness. The debate that followed was equally shoddy.

It came down to the irrelevant and simplistic one of whether you were for or against fibre. You might recall Tony Windsor explaining the part his enthusiasm for fibre played in his renegade support of Julia Gillard. Shoddy thinking usually produces unfortunate results and so it proved, in more ways than one.

Shoddy thinking is not confined to one side of politics. It is a bipartisan affliction. Ill-defined problems and clashing objectives are its stock-in-trade. The budget provides a case study.

What is meant by ‘the age of entitlement’? This would be handy to know before attempts are made to try to curb it. What is the government’s principal objective? Is it to repair the budget? Or is it to spend money on infrastructure? Or is it to begin ending the age of entitlement? Or is it to help middle-class working women by using taxpayers’ money to pay for their maternity leave and child minding? Or is it to help create jobs?

Now it is true that pursuing different objectives can be mutually reinforcing. However in this case there appears to be enormous clashing. Leave aside the substance; it is hard to win political arguments from inconsistent positions.

Start with the age of entitlement. In context, what is meant? This really matters. My own view is that a safety net, including a reasonable standard of medical care, for those unable to take care of themselves and an old-age pension, which keeps up with community standards, are not part of the age of entitlement. Of course these things aren’t rights, whatever that means, but they are essential provisions of compassionate and prosperous society. Now I am willing to hear arguments to the contrary but I haven’t heard them.

The age of entitlement in a prosperous society means providing taxpayer subsidies to those who can and should take care of themselves and their children; even if not quite to the standard that they think they deserve. It is welfare to the indolent and hand-outs to the middle class. For example, child-minding subsidies and parental leave payments to working couples fall into this category, as do family top-ups for those earning $100,000 a year. Under the existing arrangements it is $150,000 for Pete’s sake. Who do they think pays for it?

A good budgetary process would have precisely defined what was meant by entitlements before proceeding to cut them. That would have steered the government away from old-aged pensions and the Medicare co-payment. Note it may well be the case that Medicare should have had a co-payment from the start. But it didn’t and it is problematic to go back. Try reducing kids’ pocket money.

Tackling the growth in spending on old-aged pensions and basic medical treatment for the poor and their children by reducing benefits is misconceived and mislabelled if it is considered to be part of curbing ‘entitlements’. More stringent means testing may be ok; simply cutting benefits is not.

Now it could be argued that the measures were simply designed to repair the budget. But then you get into real trouble when, at the same time, you introduce generous paid parental leave for rich people. And, it is beyond silliness to raise the Medicare co-payment only to spend all of the proceed on some pie-in-the-sky medical research to cure whatever ails the population in twenty years’ time – I am sure that will be appreciated by those waiting in line, unruly sick children in tow, in bulk-billing medical centres.

Repairing the budget and curbing entitlements are, of course, consistent. The modest tightening of eligibility for family benefits was sensible and laid the basis, hopefully, for going further in future years. It was also defensible, which is sort of important if you want to get re-elected.

Unfortunately, some things can’t be touched, like child-minding support. Electoral oblivion lies in wait for those who would try. This, of course, is all the more reason why new ways are not introduced, like the PPL scheme, to bolster the age of entitlement. The argument that it is only fair because public servants are treated so generously is mind-blowingly ingenuous.

In cutting away at overly-generous hospital and education spending, courtesy of the death throes of the recklessly irresponsible Gillard government, the budget (broadly defined to include forward estimates) was well-targeted. The cuts to foreign aid and the ABC are worthy of celebration. Both in their different ways waste money on dysfunctional cultures, and are politically defensible.

On the other hand, the fuel excise and the deficit levy were irritants, when all of the lifting should have been on the expenditure side. And politically they are hard to square with promises of no increased taxation.

The changes to eligibility for unemployment were sensible in part, but in part also went too far. Certainly, if you intend to remove benefits entirely from some people aged from 25 to 30, you should have a better answer than did Joe Hockey to the key question: How will they live? When you develop a budget you should know exactly why each measure is there and how it fits, its implications and consequences, and why it is feasible, practical, and fair. No question would then be too hard to answer.

The budget had good things in it but, taken as a whole, it showed the typical signs of shoddy thinking; put together by people who hadn’t properly defined their objectives and tested the various measures they intended to implement against those objectives. It was a curate’s egg, with some unpalatable components championed, I can only assume, by some public servants intent on getting Bill Shorten elected in 2016.

There are times to get your head down and plunge ahead and times to beat a strategic retreat. This is one of those times for Abbott. John Howard knew how to do that. Abbott should speak to him.

 

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics