Alms vs Armaments

One of the reasons the Coalition won the last Federal election was because it pointed out that Australia’s spending on defence had fallen to 1.38% of GDP, the lowest level since 1938.  The promise was to spend at least 2% of GDP on defence — a pledge the Abbott government has found daunting.  The current promise is to increase defence spending by 3% per annum until the 2% of GDP figure is achieved.

The previous government had promised many things too.  The 2009 Defence white paper was entitled “Defending Australia in the Asia Pacific Century: Force 2030”. This is the document that promised twelve new submarines, amongst other good things, for Australia’s defence.  It had a short shelf life because, just eight days later, the defence budget was slashed.  Labor kept cutting the Defence budget, with a further cut of 5% in 2010 and 10.5% in 2011.

Defence expenditure peaked at 40% of GDP in 1943, during World War 2, which saw several hundred Australians killed on Australian soil – from Sydney Harbour to Darwin and round to Port Hedland.  After that war the generally accepted wisdom was that defence expenditure should be a minimum of 3% of GDP.  Given the state of the world today, with a couple of civil wars in the Middle East and North Africa (MENA) and the showdown looming in East Asia, getting to a minimum of 3% of GDP on defence would be a good idea.  And the sooner the better, one might think.

Where is the money to come from?  All taxes suppress economic activity, so we don’t want to do it by increasing existing taxes or introducing new ones.  The biggest single lump of expenditure goes to social security and welfare, at about 9% of GDP.  Defence is one-sixth that.

We all know that we have had a boom since the turn of the millennium, with GDP up 46% since 2000.  Population grew 21% over the same interval so, on average, we are about 20% better off than 14 years ago.  It turns out that welfare recipients are also about 20% better off than in 2000, with per capita welfare spending rising (in 2010 dollars) from $4,483 to $5,390 in 2013.  That 20% increase now accounts for about $20 billion per annum.  A good part of the increase was during the Howard years. Indeed, the percentage growth in per capita welfare spending actually dropped during the Rudd/Gillard era.  Howard wanted to be re-elected and was prepared to spend the country’s money to make it so.

So there’s plenty of money for defence: it’s in the welfare budget.  Defence expenditure could be doubled simply by taking per capita welfare spending back to the level of 2000 and re-directing the savings.

Would anyone really suffer if the welfare budget were to be cut?  Let’s take the recent case of the Cairns mother who allegedly stabbed eight children to death, seven of them her own.  Those children were by five different fathers.  But that’s not the problem, which is that taxpayers were paying to support them.  If the mother had to pay for the children herself, she might not have had any at all. Similarly, if fathers were made responsible for the upkeep of their progeny, they might be more careful. The Cairns mother might have had a job and contributed to society instead of being a social parasite.  The whole notion of paying single mothers to produce their offspring started with a Bill Hayden budget during the Whitlam years.

Scott Morrison has started his new ministerial post by promising to reform the heavily rorted disability pension system. If you succeed in that, Mr Morrison, there’s a lot more to be reformed after that. The savings could pay for the needed defence spending and start paying down the debt.

David Archibald, a visiting fellow at the Institute of World Politics in Washington, D.C., is the author of Twilight of Abundance (Regnery, 2014).