The Turnbull Government's propaganda about good and bad debt is a smokescreen to justify further attacks on welfare spending, writes John Passant.
WHO would have thought it? According to Treasurer Scott Morrison, good government debt is now a thing.
Australians understand that taking out a mortgage to pay for their home is a wise investment for their future. But they also know that putting your everyday expenses on the credit card is not a good idea. It never ends well. And that is basically the difference between good debt and bad debt.
The same is true for governments. It can be very wise for governments to borrow — especially while rates are low, to lock in longer term low-cost financing and invest in major growth-producing infrastructure assets, particularly in transport and energy infrastructure. But to rack up government debt to pay for welfare payments and other everyday expenses is not a good idea.
Lol!..from the party who was elected on "debt and deficit disaster" - now it's "good debt" & "bad debt"— Coalition Tea Lady (@ItsBouquet) April 26, 2017
Coming from a gang that, in opposition and in government, railed incessantly against all government debt, this is a huge change. Who can forget their cries of "budget emergency", "debt crisis" and "debt and deficit disaster"? What is behind this sudden conversion?
IA's Alan Austin has given us some good information on the looming Turnbull/Morrison deficit "disaster". As he points out, government debt is likely to hit $500 billion very soon. The 2017 Budget, to be announced on 9 May, will only increase that debt.
What the Government is trying to do in drawing a distinction between good and bad debt, is to defend government spending on some things and justify savage government cutbacks.
In Morrison’s terms, what is the difference between so-called good debt and bad debt? The money the Turnbull Government spends on some infrastructure will be rebranded as "good" debt. We will be told the money the government spends on welfare is "bad" debt.
The difference appears to be that one produces income and the other, apparently, does not. It is nonsense, of course. Spending on health and education, for example, creates a fit and educated working class now and into the future.
This good debt/bad debt smokescreen has a class basis and bias. In the world of Turnbull and Morrison, government spending that helps capital is good; government spending that helps workers and others who are not capitalists is bad.
In this world, a generous government loan worth $1 billion to the coal miner Adani – that for commercial reasons, even Westpac, along with a number of other banks, won’t fund – is good debt. Malcolm Turnbull’s wasted $49 billion on the $8 billion loss-maker, so far, that is the national broadband network (NBN) is good debt. Proposed tax cuts worth $24 billion for big business are good debt. Tax cuts of $26 billion for other business taking effect from 1 July are good debt.
Apparently, spending on health ($71 billion), education ($33 billion), pensions, unemployment benefits, the NDIS, the homeless and other social welfare areas is bad debt.
In February, The Canberra Times reported that 80-year-old women in my hometown are sleeping in cars or couch surfing. According to Morrison’s logic, spending on these women would be bad debt. So too is paying $267 a week (about $160 below the poverty line of $427) to an unemployed single person.
In Morrison's world, paying $44 billion to pensioners is bad debt. However, the tax expenditure on superannuation funds and superannuants worth $30 billion (of which about $17 billion goes to high-income earners) is apparently good debt.
I wonder where the recurrent defence expenditure of $32 billion a year fits into Morrison’s caricature. That is before we talk about the government spending $24 billion on the F-35 lemon and $50 billion on submarines.
There are others aspects to this. It will also be about recovering "bad" debt. Ever since the Hawke Labor Government abolished the Whitlam Labor Government's free universities and began sending students into debt, the amount of the "debt" and its recovery have been on the minds of governments.
It appears that in the 2017 Budget there will be University fee increases of 25 per cent, plus a lower income level at which repayments begin. On top of that, it looks as if there will be an (Orwellian) efficiency dividend imposed on universities.
So, what else can we expect from the budget in light of the good debt/bad debt propaganda? There will be an attack on those whom the far-right Liberals’ and the Hansonites demonise.
The Government might not use One Nation's language, but "dole bludgers", the homeless, drug addicts, the disabled, the sick, public services and public servants, public education, public health, women’s services, Aboriginal and Torres Strait Islanders, refugees, immigrants – to name a few – all will be under verbal, job and funding attacks.
These attacks will be joined at the hip with hyperbole about Australian values, Australianness and what a great country Australia is. Tell that to the 2.9 million Australians living below the poverty line.
The key default line for this government will be: "are you productive?", by which they mean, "are you productive of profit?" If not, then you are, in their minds, unworthy of government support. But they have to be guided by the support many "unproductive of profit" people have.
No government is going to abolish the aged pension upfront. So, they have set in train policies to undermine or reduce the pension — such as the superannuation guarantee, the superannuation tax concessions and extending the eligibility age to 70.
Given the public respect for pensioners, my guess is that there may be a bit of give-and-take with the age pension in this budget — perhaps even a small increase to disguise the greater cutbacks contained in saving restrictions. This will do little for the 36 per cent of pensioners living below the poverty line, the second worst of any OECD country.
If you thought the Centrelink "robodebt" collection model was an aberration, wait for the budget. This government has waged a war on welfare since it was elected and the 800,000 unemployed are a real and ongoing target.
Whether it be keeping them in poverty (and thus putting downward pressure on wages) or work for the dole schemes, these attacks all have one goal — to drive the unemployed into underpaid jobs and cut wage growth. Given there are 743,000 people looking for work and only 186,000 jobs on the market, many of them specialised, the problem is not laziness or bludgers but the system.
On and on the attacks will go to restore after-tax profit rates for big business.
That is all bad debt. What about good debt? Infrastructure spending for capital will be a major focus. This will include government-funded transport systems for miners to get coal and other minerals to market. If the rumours are correct, the Budget will also include $1 billion for an inland freight rail system to run between Melbourne and Brisbane. This looks like a more sophisticated version of other grand announcements this government has made to give the impression it has some vision and is doing something.
There is an alternative to all these budget attacks and silly do-nothing schemes.
How can we fund decent services? Tax the rich. Tax the tax avoiders. Tax big business.
How can we eliminate poverty? Massively increase welfare payments and fight to increase real wages well above inflation.
How can we create jobs? Begin an Australia wide switch from dirty energy to renewable energy incentives such as the ten-year plan from Beyond Zero Emissions. Build homes for the homeless. Build and make free public transport in and between the major cities.
None of this is rocket science but it won’t happen until we as a society put people before profit.
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It's a bloody disaster! https://t.co/ddYRwDnu6J— Peter (@linton_6) April 30, 2017
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