May 20 2014

Bust the budget to avert a less equal Australia


On Sunday I marched with tens of thousands of Australians against the Abbott government’s first budget. Why are we so angry? Because this budget continues Abbott’s agenda of protecting the rich, the privileged, and the powerful, at the expense of the poor, disadvantaged, and powerless.

I’ll start by debunking the justification offered for this agenda and summarizing the overall impact.

Climate change, not debt, is the real crisis

The narrative spun by Prime Minister Tony Abbott and Treasurer Joe Hockey is that Australia’s debt, spending, and taxation levels are out of control, and the only solution is to cut spending on welfare “entitlements” which we can no longer afford. In reality, Australia’s national debt as a percentage of GDP is smaller than that of most countries. Our tax-to-GDP ratio and welfare system are both small compared to other OECD countries. We also have the world’s highest tax-concessions-to-GDP ratio. Our spending-to-GDP ratio is roughly the same as it was a decade ago. And it’s not just the government budget; Australia’s entire economy is booming with the 5th highest GDP per capita. So Australia faces no fiscal or economic crisis.

The present budget deficit is caused more by lower revenue than higher spending, partly due to tax cuts made by the Howard and Rudd governments during 2004-2008. Hockey’s spending cuts and new taxes on the poor will not actually improve the overall budget position; they are only necessary to pay for the Coalition’s tax cuts and new spending, which mostly benefit big business. And as for Hockey’s claims about competence, the Fairfax newspapers have already identified a hole in the budget: it overlooks the need for redundancy payments to departing public servants.

While Abbott and Hockey peddle fear about the budget, Australia and the world do face a true emergency. As I said in regard to the previous two budgets: it’s the climate, stupid! We are already entering a period of dangerous global warming, with more frequent heatwaves, floods, droughts, and bushfires costing Australian lives. Science tells us that to have any hope of preserving a safe and stable climate, we must leave most fossil fuels in the ground.

It’s so ironic that Abbott and Hockey talk endlessly about (I’m paraphrasing here) “sustainability”, “intergenerational theft”, “leaving our children worse off”, “living beyond our means”, “the time to save our future is now”, and so forth. Those claims are false with regard to the manufactured budget crisis, but they do apply to the climate crisis. Today’s governments are leaving an incalculable ecological debt to young people and future generations. The climate crisis is what requires short-term pain for long-term gain, in contrast to Abbott’s pretense that he can cut emissions at no cost.

On the same day as the budget came news of two studies finding the West Antarctic ice sheet has entered an “unstoppable” collapse, expected to complete within a couple of centuries. But that didn’t stop Liberal Senator Ian Macdonald scoffing that “the increasing ice cap in Antarctica… always makes me smile when people talk about global warming”.

When the right accuses the left of concocting a climate emergency to justify higher taxes, spending, and regulation, maybe they are projecting their own strategy onto their opponents. A carbon tax isn’t “socialism masquerading as environmentalism”, but austerity is neoliberalism masquerading as fiscal responsibility. The right has invented a budget emergency and its proposed solutions just happen to involve reducing the size of government, hurting the poor, and ignoring the environment. It’s the same strategy followed by the right-wing in the US and around the world.

The budget hurts (only) the poor

In a 2013 blog post which was then speculative but now looks prophetic, I accused the Liberals of hiding a radical neoliberal program of great big new cuts. I was right.

This budget hurts the unemployed, young people, university students, schools, low income earners, families, the sick, the disabled, pensioners, public broadcasters, public servants, Indigenous Australians, developing countries, and the environment which sustains us all. The main beneficiaries are the mining industry, roads infrastructure, defence, and medical research, with a relatively neutral impact on corporations and high income earners. As Greens Senator Rachel Siewert says, “It’s almost as if they deliberately sat down and thought about, how can we make it the toughest for the most vulnerable members of our community?”

There are a couple of tokenistic imposts on the privileged designed to disguise the fact that the budget overall redistributes wealth upwards, but they will be short-lived and barely felt. The debt levy (a broken promise) is temporary and an insignificant burden on high-income earners. The first $180,000 a person earns will be taxed at the same rate as today, with only additional income beyond that being taxed an extra 2% for three years. Politicians’ salaries will be frozen for merely one year, tough as it may be for Abbott having his salary frozen at $507,000 (higher than Obama’s salary). The hits to everyone else look set to be permanent and deeply harmful.

The budget papers excluded the usual table comparing impacts on different types of families. ANU has calculated the numbers that would have been shown in the missing table and found:

  • An unemployed 23-year-old will lose 18.3% of their income.
  • A single parent on Newstart with an eight-year-old child will lose 12.2%.
  • An Australian earning three times the average wage will lose 0.9%.
  • A high-income childless couple earning $360,000 a year will be unaffected.

And let’s be clear: these are ideological choices by Abbott and Hockey. Even if you accept their budget crisis narrative, they have ignored a variety of Greens proposals that would raise around $80 billion by raising taxes on and cutting subsidies for fossil fuel industries, big business, and the super-rich. Hockey, who is married to a millionaire, evidently has no qualms about the choices he’s made – on budget night he reportedly danced in his office. Abbott laughed behind his hand during Hockey’s speech, perhaps because the budget allocates an undisclosed amount of money for refurbishing the Prime Minister’s residence.

Abbott is evidently following the Institute of Public Affairs’ advice that he transform Australia in three years like a right-wing Whitlam, seeming more interested in leaving a legacy than ensuring his re-election. On a recent Q&A panel, IPA head John Roskam briefly appeared to talk as if he was a member of the government, saying “we’re not going to give you any stability or security until the budget is back on track”.

Until now Australia has avoided the worst impacts of neoliberalism experienced by other countries since the 1980s, perhaps because here the agenda was initially implemented by Labor governments tempered by trade unions. Now Abbott wants to complete the process. This budget is the first step in making Australia a less equal society. Australians have always prided ourselves on egalitarianism, our ideal of the fair go. That ideal, to the extent that it was ever accurate, is now in the process of being destroyed. For all the neoliberals’ talk about “progress”, they want to take us back to the 19th century, before the welfare state.

It’s now apparent that when the Coalition promised “hope, reward, and opportunity”, “opportunity” was code for “if you’re unlucky you’re on your own”, “reward” meant “we’ll feather your nest if you’re already doing well”, and “hope” meant “dream on”. The mindset is that if someone is struggling it must be because they’re lazy or incompetent, not because they started from a disadvantaged position in society. Only people with money are important, and anything outside the economy doesn’t exist. They forget that the entire point of having an economy is to improve our lives, and cutting welfare does the opposite. When the economy doesn’t serve the needs of society it is the latter that should take precedent. Hockey idolizes Asian economies because they have rapid economic growth, but their high levels of inequality make them unpleasant places to live.

Research shows that less equal economies are less healthy societies. High economic inequality negatively impacts a broad set of indicators of social health, ranging from crime and school bullying to distrust and mental illness. It’s not difficult to figure out why – greater inequality means everyone is more concerned about getting ahead, so society degenerates into dog-eat-dog. It makes even the richest members of society less happy, perhaps because they are constantly striving to stay on top. I suspect the same status competition also helps drive ever-increasing material consumption, and hence environmental damage.

In the rest of this series I will examine specific measures in the budget and how they fit into Abbott’s elitist agenda. In Part 2, I will examine how the budget affects climate, environment, fossil fuel subsidies, business, and science.

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