Kevin Rudd should not be applauded for his handling of the GFC, writes Milton Von Smith.
Last Saturday
The Australian newspaper announced its decision to bestow the “Australian of
the Year” award upon Prime Minister Kevin Rudd, for “showing courage in the
face of fire during the global financial crisis and for displaying astute
leadership when Australia needed it most.”
Has the Oz taken leave of its senses?
Let’s get real: Mr Rudd is no profile in courage.
There is nothing “courageous” about Rudd’s central response to the crisis,
which has been to waste billions of taxpayer dollars on cash handouts, school
halls, the National Broadband Network, and other examples of fiscal
recklessness that are simply too numerous to mention.
There is nothing “courageous” about Mr Rudd’s unwillingness to cut a single income tax rate or threshold when designing his fiscal stimulus packages, even though there is a vast amount of economic evidence which supports the growth-enhancing effects of permanent tax cuts.
And there is nothing “courageous” about announcing plans to increase income taxes at the very height of an economic crisis.
That’s right: in direct response to the GFC, one of Mr Rudd’s first policy decisions was to increase income taxes.
To see why, we need to go back in history. On 14 October 2008 Mr Rudd and Mr Swan announced the government’s $10.4 billion “Economic Security Strategy”, most of which consisted of “courageous” handouts to pensioners and low income earners.
Then, on 5 November 2008 – less than two months after the collapse of Lehman Brothers in the US, the Rudd government released its 2008-09 Mid Year Economic and Fiscal Outlook (“MYEFO”). Page 52 stated that:
“In the 2008-09 Budget, the Government made a provision for its aspirational tax goals in 2011-12. The Government said that achieving its aspirational tax goals ‘will depend on economic conditions and the need to maintain fiscal responsibility’. Given the dramatic deterioration in the global economic outlook and associated increased uncertainty, the provision will no longer be maintained. The Government will reconsider the policy parameters following an improvement in overall economic conditions.”
Got it? Rudd cancelled these “aspirational” tax cuts – that is, he increased taxes relative to the status quo ante - because of the “need to maintain fiscal responsibility.”
Fine. But then, less than three months later on 3 February 2009, Rudd announced his massively wasteful $42 billion “Nation Building and Jobs Plan”. And just for good measure, he also announced plans to deliberately plunge the Budget into the red and deliver the largest deficit in our nation’s history.
Thanks to Rudd, the Budget is in such poor condition that we will probably not see another surplus until 2015-16.
In other words, Mr Rudd will likely never deliver a budget surplus.
So whatever happened to the “need to maintain fiscal responsibility”? The answer is that this phrase was simply another political fabrication, cynically designed to get those bothersome future tax cuts out of the way and provide Mr Rudd with more revenue for the wasteful spending increases he already had in the pipeline but had not yet announced.
Don’t believe me? Remember: MYEFO promised to “reconsider the policy parameters following an improvement in overall economic conditions.”
Well, economic conditions have now improved. So will the aspirational tax cuts be reinstated?
No, of course they won’t. In fact, we now know that Mr Rudd plans to increase taxes even further to fund his fiscal profligacy.
Just last week, Treasury Secretary Ken Henry said that “it would be prudent to plan on the basis that the tax system will, over time, have to generate revenues to meet substantially larger fiscal costs.”
That’s not-so-well-disguised code for higher taxes.
Let’s face it: the reality is that whenever Rudd mentions the phrases “economic conservative” or “fiscal responsibility”, there is a very good chance that he is about to do the exact opposite.
The “need to maintain fiscal responsibility” was never the real reason for cancelling the tax cuts. No, Rudd cancelled the tax cuts because he believes that he knows best how to spend the hard earned incomes of Australian taxpayers. And that is that.
In reality, Rudd’s policy response to the GFC has been driven by policy arrogance, financial recklessness, and political cynicism - not “courage”.
If The Australian sees fit to give him an award for those qualities, then it is of course free to do so.
But please: don’t treat voters like children by trying to convince us that Mr Rudd is “courageous” because he is good at increasing taxes, spending other people’s money and leaving the bill for future generations.
Milton Von Smith is a Canberra writer.
There is nothing “courageous” about Mr Rudd’s unwillingness to cut a single income tax rate or threshold when designing his fiscal stimulus packages, even though there is a vast amount of economic evidence which supports the growth-enhancing effects of permanent tax cuts.
And there is nothing “courageous” about announcing plans to increase income taxes at the very height of an economic crisis.
That’s right: in direct response to the GFC, one of Mr Rudd’s first policy decisions was to increase income taxes.
To see why, we need to go back in history. On 14 October 2008 Mr Rudd and Mr Swan announced the government’s $10.4 billion “Economic Security Strategy”, most of which consisted of “courageous” handouts to pensioners and low income earners.
Then, on 5 November 2008 – less than two months after the collapse of Lehman Brothers in the US, the Rudd government released its 2008-09 Mid Year Economic and Fiscal Outlook (“MYEFO”). Page 52 stated that:
“In the 2008-09 Budget, the Government made a provision for its aspirational tax goals in 2011-12. The Government said that achieving its aspirational tax goals ‘will depend on economic conditions and the need to maintain fiscal responsibility’. Given the dramatic deterioration in the global economic outlook and associated increased uncertainty, the provision will no longer be maintained. The Government will reconsider the policy parameters following an improvement in overall economic conditions.”
Got it? Rudd cancelled these “aspirational” tax cuts – that is, he increased taxes relative to the status quo ante - because of the “need to maintain fiscal responsibility.”
Fine. But then, less than three months later on 3 February 2009, Rudd announced his massively wasteful $42 billion “Nation Building and Jobs Plan”. And just for good measure, he also announced plans to deliberately plunge the Budget into the red and deliver the largest deficit in our nation’s history.
Thanks to Rudd, the Budget is in such poor condition that we will probably not see another surplus until 2015-16.
In other words, Mr Rudd will likely never deliver a budget surplus.
So whatever happened to the “need to maintain fiscal responsibility”? The answer is that this phrase was simply another political fabrication, cynically designed to get those bothersome future tax cuts out of the way and provide Mr Rudd with more revenue for the wasteful spending increases he already had in the pipeline but had not yet announced.
Don’t believe me? Remember: MYEFO promised to “reconsider the policy parameters following an improvement in overall economic conditions.”
Well, economic conditions have now improved. So will the aspirational tax cuts be reinstated?
No, of course they won’t. In fact, we now know that Mr Rudd plans to increase taxes even further to fund his fiscal profligacy.
Just last week, Treasury Secretary Ken Henry said that “it would be prudent to plan on the basis that the tax system will, over time, have to generate revenues to meet substantially larger fiscal costs.”
That’s not-so-well-disguised code for higher taxes.
Let’s face it: the reality is that whenever Rudd mentions the phrases “economic conservative” or “fiscal responsibility”, there is a very good chance that he is about to do the exact opposite.
The “need to maintain fiscal responsibility” was never the real reason for cancelling the tax cuts. No, Rudd cancelled the tax cuts because he believes that he knows best how to spend the hard earned incomes of Australian taxpayers. And that is that.
In reality, Rudd’s policy response to the GFC has been driven by policy arrogance, financial recklessness, and political cynicism - not “courage”.
If The Australian sees fit to give him an award for those qualities, then it is of course free to do so.
But please: don’t treat voters like children by trying to convince us that Mr Rudd is “courageous” because he is good at increasing taxes, spending other people’s money and leaving the bill for future generations.
Milton Von Smith is a Canberra writer.
