Friday, 28 November 2008

Two Dollars

The country’s financial planning is hot on the agenda. Clearly, next year’s budget is going to be tighter than we have grown accustomed to; it is unavoidable given the government will have significantly less tax income. The question is, should the government plan for a deficit budget or should it stick to the Liberal Party’s policy or surpluses?
The Liberal Party is already smelling the blood and keeps on making comments on how the Labor government is unable to manage the finances as well as they have. They are pushing their spin wheels as best they can in order to create an aversion in the public to the word “deficit”, as if that word is the devil itself. Labor, on its part, is playing along, clearly afraid of using the D word too much for fear of being stigmatized.
What I find so annoying about the way this discussion has been going is the rarity in which the real question pops up. That is, instead of asking “which policy will serve my political agenda best”, no one is asking “which policy will serve Australia best”. And that’s shocking. It is a clear indicator to the quality of leadership this country has and to the way this leadership regards us – the public – as mere children that cannot think for themselves. Worst, it is an indication that the leaders are probably right to treat the public the way they do, given that the public plays along so sheepishly. Essentially, our opinions are shaped the way we’re being told.

I will therefore use the opportunity to express my opinion on this grave financial matter.
First, I would like to say that having budget surpluses is, in my view, a clear indication for bad fiscal management. If you don’t need the money then don’t collect it; and if you can’t tell whether you need the money or not, then you obviously need to work on your forecasting ability before you can come and claim my money for obviously unjustifiable reasons. Second, once you have the money in your hands (as you do when you have a surplus), then please return it to me; don’t keep it with you for over ten years. Return it to me in the shape on better infrastructure, better health and better education. As the record clearly indicates, under the Liberal government all three were left to severely deteriorate despite the surpluses (note subsidizing private schooling for the middle classes does not count as investments in education).
Third, a budget deficit is not necessarily bad. Sure, it has lots of potential to be bad, but it can also be good: If, for example, the government goes into deficit in order to fund the infrastructure projects we actually need, then they would both kick-start the economy and help society along. If this investment kick-start works well enough it return the investment next year to wipe out the deficit. The point is, it’s better to invest in the future by borrowing now then to dig into place just so one political party wouldn’t lose face to another. That said, Labor seems to specialize in coming up with projects in a rather offhanded way, without really thinking their worth, or – worse – in coming up with projects whose main aim is to make a rich banker even richer (with numerous examples in Victoria alone, the best of which are the proposed desalination plant and the traffic tunnels: both are unneeded, damaging projects).

Last, but not least, this entire surplus/deficit argument shows just how limited the thinking capacity out there is. Surpluses and deficits are not absolutes, they are relatives living on a continuum. To explain my point, I will ask you this: What is the difference between a one dollar surplus and a one dollar deficit?
Exactly two dollars.

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