Australian Commentary (50)- How to Get Disillusioned-Quickly (II)

I’ve got a lot of time for “The Australian’s” Economics writer, Judith Sloan. In relative terms, she’s a fiscal conservative, and good writers like her are thin on the ground.

Last week, she took the Australian Federal Treasurer, Scott Morrison to task. Her comments are in italics.

…the Turnbull government is a big spending, big taxing government with no real ­intention to pare back the growth of government spending, let alone cut it. I have even given the Treasurer a new nickname: Wayne Morrison.

Most western political leaders show they know nothing about economics. They have great difficulty understanding that any national economy is just like a household one, only bigger. They seem to have little awareness that borrowed money has to be paid back, with interest, and so it is always best to get out of debt as soon as possible. When borrowings become large, the interest cost to the economy becomes great, for billions which could be used for constructive purposes, have to be set aside to service debt.

With government spend­ing only a tiny fraction less than the proportion of gross domestic product achieved by the Labor government during the emer­gency response to the global financial crisis (25.9 per cent compared with 26 per cent), the bald facts clearly support my proposition.

Unemployment in Australia is running at 5.8%. It has been lower, but not much. This would be a perfect time to be cutting expenditure by $20-30 billion, dragging the national economy back to a healthy position; low debt, leading to none.

Is that likely to happen, anytime soon? Don’t hold your breath. Taking away the punch-bowl in the middle of the party may not help your popularity, even if it is right. And spineless political leaders crave popularity.

And it gets worse. Wayne M is making up new rules on the run. According to our top money man, surpluses are overrated, who cares when one is achieved, and what about a deficit better than the long-run average of 0.8 per cent of GDP? Yep, big spending, big ­taxing.

He is even on record as saying that cutting government spending by $20 billion or $30bn is neither here nor there — recall that total government spending this financial year will be about $428bn — because it wouldn’t make any real difference to government debt. In any case, such a cut would have a “disastrous effect on the economy”. (You can see why the nickname is spot-on.)

It looks as though Scott Morrison doesn’t have an accounting background. Accountants are generally relieved when their company is reducing its debt. Not Scott. He’s happy for things to go on, just as they’ve been. The awful excesses of the past mean nothing to him.

Any economic manager who is indifferent towards cutting costs when there is a clear opportunity to do so, is negligent in their tasks. They don’t deserve to be in their position, and they will soon be exposed.

Why is this? Political leaders like Morrison treat the taxpayer with contempt. What seems to matter is re-election, not economic responsibility/accountability. But then if your hero is Franklin Roosevelt, that explains it.

I’m not sure who is advising him with this old-fashioned drivel. The idea that he cannot find $20bn to $30bn of wasteful government spending is laughable. The truth is he is not trying, presumably with the full backing of Malcolm Turnbull.

Treasury officials are generally Keynesians. They have no problem in maintaining government debt levels, for they hate the thought of reducing national aggregate demand, because that means GDP could be negatively affected. What a thought! The Treasury has no convictions, and the Treasurer has no guts. This is not good for the future.

Liberal Party Treasurers with a decent level of common sense have been unknown since Costello. They’ve all said, “Steady as she goes,” which seems fine, until the ship that’s been quietly and unobtrusively taking water starts to keel over when it’s taken too much. And when the survivors are swimming in the ocean afterwards, they say to one another, “What happened?” Gary North put it this way:

It starts with a moral problem. It starts with a violation of the commandment not to steal. We have a modern civilization that is built on a systematic violation of this commandment.

The overwhelming majority of voters today are convinced that the present economic order in no way violates this principle. Virtually all of the pastors in the pulpits are convinced of this. They don’t preach against the organized theft of modern Keynesianism. They don’t think it’s part of their calling to point out the obvious ethical implications of the system of government that compels people to support other people, merely because the other people don’t want to go out and get a job.[1]

When the pastors have no problem with big spending, government debt and theft by taxation, and when the Treasury and the Treasurer really don’t have a problem either, we are heading for a crisis. There is no one on the bridge of the ship to shout “Icebergs ahead!”

Conclusion:                                                                                                                            Australia’s not in a good place economically, and it won’t be substantially improving, soon. The people who could make a difference are sitting on their hands. And it’s the same, right around the world. What will bring the necessary change, will be crisis and disaster. I close with a comment from my mentor, Gary North:

…It pays to defend freedom. Even when the overwhelming majority of voters do not want to hear the arguments, we should keep making them. We should keep pointing out that there will be horrendous negative repercussions for violations of the principle of voluntary exchange. We don’t get a hearing, except during crises. I have good news. There will be plenty of crises in which we will get a hearing.

[1] Gary North (www.garynorth.com), “Have Hope: our Opponents are Economic Imbeciles,” 5/1/2015.

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