Cutting Taxes and Spending? Huh.

Matt Welch | January 29, 2008

A wonder from Down Under:

A new left-wing government in Australia has begun with a decidedly unliberal approach to economic policy - proposing a budget based on deep cuts in spending and taxes.

More, care of the Washington Times:

The Australian plan, announced Jan. 21 by Labor Prime Minister Kevin Rudd, was based on the assumption that a 3.8 percent inflation rate - rather than slow growth - was the greatest threat to the nation's economy. It calls for spending cuts sufficient to produce a surplus equaling 1.5 percent of gross domestic product - even as the government goes ahead with promised tax cuts totaling $27 billion over four years.

The fiscal belt-tightening goes far beyond anything envisaged by the previous right-wing government of defeated Prime Minister John Howard - a staunch U.S. ally for more than a decade - or for that matter by U.S. governments since the 1990s.

"We are embarking on a hard-line approach to fiscal discipline," Mr. Rudd said in announcing the plan last week. "It won't be easy."

In addition to $8.8 billion in savings the party identified during the campaign, the prime minister said the new government will turn to its "razor gang" to find more spending cuts.

He said his Labor Party government will also look for ways to encourage private savings and tackle a chronic shortage of skilled labor.

Whole thing here; link via The Freedom Files.

Comments

|1.29.08 @ 3:40PM|#

Australian Liberals...

PLEASE immigrate to America now...

robc|1.29.08 @ 3:44PM|#

Did the Australia labor party read about the 1980s New Zealand labor party or something?

|1.29.08 @ 3:44PM|#

Make guns legal again, and I just might bring my skilled labor* to Oz.

*being an asshole, mostly.

The Wine Commonsewer|1.29.08 @ 3:46PM|#

Ahh, Oz libertarians.

|1.29.08 @ 3:47PM|#

In many people's minds, one of the defining characteristics of liberals is that they raise taxes and increase spending, and the defining characteristics of conservatives is that they lower taxes and cut spending.
It's simply not true in so many cases. Look at the federal budget under Clinton vs GWB.
and now this.

|1.29.08 @ 3:52PM|#

a decidedly unliberal

|1.29.08 @ 3:52PM|#

It's so crazy, it just might work.
I, for one, have always been dubious about the notion that "growth" is all important. Profit and capital are really where it's at! (plus the gold buried in my yard!)

robc|1.29.08 @ 3:53PM|#

Pinette,

If I look at the federal budget under Clinton what am I supposed to see? I see raised taxes and raised spending. So he fits your definition of liberal just fine.

|1.29.08 @ 3:53PM|#

a decidedly unliberal approach to economic policy - proposing a budget based on deep cuts in spending and taxes.

*Sigh* When will people learn to distinguish between liberal economic policy and progressive economic policy?

robc|1.29.08 @ 3:54PM|#

As an aside, is it spelled Labor Party or Labour Party?
Any differences in Britain/Australia/New Zealand?

|1.29.08 @ 3:54PM|#

It's the VS GWB part that your supposed to look at. Spending increased quite a bit more under bush, who was supposed to be a conservative.

|1.29.08 @ 3:55PM|#

Sounds like someone mixed up "Austrian" with "Australian" again. Boy are they going to be embarrassed when they figure out what they did.

robc|1.29.08 @ 3:55PM|#

Smappy,

Words change meaning, it happens all the time. Do you check someone's land ownership before you call him a gentleman?

robc|1.29.08 @ 3:56PM|#

Pinette,

While Clinton may be less of a liberal than Bush, he still increased spending. No bonus points for being a sucky liberal. :)

robc|1.29.08 @ 3:57PM|#

Although to be fair to Clinton (why? I dont know.), "he" increased spending faster after the GOP took control of congress than before.

|1.29.08 @ 3:58PM|#

I'm certainly not endorsing Clinton. But the clinton(s) are looked at now as the ultimate liberals (it seems).

|1.29.08 @ 3:59PM|#

Yeah, I'd really like the word "liberal" here to mean what it does in Europe.

Episiarch|1.29.08 @ 3:59PM|#

a decidedly unliberal approach to economic policy - proposing a budget based on deep cuts in spending and taxes

It's even funnier because in Australian parlance, a "Liberal" (as in Liberal Party) is the equivalent of a Republican. Labor is Democrat. So depending on how you interpret that, it is saying that cutting taxes and spending is either not like Democrats or not like Republicans. Which is true!

|1.29.08 @ 4:01PM|#

If you want to be reminded why you hated Bill Clinton in the 90s, just listen to him talk for oh, 10 minutes.

|1.29.08 @ 4:03PM|#

Interesting, they're using government spending levels to affect the money supply, the way we use the Fed.

I've been wondering lately if there was a way to make government spending more counter-cyclical - for example, by holding off on buildint, say, 30 fighter aircraft during a period of high economic growth, or increasing this year's quota for them from 10 to 20 during a period of low growth. This would have all sorts of benefits - the pseudo-monetarist effect mentioned above, but also leaving more specialist-workers for the private sector when there is a labor squeeze, and then turning around a providing more jobs when unemployment is rising.

|1.29.08 @ 4:04PM|#

Cato study (I know they're in dutch here today, but whatevs) comparing US presidential spending for the last forty years.

Link is PDF doc.

|1.29.08 @ 4:05PM|#

Now there's a quandry:

Do we call them 'filthy capitalist swine' or 'filthy socialist swine?'

|1.29.08 @ 4:06PM|#

Joe,
that sort of thing is simply way too reasonable and responsible to become policy.

|1.29.08 @ 4:10PM|#

Cato study (I know they're in dutch here today, but whatevs) comparing US presidential spending for the last forty years.

Not surprising, but then I realized that this study was done in 2005! Imagine the numbers now!

robc|1.29.08 @ 4:12PM|#

joe,

During his 1996 run (and probably his 2k run too), Harry Browne suggested a balanced budget amendment with the max spending in a fiscal year equal to the revenue from the previous year. Thus, during a growing economny you would run a surplus every year even if you spent to the legal limit. During a recession, you would deficit spend a little bit. So, its a minor version of what you were talking about.

The Chad|1.29.08 @ 4:16PM|#

I move for a requirement of public office to play--and win--sim city. There's a fine balance in budgeting and taxing: tax too much and people leave, give services too much funding and they get corrupt.
Heed the word of wise sage Will Wright. The aussie's apparently have (at least they made me think of this random analogy)

Paul|1.29.08 @ 4:21PM|#

30 fighter aircraft during a period of high economic growth, or increasing this year's quota for them from 10 to 20 during a period of low growth.

Interesting proposition, joe, but my feeling is that holding back fighter aircraft would have a deep effect on one narrow part of the economy and having little effect on the economy at large. Ie, the Aerospace industry would certainly feel the pinch... but what else? Your idea could work if you could figure out a way to for the government in general to cut its spending or hold back on a wide variety of projects. But I can also see a lot of whining from the "private" sector industries which rely heavily on public sector business. Ie, the Fed relies almost entirely on a secondary effect. Denying "ABC Corporation" a contract for the express purpose of holding back inflation seems like a political minefield.

mmX|1.29.08 @ 4:25PM|#

Will John McCain understand what the Aussies are trying to do?

|1.29.08 @ 4:25PM|#

Paul,

Ah, but during growth periods, the aerospace industry would likely be at full employment and looking around for engineers and other specialists.

I don't think Boeing would whine if a couple hundred more aerospace engineers were on the job market from 1998-2000. I think they'd be likely to have more business than they could keep up with.

Anyway, I'm not thinking of "denying" anyone a contract, so much as making the contract read "over a 10 year period, we'll pay you $X for Y number of aircraft, the timing to be determined by us."

EJM|1.29.08 @ 4:36PM|#

robc, I've also been wondering about the spelling (Labor vs. Labour). It turns out that the ALP made a conscious decision early in its existence to use the U.S. spelling.

During the early years of the ALP, the Party was referred to by various titles differing from colony to colony. It was at the 1908 Interstate (federal) Conference that the name 'Australian Labour Party' was adopted. In its shortened form the Party was frequently referred to as both 'Labor' and 'Labour', however the former spelling was adopted from 1912 onwards, due to the influence of the American labor movement.

(from the ALP's official history page)

Paul|1.29.08 @ 4:43PM|#

Joe,

Thanks for the clarification. However, my spidey senses still predict political landmines. I can see a lot of bitching going on when say, the economy slows, and the government starts ordering more planes. Even if your idea works, there's always going to be a segment of the population that will resent money being directly spent on particular segments of the economy (contract or no) timed for economic impact-- whether we 'need' the airplanes or not.

|1.29.08 @ 4:54PM|#

I've been wondering lately if there was a way to make government spending more counter-cyclical

I'm sure there is, but a few fighter aircraft aren't where the money is.

For that, you should look at entitlement programs and government employment.

Alice Bowie|1.29.08 @ 4:57PM|#

Of course can can CUT Spending and CUT Taxes.

U Cut spending by eliminating government entitelemnts like medicare, medicaid, disability, welfare, ssn benefits...

U Cut taxes...and at the same time eliminate the entire Schedule A (Standard Deductions, etc.) from the 1040. Take away the Mortgage Deduction, the property tax deduction, and the personal exemptions for each dependent. most conservative americans would be too too stupid to realize that this is raising taxes...so it would b easy 2 get away with

Once u do this...we can have tons of money for the things we really need. U know, like:

- More Drug enforcement
- More Spying
- More Wars
- More Benefits for the Rich

Remember what Ronald Reagan said:

You can't strengthen the weak (poor) by over taxing the strong (rich).

So in the words of a great conservative....fuck the poor.

Seer|1.29.08 @ 5:02PM|#

Maybe foreign correspondents to America from Australia accidentally covered Ron Paul talking about inflation and the Australians decided that it was a huge problem.

Brandybuck|1.29.08 @ 5:08PM|#

Wow, imagine if the cosmotarians adopted policy platforms like this! We would have to start calling them libertarians again!

|1.29.08 @ 5:48PM|#

U Cut taxes...and at the same time eliminate the entire Schedule A (Standard Deductions, etc.) from the 1040.

That's the same basic idea Reagan had for his tax reform - simplify the tax code by getting rid of tax "shelters" and lower the top marginal rate.

If you cut the marginal rates enough so this was revenue neutral, I could get probably get behind it.

Of course, at that point, you're pretty much into Steve Forbes "tax return on a postcard" territorty.

|1.29.08 @ 5:51PM|#

Its Alice Bowe the wife of MCW?

|1.29.08 @ 6:19PM|#

I'm just guessing here, but one of the things that makes this newsworthy is the fact that this is the only national government that is cutting spending.

Kolohe|1.29.08 @ 6:23PM|#

joe-
the problem with your plan is something I thought you would have considered based on most of your default positions on this board.

The labor market is neither as liquid nor as fungible as is required for your plan to work.

Kolohe|1.29.08 @ 6:26PM|#

and I don't know about 80's NZ, nor the current Aus situation, but a cursory reading makes me think that the symptoms and remedy are parallel to what Hoover saw and tried in his term.

Kolohe|1.29.08 @ 6:28PM|#

ah strike my last Hoover raised taxes and lowered spending, Roosevelt raised taxes and spending, so perhaps lowering both may just be the best policy, but untried as of yet. (So crazy, it might just work)

|1.29.08 @ 6:29PM|#

robc

See here re: the Australian Labor Party (ALP).

And yes, the Liberal Party in Australia is a conservative party. There is no "Conservative Party" by that name. Just several parties that band together as a coalition when they manage to win more seats than Labor.

As far as I know no one of them has ever actually won a majority on its own.

Also, until the 1960s the ALP was a doctrinaire socialist party with a significant Marxist faction that stumped for state or federal ownership of banking, transport and certain heavy industries. It also promoted protectionist trade policies, compulsary unionism and restricted immigration (the White Australia Policy).

The leadership contests of the 60s and 70s were between factions that wanted to move in a more centrist social democrat direction. You know who won.

|1.29.08 @ 6:31PM|#

correction:

The leadership contests of the 60s and 70s were between the old worker/unionists and a faction (mostly younger and university educated) that wanted to move in a more centrist social democrat direction. You know who won.

|1.29.08 @ 6:33PM|#

Oh, and in NZ it's the Labour Party as in Britain.

GG|1.29.08 @ 7:18PM|#

Seems Labor did not take the awful, awful advice doled out (wink wink) by the IMF over the weekend:

"The foreign governments need to start spending more and running up deficits. Countries should follow [America's] lead and use big-government welfare stimulus packages as a model for what the rest of the world should do."

|1.29.08 @ 9:04PM|#

R C,

Entitlement program spending is much more time-sensitive. Its mission will fail if the checks don't show up like clockwork. Ditto with government employment - we won't just magically not need positions filled at, say, BLM because the economy is good.

On the other hand, highway spending, Army Corps projects, things like that could be ramped up and down without the projects' objectives being compromised.

|1.30.08 @ 2:13AM|#

I'm shocked. This is the first instance I can think of in my whole life in which an ostensibly socialist party actually acted in its country's best interests.

-jcr

sv|1.30.08 @ 10:17AM|#

they're not really socialist, even in name