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Features Australia

The road to bigger government spending

‘Off the table’ is no bad thing

30 January 2016

9:00 AM

30 January 2016

9:00 AM

Close your eyes and pretend for a moment that you are a top policy-maker in Canberra. On top of that, and I know this will be rather implausible when it comes to some over-paid bureaucrat in our capital city, but nevertheless play along and imagine that you share the basic policy preferences of a long-time Liberal Party voter, or those of a typical subscriber to this world’s best weekly publication.

In other words, you lean towards thinking smaller government rather than bigger government will further Australia’s long-term interests; you want free speech to be as protected as much here as it is in the United States; you accept that markets can and do fail but you also believe that government actions can and do fail, and that governments and bureaucracies do so significantly more often than markets; you are a Hobbesian about foreign policy and see the world as a dangerous place and national defence as of crucial importance; you laugh at the idiocy of cultural relativism and the politically correct platitudinous pieties it imposes on otherwise seemingly sane politicians, even those from your preferred Liberal Party.

Of course if those sort of core positions seem to you too unlikely to be held by any real-life Canberra top bureaucrat then make yourself a think tank director or Liberal Party staffer or some other sort of top gun policy wonk. And now imagine that the present Coalition government asks you to provide it with some options when it comes to various policy areas this government believes are in need of reform. What I want to test is your willingness (given all those preferences and core beliefs of yours) to rule certain things ‘off the table’. So I will imagine a few general areas being considered for reform and then also some more specific proposals. You decide if the specific item should be ruled ‘off the reform agenda table’ by a Coalition government supposedly sharing most of your core preferences and beliefs.

Hypothetical One: Suppose we are talking about tax reform generally and the specific proposal is a capital gains tax on people’s first homes. Would you rule that off the table and not part of any general discussion worth holding?

Hypothetical Two: This time it’s media regulation and the specific proposal is a clone of the Gillard era, free-speech enervating regulatory regime whereby you end up with a sort of government sanctioned journalism. On or off the table?


Hypothetical Three: Border security is the theme and repealing the Abbott boat turn-back policy the specific proposal. Would you rule such a repeal proposal off the table or leave it as a live option worth considering in the general review?

I pose these three hypotheticals to drive home the idea that ruling certain specific proposals off the table can be a good thing – something in keeping with your core beliefs – not a sign of close-mindedness. Just because you rule out bad ideas from a general discussion you are not therefore some immature, myopic misfit. Being all inclusive, in other words, is not a good-in-itself. Yes, let’s keep options open, but only options that are themselves palatable ones. It is not a virtue to keep on the table bad policy options, even if rejecting them from the start gets you called names.

And that brings me to the policy of increasing our 10 per cent GST. This Coalition government has put it on the table. In fact, it’s pretty clear to us all that if the politics can be finessed – and the federalism implications ignored or side-stepped – then this present government wants to bump up our GST, possibly by as much as 50 per cent. The Australian newspaper seems to support the government on both of those, as is evident from its editorial of January 14th.

But that assumes that increasing the GST is a good idea. In my view, it’s not. Yes, yes, yes it’s an easy to apply tax and in that sense it’s efficient (if obviously regressive). And yes, an increased GST might come with a cut in personal income taxes. But here’s the thing. Look around the world and you’ll notice that once a GST is raised it virtually never gets cut (Canada being the single only exception). Meanwhile what happens over time to those lowered personal income taxes? They slowly go back up, either by bracket creep or when a left-wing government gets back into office. The GST will not be cut when this happens. We know this because we’ve seen it here in Australia since the Howard government first brought in a GST.

Put differently, a higher GST is part and parcel of the road to bigger government, with more money going to Canberra for it to spend rather than you. And that lessens the pressing need to cut spending. Let’s be clear: we have a spending problem in this country, not a revenue one – as the evidence makes plain.

Here’s the odd corollary to that belief of mine that a GST increase should indeed be ruled off the table. It puts me in the same camp (though no doubt for largely different reasons) as Bill Shorten and the Labor Party. Shorten has ruled off the table any GST increase. I can’t recall saying this before, but ‘Bill’s right’.   And taking it off the table does not somehow put you in the camp of those who are afraid of ‘conversations on tax reform’ or someone who can’t see we have a massive deficit problem in this country. We do. We also have a massive Government gutlessness problem on the spending front (not to mention the free speech front and the political correctness front).

The question to ask yourself is, will putting on the table, and possibly implementing, a higher GST have good or bad long-term consequences? If you believe, with me, the answer is ‘bad’ then why put it on the table and thereby make its eventual enactment more likely? You wouldn’t put on the table a repeal of our boat turn-back policy or leave on the discussion table any Gillard-style hobbling of the press package. So taking those off the table is not done out of a desire ‘to frustrate vital discussion’, as the Australian puts it, but simply because they constitute bad policy choices. The same goes for mooting an increase in the GST.

Say it with me slowly: ‘not all changes count as reform. They have to be changes you think are likely to have good long-term effects’. So those that aren’t in that category absolutely should be ruled off the table.

P.S. Want to bet that Electricity Bill is dying to fight an election on an increase to the GST?

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