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Issue #1638      May 14, 2014

Axe Abbott

The main objectives of the federal budget are cuts to social spending, culling the pubic service and privatisation of public assets and government functions. This is being done in the name of fixing “Labor’s mess”, tackling a “debt and deficit disaster” and ending “unsustainable” spending on social welfare and the public sector. The truth is that there is no budgetary crisis, government debt is not about to spin out of control, social welfare spending is NOT unsustainable and the public service is already beyond “lean and efficient”.

Save Medicare Rally earlier this year in Sydney. (Photo: Anna Pha)

It is struggling to carry out its functions after years of pruning. The budget is based on lies to cover up an anti-people, neo-liberal agenda dictated by big business.

At the time of writing, the budget has still to be released, but the steady trickle of announcements over the past week point to one of the cruellest, anti-people budgets in Australia’s history, even outdoing the Howard Coalition’s first budget.

The class nature of the cuts is clear. Their main targets are working people, families, the unemployed, Indigenous Australians, age pensioners, people with a disability, women, students and others most in need. Access to benefits and pensions will be cut, as will payments for many people. It appears the less you have the harder you will be hit; targeting the vulnerable. The inequality gap is set to widen, with hundreds of thousands more Australians impoverished.

There is set to be mass sackings of public servants, cancellation of community programs and services, “reforms” to Medicare and higher education, contracting out of services and higher costs resulting from privatisation and deregulation.

Seventy-four government departments, agencies and bodies are in for the chop, community programs to lose their funding (or have already lost it). The environment and climate change, science, research, the arts and a range of advisory bodies are to lose their funding. Anything that might enhance the culture of the nation, assist people in need or does not make a profit for the private sector is in line for the axe as the government sets about culling the public sector and community funding.

In a desperate attempt to try to justify the cuts, Finance Minister Mathias Cormann released a 64-page document on the eve of the budget, under the title “Labor’s Mess”. It is one of the crudest and most dishonest pieces of propaganda to hit the decks for a long time. It attempts to reinforce the line of “debt and deficit disaster” if there is a “no policy change scenario”.

It claims that the underlying budget deficit is $47 billion, when the most recent official estimates put it at $24 billion or 1.5 percent of GDP – the envy of many governments. Likewise the Liberal Party’s claims of debt blowout are dishonestly inflated.

It seeks to manufacture a crisis and even attributes the consequences of the Abbott government’s actions to Labor, to inflate Labor’s budget deficit! These actions include the loss of income from the abolition of the carbon tax, Hockeys’ $8.8 billion handout to the Reserve Bank of Australia, and the allocation of billions of new infrastructure spending on roads.

While the worst of the budgetary cuts are set for the 2016-17 (post-election) and years following, the foundations are being laid for a massive takeover by the corporate sector of many of the public sector’s functions and a fundamental change in the role of government. The blueprint for these, drafted by the representatives of big business, is contained in the National Commission of Audit report. (See Guardian, “National Commission of Audit – Corporate hostile takeover”, #1637, 07-05-2014)

The government has indicated it supports the main thrust of the report, although there might be some variations in detail such as when the retirement age of 70 kicks in.

“Heavy lifting”

“I’m going to be able to look people in the eye ... and say we are all in this together,” Abbott said, pointing to his proposed temporary levy on those with high incomes.

No one is exempt from “heavy lifting”, according to Hockey. “Individuals must do more for themselves, they must become more self-reliant, and the business sector must shoulder more of the burden,” Hockey said.

Individual “self-reliance” is spin for reducing or throwing people off disability, unemployment and age pension and other benefits.

As for big business, Hockey says it must “shoulder [the] burden” by buying public assets! Almost everything will be up for grabs in coming years including the sale of remaining enterprises and real estate. They’ll be lifting the profits. What remains of service provision will be outsourced to the private sector to do some more “heavy lifting” as well as some functions of government.

At the same time the federal government looks set to hand over its responsibilities for areas such as health, education, community services and housing to the states. It will hold onto defence, foreign affairs, intelligence, policing, border protection and collection and distribution of taxation revenue: a government first and foremost in the service of the corporate/military matrix.

The government, despite all its rhetoric about budget deficits, still plans to cut corporate taxes. The cuts to spending on people pave the way for the big business tax cuts. The longer term agenda is to abolish the taxation of company profits.

The call for the abolition of taxing company profits is becoming louder, with economists in the Australian, Bloomberg Businessweek, Spectator, New York Times, and other pro-big business publications pushing the idea.

Desperate cash-strapped states, picking up federal government responsibilities, are more than likely to support an increase in the GST.

The aim is to wind back direct company and state taxes and place greater reliance on the GST and other sales (eg excise) taxes. This is part of an ongoing process, commenced by Labor in the 1980s and continued by the Howard and Rudd/Gillard governments.

There is a great deal of talk about the necessity of budget surpluses and the evils of debt. But the policies of privatisation, company tax cuts and slashing of social spending spell disaster, not just for those on the receiving end, but for the economy itself.

Forty years ago, before the privatisations began, when governments (state and federal) owned banks, insurance companies, utilities, public transport, the national telecommunications network, postal services, airlines, airports, ports, office accommodation, housing, etc, the public sector was backed by considerable material assets and a steady flow of income from a number of them.

There was a degree of common wealth, which along with the government’s ability to raise income through such means as taxes, provided the basis for security and the ability to borrow at lower interest rates than the private sector. There were many social injustices and, like capitalism in all of its stages, it lurched from crisis to crisis. But government guarantees still meant something.

They could rescue a bank or assist struggling businesses as well as expand consumption and create jobs during periods of economic crisis, just as Labor did during the onset of the most recent global crisis of capitalism.

Much of this common wealth, achieved by decades of struggle led by the working class, has gone with little or nothing to show for it except the introduction of user pays and higher charges, poorer quality of services or even loss of service, loss of accountability.

What will happen when governments have few remaining assets and the flow of income is depleted through tax cuts? When commercial rents, electricity, communications and other bills facing government go up? Or when remaining income declines during a crisis and the budget cannot be kept in surplus? And the private ratings agencies descend with junk bond ratings for the government?

In the UK and US bankruptcy is already a very real issue at local government level.

There is nothing wrong per se with a budget deficit or government debt. The key question is the ability to be able to manage the debt, to pay the interest and manage mounting debts. The other important issue is why the debt was incurred. For example, if it was of social or economic value, contributed to job creation and generated further income.

People’s option

If the government’s primary concern was really creating a budget surplus then there are other ways than slashing social spending and privatisation which have such disastrous social and economic consequences.

The government could and should be looking at raising company tax rates, closing the many loopholes that let companies such as Apple shift $9.8 billion in profits offshore to tax shelters in Ireland. There are other measures such as cutting military spending, abolishing the $6 billion private health insurance and fossil fuel rebates, and ending negative gearing which also drives up house prices.

Investment in job creation programs such as conversion of former car plants to construction of public transport vehicles and solar power units would not only bring increased taxation revenue and reduce unemployment, but make a valuable contribution to addressing climate change.

Apart from all the hardship and suffering that will result, present “small government” policies, which strip governments of their assets and reduce their incomes, are setting those selfsame governments up to fail. Sovereign bankruptcy is the inevitable outcome.

Every round of tax cuts, every privatisation, makes it more difficult for a progressive government at some later date to restore services, pensions and other social spending. If the cuts and privatisation are not stopped very soon, they will become irreversible, like smashing an egg and trying to put it together again.

The government argues there is no choice and it is relying on the Labor Opposition to do little to oppose its contents. And so far it has proved correct, with Labor’s focus on broken promises rather than the content of the government’s policies. Labor has even lashed out over the temporary deficit tax of 2.5 percent on people with higher incomes. It is the only Abbott decision worth supporting, except the higher tax rate should be larger and permanent.

There is strong opposition, considerable fear and concern over what the government is doing. At the same time, there is little confidence in Labor. The struggle to defeat this big business agenda must be won outside Parliament, on the streets, in our communities and workplaces.

It is vital that all the left and progressive forces, including trade unions, Australian Greens, Communists and community organisations build a mass, united movement capable of forcing pro-people change and electing progressive candidates at the next election.

Next article – Editorial – Corruption – different forms, same source

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