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Issue #1640      May 28, 2014

Federal budget 2014-15

Myths, lies and deceit

Remember the Coalition’s pre-election promises of no cuts to education, health, or the ABC or SBS; no forced redundancies in the public service; no change to pensions; restoration of accountability and improved transparency; no increase in university fees; no increased taxes; etc. All torn up in its first budget. But the deceit is not confined to broken policies. The spin that accompanied each broken promise, each attack on pensioners, students, the unemployed, families, Indigenous Australians, the public service, etc, is accompanied by neo-liberal mythology, outright lies and deception in an attempt to justify them.

The following are a few of the lines which, with the help of the Murdoch and Fairfax media and business leaders, have been sold to the working class in an attempt to justify an all out attack on their living standards and basic human rights:

Myth: There is a “budget emergency”

Fact: The budget deficit was 1.2 percent of GDP in 2012-13 down from 1.7 percent in 2011-12. This is one of the lowest in the world and is also historically very small. (Stephen Koukoulas, “Budget emergency? Not if you look at Hockey’s numbers”, Business Spectator, 26-05-2014)

Likewise government debt (resulting from accumulated deficits) is one of the lowest at 10.1 percent in 2012-13. According to the IMF’s World Economic Outlook Database (2013) only six OECD countries have a lower net debt to GDP ratio than Australia. (GDP, the gross domestic product is a measure of national income – wages, profits, taxes, etc)

The source of the deficit (and hence debt) is the outcome of the erosion of the tax base over almost three decades of cumulative tax cuts. The corporate rate has been reduced from 46 cents in the dollar to 30 cents and in the first Abbott/Hockey budget is to be reduced to 28.5 percent. The tax take was only 21.6 percent of GDP in 2012-13 compared with spending of 24.3 percent in 2012-13, and 25.2 percent of GDP in 2011-12.

Australia is fifth lowest taxing counties in the OECD.

Deceit: “Without action we face a decade of deficits and debt growing to $667 billion by 2023-24 ...

Fact: This is a dirty piece of scare-mongering, with large-sounding figures pulled out of context (no comparison with GDP) that combine Labor’s future estimates with the Coalition’s hike in spending on military, etc. It fails to properly take into account GDP growth, inflation, etc, let alone what the money is being spent on and how it might benefit people. It includes future company tax cuts which reduce income.

Unstated, but implied, in all of these statements, is the notion that debt is bad. There is no similar attack on corporate debt which in relative terms is far higher, or on domestic debt. The government is not suggesting people do not borrow to buy a home or that companies do not borrow to buy up public assets when the government privatises them.

Myth: Spending on health, education and social security are unsustainable

Fact: This claim has nothing to do with balancing a budget. The claim is unfounded. It is propaganda, designed to cover up the government as it dumps its responsibilities for social spending and pushes ahead with massive cuts to company tax rates.

This is a class question: whose interests does the budget serve – the big corporations and rich or the working class? A government serving the interests of the working class would say it is the tax cuts that are unsustainable. The increase in the military budget from just under $30 billion to $40 billion is unsustainable as well as a threat to regional security. The fossil fuel rebate and other mining industry subsidies of close to $14 billion are unsustainable financially and environmentally. The private health insurance rebate, which subsidises private hospitals and insurance companies diverts funds from under-funded public hospitals.

What is “unsustainable” is defined by which side you are on.

Myth: The size of government has “expanded significantly”

Fact: As the above figures indicate, government has not expanded but shrunk in real terms compared with the size of the economy. Such claims are based on the concept that “small government” is good, that “large government” is some evil. “Small government” is only good for companies and the rich seeking to avoid paying taxation, not for the people.

The taxation system and government expenditure are a key means of wealth distribution. “Small government” is a neo-liberal agenda to rob the working class of its social wage – health services, education, social security, age pension, etc, – so that company taxes can be reduced and eventually abolished. The Communist Party of Australia supports the expansion of the social wage with an increase in company tax rates and in the marginal rates of those on high incomes.

Under a progressive tax system, everyone contributes according to their ability to pay, and at various stages of their lifetime they receive the services and benefits they need.

Deceit: “Each year, the government spends more on welfare than we spend on the education of our children, the health of our people or the defence of our nation”.

Fact: Is it such a crime that the social security payments covering the age pension, unemployment benefits, disability pensions, family payments, childcare support, etc, add up to more than other individual items of expenditure? No. They total around 35 percent of expenditure.

Compared with the GDP, they consume approximately 8.5 percent of the total wealth produced (2012-13) figures. Is that unreasonable? Is that unsustainable? The amount is relatively small and should be increased, not further cut.

Myth: There is “wasteful spending”

Fact: Not a single piece of evidence is provided to support this claim. Years of cuts mean every cent is stretched, every public sector worker is also stretched beyond their limits. Of course the government may mean by wasteful, that it is a waste of money spending anything on the unemployed, the sick, students and age pensioners.

There is an element of truth in this claim; there is wasteful spending on the military and mining industry subsidies.

Lie: The budget is “fair”

Fact: There is a direct relationship between how well off someone is and how much “heavy lifting” they do. The more vulnerable someone is, the more disadvantaged they are, the bigger the cuts.

There is nothing fair about an unemployed person of 25 having no income for six months. A single parent on Newstart with an eight-year-old child will lose $54 a week. A childless couple earning $360,000 a year will lose nothing. (See Peter Martin, “Families on benefits the biggest losers, analysis of budget shows”, Sydney Morning Herald, 19-05-2014) for more comparisons.)

Deceit: “Doing nothing is not an option”

Fact: What a load of twaddle. It is a meaningless statement, designed to reinforce the concept of an emergency and to justify a brutal attack on people’s lives. Every government does something. The key question is what they do, what the options are. “Small government” is one conservative and regressive option. There are a host of other progressive options.

Next article – Cuba: a potent symbol

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