Treasury Has $25bn Prize For Poll Victor
To Paraphrase "Alien versus Predator", Whoever Wins We Lose!
The headline was from an article in today's "Sydney Morning Herald (11 Sep 2004 here ). The first paragraph reads:
"The dynamics of the election campaign have been dramatically altered with the revelation by the Treasury and Finance departments of a $25 billion war chest to fund new promises by the Coalition and Labor."
Now, I guess I shouldn't be surprised that the automatic reaction to the discovery of "more money" is for the politicians to think of more ways to spend it. However, it is rather frightening that the bias is towards more spending rather than cutting taxes and letting us make up our own minds about what to spend it on. However, doing that would, of course, mean that there was less money available for the politicians to "bribe" their way back into office.
We've had a brilliant example of this from Prime Minister John Howard this week, as he throws yet more money at the elderly and the "grey vote". Alan Ramsey shows in his article today why he was once a great writer, as he disects the electoral numbers and shows very clearly how Howard's spending is designed to deliver the maximum electoral benefit to him.
Should we be surprised? Not really, I guess, but there persists this fantasy that politicians act in the interests of "the greater good" rather than simply acting to maximize their own welfare. Of course, it's not quite as "black and white" as this, but the primary motivation for politicians will always be their own welfare. This, of course, is natural and human nature. So the solution is not to get "better politicians" but rather have a political system that limits the damage and encourages better government.
Back to the economics. The increased surplus is the result of two main factors:
Neither of these factors are necessarily sustainable. So the danger of increasing spending is that when circumstances change, financial stress arises. We've already seen this in the USA (California's financial problems are largely the result of increasing spending to match the windfall tax revenues that arose from the "dot.com" boom , which were not sustainable) and closer to home in NSW where the budget is under stress because revenues arising from the long property boom are now tailing off.
Talking about NSW property, I couldn't help laughing when there was a report during the week that the new "vendor tax" on property has raised much less than expected! Of course, the property market was already coming off the boil (politicians are typically w-a-a-a-y behind the curve when it comes to recognising the realities of the market) and what did they expect? If you're going to penalise people for making money, then they will stop doing it!
On a more sinister note, the property tax is a warning of things to come and why property may be a dangerous place to keep your wealth. As and when times get difficult, governments will grab any source of revenue that they can. The problem with property is that you can't pick it up and move somewhere else! So, property is a "sitting duck" for governments to tax. As always, "The Sovereign Individual" explains this at greater length.
Couldn't happen here? The odious Bob Carr and his gang of thugs (eg Costa) is a great example of the complete contempt that most politicians have for the ordinary people.
Finally, a chilling warning from the UK (and why I will probably vote Liberal, despite my misgivings). The "Daily Telegraph" reported a study that showed that under Labour, the tax rate for the average father of two earning GBP 40,000 a year (i.e. a typical middle class, hard working, decent individual) had gone from 35% to 50%!!! Stealthily, taxes have been hiked dramatically and, of course, in recent years the Labour government in the UK has let spending rip. So much so, that despite the tax hikes and a relatively strong economy, the UK now runs a huge budget deficit. Couldn't happen here, of course!
The headline was from an article in today's "Sydney Morning Herald (11 Sep 2004 here ). The first paragraph reads:
"The dynamics of the election campaign have been dramatically altered with the revelation by the Treasury and Finance departments of a $25 billion war chest to fund new promises by the Coalition and Labor."
Now, I guess I shouldn't be surprised that the automatic reaction to the discovery of "more money" is for the politicians to think of more ways to spend it. However, it is rather frightening that the bias is towards more spending rather than cutting taxes and letting us make up our own minds about what to spend it on. However, doing that would, of course, mean that there was less money available for the politicians to "bribe" their way back into office.
We've had a brilliant example of this from Prime Minister John Howard this week, as he throws yet more money at the elderly and the "grey vote". Alan Ramsey shows in his article today why he was once a great writer, as he disects the electoral numbers and shows very clearly how Howard's spending is designed to deliver the maximum electoral benefit to him.
Should we be surprised? Not really, I guess, but there persists this fantasy that politicians act in the interests of "the greater good" rather than simply acting to maximize their own welfare. Of course, it's not quite as "black and white" as this, but the primary motivation for politicians will always be their own welfare. This, of course, is natural and human nature. So the solution is not to get "better politicians" but rather have a political system that limits the damage and encourages better government.
Back to the economics. The increased surplus is the result of two main factors:
- A healthy economy, so as growth has continued, tax revenues have increased (with GST playing a large part in this); and
- A large effective increase in taxes under the current government (see GST again).
Neither of these factors are necessarily sustainable. So the danger of increasing spending is that when circumstances change, financial stress arises. We've already seen this in the USA (California's financial problems are largely the result of increasing spending to match the windfall tax revenues that arose from the "dot.com" boom , which were not sustainable) and closer to home in NSW where the budget is under stress because revenues arising from the long property boom are now tailing off.
Talking about NSW property, I couldn't help laughing when there was a report during the week that the new "vendor tax" on property has raised much less than expected! Of course, the property market was already coming off the boil (politicians are typically w-a-a-a-y behind the curve when it comes to recognising the realities of the market) and what did they expect? If you're going to penalise people for making money, then they will stop doing it!
On a more sinister note, the property tax is a warning of things to come and why property may be a dangerous place to keep your wealth. As and when times get difficult, governments will grab any source of revenue that they can. The problem with property is that you can't pick it up and move somewhere else! So, property is a "sitting duck" for governments to tax. As always, "The Sovereign Individual" explains this at greater length.
Couldn't happen here? The odious Bob Carr and his gang of thugs (eg Costa) is a great example of the complete contempt that most politicians have for the ordinary people.
Finally, a chilling warning from the UK (and why I will probably vote Liberal, despite my misgivings). The "Daily Telegraph" reported a study that showed that under Labour, the tax rate for the average father of two earning GBP 40,000 a year (i.e. a typical middle class, hard working, decent individual) had gone from 35% to 50%!!! Stealthily, taxes have been hiked dramatically and, of course, in recent years the Labour government in the UK has let spending rip. So much so, that despite the tax hikes and a relatively strong economy, the UK now runs a huge budget deficit. Couldn't happen here, of course!
posted by Kevin Francis at
1:14 pm
