Remember the 80's? The years of reform that would go on to lock in years of growth?
We had Thatcher, Regan and Hawke.
Today we have Brown, Obama and Rudd.
No reform, plenty of debt. There legacy will be governments saddled with unimaginable levels of debt which will ensure the Government sector is once again a dead hand on the economy - but the provision of services will decline as servicing debts becomes increasingly unmanageable.
From our perspective in Australia, it looks like Treasurer Swan will go from this:
We are budgeting for a surplus of $21.7 billion in 2008‑09, 1.8 per cent of GDP, the largest budget surplus as a share of GDP in nearly a decade.
To this:
Tonight I am announcing the biggest budget deficit in Australian history, with no prospect of recovery in the forward estimates.
Amazing stuff. Just for the record, you check out what the Treasurer was saying at this time last year:
He recognises that the global financial crisis is on its way, but is focussed on talking up inflation in the interest of scoring political points:
It is the responsible Budget our nation needs at this time of international turbulence, and high inflation at home.
Amazing stuff this in retrospect. Just 11 months have passed. It just goes to show how cheap words are:
And it is a surplus built on disciplined spending, with the lowest real increase in Government spending in nearly a decade; spending growth which is one quarter of the average of the previous four years.
Mr Speaker, we need a strong surplus to anchor a strong economy; to do our bit to ease inflationary pressures in the economy; to build a buffer against international turbulence; and so we can fund ongoing long term investment in the ports, roads, railways, hospitals, universities and vocational education we need, to deliver growth with low inflation into the future.
'We need a surplus to anchor and strong economy and buffer against international turbulance'. You couldn't make this stuff up.Update: Looks like I'm not alone. Cracking article by John Roskam of the IPA:
The public has the impression that the stimulus measures are temporary and short term. But this is only half true. The economic effect of the measures may indeed be temporary, but they have long-term consequences. It will take years for the budget to return to surplus, and the increase in the size of government is as good as permanent, given the difficulty of cutting government spending.
The rhetoric of Obama, Brown, Rudd, and indeed everyone else preaching the mantra of stimulus packages, has been masterful. They haven't said "our solution to the gravest economic crisis since World War II is to make government bigger". Nor have they said "the reason we're in this mess is because government is too small". Instead they've talked about things like "targeted measures" and "one-off fiscal injections".
But no matter how it's phrased, the result is the same. Government will be bigger after the global financial crisis than it was before.
